Morgan Stanley Coffee Report

KC continues under pressure as a 2nd day of lower lows and lower highs were posted on relatively modest outright volume.  The active March contract featured less than 10,000 lots of outright volume, while the Z/H structure traded in a volatile 75 point band as positions are squared ahead of first notice day.  While one would struggle to call the performance good, the uptrend line connecting the Oct 17 and Nov 14 lows was held on today’s floor.  Meanwhile robusta continues to hold in amidst a lack of motivated spec sellers and small hedge flow, and F/H settling at a 31 premium.  With rumors continuing to spread with respect to reimportation of conilon to Brazil there is a again a hot coffee story with plenty of intrigue, though few independently verifiable facts.  Expectations of a December fed action are near universal, while the pricing of multiple 2017 hikes has doubled since the US election.  Janet Yellen did little to temper expectations, providing a dollar boost as it continues to trade above the key 100 level, and the S&P again approaches all-time highs.   The BRL has done well in shaking off the volatility as the BCB continues to intervene while additional positive expectations are set by domestic economists.