Morgan Stanley Coffee Report

Fairly good volume changed hands in KC today as ~48k lots total were recorded, 20k of which were spreads.  The day’s high was traded on the open, and little happened for the following 2 hours until lunch time selling emerged from Europe, driving prices roughly 150 points lower.  With the arrival of New York traders, and the opening of BRL trading, KC reversed its losses yet the rally was short lived and the rest of the session was spent in negative territory.  The volume itself belied quiet trading, with options totaling around 8500 lots and the related delta assisted in liquidity window dressing while discretionary traders seemed interested mostly at the margins.  The BRL correlation faltered midday, and while the price direction was similar, KC was unable to keep up with the currency’s pace as it accelerated into strong territory and the two completely diverged going into the end of the day.  All in all, a strange day where various indicators seemed to work until they didn’t.  The combination of weakness with the BRL inside 3.13 and the first sub 140 close since June 27 basis KCU has to be a bit disappointing to the Bulls, yet we see none amongst our contingent of clients who are expressing much angst yet.  Robusta continued to attract buyers, closing roughly unchanged while suffering a $9 range in the front month (41 points in Arabica terms).  RC volume, needless to say, was sad.