Morgan Stanley Coffee Report

Arabica produced a 4th consecutive day of higher settlements, staging an impressive comeback in volatile trading.  Focus remains on interest rates as an early morning Stanley Fischer interview on Bloomberg media dominated the headlines for much of the day.  However, while the day was clearly macro driven through roughly noon EDT, KC seemed to separate from everything coincident to an impressive rally on the London close.  Good size clips of support were visible on the screen in RC, and it wasn’t long before a determined buyer carried Robusta roughly $10 higher in the dying minutes.  Arabica maintained that momentum for the following hour, turning recent shorts into buyers while posting the day’s high in the final 20 minutes.  With a vote on Dilma Rousseff’s impeachment expected tomorrow, perhaps expectations of a short term rally in the BRL were a motivating factor, though the late day weakness in the currency would indicate such a motivation would constitute a fairly large risk.  Arabica still seems to lack significant hedge flows, while intraday movements appear to be driven by outside factors, some more obvious than others, leaving both origin and industry with decisions to make.