Morgan Stanley Coffee Report

The Arabica market closed in the green for a third session with a cumulative gain of only 170 points, aided along by the a 1% gain up in the CRB complex while chatter builds about excessive precipitation in Brazil’s coffee belt hindering the pace of the harvest.   In the meantime, periodic showers in Vietnam’s Central Highlands have alleviated imminent drought concerns, causing the Jul/Jul arb to naturally widen, while London remains in a holding pattern.  Curiously, open interest in New York has increased by 10,000 lots over the COT reporting week while the market has traded in a 310 points 12080-12390 range. Systems funds have been the best sellers, origin are all but absent, industry are comfortable taking on cover, while managed money and short term specs almost routinely nibble on the long side from levels where a bounce has a proven track record. Certified stocks which attracted attention by a 41,000 bags drop on Tuesday fell by a less noteworthy 2,078 bags over the past two days.  September at the money option volatility running historically cheap at just below 30% reflecting a market that has “chilled” to the thought of a frost.