Morgan Stanley Coffee Report

Coffee posted a predictably choppy performance as March options rolled off the board.  OI for the serial was most pronounced chiefly in strikes far from relevance (2nd most OI was the 200C with 3572, 3rd was the 135P with 3250).  Meanwhile the heaviest ownership was in the nearby H 150 P with 4155 coming into the day.  Paper is thought to be the primary short, which perhaps could indicate a freshly materialized underwater position for some naked grantors – limiting buying possibilities in the short term.  Interestingly, the most active minute of trading came in the form of aggressive selling, which returned during the settlement period. However, last minute action outpaced that of the 1:23 time, and the dying moment’s buying erasing the MOC losses.  With KCK settling in the middle of a 200 point day, and volume being aided by heavy spread activity ahead of FND (around 11k HK, 2300 HN), it is difficult to get terribly excited about this particular Friday reversal, particularly as we trade a second consecutive weekly lower low and lower high following four weeks to the contrary.  Robusta trading was even less inspired, chopping its way generally lower before end of day buying forced a positive close.  Spreads settled weak, with HK going out -31