Morgan Stanley Coffee Report

The commodity complex was under pressure from the start as interest rate hike anxieties again drove the dollar higher and emerging markets and other risk assets lower.  Coffee managed to follow other softs upward by mid-morning during the Americas session, but the rally was short lived amidst low market participation, and the high was in place at 8:30 EDT.  Spread volume was light, and options in particular suffered a particularly cruel fate as Oct vol closed the day offered around 26%.  Crude and the CRB fell precipitously in unison at 10:30 am upon the release of DOE statistics which reflected across the board increases in inventories and falling US refinery utilization of -1%.  Coffee was insulated from the broad move lower, which afflicted cocoa not long after, and it appeared that an inline decline with the broad CRB was likely.  Intriguingly KC collapsed in dramatic fashion as soon as Robusta closed on far and away the best trading volumes of the day.  A brief recovery effort was staged, yet a reclaiming of value was not to be, as the market closed below the 5, 26, and 50 day moving averages.  Sentiment has bent negative in the past few days, and it seems most discretionary traders are still focused on macro cues that should be forthcoming in Chairwoman Yellen’s comments Friday.