Morgan Stanley Coffee Report

The month of May initially looked like it was going to end on a positive, if not merry note, as strength in the Jul/Sep spread basis presumptive end of month rolling, supported the outright market to trade through the highs of the previous 4 sessions. Gains at the high amounted to 260 points in the July contract (12390), but the rally fizzled out as all too familiar selling reappeared into the close and the low print of the day at 12135, seen just after the opening, was revisited on the bell.   For 11 months in a row the second month contract has printed between 12300-12660 as fund activity defines the range and trade, industry and origin become accustomed to trading within the parameters.   Certified stocks dropped by a surprising 41,460 bags on Friday bringing the May drawdown to 66,578 bags and worth keeping an eye on to see if it’s a one off or a resumption of the appetite for certs.  London ended May trading in a quiet $18 range yet managed the highest month close in 11 months basis the second month chart as the effects of recent dryness in Vietnam and conillon growing region of Brazil have yet to be determined.