Morgan Stanley Coffee Report

A resumption of the unravelling of the rally from 11890-13560 as the Arabica market has now fallen freely 1375 points since the highs posted a week ago.  Dealings were orderly and lackluster despite the early morning news of a major price leading roaster dropping prices an average of 6% in response to “sustained declines” in green coffee costs and noting that they do not see green coffee prices changing “significantly”.  Conab also came out with an  estimate of 49.7 mln bags for Brazil’s crop which was greeted with the all the enthusiasm of “please pass the salt”. From 8am until the close the market lulled about in a 110 point 12265-12155 range pressured by persistent systems fund selling,  while industry was comfortable in letting the market come their way to take on some additional cover below yesterday’s low.   We have been in a range bound market for the past 7 months and conventional wisdom would say to expect those who have been successful in trading the range to look to reenter on the long side as we approach the 120 level, that is lest the calendar and crop flows dictate a justification for patience.