Morgan Stanley Commentary for January 15, 2016

With a quiet macro environment, coffee was able to post a settlement at yesterday’s high, while only violating the week’s double bottomin the smallest of ways. With the absence of meaningful stops and follow through at the low, and a lack of pressure from crude, China, or the BRL, one is tempted to question who is left to sell the market aggressively unless another large outside force emerges. However, as we have seen all too often, it is unwise to risk poking the Bear. Roasters exhibited an active appetite across the globe in both Arabica and
Robusta, with KC in particular being the beneficiary going out quite far along the curve in decreasing size. Brazil selling was apparent as well in both markets throughout the day to the surprise of many, while the excellent size traded in the physical robusta market also drew substantial Vietnam fixing in the early hours. Tet is roughly 3 weeks away and it will be interesting to see whether the combination of the holiday and physical shorts in the market conspire to cap the London market near these levels. Ice certs climbed in the slimmest of manners, and remain below 1.7 million bags.