ICE Canola Contracts Drop on Large Output Ideas

Statistics Canada in its first crop production outlook for the 2010/11 (Aug/Jul) crop year pegged canola output at 10.867 million metric tons, which was at the high end of pre-report estimates that ranged from 10.30 million to 10.91 million tons. In 2009/10, Canadian canola production was 11.825 million.

There were ideas that with the survey, which was taken three to four weeks ago, and the good growing conditions since, that canola output will easily surpass the 11.0 million ton level, brokers said.

The report sparked a wave of liquidation orders from speculative and commercial accounts, traders said.

Adding to the bearish price sentiment in canola was the advancing harvest and the generally weak tone in CBOT soybean and soyoil values. Losses in Malaysian palm oil futures overnight added to the price declines in canola.

A deterioration in crush margins and reduced domestic processor demand contributed to the weakness in canola. The absence of fresh export demand was also an undermining price influence, brokers said.

End-users were said to have backed away from canola given the larger crop prospects and the probability of weaker canola values, traders said.

Some chart-based selling was also evident and helped to amplify the downward price slide.

Farmer selling right off the combine was said to be fairly aggressive as well, adding to the weak price tone in canola, traders said.

There were an estimated 18,042 canola contracts traded at 10:40 CDT.

There were no western barley futures traded as of 10:40 CDT.