ICE Canada Review: Large supplies undermine canola

Statistics Canada pegged Canadian canola stocks on farm and in commercial position as of July 31, 2010 at 2.123 million metric tons. This was well above pre-report projections that ranged from 1.100 million to 1.355 million tons and compares with the 2008/09 (Aug/Jul) canola ending stocks level of 1.661 million.

The 2009/10 canola projection was also the second highest on record after 1999/2000 when canola ending stocks were a record 2.200 million tons.

Canola contracts moved down after the release of the report.

The sharp jump in the value of the Canadian dollar, thanks to the Bank of Canada’s decision to hike interest rates early Wednesday, also weighed heavily on canola.

Traders said the extra canola supplies and the jump in the dollar caused domestic crushers and end-users in general to back away from the canola market.

A pick up in elevator company hedge selling added to the price declines in canola as did liquidation orders from speculative accounts. Weakness in CBOT soyoil values further undermined canola futures.

Some small underlying support in canola came from ongoing concerns about yield potential given this year’s poor growing season and the wet weather during the harvest, brokers said.

Some position evening ahead of Friday’s supply/demand balance tables scheduled to be released by the USDA also was a feature of the activity in canola.

Spreading was also evident in canola and helped to augment the volume total.

There were an estimated 19,617 canola contracts traded Wednesday, up from the 11,981 contracts that changed hands during the previous session.

Western barley futures were unchanged and untraded Wednesday. On Tuesday, there were 25 barley contracts that changed hands.