ICE Canada Review: Canola eases as demand wanes

The demand that had been coming from the domestic and export sectors has declined significantly give the huge supply of old canola being held on farm by producers in Western Canada, brokers said. The larger supply base has eased the need of end-users to cover supply until new-crop canola is available.

The wet growing season on the Canadian prairies has slowed crop maturity and in turn, harvest activities, analysts said. However, they noted that with 2009/10 (Aug/Jul) canola ending stocks being the second highest on record, there is no rush to cover needs even if the 2010/11 canola harvest is delayed.

The continued strengthening of the Canadian dollar also caused end-users to ease up on demand, as the stronger currency cuts into crush margin profitability and makes canola more expensive for importers.

Increased hedge offers by elevator companies during the session helped to undermine canola futures. A pick up in liquidation orders from speculative accounts also put canola on the defensive, brokers said.

Weakness in CBOT soybean and soyoil futures helped to encourage the losses in canola.

The losses in canola were tempered by scale down buying by commercials and by the buying back of previously sold positions by a variety of market participants, analysts said.

There were an estimated 20,233 canola contracts traded Thursday, up from the 19,617 contracts that changed hands during the previous session.

Western barley futures were steady to lower with light commercial offerings in the absence of willing buyers, allowing the nearby October contract to be pushed lower, traders said. On Thursday, there were 10 western barley contracts traded. On Wednesday, no barley contracts changed hands.