ICE Canada Grain/Oilseed Review: Canola Drops On Profit-taking

Canola finished with small to modest declines after bouncing to both sides of the plus/minus line during the session. Some of the early weakness in canola reflected the losses seen overnight in the overseas oilseed markets, traders said. Losses in global crude oil futures had also inspired some selling in canola.

Steady commercial and commission house selling, triggered by the lack of fresh export demand and the weakness in CBOT soybean and soyoil futures, accounted for much of the downward price action seen in canola. Chart-based speculative liquidation orders added to the price weakness.

The downward price slide in canola was slowed by weakness in the Canadian dollar and by the continued uncertainty facing the canola crop in western Canada. Weather issues are believed to have caused some major yield reductions, traders said.

Cool temperatures, frost, dryness, and excessive moisture have set the western Canadian canola crop back significantly, and has reduced production potential.

Bruce Burnett, Director of the CWB’s Weather and Crop Surveillance Department in an industry briefing on Thursday estimated western Canadian canola output in 2009/10 (Aug/Jul) at 10.2 million metric tons, which would be down significantly from the 2008/09 level of 12.6 million.

The reluctance of producers to deliver canola into the cash pipeline helped to underpin prices as did a small improvement in domestic crusher demand Friday, traders said.

There were an estimated 15,017 canola contracts traded during Friday’s session, up from 13,285 during the previous session. Of the contracts traded, 10,950 were spread related.

Western barley futures ended higher in the July and October contract. Much of the action in barley consisted of inter-month spreading by commercials, brokers said.

An estimated 32 barley contracts changed hands during the session. On Thursday, 386 barley contracts were traded. Of the contracts traded on Friday, 30 were spread related.