ICE Canada Review: Canola Climbs Higher On Strong Demand

The gains in canola were partially tied to the strength in the US wheat markets, which were posting the largest advances of the agricultural commodities on Tuesday. Canola competes with spring wheat for acres in western Canada, and the rising wheat prices were leading to ideas that some acres originally intended for canola may end up being planted to wheat instead, according to brokers.

A turn higher in the CBOT soy complex was also supportive for canola, according to traders.

Domestic crushers and exporters were some of the featured buyers in canola, with some speculators also adding to their long positions given the generally bullish technical outlook, said traders.

A weaker tone in the Canadian dollar, which was down by about half a cent relative to its US counterpart, provided some further support for canola.

Light farmer hedges and profit-taking did temper the upside. However, aside from those growers with nearby cash-flow needs, most producers continue to hold out for the possibility of seeing higher prices down the road, said a broker.

An interest rate hike in China also accounted for some selling pressure in the oilseed markets on Tuesday, as the higher costs of borrowing in the country could cut into some of the demand for commodities, including canola, said traders.

The USDA issues updated supply/demand projections on Wednesday, and some positioning ahead of the report was taking place on Tuesday.

About 22,859 contracts were traded on Tuesday, which compares with Monday when an estimated 24,106 contracts changed hands. Spreading accounted for about 16,410 of the contracts traded.

Western barley futures were untraded and unchanged.

Settlement prices are in Canadian dollars per metric ton.