ICE Canada Review: Hedging Trims Canola Gains

The adverse weather conditions for the development of the canola crop across the Canadian prairies were said to have reduced the production potential of the crop. The need to ration demand helped to influence some of the early buying interest, brokers said.

Overnight gains in Malaysian palm oil and European rapeseed futures helped to bolster canola values as did the advances experienced by CBOT soybean futures.

Support in canola also came from fresh chart induced commodity fund buying interest, brokers said. Much of that interest was triggered by the penetration of technical resistance in the November canola futures during Wednesday’s session.

Light, but steady domestic crusher demand also contributed to some of the strength displayed by canola as did the pricing of old export business by commercial accounts, traders said.

However, at the highs of the day elevator company hedge selling picked up and took several canola contracts off their highs, brokers said. The hedging was linked to producers increasing deliveries into the cash pipeline. That selling was linked to reports that bids for canola in the cash market had approached the C$10 a bushel level, a trigger point for unloading canola by producers.

The lack of followthrough fund buying at the highs also helped to trim the gains in canola. Profit-taking and the absence of fresh export demand also were undermining price influences.

Weakness in CBOT soyoil values also helped to restrict the price gains seen in canola, brokers said.

Position evening ahead of the new round of supply/demand updates from the USDA Friday morning was also a feature of the activity seen in canola.

There were an estimated 10,158 canola contracts traded Thursday, up from the 8,898 contracts that changed hands during the previous session.

Western barley futures were bid higher although no contracts changed hands Thursday. On Wednesday, no barley contracts were traded.