ICE Canola Down On Reduced Frost Threat

Canola saw a light trade with intermonth spreading augmenting the volume. Month-end and week-end positioning was also noted.

Canola was higher in the overnight market on strength in e-cbot soy complex values and gains in outside markets. Canola held onto its gains until about mid morning and turned lower as buying backed away from the market allowing small selling to pressure values down. Canola ended lower.

The total canola volume was estimated at 8,465 contracts, down from Thursday’s 9,783 contracts, including an estimated 2,148 contracts involved in the spread trade.

Canola was pressured down by a shift in weather forecasts reducing the threat of frost with warm conditions forecast for the prairies through the end of next week. Traders noted that if no frost appears they expect the canola crop size to be 10.0- 10.5 mln tonnes, up from the Statistics Canada forecast of 9.5 mln tonnes.

Canadian weather forecasters indicate that there is no frost threat in western Canada until late in the second week of September. "If frost stays away till the middle of the month (September) a lot of the (canola) crop will have made it," said a trader.

Trade sources are estimating that early canola harvesting should be underway in the southern prairies within a week with swathing already occurring in some areas.

Sluggish demand also weighed on prices on ideas that Europe was making rapeseed export sales at the expense of Canadian sales as they have a record large rapeseed crop to sell. The crush pace also continues to lag last year.

Limiting the price slide is the weak Canadian dollar, slow farmer selling and strength in Chicago Board of Trade soybean futures, said analysts.

Routine light exporter and crusher pricing met commercial selling. The indecisive technical signals sidelined much of the speculative actvity, said brokers.
Month end pricing pressured the market down, as well.

Western barley ended lower in moderate trade. Oct was pressured down by liquidation selling by a US commodity index fund and by the weakness in international barley prices.

The weakness in Oct weighed on the Nov contract as did the ample competing feed grain stocks, mainly Dried Distiller Grains (DDG).
"Barley is almost becoming a secondary grain in livestock feed rations with all the DDG’s being used this year," said a trader.

Also weighing on the market was the lowering of the Pool Return Outlook prices for barley by the Canadian Wheat Board which will likely result in more barley moving into the domestic market, brokers said.

The total barley volume was estimated at 1,172 contracts, up from 422 contracts on Thursday, including an estimated 980 contracts involved in the spread trade.

Prices are in Canadian dollars per metric ton: