ICE Canola Down On Slow Demand

Canola saw a moderate trade with only light intermonth spread activity.

The total canola volume was estimated at 9,115 contracts, up from Tuesday’s 8,169 contracts, including an estimated 942 contracts involved in the spread trade.

Canola was lower in the overnight market, prompted by a weak tone in international vegetable oil prices. Canola continued to see those declines as Statistics Canada released its grain stocks report, pegging 2008-09 (Aug-Jul) canola ending stocks at 1.66 mln tonnes, well within trade forecasts. Canola maintained its modest declines as the North American trading session opened and the Chicago Board of Trade soy complex posted losses.
Canola ended with small losses.

Canola was pressured lower by the weakness in the Chicago soy complex and the firm tone in Canadian dollar. Fresh export demand was sluggish and that weighed on the market as did the lack of significant frost in the forecast into early next week, traders said. Bearish technical signals also weighed on the market, prompting speculative selling, as technicians are looking for a test of support at C$388 in the Nov contract.

While some traders felt the StatsCan ending estimate of 1.66 mln tonnes was mildly bearish as it was up from last year’s 1.46 mln tonnes, other traders were more friendly to the market noting that last year’s canola production was a record 12.6 mln tonnes and that people had originally been talking about ending stocks as high as 3 mln tonnes.
"We proved we could use the supply and I think that is pretty friendly with the smaller crop that will come off this year," said a trader.

Underpinning the market was the pricing of a canola sale to Mexico, the continued late development of the canola crop and its vulnerability to frost, and ideas the market is heavily oversold, analysts said.

Japanese pricing was augmented by exporter buying and some light routine crusher pricing. The selling came from commercials with steady elevator company offerings and speculative selling noted. Commodity funds were noted adding to their short position in the Nov contract.

Western barley ended lower in light commercial trade. The market was pressured down by the advancing harvest and sluggish demand. This morning’s StatsCan’s report pegged 2008-09 ending stocks at 2.8 mln tonnes, well above the highest trade forecast. Giving some support were ideas that farmers will be storing the barley crop rather than sell it into the current depressed market, cash dealers said.

The total barley volume was estimated at 174 contracts, down from 107 contacts on Tuesday, including an estimated 30 contracts involved in the spread trade.

Prices are in Canadian dollars per metric ton: