ICE Canola Down On Slow Demand, Month End

Canola saw a moderate volume of trade with light intermonth spreading evident. Activity was muted ahead of Tuesday’s US Department of Agriculture’s grain stocks and acreage reports. Some participants were also sidelined ahead of Wednesday’s Canada Day holiday which will see ICE Canada closed for the day and ahead of Friday’s US holiday for the US Independence Day weekend.

The total canola volume was estimated at 6,884 contracts, down from Friday’s 9,057 contracts, including an estimated 1,686 contracts involved in the spread trade.

Canola was narrowly mixed with most prices lower in the overnight session, prompted by selling ahead of month end and weakness in palm oil prices. Canola maintained its mostly lower prices as the North American trading session opened.
The US soy complex quickly turned lower after its mainly higher opening and that contributed to the weakness in canola. Canola ended with moderate losses.

Canola was pressured down by month end positioning as commercials face exchange imposed position limits when the July contract becomes the cash month later this week. Sluggish fresh demand and bearish technical signals contributed to the price slide, traders said. The weak tone in the US soy complex was a minor bearish influence said traders. Exporters are unaggresive buyers, said brokers, as they assess the crop size and new crop demand.
"The (canola) crop is going to be smaller than our traditional demand and that is making everyone nervous", said a trader.

Giving some support was the continued weather problems with dryness a problem on the western prairies and excess moisture a problem on the eastern prairies. An Alberta analyst said that 2 more weeks of dryness in the province will devastate the crop and force cash market basis levels to firm considerably from current levels. The weak Canadian dollar gave some support.

Activity was commercially dominated with the trade felt to be fairly routine. Farm selling was slow as cash basis levels have generally weakened dropping even with or below futures prices, cash dealers said.

Western barley ended lower in light trade. Activity was focused in the old contracts that are deliverable in Saskatchewan
and featured the rolling of July contracts into the Oct contract. The general weakening in CBOT corn values weighed on the market amid a lack of other fresh news. Commercials dominated the activity, brokers said.

The total barley volume was estimated at 171 contracts, up from 81 contracts on Friday, including an estimated 154 contracts involved in the spread trade.

Prices are in Canadian dollars per metric ton: