ICE Canola Down On Slowing Demand

Canola saw a moderate trade with intermonth spreading accounting for over half the volume.

The total canola volume was estimated at 11,179 contracts, up from Monday’s 1,901 contracts, including an estimated 6,624 contracts involved in the spread trade.

Canola was lower in the overnight market, prompted by weakness in international vegetable oil prices. Canola continued to see losses as the North American trading session got underway and the Chicago Board of Trade soy complex posted declines. Canola closed moderately lower, ignoring strength in CBOT soybean futures.

Canola was pressured down by weakness in CBOT soyoil and eroding demand. Exporter demand traditionally declines at this time of year with the domestic crush also slowing, as confirmed by recent crushing reports from the Canadian Oilseed Processors Association, traders said. Reports that China was beginning the harvest of a record rapeseed crop was also a bearish factor as China has been Canada’s largest canola buyer in 2008-09. The strong Canadian dollar is also eroding crush margins and dampening export interest, analysts said.

Adding to the weak tone was the advancing planting in western Canada and weather forecasts calling for near ideal planting conditions in some of the areas that have seen the biggest delays. Talk that Canadian canola acres will likely be little changed from last year’s record level also weighed on prices, adding to the weakness in the face of the gains in CBOT soybeans.

The main support in the market came from the gains in CBOT soybeans with some technical support noted as brokers indicated the current move down is simply a test of the 20 day moving average.
"We’ve come back to this level 3 or 4 times (in the July contract) and then started the next leg up after it," said a technical trader. Farmer selling was also slow as prices have generally dropped below the C$10.00/bu level, cash dealers said.

Routine exporter and crusher pricing met commercial selling with only light elevator company selling. evident. Exporters were sellers. There was also some commission house profit taking noted.

Western barley ended higher in light commercial trade. The market was lifted by slack country movement and ideas that the recent canola rally has shifted some acres from barley into canola, brokers said.

The total barley volume was estimated at 86 contracts, up from no activity on Monday.

Prices are in Canadian dollars per metric ton: