ICE Canola Down On Weather

Canola saw a moderate trade with intermonth spreading enhancing the volumes as crushers were buying the spread and commercials the main sellers.

The total canola volume was estimated at 14,216 contracts, up from Monday’s 13,882 contracts, including an estimated 4,806 contracts involved in the spread trade.

Canola was higher in the overnight market, prompted by ideas that Monday’s big price decline was overdone and on a firm tone in Malaysian palm oil prices. Canola held onto its gains as the North American trading session got underway and the Chicago Board of Trade soy complex rallied. However, canola turned lower shortly after midday with the biggest losses in the new crop. Canola ended with moderate to steep declines.

Canola was pressured down by shifting weather forecasts as the eastern Canadian prairies are receiving ideal growing conditions after a wet cool spring that had affected planting. Meanwhile critically dry areas of western Saskatchewan and Alberta received some showers and that weighed on the market as did forecasts for heavier
rains later in the week.
"We’re starting to remove some of the weather premium", said a trader.

Contributing to the weakness was slowing demand as crushers have started to take their routine summer maintenance break while there has been no fresh export trade booked. Reports from China that their buying in 2009-10 would be 1.3 mln metric tons of canola/rapeseed, down from almost 3 mln tons in 2008-09 weighed on the market as well. However, the news was met with some skepticism by exporters.

Bearish technical signals were also cited as a negative influence on the trade with some brokers pointing to a seasonal downtrend in the market at this time.

Underpinning the market was slow farmer selling, the weak Canadian dollar and continued concerns about canola production.
"We may have some rain in the forecast, but this (canola) crop is not out of the woods yet," said a trader.

Routine exporter and crusher pricing met commercial selling and only light elevator company offerings. Commodity fund profit taking was evident in the Nov contract, with traders estimating their selling at 500 – 700 contracts.

Western barley was little changed in light trade as intermonth spreading accounted for the bulk of the activity. There continues to be little interest in the market.

The total barley volume was estimated at 46 contracts, up from 21 contracts on Monday, including an estimated 28 contracts involved in the spread activity.

Prices are in Canadian dollars per metric ton: