ICE Canola Firm In A Choppy Trade

Canola saw a light trade with an estimated 1,050 contracts traded.
Activity was subdued ahead of Thursday’s Statistics Canada crop production report.

Canola was narrowly mixed in the overnight session with the market drawing some support from the firm tone in the international vegetable oil and oilseed markets. However, the very strong Canadian dollar weighed on prices and created the choppy tone, brokers said.

Canola firmed ahead of the opening of the North American trading session on expectations for firmness in Chicago Board of Trade soy complex futures. Gains were small and traders were looking for generally choppy activity.

Canola drew support from the US market and a slower pace to farmer selling.
Export activity has only been routine although crush demand has seen an increase and that is helping to underpin the market, analysts said. Canola is felt to be a undervalued against competing vegetable oilseeds and that is giving support as well.

Traders are looking for continued challenges of the resistance at the C$410- $411 level in the Jan contract. The market has been unable to convincingly break above that level. However brokers say that if it does they feel there are sizeable buy orders sitting above $412 which could be triggered.

Capping the market and creating the choppy tone is the very strong Canadian dollar and the continued locomotive engineers strike against CN Rail. The government has introduced legislation to end the strike, but resistance from two opposition parties could hold it up for as long as 2 weeks, officials say.

There is continued concern about the lack of canola export sales to China, but here the trade is looking for this week’s trip to Beijing by Canadian Prime Minister Harper to help to resolve the impasse.

Also weighing on the market is Thursday’s Statistics Canada crop production report which is expected to show a larger canola crop than the 10.3 mln tonnes in their previous report.
Traders feel the number will be closer to the 11 mln tonne level.

Commercials have been the main early traders and are expected to continue to dominate the trade unless there is a convincing break above resistance in the Jan contract.

Western barley is expected to be little changed amid a lack of interest. There was little fresh news in the market and expectations for small increases in the barley crop size will limit any gains, brokers said.

As of 08:40 EDT there had been no trade in barley and prices were unchanged.

Prices at 08:38 EDT in Canadian dollars per metric ton: