ICE Canola Firms On “Anaemic” Bounce

Canola saw a light trade focussed in the Nov contract with only 377 contracts traded as of 08:29 CDT.

Canola drew the bulk of its overnight strength from a modest firming in the e-CBOT soybean market and gains in the energy markets. However further weakness in the Malaysian palm oil market countered some of that keeping the gains small and the rally "anaemic" said a trader.

While traders expect to see modest early gains in the canola market, they do feel that it will work lower throughout the session as bearish technical signals will weigh on the market. The retreat in the energy sector from early strength also contributed to ideas that canola will eventually drift lower.

"There is a significant rain event happening in Saskatchewan and Alberta today and that will weigh on the market", said a broker. He indicated that it will likely not significantly improve the crop but it will halt any further deterioration.

Analysts also noted that "panicked" speculative selling continues to hang over the market.
"We got a lot of the shorter term longs out of the market yesterday, but I wouldn’t be surprised if we see more commodity fund liquidation selling", said a broker. Traders estimated Monday’s commodity fund liquidation selling at 2,000 to 3,000 Nov contracts.

Underpinning the market will be the lack of farmer selling, ideas that Monday’s losses were overdone and the feeling that the rain that has appeared in Alberta and Saskatchewan has been "too little too late".

Traders generally did not expect to see big declines in the canola market as they feel that current prices do accurately reflect the stress in the canola crop.

Western barley futures were unchanged and untraded overnight. The market is expected to see some further weakness today as analysts are noting that it has become overvalued against US corn with significant imports of US DDGS, an ethanol byproduct, finding their way in livestock rations.

Prices at 08:42 CDT in Canadian dollars per metric ton: