ICE Canola Futures Drop on Sluggish Demand

The liquidation of positions by commodity fund accounts was a factor in Monday’s declines in canola and market participants were expecting another round of that selling to occur Tuesday. Some of the fund liquidation was being linked to the bearish turn in the technicals.

Some positioning 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, was also anticipated.

ICE Futures Canada and ICE Clear Canada will be closed for trading and clearing operations on trade date Wednesday, July 1, 2009 for Canada Day. Normal trading hours will be observed on Tuesday, June 30, 2009. Trading resumes on Wednesday, July 1, 2009 at the normal "evening" time.

The Toronto Stock Exchange and all other Canadian financial institutions will also be closed Wednesday, July 1, 2009 for Canada’s national holiday.

The absence of fresh export demand for canola was a factor behind the declines, with domestic crushers also taking to the sidelines to await further market developments, brokers said.

Losses in Malaysian palm oil futures overnight were also viewed as an undermining price influence.

The selling interest in canola was expected to be contained in part by continued weather problems, specifically dryness on the western Canadian Prairies and excess moisture on the eastern Prairies.

Steady to firm numbers for CBOT soybean futures in the USDA’s acreage and stocks report also may be enough to slow the selling in canola with the start of the North American day session.

As of 9:50 am EDT, there were 1,725 canola contracts traded.

Western barley futures while unchanged and untraded as of 9:50 EDT, were expected to come under some downward pressure as the session progresses, brokers said. Anticipated declines in CBOT corn futures were expected to spark some commercial liquidation. The rolling of positions was also anticipated.

The increased expectation that a larger portion of Canada’s grain crop in western Canada will grade as feed than normal was seen as an undermining price influence, brokers said.

Reports that Canadian livestock companies were importing US distillers grain as feed, also had bearish price implications, traders said.

Prices in Canadian dollars per metric ton at 9:50 am EDT: