ICE Canola Futures Pull-back On Overbought Ideas

Profit-taking after recent sharp gains and a pick up in the level of hedges from elevator companies also helped to undermine canola futures. The increase in hedge selling reflected a pick up in producer offerings, as cash bids for canola approached the C$10 a bushel level Thursday.

Weakness in canola also reflected
the sharp uptrend in the value of the Canadian dollar early Friday.

The unimpressive price action in canola during Thursday’s session also has left the technical outlook looking a bit bearish, brokers said.

The lower calls for CBOT soybean futures with the start of the North American day session also helped to influence some selling in canola, traders said.

CBOT Soybean futures are expected to open on a weak footing Friday morning given bearish numbers in the USDA supply/demand update.

The declines in canola will be limited by the continued uncertainty surrounding production of the crop in western Canada. There are ideas a lot of acreage has been left unseeded and a good portion of the canola crop in northern Alberta, Saskatchewan and parts of Manitoba were not experiencing yield enhancing weather conditions, traders said.

Some minor support may also come from an Agriculture Canada supply/demand update released late Thursday evening. The Market Analysis Branch of Ag Canada reduced its 2010/11 Canadian canola production estimate to 10.5 million metric tons from the 11.7 million estimate made in early May. Ending stocks of Canadian canola were now pegged by Ag Canada at only 750,000 tons compared to an early forecast of 1.040 million.

Gains in Malaysian palm oil futures overnight were seen providing some underlying support for canola. Additi9onal strength may come from reports of weather reduced European rapeseed production.

As of 9:31 am EDT, there were 563 canola contracts traded.

As of 9:31 am EDT, no western barley contracts had been traded.