ICE Canola Futures Recover, China Uncertainty Reigns

It was learned late Thursday that the Canadian Food Inspection Agency has a conference call planned with the Canadian grain trade Friday to discuss a number of issues. Chief among the subjects is the potential Chinese revisions to quality regulations on imports of Canadian canola.

Brokers said that just the sound of that was enough to spook the market and send canola futures crashing lower.

They noted that the situation goes back to a report in early October that China had expressed concerns regarding blackleg risks in Australian origin canola.

Speculation in the market is that the CFIA call to the grain trade might involve a Chinese request to also now provide blackleg free certification on Canadian canola exports starting sometime in November, brokers said. Another issue may involve establishing weed seed tolerance in Canadian exports of grains and oilseeds to China.

There remains a great deal of concern regarding the uncertainty of these and other issues, traders said, noting that uncertainty breeds fear, and fear leads to selling.

They noted that with EU GMO policies recently bringing Canadian flaxseed exports to a halt, even the hint of interrupted Chinese buying of Canadian canola was enough to spark the selling.

There were conflicting reports about whether any Canadian canola business to China had been cancelled circulating early Friday. Export sources at the West Coast of Canada said no sales by China had been cancelled, but reports out Beijing were indicating some sales had indeed been cancelled.

The CFIA meetings have reportedly been scheduled for after the close of the ICE Futures Canada platform Friday afternoon. As a result, buyer interest in canola was seen as being extremely light.

Weakness in the Canadian dollar early Friday was helping canola find some support with some buying also related to the higher calls for CBOT soybean and soyoil futures with the start of the North American day session, brokers said.

Delays in completing the canola harvest in western Canada due to wet and cool weather conditions was also generating some underlying support.

Keeping canola on the defensive will be the China uncertainty, as well as increased hedge selling, traders said.

Reduced domestic crusher demand for canola was viewed as an undermining price influence as well.

As of 9:40 am EDT, there were 3,100 canola contracts traded.

As of 9:40 am EDT, no western barley contracts had been traded.