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ICE Canola Futures Up, China Quandary Lingers

| 2 min read

By Dwayne Klassen

By Dwayne Klassen, Resource News International

October 27, 2009

Winnipeg – Canola contracts on the ICE Futures Canada platform were trading at mainly higher price levels at 9:44 EDT. Harvest delays in western Canada provided some support to values as did firmness in the cash market, industry sources said.

The rolling of positions out of the November contract ahead of it becoming a cash delivery month and into the January future was a feature of the trade.

Activity in the canola market continues to be on the lighter side as the entire Canadian canola industry tries to assess China’s decision to demand certified zero-tolerance in blackleg content in canola shipments starting November 15, brokers said.

Market participants feel that this is an impossible requirement from any supplier, whether Canadian, Australian or European origin, traders said, noting that this begs the question as to what are the Chinese up to?

Without China taking 2.0 million metric tons or more of Canadian canola this year, that will be a huge hole to find someone else to fill, brokers said. However, on the other side of the coin, Chinese canola users have few to no other alternative options for supply under those import restrictions.

Industry sources believe that a compromise will be worked out between Canadian and Chinese government officials, but the bigger question will be when.

Canola futures had traded on both sides of the plus/minus line overnight and only moved up near the opening of the CBOT for its North American day session.

Some weakness in canola had been inspired by the declines posted in Malaysian palm oil and European rapeseed values overnight, brokers said. E-CBOT soybean values were steady to fractionally higher overnight.

Calls for CBOT soybean and soyoil futures Tuesday’s North American day session were generally steady and failed to provide any clear direction for canola participants, traders said.

The general weakness of the Canadian dollar was seen as supportive for canola. The pricing of previously made canola sales to Japan and Mexico was seen helping to provide some light support.

As of 9:44 am EDT, there were 1,448 canola contracts traded.

As of 9:44 am EDT, no western barley contracts had been traded.