ICE Canola Higher On Soy Gains

Canola saw a light trade overnight as the market continues to assess the canola crop situation following a spring and early summer of adverse weather, traders said.

The total canola volume as of 08:41 CDT was 625 contracts with the bulk of the trade in the Nov contract while commercials continued to pare down their positions in the July contract to meet exchange position limits for a cash month.

Canola drew the bulk of its support from the outside markets overnight on the firm tone in overnight e-soybean markets prompted by the weakness in the US dollar index, analysts said.

Canola is expected to hold its gains as the North American trading session gets underway and the US soybean market firms. Tightness in old crop soybeans is coming to the fore again and giving support which is spilling into the canola market.

Canola old crop values are continuing to be supported by the strong export line-up which is keeping cash basis levels firm in order to attract in farmer supplies, brokers said.

New crop canola is drawing support from the production uncertainties as wide spread drought problems in the western prairies and delayed planting due to excess moisture in the eastern prairies have raised questions about crop size. Analysts estimate as much as 60% of the crop could be sub par, depending on weather through the summer.

The crop uncertainness have sidelined export interest and have caused farmer selling to come to a standstill.

For Friday, the expectation is that the market will move modestly higher in relatively small volumes with technical factors indicating the market is consolidating in preparation of a major price move, technically oriented
traders said. However they said the ultimate direction is still in question.

Western barley is expected to move a bit higher with most support tied to the crop uncertainties.
Cash dealers have noted that current Nov futures are trading at a premium to the cash market because of the uncertainly.
Some brokers feel the market is ahead of its self and could correct a bit lower.

"Two hundred dollar barley (in the Nov contract) is certainly an attractive price and has attracted some interest", said a broker.
"However I don’t think the cash (market) is there yet", he added.

Analysts are also noting that there is potential for some major gyrations in the Oct old barley contract as the market attempts to liquidate the open interest and move it into the new Nov contract.

There was no trade in the barley market overnight, but analyst said that is not unusual given that it is a domestic contract.

Prices at 08:35 CDT in Canadian dollars per metric ton: