ICE Canola Lifted By Export Talk

Canola saw an active trade with much of the volume comprised of intermonth spreading as funds rolled positions into the Mar contract from January.

The total canola volume was estimated at 18,654 contracts, up from 17,853 contracts on Wednesday, including an estimated 10,814 contracts involved in the spread trade.

Canola was higher in the overnight session on strength in international vegetable oil prices. Canola turned lower following the release of the bearish Statistics Canada crop production report. Canola continued to see losses as the North American trading session opened and the Chicago Board of Trade soy complex posted gains. Canola ended with small gains.

Canola was supported by the firm tone in the US soy market, the weak Canadian dollar, favourable crush margins and slow farmer selling. Contributing to the gains were friendly technical signals as the Jan contract moved above the 100 day moving average, said analysts.

Also supportive was news that a vessel was being loaded with canola destined for China. Talk was that this suggests that China’s embargo against Canadian canola imports due to Blackleg contamination has been resolved.
Canada’s prime minister Stephen Harper is in Beijing right now in talks with Chinese officials and exporters confirmed that this was one of the items on the list.

Traders noted that the ability of the market to rally in the face of the bearish Statistics Canada crop report tends to confirm the trade talk of exports to China. "You don’t sell a market that rallies on bearish news and that is certainly the case today for canola, " said a broker.

Canola futures were initially pushed lower by this morning’s StatsCan report which pegged the 2009 crop at 11.8 mln metric tons, which was the high end of trade forecasts and well above the previous StatsCan estimate of 10.3 mln tons. The higher production was expected to push 2009-10 ending stocks to burdensome levels of over 2 mln tons, said brokers.

Crushers and exporters were buyers today with early commission house shorting of canola becoming short covering by the close as the market bounced back from losses. Technical signals prompted commodity fund buying with fund buying estimated at around 1,000 Jan contracts. The selling was mainly commercial with grain elevator companies good sellers early. However their selling faded as the session progressed.

Western barley ended higher in light trade. The market firmed on feed lot demand as early country selling slowed and allowed barley to rally in the last hour of the session, brokers said.

The barley volume was estimated at 90 contracts, up from no activity on Wednesday.

Prices are in Canadian dollars per metric ton: