ICE: Canola lifted by outside markets, steady buying interest

By Alana Vannahme, Resource News International

March 23, 2009

Winnipeg – Canola futures on the ICE Canada platform were trading at firmer levels as of 11:01 CDT on Monday and had extended their earlier advances.

There was strong support for canola tied the bullish tone seen in outside markets, traders said.

Global equity markets were sharply higher, crude oil futures had climbed above US$53.00 a barrel and in overnight trade Malaysian palm oil values rose to nearly six-month highs. Early profit-taking had trimmed CBOT soybean and soyoil gains but both those markets were still solidly higher as well.

Further contributing to the upside in North American vegetable oil prices was the escalation this weekend in tensions between the Argentine government and farmers unions over the country’s 35% soybean export tax.

Farmers set up road blocks on Friday and began a seven- day strike on Saturday. The strike was seen as positive for US soybeans, and in turn canola, as it will encourage further US exports to countries such as China, market analysts said.

Canola’s chart signals have turned the corner and are looking quite friendly, which was encouraging mild short- covering by commodity funds, a Winnipeg trader said. The nearby May contract is nearing the 40-day moving average and that is stimulating interest, he said.

Additional demand was tied to commercials covering routine export sales. Domestic processors were thought to be steady buyers as well, with crush margins beginning to improve from last week’s lows, brokers said.

Ideas that farmer cash sales will slow down even more in the coming weeks once spring road restrictions are fully implemented and farm yards are waterlogged by the spring melt also helped to underpin the market.

The Canadian dollar was trading at a firmer level on Monday, which brokers said was helping to temper canola’s upward price advance.

Trade was fairly light in canola on Monday. As of 10:56 CDT, 8,949 contracts had been traded, 5,256 of which were spread-based.

In the western barley, meanwhile, trade was very thin, with only 30 contracts having changed hands as of 10:56 CDT.

Prices in Canadian dollars per metric ton at 10:56 CDT:

          Price    Change
Canola
     May     425.50    up 4.70
     Jul     430.00    up 6.90
     Nov     435.40    up 8.70
 
Western Barley
     May     150.00    dn 1.00
     Jul     157.50    unch