ICE Canola Lower In Dull Trade

Canola activity was very light with small intermonth spreading evident in the trade. The estimated volume at 11:04 CDT was 3,221 contracts.

Canola was pressured down by the firm tone in the Canadian dollar, weakness in Chicago Board of Trade soy complex futures and bearish technical signals, said analysts. Sluggish fresh demand contributed to the weakness.

Crusher demand has backed away from the market as crush margins have dropped sharply.
The Canadian Oilseed Processors Association reported Friday morning that crush capacity utilization has dropped to 72.1%.
While poor crush margins have reduced crusher demand, sources indicate that some crushers have also closed for seasonal summer maintenance.

Export demand is also sluggish with export sources indicating that the only demand in the market is for routine sales to Mexico and Japan.

Contributing to the weakness is steady, but light, speculative liquidation selling with both funds and commission houses selling noted, brokers confirmed. "These guys got long during the weather problems and are licking their wounds and just getting out of the market," said a trader.

The firm Canadian dollar is a bearish influence with traders closely watching to see if it will break through significant resistance at US$0.9250. "They’ve (speculators) taken a run at that level twice so far today and haven’t been able to convincingly penetrate it", said a trader.
He added that "the (Canadian) dollar has faded back quite a bit since the second attempt failed."

Underpinning the market was the lack of farmer selling as farm bids have dropped below the C$9.00/bu level in Saskatchewan, a level that cash dealers say is very unattractive. Ideas that canola is oversold and due for a rally also gave some support.

Traders also noted that open interest continues to climb in canola suggesting that commercials are "quietly" acquiring a long position.
"I think they (commercials) know the crop is in trouble and are just quietly picking up the canola they will need later in the year", said a broker.
Open interest in Nov and Jan canola increased 4,314 contracts on Thursday, according to data from the exchange.

Exporters were the best buyers with commercials and speculators the main sellers.

Western barley was unchanged in light trade. Activity was focused in the Oct contract where the trade was described as liquidation.
Actvity in other contracts saw buyers back away from the market on a weak tone in the cash market, brokers said.

The total barley volume at 11:03 CDT was estimated at 12 contracts, all in the Oct futures contract.

Prices at 11:03 CDT in Canadian dollars per metric ton: