ICE Canola Lower On Expected Weak US Soy

Canola saw only light trade with only the Nov contract seeing activity. The total canola volume, as of 08:29 CDT, was 286 contracts.

Canola was lower for the bulk of the overnight session on expectations that Friday morning’s USDA report would be bearish for the crop. Activity was subdued ahead of the report. When the report was issued the market edged down but in very thin volumes and traders did not feel it was significant.

Canola is expected to start lower but will likely rally during the session as short covering is expected to boost prices. "I think there were lots of shorts waiting for really bearish numbers (in the USDA report) and I think they will just want to buy their positions back today," said a broker.

While the market is seeing some pressure from his week’s rain in western Canada, brokers are looking for the lack of farmer selling, as producers are disappointed with current prices, and some steady demand in the market, covering old sales, to give support.

News this morning that China continues to be an exceptional buyer of US soybeans was also supportive on ideas that they would likely be booking some canola as well. However, a forecast from the Canola Council of Canada at an oilseed conference in Beijing overnight predicted lower canola exports to China, due mainly to smaller supplies. They also forecast that canola prices would likely range from C$450-$550 per metric ton in 2009-2010, up 5% from 2008-09,
due to a drop in production to about 10.2 mln tons.

Also giving some support to canola will be technical factors as the market has dropped to a strong support level which should contribute to a bounce higher. The weakness of the Canadian dollar should also supply some underpinning to prices.

Ideas that commodity fund liquidation selling has finally ended was also noted as a supportive factor, traders said. They do note that they don’t expect a big upward surge in the market, but feel that gains in the $5.00 per ton area would be likely after the opening weakness.

Western barley is expected to continue to be under pressure with small losses forecast. The Oct contract will continue to see liquidation weigh on the market while the Nov contract with be pressured by the weak tone in feed grain markets generally, said analysts.

Prices at 08:47 CDT in Canadian dollars per metric ton: