ICE Canola Lower On Weather, Weak Soyoil

Canola saw a moderate trade with intermonth spreading augmenting activity.

The total canola volume was estimated at 10,866 contracts, up from 6,451 contracts on Friday, including an estimated 3,034 contracts involved in the spread trade.

Canola was lower in the overnight session prompted by weakness in European rapeseed and Malaysian palm oil futures. Canola continued to see moderate declines as the North American trading session opened and the CBOT soyoil market posted losses. Canola maintained its early weakness ending moderately lower.

Canola was pressured down by the weak tone in vegetable oil markets and ideas that the canola crop continues to improve with weather forecasts for the week considered benign for the crop. "It’s cool and dry and that is what canola likes", said a trade source.

Bearish technical signals also pressured the market lower as traders are looking for the market to test support at the C$400 level in the Nov contract.
Technicians consider it a significant point which, if support fails, would signal another major leg down in canola, they said.

There is demand in the market but it is on a scale down and that contributed to the price decline. The Canadian dollar is down modestly but is still relatively strong against the US currency and that was a bearish feature of the market as well.

The main support in the market comes from the lack of farmer selling with cash dealers indicating that farmers are distressed at the big slide in canola prices as the crop is behind normal development and yields will be less than optimal. Cash dealers noted that new crop basis levels are firm and that has attracted in some interest.

Routine exporter and crusher scale down buying was augmented by some small short covering by commission houses as the Nov contract approached the C$400 level. The selling was a combination of speculative and commercial with some European hedge selling noted.

Western barley was untraded and unchanged with end user bids C$5-7 per tonne below the market as reduced livestock numbers and competition from "cheap" feed alternatives limited demand, brokers said.

Prices are in Canadian dollars per metric ton: