ICE Canola Pressured By Bearish Outside Markets

Pressuring canola to the downside was the bearish tone in outside markets, traders said. The strong US dollar, lower equities and a drop in crude oil futures will undermine commodity markets and will discourage the supportive flow of speculative money.

Lower e-CBOT soybean prices further fuelled the downward price action.

Additional weight was tied to lower opening calls for soybeans with the start of North American trade in Chicago. After reaching nine-month highs earlier this week, soybean prices could move lower on profit-taking and pull canola futures along with them, market watchers said.

Declining crush margins and the lack of fresh export sales were encouraging weakness in canola as well, traders said.

However, canola contracts will be underpinned by production concerns and the slow pace of farmer selling in western Canada, brokers said. Delayed crop development, cool temperatures, dryness and, in Manitoba, excessive moisture could threaten 2009/10 Canadian canola production unless conditions are near- ideal through the rest of summer.

With that in mind, farmers are reluctant to sell their remaining canola should their new crop production suffer and that will provide a floor for the market.

The weakness of the Canadian dollar Friday was also seen as a supportive price influence for canola. In early activity, the currency had slipped below the 90 US cents mark.

Activity in canola was heavier than normal although a portion of the trade volume was tied to intermonth spreading. As of 9:05 CDT, canola contracts had changed hands.

Meanwhile, western barley futures were untraded and unchanged as of 9:10 CDT. Most traders have taken to the sidelines as they wait for the introduction of revised western barley contracts.

During its annual industry briefing on Thursday, the Canadian Wheat Board said it expects Canadian barley production to fall to 8.9 million tonnes in 2009/10 compared to 11.2 million tonnes last year. Cold weather is delaying crop development, which leaves the crop at greater risk of being damaged by fall frosts.

Prices in Canadian dollars per metric ton at 9:10 CDT: