ICE Canola Rallies On Frost Talk, US Soy Gains

Canola saw an active trade with intermonth spreading augmenting the activity. Positioning was evident ahead of Wednesday’s US Department of Agriculture supply- demand reports.

The total canola volume was estimated at 12,569 contracts, up from Monday’s 5,979 contracts, including an estimated 5,888 contracts involved in the spread trade.

Canola rallied in the overnight market as Malaysian palm oil posted strong gains and the overnight soybean market also advanced.
Canola extended those gains as the North American trading session got underway and the CBOT soy complex rallied. Canola ended with strong gains.

Canola was lifted by a forecast for frost to hit the Saskatchewan crop on Aug 20th. With canola development 2 to 4 weeks late and this summer being unusually cool, traders are concerned about any frost predictions.
"Always tough to trade a weather market," said a trader, " but you have to respect frost potential."

Contributing to the strong gains in canola was the major improvement today in crush margins as the very strong US soyoil and soymeal prices and the very weak Canadian dollar improved crush profitability, said traders.

Technical signals have turned bullish and that contributed to the gains, said traders. "The charts suggest that this market (Nov canola) is going to C$460 (per ton)", said a technical trader, who added "I’m amazed how fast it changed."

The strong gains in the US soy complex and a strong west coast fall export program for canola have also encouraged the advances in the canola market, said traders.

Capping the advance was the favourable growing conditions forecast for this week in Manitoba and Saskatchewan, the need to clean out bins ahead of the harvest and the large European rapeseed crop, said brokers.

Routine export buying was augmented by solid crusher demand and speculative buying. The speculative buying comprised of short covering and fresh longs in the market.
Commodity funds were noted buyers. The selling came mainly from commercials with steady elevator company hedging and some European hedge selling noted.

Western barley futures ended mixed in moderate trade. Liquidation trade dominated the Oct contract. The lack of farmer selling forced some end user pricing in the Nov contract to boost values, brokers said.

The total barley volume was estimated at 360 contracts, up from only 5 contracts on Monday, including an estimated 104 contracts involved in the spread trade.

Prices are in Canadian dollars per metric ton: