ICE Canola Soars On US Soy, China Talk

Canola saw a moderate trade with only small amounts of intermonth spreading. Evening up was noted ahead of the Canadian long weekend which will see the ICE Canada market closed on Monday.

The total canola volume was estimated at 6,819 contracts, down from Wednesday’s 7,972 contracts, including an estimated 382 contracts involved in the spread trade.

Canola was lower in the overnight market on the bearish technical momentum following the Nov contracts drop below the C$400 per metric ton level. However,
as international vegetable oil and oilseed markets rallied, canola started to move higher, eventually posting gains. Canola held onto and extended its gains as the North American trading session opened and the US soy complex posted a strong rally, traders said.

Canola was supported by the big advance in the US soy complex, particularly the near 2 cent rally in soyoil futures, said traders. Also giving support were ideas that canola was oversold and due for a rebound.

Talk that China has or is preparing to make large canola purchases, equaling last falls shipping program, fueled the gains as well. Exporters would not confirm the talk. However, traders noted that open interest has risen ever day for weeks, despite low volumes, and they took that as a sign that "something is happening". "Commodity fund liquidation ended in mid-July and since July 17th open interest has increased in canola every day.
It is up over 14,000 contracts, that’s a 16% increase…someone is acquiring a large position," said a trader.

The market was also starting to put in a weather premium as recent cold conditions continue to encourage talk of an early frost.
Overnight, temperatures in Saskatoon, a prime canola growing area, dropped as low as 5 degrees Celsius, brokers noted.

The firmer Canadian dollar was only a minor bearish feature today.

The buying came from exporter and crusher pricing and some commission house short covering.
Commodity funds did do some small buying and selling today, said traders. However, traders feel that funds will not cover their small short position in Nov canola until the contract tops $420/ton.

The selling was unaggresive and mainly commercially dominated.
"Nobody wants to be short this market with the crop problems and the cool weather so most of the selling is either liquidation or covering a cash position," said a trader. Farmer selling is small.

Western barley rallied in moderate trade. The Oct contract was dominated by liquidation activity. The Nov contract was lifted by the firm tone in CBOT corn and the lack of farmer selling, brokers said.

The total barley volume was estimated at 188 contracts, up from 11 contracts on Wednesday, including an estimated 42 contracts involved in the spread trade.

Prices are in Canadian dollars per metric ton: