ICE Canola Up On Frost Talk, Crush Margins

Canola saw a moderate to active trade with an estimated 8,045 contracts traded as of 11:37 CDT. Positioning was noted ahead of the Wednesday USDA supply-demand reports.

Canola posted strong gains lifted by a weather forecast calling for frost in Northern Saskatchewan on August 20th and very strong crush margins.

With the canola crop 2-4 weeks behind development, the threat of frost is fore front in traders minds.
However some traders were skeptical, noting that forecasters have trouble "getting the forecast right for tomorrow…forget about next Thursday". Another noted that "it seems to be tied to a new moon chart and I won’t believe anything until we get to next week."

Weather forecasts are calling for single digit lows in Alberta this week with the lowest temperatures expected in the Edmonton area.

Crush margins have seem a major improvement today as strong soyoil futures and the very weak Canadian dollar were cited a friendly influences on the crush profitability.

Slow farmer selling and a strong export program in the Sept-Dec period also is underpinning the market as is the solid gains in Chicago Board of Trade soy complex futures.

Bullish technical signals were also cited as a positive force in the market. "The market tried to fill gaps in Nov canola at the C$420 level, failed and now looks like it wants to go to $460,’ said a technically based trader.

Capping the gains was the favourable growing conditions in Manitoba and Saskatchewan and ideas that the canola crop will be larger than some early forecasts at about 9 mln metric tons. Large European production also weighed on the market.

Routine exporter demand was augmented by strong crusher buying and speculative buying. The speculative buying was both short covering and going long the Nov contract, said analysts. The selling was mainly commercial with some farmer pricing evident as they make room for the new crop. Also weighing on the market was hedge selling out of Europe.

Western barley posted small gains in light to moderate trade. The lack of farmer selling forced some end user booking in the Nov contract to take the market higher, brokers said.

The total barley volume at 11:35 CDT was estimated at 321 contracts.

Prices at 11:36 CDT in Canadian dollars per metric ton: