ICE review: Demand bolsters Canola

Dwayne Klassen, Resource News International

Winnipeg, April 1, 2009 — Canola contracts on the ICE Futures Canada platform finished the day higher with strength associated with weakness in the Canadian dollar and steady nearby demand for the commodity from commercials, market watchers said. Weakness in CBOT grain and soyoil futures discouraged some of the upward price action.

A good portion of the advances were associated with good commercial demand that was believed to be covering nearby commitments, traders said. There were ideas that some fresh export business had come forward and exporters in turn were covering those requirements. Some of the demand was also believed to be from the domestic processing sector, with crush margins having improved significantly over the past couple of days, brokers said.

The pricing of routine export business to Mexico and Japan was also evident and helped to account for some of the nearby demand, traders said.

Some of the support in canola also came from sentiment that since U.S. soybean acreage this spring will not be as large as first anticipated, the amount of canola that will be seeded this spring will also not increase as much as first thought, traders said.

Some of the buying in canola also came in anticipation of fresh speculative buying entering the market and from supportive chart signals, traders said.

The gains in canola were limited by the weakness displayed by CBOT soyoil values and the mixed price tone seen in CBOT soybean futures.

Farmer movement of canola was on the lighter side, but it was still heavy enough to spark some late hedging by elevator companies, brokers said.

There were an estimated 21,650 canola contracts traded during Wednesday’s session, up from 13,211 during the previous session. Of the contracts traded Wednesday, 17,480 were spread-related.

Western barley futures were mostly higher with only the nearby May and July contracts attracting any kind of attention. Light commercial demand in the absence of willing sellers resulted in the May and July futures being pushed higher, traders said. Much of the activity in barley consisted of spreading.

An estimated 773 barley contracts changed hands during the session. On Tuesday, 1,028 barley contracts were traded. Of the contracts traded Wednesday, 760 were spread-related.