By Terryn Shiells and Jade Markus, Commodity News Service Canada
Winnipeg, July 27 – ICE Canada Review: Canola Down Sharply With Spec Selling
By Terryn Shiells, Commodity News Service Canada
Winnipeg, July 27 – Canola contracts on the ICE Futures Canada trading platform ended sharply lower on Monday, as speculators liquidated their long positions after the market broke through key support levels, analysts said. Some of the spec selling was also linked to the crashing Chinese stock market.
Further spillover pressure came from the sharply weaker Chicago soybean and soyoil market.
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Expectations that the Canadian canola crop will be a bit larger than first anticipated added to the bearish tone. Current average trade estimates sit at about 13.5 million tonnes, according to a broker.
Improving weather for crop development in Western Canada, with weekend rains seen in parts of Alberta and Saskatchewan, further undermined values.
Though, canola supplies will still be tight at the end of the 2015/16 marketing year, which helped to limit the declines.
Some light commercial and exporter buying was also seen at the lows of the day, traders noted.
About 26,863 contracts traded on Monday, which compares with Friday when 22,363 contracts changed hands. Spreading accounted for 6,764 of the trades.
Milling wheat, barley and durum futures were untraded. Though, the Exchange moved barley and milling wheat prices lower after Monday’s close.
SOYBEAN futures at the Chicago Board of Trade closed between 31 and 23 cents per bushel lower on Monday as stocks in China fell and a positive weather outlook for US growing regions weighed on prices.
Chinese stocks fell 8.5 per cent on Monday, which was the biggest one-day drop since 2007.
The tumble negatively affected Chicago prices as it raised concerns that export demands from China could lower, analysts say.
Market watchers say weather conditions in US growing regions are favourable for production, which is bearish, especially when combined with the potential for decreased demand.
SOYOIL prices settled weaker on Monday following neighbouring markets.
SOYMEAL closed lower on Monday following nearby markets.
CORN futures closed between 19 and 12 cents per bushel weaker on Monday, also feeling pressure from lower Chinese stocks.
Dryer conditions in the US after a wet June and July are favourable for corn production, analysts say.
Dryer weather during a key growing phase increases the chances this year’s yield will be high, which is bearish.
WHEAT futures in Chicago closed between nine and six cents per bushel weaker on Monday on concerns about China’s economy and following neighbouring markets.
Market watchers also say US wheat is not competitive globally, which added to the bearish tone.
However, wheat found some support as the greenback had lost ground ahead of a two-day US Federal Reserve meeting to take place on Tuesday. Analysts expect the bank to discuss an interest rate increase for later this year at the meeting.
Market talk about lower quality winter wheat could have a bullish effect on prices in coming weeks. Heavy rain in US growing regions has caused damage to some crops.
• Egypt is considering extending the amount of time it is accepting higher moisture wheat. The country had upped its standards to 13.5 per cent, the extension allows continued purchasing of French wheat.
• Some US farmers are reporting that their winter wheat is of the worst quality seen in at least 17 years.
• Cuba may become a big buyer of US wheat if the embargo between the two countries is lifted, according to reports.
ICE Futures Canada settlement prices are in Canadian dollars per metric ton.
