Canola Futures Rally on Export Demand and Weak Canadian Dollar

Strategic Insights -

Canola futures at the Winnipeg Commodity Exchange (WCE) experienced moderate gains on Monday, driven by strong export demand and a weak Canadian dollar. The lack of farmer selling and improving weather conditions in western Canada also contributed to the rally. However, overall lackluster export markets and bearish factors hung over the canola market, capping the gains.

Key Takeaways:

  • Canola futures at the Winnipeg Commodity Exchange (WCE) finished Monday's session mainly higher, with a moderate gain in light trade.
  • The July/Nov spread traded at C$7.00 to $8.00, with an estimated 616 contracts involved in the spread trade and a total estimated volume of 3,379 contracts.
  • Canola advanced from the outset of trade, outperforming the gains in the Chicago Board of Trade soybean market, due to talk of Mexico taking a cargo of canola and Japan booking 10,000 metric tons of canola on the weekend.
  • The weak Canadian dollar contributed to the advance, along with the lack of farmer selling, which was a supportive factor today, according to trade sources.
  • Speculative buying was triggered by the rally, and gains in Chicago Board of Trade soybeans were mildly supportive, but partially offset by weakness in CBOT soyoil futures.
  • Commercials were the main participants in the canola trade, with light commodity fund short covering evident today, and last week commodity funds went short 2,000 to 3,000 contracts, traders said.
  • Feed grains ended the session narrowly mixed, with feed wheat a bit lower and western barley a bit higher in almost no trade, due to firmness in the CBOT grain futures market and slow country movement.

Statistics:

  • Canola futures posted moderate gains in light trade, with the July/Nov spread trading at C$7.00 to $8.00.
  • An estimated 3,379 contracts were traded in the canola market, down from Friday's 7,443 contracts.
  • Commodity funds went short 2,000 to 3,000 contracts last week.
  • The weak Canadian dollar contributed to the advance in canola futures.
  • Feed wheat dropped at the close on small commercial selling and unaggressive end user demand, with an estimated 171 contracts traded, up from Friday's 106 contracts.
  • Western barley edged higher in a two-sided commercial trade, with an estimated 59 contracts traded, down from 258 contracts traded on Friday.

Sources:

  • Resource News International via COMTEX, "Winnipeg Grain and Oilseed Prices - May 16, 2005" (Copyright 2005 Resource News International)
  • COMTEX (http://www.comtexnews.com)