Canola Prices Decline Amid Hedge Selling and Supply Concerns

Strategic Insights -

Grain and oilseed futures at the Winnipeg Commodity Exchange (WCE) were mainly lower on Thursday, with canola prices experiencing losses in moderate trade. The market's activity was comprised of intermonth spreading, with a notable feature being the Jan/Mar spread at C$7.50 to C$8.00. Analysts attributed the decline to a record large canola supply in western Canada, unaggressive export demand, and technical selling. The market is also testing contract lows, with current prices within about C$1.00 of these lows.

Key Takeaways:

  • Canola prices declined in moderate trade, with a loss estimated at 75% of the trade.
  • The Jan/Mar spread traded at C$7.50 to C$8.00, with a total volume of 9,745 contracts.
  • The market's activity was comprised of intermonth spreading, with commodity funds completing their rolling of Jan futures into the Mar contract.
  • The spread trade was 100% commercially dominated.
  • Technically based selling was evident, with the market testing contract lows.
  • Current prices are within about C$1.00 of lows.
  • Routine crusher and exporter buying competed with commercial selling, with pricing from western Canada and Australia weighing on the market.
  • Hedge selling from Australia and pricing of basis contracts by farmers ahead of year-end also contributed to the decline.

Statistics:

  • 75% of the trade in canola was comprised of intermonth spreading.
  • 9,745 contracts were traded in the Jan/Mar spread.
  • The market's current prices are within about C$1.00 of contract lows.
  • Commodity funds completed their rolling of Jan futures into the Mar contract.
  • The western barley volume was estimated at 3 contracts, while the feed wheat trade was estimated at 7 contracts.

Sources:

  • Resource News International, Winnipeg Commodity Exchange (no date)
  • Resource News International, Winnipeg Commodity Exchange (no date)
  • Resource News International (2005)