By Phil Franz-Warkentin, Commodity News Service Canada
February 3, 2015
Winnipeg – ICE Futures Canada canola contracts were stronger on Tuesday, as a rally in the US grains and oilseeds provided some spillover support.
Gains in crude oil and a sharp drop in the US dollar index triggered a rally in the US grains and oilseeds, according to participants. Fund traders and other speculators were noted buyers in canola, adding to their large net long positions. Advances in European rapeseed futures, steady end user demand, and relatively favourable chart signals also provided some underlying support for canola.
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However, the Canadian dollar showed significant strength on Tuesday, moving up by over a cent relative to its US counterpart. The stronger currency tempered the upside potential in canola, as it cuts into crush margins and makes exports less attractive.
Scale up farmer selling, as more canola starts to move in Western Canada, also served to put some pressure on the market, according to participants.
About 19,959 canola contracts were traded on Tuesday, which compares with Monday when 13,399 contracts changed hands. Spreading accounted for 13,980 of the contracts traded.
Milling wheat, durum, and barley were all untraded.
CBOT SOYBEAN futures ended sharply higher on Tuesday, seeing gains of 13 to 28 cents US per bushel. Speculative short covering after the market failed to put in new lows on Monday was behind the rally, analysts said.
Slow farmer selling in both the US, and South America, was also underpinning values, as was steady demand for US oilseeds.
Strength in the crude oil market, and a softening US dollar index, added to the bullish tone.
However, South America is still expected to harvest a record large crop, as weather is generally favourable, which was bearish.
SOYOIL futures were stronger Tuesday, with strength in soybeans lifting prices. Though, weakness in Malaysian palm oil futures limited the gains, traders said.
SOYMEAL futures were up sharply, with good demand, a weak US dollar and strength in crude oil helping to underpin the market.
CORN futures in Chicago finished sharply higher on Tuesday. Prices ended 14 to 16 cents US per bushel higher.
Reports that farmers are reluctant sellers of the commodity, due to unattractive prices, further underpinned the market, as did chart-based buying, brokers said.
A rebound in the crude oil market was also supporting corn values, given the commodity’s relationship with the ethanol industry.
WHEAT futures in the US also saw large gains, with Chicago, Minneapolis and Kansas City futures ending 20 to 25 cents US per bushel higher.
Support came from optimism that the US will win some recent tenders put out by multiple Middle Eastern countries, as prices have moved sharply lower recently.
The softening US dollar and worries about unfavourable conditions damaging US winter wheat crops added to the bullish tone. Recent USDA data shows winter wheat crops have deteriorated more than expected in Kansas and Oklahoma.
However, the global supply situation for wheat remains very large and continues to overhang the market, brokers said.
• Egypt’s General Authority For Supply Commodities (GASC) issued a tender for March 1 to 10 delivery, optional origin. Though France was listed as one of the acceptable origins.
• Saudi Arabia recently purchased 690,000 tonnes of hard wheat, with prices ranging from $250.64 to $258.71 per tonne, reports say.
• India is expected to harvest another bumper wheat crop this year, which would mark the eight consecutive year where supply exceeds demand.
Settlement prices are in Canadian dollars per metric ton.
