October 27, 2009

Canola contracts traded on the ICE Canada platform were mostly weaker at 11:55 a.m. EDT Monday (October 26), pressured by losses in the CBOT soy complex and the ongoing uncertainty regarding canola sales to China.

News came out last week that China would require strict phytosanitary certificates on Canadian canola by Nov. 15, certifying canola shipments as free of blackleg, a disease that is no longer a major threat in Canada, but continues to be commonly found in canola seed.

"The blackleg (situation) is a black cloud over canola," said a canola broker. While the Canadian government and industry are working to find a resolution to the problem, there is still too much uncertainty in the market, the broker said. China is a major customer for Canadian canola, and it remains to be seen whether or not those exports will be able to continue.

Losses in the CBOT soy complex were also weighing on canola at midsession, although canola was lagging soy to the downside, the broker said.

A weaker tone in the Canadian dollar provided some underlying support for canola. Improved crush margins over the past week were also bringing in some domestic crusher demand, although the broker noted that the crushers were still dealing with their own problems of rejected soymeal shipments to the US due to salmonella contamination.

Ongoing harvest delays to the last of the canola crop, with 1.5 million to 2 million tonnes of canola still thought to be in the fields, was also supportive for canola, according to traders.

At 11:55 a.m. EDT, about 7,000 canola contracts had changed hands. The November/January spread was a feature of the trade, with participants rolling out of the nearby month.

Western barley futures were mixed at midsession, with about 160 contracts traded. The November/January spread accounted for the bulk of the trade ahead of first deliveries on the November contract, said the broker.