Weak U.S. and European economies pressure canola lower

Price support from seeding delays and a weaker loonie were not enough to stop Winnipeg canola futures from falling Friday.Commodity and equity markets fell generally when the U.S. May employment report turned out much worse than expected, cooling hopes that a resurgent U.S. economy would offset Europe’s economic and fiscal problems.Also, a report that Hungary’s fiscal situation is worse than thought revived worries about Europe and pushed the euro lower.Lack of new canola export business and elevator hedge selling added to the downward pressure.There also appears to be a problem in the Canadian canola crushing sector.The Canadian Oilseeds Processors Association reported that its members crushed 79,263 tonnes of canola in the week ending June 2, a reduction of almost 21 percent from the week before. The week’s crush represented a capacity use rate of about 62 percent.On Friday, July canola fell $2.90 per tonne to $375.90 on 8,287 trades.The contract rose 60 cents between the close May 28 and the close June 4.The previous day’s best basis on the July contract was -$2.78 per tonne off the July contract in the par region, according to the Winnipeg ICE Futures daily report.The 14-day Relative Strength Index for July canola was 44, according to BarChart.com. The rule of thumb is that an RSI of 30 indicates an oversold market and 70 indicates overbought.New crop November canola fell $2.70 to $381.10 per tonne on 8,031 trades.November 2011 fell $3.50 to $398.90 on 175 trades.The losses Friday came after sharp gains Thursday when the Canadian Wheat Board said wet conditions might prevent prairie farmers from seeding as much as one million acres this year.The Canadian dollar at noon was 95.09 cents US, down from 96.01 cents at noon the previous trading day. The U.S. dollar at noon was $1.0516 Cdn.Although Canada posted strong job growth in May – 24,700 new hires or twice the expected number – investors focused more on a weak jobs report in the United States and Europe’s fragile economy and government finances. Winnipeg July barley was again untraded at $147.50. December was untraded at $150, with 10 outstanding contracts. The market is virtually in limbo, waiting to see if the federal government changes the Canadian Wheat Board’s role in barley marketing.Chicago July soybeans fell 20 cents to $9.35 US per bushel, while new crop November fell 19.75 cents to $9.July oats fell two cents to $1.94 per bu. December oats fell six cents to $2.085 per bu. In New York, crude oil for July delivery fell $3.10 to $71.51 per barrel.

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