Funds liquidating large canola long positions

(Commodity News Service Canada) — Commodity and index fund traders holding large long positions in canola are in the process liquidating some of those positions and taking profits. However, traders were uncertain just how much more liquidating there was to go.

At the recent height of the canola market the funds were holding long positions of up to 39,000 contracts, according to market estimates. They started liquidating two weeks ago, and their current position estimated in the 20,000- to 28,000-contract area.

Market participants usually follow the movements in the funds with interest, as it is said that a position of 10,000 contracts or more can independently move the futures.

“Canola does feel vulnerable to some further long liquidation,” said a broker, noting a technical move below the 20-day moving average should open the door for some more fund selling.

A second canola broker said that from a chart perspective, the fund liquidation could continue until the January canola contract moves as low as $519 per tonne. At that point he expected to see some consolidation in the futures.

The ICE Futures Canada January canola contract closed Tuesday at $534.70 per tonne.

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