TORONTO, March 31 /CNW/ - Scotiabank's Commodity Price Index, which
measures price trends in 32 of Canada's major exports, surged by 7.5 per cent
month-over-month in February, climbing to a new record high for the second
The Agricultural Index led the advance in February, soaring 25.5 per cent
month-over-month. Spot prices for high-protein wheat in Minneapolis, which
drive the Canadian Wheat Board's asking export price for 'Number 1 grade hard
red spring wheat' rocketed to a new record high of US$22.56 per bushel on
February 26 amid expectations that U.S. wheat stocks will end this crop year
at the lowest level since 1947-1948 and global stocks at a 30-year low.
"U.S. supplies of high-protein bread wheat and durum are unusually short,
driving up protein premiums," says Patricia Mohr, Vice-President, Economics
and commodity market specialist at Scotiabank. "While prices began to ease
back in late February, with unwinding of a technical squeeze on the
Minneapolis Grain Exchange and anticipation of new crop supplies, prices
remain unusually high at US$14.88 in late March, double the US$5.48 price of a
"Concern over a weak U.S. economy, tighter credit conditions and the
fallout on the U.S. financial sector continues to buffet industrial commodity
prices from time-to-time," adds Ms. Mohr. "However, investment and hedge fund
interest in hard assets such as commodities, as a hedge against weakness in
the trade-weighted U.S. dollar, has underpinned commodity prices, as has the
strength of emerging market demand. The near-collapse of a major U.S.
financial institution on March 16-17 pushed the U.S. dollar to a record low
against the euro, catapulting oil and gold prices to new heights. In coming
months, Scotiabank's Commodity Price Index will almost certainly be buoyed by
large price gains for coking coal and potash/sulphur at the Port of
Potash prices in Vancouver are jumping from record to record, climbing
from US$316 per tonne in January to US$394 in February and to US$412.50 in
March, up 129.2 per cent year-over-year. Prices will strengthen further in the
next six months, likely to the US$500 to US$600 mark, with substantial gains
in Brazil, Southeast Asia, India and China. Potash demand in Brazil, for
soybeans and sugar cane, has been unusually strong in the first quarter, with
prices rising by US$100 to US$600-610 cfr (delivered) for granular material in
Following the BPC - a joint venture of Uralkali in Russia and Belaruskali
- settlement, Canpotex has now concluded its annual contract negotiation with
India, lifting the price to US$625 cfr from the current US$270. Shipments
under the new contract will get under way around May and extend through March
International spot prices for hard coking coal also continue to climb,
with confirmed transactions at US$275- US$330 per tonne and a report that
Nippon Steel and other Japanese steel mills have obtained emergency supplies
from the United States at around US$350 to offset reduced Australian
shipments. Spot prices are well above current contract prices of US$96 for
premium-grade Australian coal. Heavy rain and flooding in Queensland has
triggered force majeure by three major exporters, with production losses
estimated at 11 million tonnes, roughly the growth expected in global imports
in 2008. Production losses will not be easily reversed this year. China's
exports are still suspended.
"As a result of this, we have again upwardly revised our forecast for
annual contract prices for the Japanese Fiscal Year 2008, beginning in April.
The price of premium-grade hard coking coal from Western Canada to Japan
should rise to about US$203 per tonne from today's US$94," says Ms. Mohr.
Key base metals, especially copper, have enjoyed renewed funds inflows in
early 2008. After falling to US$2.99 per pound in December, London Metal
Exchange (LME) copper prices rallied to US$3.20 in January and US$3.58 in
February. Prices reached a surprising new record high of US$4.03 on March 6,
surpassing the previous May 12, 2006 peak of US$3.99.
"The strength of copper prices reflects the perception that ongoing gains
in 'emerging market' demand in areas such as China will more than offset the
decline in G7 consumption. LME stocks have dropped by 42 per cent since late
2007, partly due to delayed shipments from Chile," adds Ms. Mohr.
Spot uranium prices have lost ground since early December, falling from
US$93 per pound to US$73 in late February, and are at that level in mid-March.
Long-term base contract prices remain at US$95. Market activity has turned
quiet in early 2008, with 'uncovered utility requirements' (especially in the
United States) believed to be low, after the rush to restock from
2005-2007:H1. However, "buying is expected to pick up again by late 2008
through 2010, pushing up prices", says Mohr.
Scotia Economics provides clients with in-depth research into the factors
shaping the outlook for Canada and the global economy, including macroeconomic
developments, currency and capital market trends, commodity and industry
performance, as well as monetary, fiscal and public policy issues.
For further information:
For further information: Patricia Mohr, Scotia Economics, (416)
866-4210, firstname.lastname@example.org; or Paula Cufre, Scotiabank Public
Affairs, (416) 933-1093, email@example.com