Issue - January/February 2005

Commodities

Factors in 2004

RBC’s commodity price index rose 1.1% in December and closed the year 12.8% higher than a year ago to average 165.61. Strong world growth, oil supply disruptions and speculative trading activities were among the many factors behind fluctuating commodity prices in 2004. Of the four major sub-indexes, only agricultural products prices fell in December, down 1.2%. Forestry products gained the most, up 4% for the month, and Energy products and metals prices were up 0.5% and 0.6%, respectively.  Agricultural products were down 14.1% year-over-year, while energy products, metals and forestry products were up 14.4%, 14.7% and 12.5%, respectively. RBC’s commodity price index and sub-indexes are denominated in U.S. dollars and weighted by major Canadian commodity exports.
Agricultural products prices fell in December, largely due to lower canola prices, which were off 5.0%. Also contributing to the monthly declines were wheat and barley prices, down 2.3% and 0.8%, respectively. Canola, wheat and barley prices were down  24.5%, 22.9%, and 15.4%, respectively, year-over-year.  Hog prices were up over 45% from a year-ago.
Oil prices were once again the centre of attention in the commodities market in 2004. After falling 10.8% in December to average US$43.26 per barrel, oil prices were still up nearly 35% from year-ago levels and peaked in October at an all-time high of more than US$53 per barrel. Milder weather of late and higher stockpiles of inventories have led to lower prices.
Within the metals sub-index, silver prices fell 5.7% in December, but are still up almost 25% from a year-ago. Gold prices averaged US$442.50 per ounce, up 0.6% for the month and 8.2% higher from a year-ago. Lead and copper prices are both up more than 40% on a year-over-year basis.
A rise in the forestry products sub-index can once again be attributed to higher lumber prices, which rose 6.4% in December. Lumber prices levelled off somewhat towards the end of 2004, but prices are still up more than 14% from a year-ago.