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Commodities
Prices begin to moderate
The RBC commodity price index was virtually unchanged in January, rising 0.1% to average 165.75. The index is up nearly 10% on a year-over-year basis, while prices began to moderate early this year. The largest gain came in the forestry products sub-index, which was up 4.9% in January. The metals and agricultural products sub-indexes both rose less than 0.1%. The energy products sub-index declined 1.4%. RBC’s commodity price index and sub-indexes are denominated in US dollars and weighted by major Canadian commodity exports.
In the forestry products sub-index, lumber prices have once again been on a tear, rising 7.7% for the month. The consistently steady housing construction market has kept demand for lumber strong. Pulp prices were up 1.8%, while newsprint prices managed a small gain of 0.6%.
Within the metals sub-index, nickel and zinc prices had the largest gains, rising 5.8% and 5.2%, respectively. Gold and silver prices were hit the hardest, falling 4.2% and 6.3%, respectively. The pullback in both gold and silver prices can be attributed to US dollar strength throughout January. Both commodities act as somewhat of a safe-haven in periods of US dollar weakness, some of which has been unwound of late.
Agricultural products prices, although virtually unchanged in January, included declines in both canola and barley prices of 4.6% and 4%, respectively, as well as a rise in cattle prices of 4.3 per cent. A reported second case of mad cow disease in Canada has threatened the opening of the US border to live cattle from Canada this March.
Energy prices fell mainly due to lower natural gas prices. Natural gas prices fell 6% in January to average US$6.19 per British thermal unit, while oil prices rose 8.6% to average US$47.04 per barrel. Energy prices tend to fall (and inventory levels rise) when winter weather conditions become milder, and this winter has seen both severe and mild weather conditions.
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