Issue - April, 2005

Price index higher

The RBC commodity price index rose 1.8% in February to average 168.69. The index has been gathering steam again and commodity prices have drawn much attention from market watchers of late. On a year-over-year basis, the index is up more than 15 per cent. The rise in prices has been broadbased with three of the four sub-indexes moving higher in February. Forestry products were up 6.2%, while metals and energy products were up 3% and 0.2%, respectively. Agricultural products fell 1.3% for the month. 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 accelerated 9.4% in February as prices averaged US$398.19 per 1000 feet. The consistently steady housing construction market has kept demand for lumber strong. Pulp prices were up 3.4% for the month, while newsprint prices managed a small gain of 0.1 per cent.
All of the individual metals within the metals sub-index were higher in February. Leading the way were silver and zinc prices, which were up 6.7% and 6.4%, respectively. Consumers have been enduring higher zinc prices, which have reached their highest levels since 1997. Nickel prices were also up significantly, rising 5.9% for the month, but up just over 2% from a year ago.
Energy products were once again influenced by mixed weather conditions. Natural gas prices fluttered 1% lower, while oil prices climbed 2.2% higher. Oil prices crept above the psychologically important $50 mark in February, averaging $48.05 per barrel. Market watchers will have their eyes set on the next OPEC meeting on March 16 for insight on the future direction of oil prices.
Agricultural products prices slipped lower in February, with cattle prices falling 2.4 per cent. The recent decision from the US Department of Agriculture to postpone reopening the American market to young Canadian cattle will affect cattle prices this month. The ban was initially scheduled to be lifted on March 7.