News Releases

The BMO Financial Group Commodity Price Index experienced a 4.7 per cent surge in June to 178.6 (1993=100), recovering more than half the decline that occurred during April and May.  All commodity groups except Forest Products contributed to the increase.

“Commodity markets were lifted by a surge in crude oil and natural gas prices, with agricultural products and key metals also contributing,” said Kenrick Jordan, Senior Economist, BMO Financial Group.

While the strong uptrend in commodity prices over the past two years is not expected to be sustained during the remainder of 2005, most commodity markets should remain tight, meaning the all-items index is likely to hold near its average level of 2004.  “Performance amongst commodities is likely to be mixed, with continued strength in metals, energy and some gains for pulp and paper offsetting declines in wood products and agricultural products,” noted Jordan.  “By 2006, moderating global economic growth and rising production of several commodities should relieve tightness in most commodity markets and generally drive prices lower.”

In June, the Oil & Gas Index recovered almost all of the previous month’s steep decline, climbing 10.4 per cent to a level 29.6 per cent above that of a year earlier.

“While both crude oil and natural gas prices rose in June, the primary driver for the energy index last month was oil,” stated Jordan.  “Since the end of June, both oil and natural gas prices have continued to increase as refinery problems and tropical storms in the Gulf of Mexico disrupted supply and raised concerns about the ability to meet the demand for fuels during the winter.”

After slipping for two consecutive months, the Metals & Minerals Index recorded a small gain of 0.6 per cent, driven by higher gold and copper prices.  “Prices are generally expected to ease during the next year,” said Jordan.  “Nevertheless, current low inventory levels should help to keep prices at relatively high levels through the remainder of 2005.”

The Forest Products Index softened again for the fourth consecutive month, as plentiful supplies further loosened market balances.  “Most of the index’s weakness came from the pulp and paper side, where market pulp continued to decline,” said Jordan.  “It is expected to trend moderately lower starting later in 2005 and through 2006, mainly due to a cyclical erosion of market conditions for wood products.”

The Agriculture Index benefited from broad-based gains among its components to record an increase of 4.4 per cent in June amid weather concerns in key producing regions.  Adverse weather conditions in parts of United States, Southern Europe and Australia fostered expectations of lower yields, which helped propel grain and oilseed prices higher.  “With global production outstripping use for the 2004-05 crop year, ending stocks have risen substantially relative to consumption, which should pressure prices lower over the next year,” stated Jordan.

BMO Commodity Index for June 2005

The full BMO Financial Group Commodity Price Index report for June 2005 is available at www.bmo.com/economic.

- 30 -