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Increases in Oil & Gas, Agriculture, and Metals & Minerals generated yet another record-breaking month for the BMO Financial Group Commodity Price Index in October, with the overall index gaining 2.8 per cent to 216.3 (1993 = 100). 

The increase continued a record run for the Index, which rose 28.1 per cent in the past year alone and has doubled since 2002.

Despite this new record, the upward trend in our composite commodity price index is not expected to be sustained through 2006. "Higher prices are expected to slow demand growth and encourage increases in production of several commodities, relieving market tightness," said Earl Sweet, Assistant Chief Economist, BMO Financial Group.  "However, performance amongst commodities is likely to be mixed."

The Oil & Gas Index continued on its upward trend in October, rising 5.1 per cent to a level 51.2 per cent higher than that of a year earlier.  "For the second consecutive month, the increase entirely reflected a steep jump in the price of natural gas," noted Sweet.  "While oil prices remain very high by historical standards, they have retreated in the face of rising inventories and signs of softening demand growth."

The Metals & Minerals Index continued to move higher in October, with a broad-based gain of 2.3 per cent for the month.  Inflation worries supported gold, while the base metals (except nickel) were buoyed by supply concerns due to ongoing labour disruptions.  "Although metal prices are expected to retreat over the next year, low inventories should continue to support them at fairly high levels," said Sweet.

The Forest Products Index was the only sub-index to fall in October, retreating 1.9 per cent for the month.  "As the hurricane effect subsided, wood product prices began returning to their earlier downward trends," stated Sweet.  "A projected slowing in housing construction in North America is expected to keep wood product prices on a downward course.  On the other hand, pulp and paper prices are likely to hold up, thanks to effective supply management and, in some cases, rising demand."

The Agriculture Index gained roughly 5 per cent in October, propelled entirely by higher wheat prices.  The increase left the Index close to 2 per cent higher than it was a year ago.  "While prices are likely to weaken in the near term, low stocks relative to use should provide a floor during the next year," said Sweet.

BMO Commodity Index for October 2005

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

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