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BMO's Commodity Price Index To Remain Buoyant Throughout 2006

Commodity markets are expected to remain buoyant in 2006, with only a slight cooling from record levels seen last year, according to BMO Financial Group's Economics Department.  On an annual average basis, the BMO Financial Group Commodity Price Index is projected to decline marginally by 1 per cent.

“The Index will be maintaining its level close to last year's all-time high throughout 2006,” said Earl Sweet, Assistant Chief Economist, BMO Financial Group.  “However, this would represent a significant deceleration in the Index's momentum, following average growth rates of 21 per cent in the previous three years. 

Sweet noted that the Index dropped 6.7 per cent in January to 204.9 (1993 = 100).  “The Index fell last month as a result of lower prices for natural gas and wheat.  Some offset was provided by price increases in metals, minerals and forest products.”

The Oil & Gas Index continued its see-saw pattern of the past four months, turning down sharply in January.  The monthly decline stemmed entirely from a very steep drop in natural gas prices.  “Unusually warm weather significantly reduced the winter draw on inventories, leaving the continent very well supplied,” stated Sweet. 

The plunge in natural gas prices outweighed a rise in crude oil.  “Although the market is also well supplied with crude oil and products, it was roiled by geopolitical events – insurgency in Nigeria's oil-producing region and the potential for sanctions against Iran due to its ramped up nuclear activities,” said Sweet.  “Fears of supply disruptions caused prices to move higher.”

The Metals & Minerals Index continued its ascent in January with a 5.4 per cent rise, with solid gains in both precious and base metals.  Notable was a 7.1 per cent rise in the price of gold, resulting in its highest price in 25 years.  “Metal and mineral prices are generally expected to ease in 2006, although solid demand, low inventories and limited production growth should keep them close to previous-year levels,” noted Sweet.

The Forest Products Index rose for the third straight month in January with a 1.6 per cent gain. The advance was broadly based, with most components posting modest increases and the balance remaining unchanged.  “Looking forward, a projected slowing in housing construction in North America is expected to keep wood product prices on a gradual downward course in 2006,” said Sweet.  “Pulp and paper prices are likely to hold up comparatively better.”

The agricultural sub-index slipped 2.3 per cent in January, as losses in wheat and soybeans more than offset gains in canola and corn.  Weaker wheat and soybean prices were precipitated largely by increased competition in export markets and improved crop prospects in South America. 

“During the past twelve months, the sub-index for agriculture has retreated modestly amid generally increasing supplies,” according to Sweet.  “Agricultural prices should continue to ease over the next year although low global inventories for key commodities, in relation to consumption, are expected to provide some support.”

BMO Commodity Index for January 2006


January 2006 Level
(1993 = 100)

Per cent change

from month ago

from year ago

All Commodities




Oil & Gas




Metals & Minerals




Forest Products








The full BMO Financial Group Commodity Price Index report for January 2006 is available at

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