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BMO's Commodity Price Index Falls For Second Consecutive Month in February

The BMO Financial Group Commodity Price Index fell in February for the second consecutive month, with a 3.3 per cent drop to 198.0 (1993=100).  The decline was driven mainly by a fall in energy prices, while a gain in Metals & Minerals provided a partial offset.  The two other commodity groups measured in the Index, Forest Products and Agriculture, showed little change.

“Commodity markets are expected to remain buoyant in 2006, coming down only a little from record levels in 2005,” said Earl Sweet, Assistant Chief Economist, BMO Financial Group.  “However, this would represent a significant loss of momentum in the Index, given that the past three years have seen growth rates averaging 21 per cent.”

Among the groups measured, the Oil & Gas Index fell steeply for the second straight month with a decline of 8 per cent.  Natural gas prices contributed most to this decline, although crude oil prices also retreated from their average level in January.

“Despite the return to cooler weather during the second half of February, the winter has been much warmer than average in the primary heating regions of North America,” stated Sweet.   “Thus, the draw on natural gas inventories has been well below normal, with the result that winter-ending inventories are likely to reach a record high.  This should continue to place downward pressure on natural gas prices in the months ahead.”  Sweet further noted that while the average oil price fell in February, it has been very volatile, reflecting on-again, off-again concerns about supply security in geopolitical hotspots like Iran and Iraq.

The Metals & Minerals Index rose 3.5 per cent in February, continuing its ascent.  Gains were seen both in precious and base metals.  “Gold was lifted, in part, by geopolitical concerns while supply worries and strengthening demand spurred base metals,” according to Sweet.  “Low inventories, continued solid demand, and limited production growth in the near term should keep prices well supported in 2006.”

The Forest Products Index fell only marginally in the month, with a 0.4 per cent decline after three straight months of gains.  The relative stability in the Index resulted from offsetting movements by key components, namely falling prices for wood products and price gains by market pulp.  Paper prices remained flat, although newsprint producers are gearing up to increase prices in March.

“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, largely reflecting capacity reductions.”

The Agricultural Index rose 0.8 per cent, as wheat, corn and canola firmed on dry weather concerns in key U.S. growing areas.  In contrast, soybeans were adversely affected by healthy crop prospects in South America. 

“Agricultural prices have advanced modestly over the past twelve months,” stated Sweet.  “We anticipate that prices will slip over the next year, although low global inventories for key commodities, relative to consumption, should provide some support.”

BMO Commodity Index for February 2006


February 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 February 2006 is available at

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