News Releases

TORONTO, October 16, 2008 – The BMO Capital Markets Commodity Price Index fell 7.8 per cent in September to 207.9 (2003 = 100), with all commodity groups suffering major losses.

“While weakening global economic growth had already kick-started the downtrend in commodity prices, intensifying financial market turmoil amplified losses,” according to Earl Sweet, Senior Economist, BMO Capital Markets. “Weak and uncertain global economic conditions will restrain demand and pressure prices through 2009. The weight of downward price pressure depends on how deep and protracted the U.S. recession is and whether it seriously impairs economic activity in other regions.”

Mr. Sweet noted that volatility will remain a notable market feature over the next several months, amid uncertainty regarding the impact of financial market mayhem on the global economy.

The Oil & Gas Index continued to drop sharply in September and early October. The intensification of financial market stress globally has increased expectations of a deeper U.S. recession, economic downturns in Europe and Japan, and significantly slower growth in emerging markets. Projections of much slower demand growth have spurred sharp price declines for crude oil. Natural gas has followed oil's downward spiral, with its own retreat reinforced by a reasonably strong build-up of inventories prior to winter.

Broad-based declines pushed the Metals & Minerals Index notably lower in September. The weakness in precious metals was driven by a bottoming out and moderate bounce in the U.S. dollar and the growing prospect of lower inflation. Meanwhile, global economic weakness and the turmoil in financial markets undercut base metal prices.

The Forest Products Index dropped in September – its first pullback in 2008. Demand conditions for lumber and pulp remained soft in North America, given the credit squeeze and weak economic conditions. Newsprint prices continued to receive support from capacity reductions.

The Agricultural Index continued to move lower as an ever-improving global production outlook, pressure from ongoing harvests, and retreating investors worked against grains and oilseeds. Hog prices fell on ample animal and meat supplies in North America and weaker export demand.

	September 2008 Level 2003 = 100)	Per cent change
		from month ago	from year ago
All Commodities	207.9	-7.8	16.5
Oil & Gas	234.8	-9.8	28.8
Metals & Minerals	268.0	-5.0	2.5
Forest Products	119.7	-4.0	11.5
Agriculture	169.6	-12.7	4.3

The full report, The Goods: A Monthly Commodity Watch for September 2008, is available at www.bmocm.com/economics.

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