Commodity prices reached a record high during November, and the three-year “bull run” looks as if it will continue at least into the first half of 2005, said Patricia Mohr, vice-president of economics for Bank of Nova Scotia.

The 3.9-per-cent rise in the bank’s commodity price index during the month reflected a surge in natural gas and base metal prices.

Commodity prices next year should continue to be fuelled by uranium, oil and gas, and coal and iron ore, Ms. Mohr said. She also expects pulp and paper prices will increase.

Uranium is the “key commodity pick” for 2005, the report said. It is also predicting higher oil prices because the Organization of Petroleum Exporting Countries has raised its target price to compensate for the decline in the U.S. dollar.

Commodity prices are up 23.9 per cent from a year ago, and 2004 will mark the third consecutive year of double-digit gains that have totalled 66 per cent since the cyclical bottom in October, 2001, according to the Scotiabank commodity price index.

“Prices in 2001 were unusually low,” and industries were losing money, Ms. Mohr said. “It’s really only in the past year and a half that the price increases have been creating higher profit margins.”

Strong demand helped copper and zinc prices, and the weak U.S. dollar also contributed to the price increases.

Most commodities are priced in U.S. dollars and a soft greenback results in commodities rising in price to offset the swing in the currency.

Among the biggest commodity price moves this year are molybdenum (up 105 per cent), cobalt (84 per cent), lumber (47 per cent), lead (42 per cent), uranium (35 per cent), copper (34.8 per cent), and light crude oil (32 per cent).

The price of coking coal, which is used to make steel, is expected to double when the new contract year begins in April, 2005.

“The commodity price momentum may slow later in 2005, as U.S. and global growth decelerates and world capacity is ramped up in many sectors,” according to the report.

Growth in China is expected to slow to 8 per cent in 2006, down from a forecast 9.2-per-cent increase in gross domestic product in 2004. The Group of Seven countries have been growing at an annual rate of 3.3 per cent this year.

Two of Canada’s key industries, forest products and agriculture, can also look for some price increases, according to Scotiabank.

The prices of lumber, oriented strandboard and pulp, which have weakened during the past three months, are expected to rebound. Prices are also forecast to increase for most grades of printing and writing paper during the first half of 2005, helped by a recovery in print-media advertising business.

A pickup in magazine advertising has increased the demand for supercalendered papers, and a reduction in telemarketing in the United States as a result of “do not call” legislation has resulted in stronger demand for groundwood specialty paper used in direct mail campaigns.

The agricultural subindex of the commodity survey increased by 2.4 per cent during November, but it is up only 3 per cent this year.

Higher wheat, barley, canola and cattle prices helped offset lower hog prices.

Although the Canadian Wheat Board’s asking export price for Canadian wheat is up 9.4 per cent from a year ago, the prices of barley and canola have declined as a result of record U.S. corn and soybean crops as well as good growing conditions for soybeans in Brazil and Argentina.

Commodity prices

% change from 1-month % change from Year ago
All commodities +3.9 +23.9
Forest products -1.9 +3.1
Metals & minerals +1.0 +26.6
Oil & gas +12.3 +60.0
Agriculture + 2.4 +3.0