Commodity prices registered a 1.8-per-cent decline in September, according to Scotiabank's monthly survey, but the bank said Monday it expects the index to bounce back to the positive side when figures for October are tallied.
Agriculture suffered the biggest month-over-month decline in September, down 6.1 per cent as a result of seasonal factors such as harvest pressure on grain prices, the bank said in its Commodity Price Index report.
Forest products was the only sub-component of the index - which measures price trends in 32 of Canada's major exports - to increase in September. It was up 0.6 per cent, Scotia Economics said in a news release.
Other components showing declines included oil and gas, down 2.5 per cent compared with August; and metals and minerals, down 1.1 per cent as lower potash, uranium and molybdenum prices and a mixed performance in base metals more than offset stronger precious metal prices.
Meanwhile, the bank said a weakening U.S. dollar lifted commodity prices in late October and are expected to drive prices higher through much of 2010.
In the energy sector, the bank noted that prices for Canadian natural gas exports reached a low of only $2.50 (U.S.) per million British thermal units in early September - below full break-even costs for even the lowest-cost shale developments in the United States - before rebounding close to $5 in late October.
"Traders likely recognize that recent levels were unsustainably low and are anticipating some recovery in U.S. industrial demand in industries such as steelmaking and chemicals," said Patricia Mohr, vice-president for economics and a commodity market specialist at Scotiabank.
"WTI (west Texas intermediate crude) oil prices also eased from $71.14 per barrel in August to $69.54 in September, but have rallied back over $80 in mid-October," Ms. Mohr said.
Much of the gain in recent weeks reflects weakness in the U.S. dollar, which has attracted investment fund interest in oil as a hedge against the declining greenback, she said. A soft dollar also makes it easier for the industry to lift prices in currencies such as euros, without unduly curbing consumer demand.
Over all, the Scotiabank index remained 4.3 per cent above the April cyclical low and "will receive a big boost in October, as oil climbs to a higher plane ($80 U.S.) and natural gas prices lift off the bottom."
"Oil prices are headed towards $90 (U.S.)by mid-2010, as the U.S. dollar moves irregularly lower and economic recovery takes hold in the G7," Ms. Mohr predicted.