Canadian commodity prices continue ?boom to bust? shift in Nov.

Canadian commodity prices continue æboom to bustÆ shift in Nov. Canadian commodity prices further continued a meteoric shift from a summertime peak, falling for a fourth consecutive month in November and spurred downward by sharp declines in business and consumer confidence, lackluster finished goods sales and an overall lack of liquidity and credit.
   The Commodity Price Index, comprised of price trends of 32 of Canada's major exports as tracked by Scotiabank, was down 9.4 percent for November, the latest monthly number available. The CPI has slipped 35.4 percent since a record high in July.
   'The shift from boom to bust in many commodities has been the most rapid in the history of the Scotiabank Commodity Price Index, with data back to 1972, magnified by the exit of hedge and investment funds from commodity market investments as well as a rapid markdown in anticipated global growth from 5 percent in 2006-2007 to only 1.5 per cent for 2009,” said Patricia Mohr, a vice president at Scotiabank.
   'A spiraling down in business and consumer confidence, the intensifying credit crunch and a sharp, sudden slowdown in global auto sales and G7 housing have contributed to the rapid deceleration, as has recent data from China indicating a marked deceleration in industrial activity,' Mohr said.
   Leading the declines was the oil and gas index, which dropped 17.5 percent in November, compared to the previous month. Following a Dec. 17 production cut by OPEC representing 5 percent of world supplies, crude prices fell to $33.87 per barrel on Dec. 19, down $114 per barrel since the July 11 peak of $147.90 per barrel.
   'In our view, a sharp global capital spending slowdown on new oil field development, which now appears likely in 2009, will set the stage for tighter markets and a big rebound in prices early next decade,' Mohr said.
   Scotiabank predicts that oil prices will start 2009 on a weak, albeit upward trend, with crude prices headed to an average of $55 per barrel in 2009, and rising to $70 per barrel in 2010.
   Metal and mineral prices also dropped significantly in November, with further declines seen through mid-December. According to Scotiabank, only potash and uranium prices have advanced since the summer, with gold remaining stable.
   Potash prices at the Port of Vancouver were up in November to $872.50 a pound with uranium climbing $9 per pound since October to $53 per pound. Gold prices held steady in November at $839 per ounce.
   Scotiabank predicts that the commodities index will continue to fall for the next six months, mirroring the deteriorating world economic situation.