Bank of Nova Scotia’s Commodity Price Index, which measures price trends in 32 of Canada’s major exports, advanced by 4% month-over-month in July, rising to a new record high for the seventh consecutive month.

“The cyclical upswing in commodity prices from the low in October 2001 — at 226.8% — is now virtually on par with the huge 235.1% advance in the 1970s in the aftermath of the Arab oil embargo,” says Patricia Mohr, vp, economics and commodity market specialist, Scotia Economics. “The strength of this upswing is a testimony to the remarkable growth of ‘emerging-market’ demand this decade in the face of significant supply constraints in many resource sectors.”

The strength in commodity prices was broad-based in July, with the metal and mineral Index leading the way (up 5.9% month over month). Spot potash prices at the Port of Vancouver jumped from US$525 per tonne in June to US$763, up 277% year-over-year. LME copper prices also rose to a new record high of US$4.08 per pound in early July, amid sporadic strikes in Peru, and aluminium prices climbed to US$1.49 — the highest level in 20 years, buoyed by smelter cutbacks in China to conserve electricity for the Beijing Olympic Games. Metal prices subsequently unwound significantly in late July through mid-August on news of a decline in 2008 second quarter GDP in the euro zone and a retrenching Japanese economy, pointing to weak economic conditions across the G7, which threaten to slow growth in ‘emerging markets’.

The oil & gas index also surged in July to a new record high. Light and medium/heavy oil prices reached new heights in Edmonton and natural gas export prices surged. West Texas Intermediate oil prices have subsequently unwound from a record US$147.90 per barrel on July 11 to US$117, as U.S. consumers quickly responded to record prices by cutting demand, and as hedge funds began to reverse ‘long crude oil futures – short U.S. dollar positions’ put in place earlier this year. However, concern over ‘geopolitical supply risks’, centred in the Caucasus, have resurfaced in late August, underpinning prices.

The Agricultural Index eased in July, as lower wheat and canola prices offset gains in barley, hogs and cattle. The U.S. Department of Agriculture expects an increase in world wheat output to lift the global stocks-to-use ratio to a more comfortable 20.9% from 18.5%.