This year has turned out to be a favourable one for resource producers, with overall commodity prices up 17.1% year-over-year in October and 10.6% in the year-to-date.

Bank of Nova Scotia’s Commodity Price Index, which measures price trends in 32 of Canada’s major exports, jumped by 4.4% month-over-month in October, to a level only 1.4% below May’s record high.

The oil and gas index led the advance in October, surging 10.7% month-over-month. A perception of growing supply tightness has driven prices to record highs.

“While ‘peak oil’ theories are unduly alarmist, the CEOs of a number of major oil companies have recently cast doubt on the ability of world supplies to keep pace with demand growth over the longer-term, limited by engineering staff and capital cost escalation”, says Patricia Mohr, vp, economics and commodity market specialist at Scotiabank.

“Prices are expected to remain high for two reasons: Firstly, non-OPEC supply developments in 2008 appear to be shaping up in a similar fashion to 2006 and 2007. While new field development could boost non-OPEC supplies by 1.1 million barrels per day, centred in the Alberta oil sands, Russia & the Caspian Sea area and Brazil, technical and political challenges could once again cut this output. Secondly, while US$90-plus oil has slowed U.S. petroleum consumption, consumers and industrial users in a large part of ‘emerging Asia’ and the Middle East are being shielded from the full weight of record prices through government subsidies.”

The metal and mineral index surged in October. Potash and sulphur prices at the Port of Vancouver led the way, with sulphur, a by-product of Western Canada’s oil and gas production, leaping 45% month-over-month, reflecting strong international demand for phosphate fertilizers and tight sulphur supplies.

The agricultural index continued to advance in October, as strength in grains and oilseeds offset weaker hog and cattle prices.

“In October, the Canadian Wheat Board’s asking export price for wheat was at a record in U.S. dollars, though currency appreciation has moderated Canadian dollar receipts for farmers,” says Mohr. “International wheat prices retreated in late October and early November due to aggressive Russian exports ahead of a November 12th 10% export tax and with the beginning of the harvest season in Argentina. However, a frost in the southern growing areas of Argentina has halted the decline and U.S. grain exchange prices have bounced back.”