After two months of successive declines, prices for Canada’s major commodity exports recorded a moderate rebound in May, said TD economists in the June issue of the TD Commodity Price Report.

The TD Commodity Price Index, expressed in U.S. dollars, increased by 3.5% last month, with 11 of the 18 items composing the index recording higher prices. Hogs, natural gas and gold experienced the strongest gains, while flaxseed and lumber suffered the largest percentage price declines.

“However, the overall advance in prices provided little support to Canada’s commodity industries, as a strong rally in the Canadian dollar erased all of the gain when the prices were translated into the domestic currency,” noted Craig Alexander, associate vice president and senior economist at TD Bank Financial Group. The TDCI expressed in Canadian dollars fell by close to 2% last month, bringing the total decline since February to 14% and taking the index to its lowest level in eight months.

Crude oil prices trended higher over the course of May, rising from US$25-26 a barrel early in the month, to almost US$30 by month end. Prices rose above the US$30 threshold in early June.

After a sharp retreat in March and April, natural gas surged higher in May, with prices up almost 11% for the month. The rise in crude oil prices and low inventories were the key drivers behind the increase in natural gas prices.

Lumber prices slipped lower by 1.3% in May to US$230 per thousand board feet, but subsequently rebounded to US$252 in early June, amid announcements of reduced production by several firms.

Gold had a remarkable run last month, as prices climbed from around US$340 per ounce in early May to over US$371 on May 27, but dropped back to near the US$360 level during the final three days of the month. “The volatility in gold prices last month was directly tied to the fortunes of the U.S. dollar, with the yellow precious metal rallying on U.S. dollar weakness, but giving up some of the gains when the greenback periodically recouped a portion of its losses,” noted Alexander.

Base metals enjoyed a broad-based rally last month. Prices for lead, nickel and aluminum all rose by more than 5% in May, while copper gained 4.2% and zinc bounced back by 2.8%. Lead and nickel rose on reduced supply. Of particular note, nickel prices were lifted on news of a possible strike at Inco’s Sudbury plant, which accounts for about half of the company’s production and about nine% of world output. The strike began on June 1.

The Canadian agricultural products sub-index rose for the second consecutive month in May, as a strong increase in hog prices combined with a slight gain in canola more than offset the declines in wheat, barley and flaxseed. News of a case of mad cow disease in Alberta created considerable turmoil in cattle markets late in the month. From May 20 until month end, cattle prices at the Chicago Mercantile Exchange rose eight%, reflecting a U.S. ban on imports of Canadian cattle and beef.