BMO Financial Group’s Commodity Price Index rose by 5.4% in September, due to strong increases in both the energy and the agricultural sectors.

This robust price growth for the month built on the 4.6% gain recorded in August and raised the level of the index 6.8% higher than a year earlier.

“Although recent gains in the index have more than offset the price weakness during the May-July interval, a more substantial move to the upside, broadly based amongst all commodity groups including forest products and metals, will likely have to wait until there are signs of stronger economic expansion in North America and abroad,” noted Earl Sweet, assistant chief economist at BMO in a news release.

“Given current geopolitical and economic uncertainties, we expect that commodity prices will likely be volatile during the next few months,” he said.

In September, the Oil & Gas Index surged up 14.3%, the second consecutive large monthly gain. Once again, both crude oil and natural gas contributed to the increase, although gas prices contributed most. Crude oil prices rose into the neighbourhood of US$30/barrel, reflecting falling inventories and fears of supply disruptions emanating from a potential US attack against Iraq and from political unrest in Venezuela.

The forest products sub-index fell for the sixth consecutive month, dropping 2.1%, and reaching a ten-year low. The Metals and Minerals Index managed to tread water in September, edging upwards by 0.8%. The report noted that support for the sub-index was derived primarily from gold, as investors sought safe havens after bailing out of equities during the month. Base metal prices remained soft in September and will not likely rise until there are firm signs of stronger economic growth globally. Nickel and copper should show the strongest gains next year, while aluminum prices may be burdened by expanding production and continued high inventories.

BMO Financial Group’s Agricultural Index maintained its strong upward momentum in September, rising 13.8% to a level more than 40% above that of a year earlier. “Drought conditions in several of the world’s largest exporting countries, including Canada, the United States, and Australia, have significantly reduced yields and stocks,” said Sweet. “With global inventories of grains low relative to consumption and tight supplies of edible oils, grain and oilseed prices, should remain firm in 2003.”