Encouraging news on the U.S. economy and tighter supply conditions for several key commodity groups pushed BMO Financial Group’s Commodity Price Index up a solid 3.4% in August.

The biggest rise took place in Forest Products as month-long forest fires took their toll on lumber operations. The BMO Index is now 132.1 (1993=100), 26% higher than a year ago.

“The renewed strength of commodity market prices in August was broadly based and reflects restored confidence in the growth of the North American economies, particularly in the United States, combined with continued weak inventory levels in many commodities,” said Earl Sweet, Assistant Chief Economist, BMO Financial Group.

In August, the BMO Oil and Gas Index rose 2.3% to 206.6 Crude oil prices, which edged up 2.6% in August, are being driven in large part by low North American commercial inventories and the still spotty supply coming out of traditionally large producers Iraq, Venezuela and Nigeria.

Natural gas prices held firm during the month, averaging US$4.35/mmbtu, essentially unchanged from July.

The BMO Commodity Index growth leader for the month was Forest Products, which posted a robust gain of 5.5% in August. “Forest Product prices took their second biggest month-over-month jump in over two years,” said Sweet.

The devastating forest fires in large parts of the B.C. Southern Interior and Northwestern United States significantly disrupted logging activity and forced the temporary closure of several B.C. sawmills during August.

Prices for Market Pulp remained unchanged for the month, while Newsprint prices edged up by a slight US$ 5/tonne to US$510/tonne.

The BMO Metals and Minerals Index continued its ascent in August — rising 1.8% in the month and more than 14% from a year ago. Nickel prices rose strongly in August, up 6.4%, while Copper prices increased by 2.4% and Aluminum by a more modest 1.0%.

The Agricultural Index rebounded by 2.8% in August, propelled by downward revisions in crop forecasts in key growing areas. In particular, wheat prices rose 3.7% on concerns that hot, dry weather in the European Union, Canada and the United States might aggravate an already tight global supply-demand balance.