From the Leader-Post, with files from The Canadian Press, December 20, 2013 - The outlook for Saskatchewan commodities, like oil and gas, potash and uranium, wheat and canola, is not good for 2014, but prospects for 2015 and beyond are better, according to commodity price reports from two major financial institutions. Scotiabank's Commodity Price Index year-end review and outlook for 2014 noted that the index declined 5.8 per cent in November and is currently 10.4 per cent below where it was a year earlier.
"While commodity prices lost ground in 2013 - partly due to disappointingly slow global growth (2.9 per cent in 2013, down from 3.2 per cent in 2012) - signs point to a bottoming out in 2014 and a return to the 'bull run' in the second half of the decade,'' Scotiabank economist Patricia Mohr said in the report. In the energy sector, crude prices have fallen due to a combination of seasonal and longer-term factors while natural gas prices have revived, due to an unusually cold U.S. winter.
Mohr noted that November showed a wider gap between the price of a North American benchmark crude - West Texas Intermediate - and benchmark grades of Canadian light and heavy crudes. This reflects rapidly growing supplies of U.S. oil from the U.S. southwest and North Dakota's Bakken formation, an increasingly important source of crude for the United States.
"There is a critical need to build additional oil export pipeline capability, enabling Western Canada to diversify its oil markets away from the United States to Asia-Pacific and India as well as Eastern Canada," Mohr said.
On a brighter note for Canadian producers, Mohr noted that natural gas futures rose to $4.35 US per million British thermal units as of mid-December - a 30 per cent gain from a year ago.
Scotiabank's metals and mineral subindex was down 1.8 per cent in November, compared with October and down 16.3 per cent from the same month last year. "Potash prices were hurt by a random event, Uralkali's exit from the BPC marketing arrangement, and its decision to maximize sales volumes at the expense of prices. Uranium prices also stayed at a low ebb (currently $34.50 US per pound) with Japan's 50 nuclear reactors still offline,'' the report said.
Scotiabank's agriculture index also dropped 1.1 per cent month over month and 11.5 per cent year over year. "Grain and oilseed prices have unwound, given monster-sized crops in the Canadian Prairies and the U.S. Midwest this fall and generally favourable international crops.'' Likewise, BMO Capital Markets commodity price index slumped 4.2 per cent to a three-year low in November.