Potash prices (FOB Vancouver) soar by US$400 to China.

    TORONTO, April 24 /CNW/ - Scotiabank's Commodity Price Index, which
measures price trends in 32 of Canada's major exports, jumped by 5 per cent
month-over-month in March, reaching a new record high, the third in as many
months.
    The All Items Index has climbed 181.2 per cent above the cyclical low in
October 2001 and may approach the huge upswing seen during the 1970s. Measured
over the same 6.5 year time period, this advance has been stronger than from
early 1972 through mid-1978.
    The Oil and Gas and Metal and Mineral Indices both posted new record
highs in March and the Forest Product Index edged up, as higher newsprint,
fine paper and oriented strandboard prices just offset a further small decline
in lumber prices.
    "The Oil and Gas Index soared by 11.8 per cent in March, climbing above
its previous peak in October 2005 and will rise further in April," said
Patricia Mohr, Vice-President, Economics and Commodity Market Specialist, at
Scotiabank. "West Texas Intermediate (WTI) oil touched a new record of
US$119.90 per barrel in intraday Nymex trading on April 22, 2008 driven higher
by renewed concerns over supply disruptions in Nigeria. Fund interest in
commodities as an asset class and a hedge against a soft U.S. dollar have also
contributed to the relentless rise in oil prices since early 2008."
    "Recent news that Russian oil production dropped by 0.9 per cent in the
first quarter of 2008, the first year-over-year decline in a decade, set off
another wave of concern over supplies to meet growing emerging market demand
and may have been a more significant factor behind the recent explosion in
prices," added Ms. Mohr.
    After a sharp decline in Alberta gas-targetted drilling since the fall of
2006, drilling activity in Western Canada appears to be steadying, and we
expect a big improvement in 2009 and 2010. The industry is expected to respond
favourably to Alberta's revised royalties on deep natural gas and on
multilateral drilling. Interest in the shale gas and tight sands of
northeastern B.C. and in the Bakken oil play in Saskatchewan remains intense.
    The Metal and Mineral Index rose by 8.3 per cent in March, surpassing the
previous peak in May 2007, when London Metal Exchange (LME) nickel prices
spiked to a record US$24.59 per pound. The gain was led by a huge jump in
sulphur prices at the Port of Vancouver, with prices soaring from US$295 per
tonne in February to US$455 in March, up from only US$47 a year earlier.
    "Widespread gains in base and precious metals and huge jumps in
fertilizer-related mineral prices contributed to the strength of the Metal and
Mineral Index in March," said Ms. Mohr. "Canpotex, acting on behalf of Western
Canada's three major potash producers, has secured a US$400 per tonne price
increase to about US$576 (FOB Vancouver) for potash sales to China in 2008, up
227 per cent."
    International potash markets are extremely firm. Average spot prices for
potash (FOB Vancouver) rose from US$394 per tonne in February to US$412.50 in
March and US$482.50 in April, well above the US$180 of a year ago. Canpotex
has already announced new pricing of US$725 cfr (cost and freight) for all new
sales of standard-grade potash to Asian cfr markets (excluding China, which
buys on an fob basis) from June 1, 2008. Prices may effectively move to this
level in May, as Silvinit, which markets potash for Russian producer IPC,
lifts prices for the granular grade to US$750 in May. The net result, spot
prices (FOB Vancouver) are likely to climb well over US$600 late in the second
quarter and should rise to at least US$700 in the third quarter of 2008. A
major Russian producer has just indicated that prices may be lifted to the
US$1,000 mark delivered into Asian markets as of July 1, 2008.

    Forest Products

    Western Spruce-Pine-Fir 2 x 4 lumber prices inched down from US$193.40
per thousand board feet (mfbm) in February to US$192.50 in March, though
prices have rallied seasonally to US$215 in mid-April, still below average
mill cash costs in the B.C. interior.
    On a more positive note, industry rationalization has tightened North
American market conditions for newsprint and uncoated freesheet paper. A US$60
first-quarter price hike for newsprint has been largely implemented as
announced by producers, with newsprint prices in the U.S. east climbing to
US$634 per tonne in March. Producers will now focus on driving through another
US$60 increase in the second quarter of 2008.

    Agriculture

    The Agricultural Index lost ground in March, but remains 57.8 per cent
above a year earlier. The Canadian Wheat Board's asking export price for No. 1
grade wheat dropped from a record US$739 per tonne in February to US$613 in
March and US$555 on April 11, still more than double year-ago levels. Canola
prices have also edged down. The U.S. Department of Agriculture released its
annual pre-planting survey on March 31, 2008 pointing to a shift by U.S.
farmers from corn to soybeans and wheat in the new crop year.

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shaping the outlook for Canada and the global economy, including macroeconomic
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