Grain World:Commodity Prices To Come Off Highs,But Stay Strong
17:39 EST Tuesday, February 26, 2008
WINNIPEG (Dow Jones)--Global commodity markets' upward moves will likely slow and see some correction lower over the next year, as the U.S. economy is expected to slow down, an economist said Tuesday. However, he added that prices for most commodities will still be considered strong overall.
Craig Alexander, vice president and deputy chief economist with the TD Bank Financial Group, noted the current U.S. subprime mortgage crisis has most economists calling for a slowdown of the U.S. economy. While he wasn't convinced there would be a recession, he said a period of stagnant economic activity would occur.
As the U.S. is the major destination for many of the goods produced around the world, Alexander, speaking at the Canadian Wheat Board's annual Grain World conference here, said he expected a slowdown in the U.S. economy would spill into the global economy.
In recent years, the global economy has grown at a 5% rate, and Alexander said he expected that to decline to 3.8% in 2008. While the projected inflation would be lower, he pointed out that it would still be above the trend rate of 3.5%.
Looking at a few of the commodity groups in particular, Alexander projected that oil prices would edge lower over the next 18 months. By the end of 2008, he forecast crude oil values at US$90 per barrel, with levels dropping to US$85 per barrel in early 2009. After that, he expected prices would start to edge back up.
Base metal prices should also see a slowdown over the next year, said Alexander. However, he added that supplies for most metals are still tight, and any reduction will pale in comparison to the sharp rises over the past couple of years.
Assuming normal weather patterns, agricultural commodities should see a bit of a pullback in price, but stay strong overall, he said.
High grain and oilseed prices were here to stay, according to Alexander.
Livestock prices are already under pressure, and he said he expected tightening supplies would eventually help alleviate the poor price situation.
As commodity prices edge lower, the strong Canadian currency should also come off its recent highs over the next year, said Alexander. He had a target for the Canadian dollar of 95 U.S. cents by the end of 2008 and then 90 U.S. cents for 2009.
-By Phil Franz-Warkentin, Dow Jones Newswires; 204-947-1700; resnews@ shawbiz.ca
(END) Dow Jones Newswires
02-26-08 1739ET
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