Commodity prices continued to decline in March, extending the slide to four months, according to the Scotiabank Commodity Price Index. The index fell 2.9% month-over-month, and is off 5.2% year-over-year.

“While the Agricultural and Forest Products sub-indices rallied, these gains were more than offset by a sharp drop in Oil and Gas and a slight decline in Metal and Minerals,” said Patricia Mohr, Vice-President, Economics and Commodity Market Specialist at Scotiabank.

The agricultural and forestry sub-indexes were up 5.7% and 2.1%, respectively, while the energy and mining sub-indexes were off 9.1% and 1.1%, respectively.

The decline in the energy component runs contrary to world benchmark prices, as Brent and West Texas Intermediate both gained in value in March to US$124 and US$106, respectively. But Canadian crude suffers from a hefty discount due to export limitations.

“Unusually high price discounts on Western Canadian oil reflect over reliance on one key export market—the U.S. Midwest—and inadequate pipeline export capacity, especially to the faster-growing markets of Asia-Pacific,” said Mohr.

“In coming years, various pipeline projects connecting Cushing, Oklahoma to U.S. Gulf Coast refining centres will help to narrow the currently wide price discount for WTI oil off Brent, in turn lifting Western Canada’s oil prices.”

Edmonton light sweet and Western Canadian Select heavy oil prices both fell, with Edmonton light crude dropping to US$86 per barrel. Western Canadian Select normally trades at an average discount of US$17.79 to WTI because it is of much lower quality. That discount has blown out to US$31.44 in March and US$32.81 in April.

“The ‘commercial risk’ of relying on one major export market will remain, particularly in light of the recent decline in U.S. petroleum demand and only slow projected demand ahead,” Mohr says. “There is an urgent need to expand Canada’s export pipeline capacity to tap the faster-growing markets of Asia.”

Scotiabank predicts the spread will narrow again in May, as road repair season drives up demand for heavy crude, which is also used in asphalt.

Mohr points out that oil and gas have grown to account for 39.9% of Canada’s net exports of all commodities and resource-based manufactured goods.

The much smaller agricultural sector has benefited from strength in canola, barley and Atlantic Coast Lobster prices. Canola soared by US$89 per tonne to US$632 in March—hitting US$668 in mid-April.