CALGARY - Surging commodity prices, led by wheat and potash supply cycles in full throttle with coal bringing up the rear, set a new record high in February, said Scotiabank's monthly report on commodity prices.

Scotiabank's Commodity Price Index gained 7.5 per cent month-over month in February, notching a new record high for the second time in as many months, said the report released Monday.

The index, which measures price trends in 32 of Canada's major exports, got its biggest pop, a 25.5-per-cent gain, from the agricultural index.

Patricia Mohr, Scotiabank's vice-president, economics and commodity market specialist, noted spot prices for high-protein wheat on the Minneapolis Grain Exchange hit a record high of $22.56 US per bushel on Feb. 26 amid concerns that U.S. wheat stocks at the end of this crop year will be at their lowest levels since 1948.

The supply worries come as global wheat stocks are already at a 30-year low.

"U.S. supplies of high-protein bread wheat and durum are unusually short, driving up protein premiums," Mohr said in the report.

But Doug McBain, a pro-marketing choice farmer from Cremona, Alta., said western Canadian farmers won't see one cent of that record $22.56 per bushel for their wheat - because they didn't get a chance to market it themselves.

He said the Canadian Wheat Board, the monopoly seller of wheat and barley grown in Western Canada, price to farmers is about $10 a bushel for top grade hard red spring wheat out of Vancouver. Less freight that's about $9 a bushel in Alberta.

"The board brags its (per bushel price is) a record high price, but it's still half of what they're getting on the other side of the border," said McBain, past president Western Barley Growers Association.

Canadian Wheat Board spokeswoman Maureen Fitzhenry said the pool return outlook for the current year is $9.18 per bushel for No. 1 hard red spring wheat, with the freight deductions removed, and is indeed a record high price.

However, she said it's difficult to compare pool return prices - or the average return received for all markets for the entire year - with spot markets.

Fitzhenry suggested that nobody is seeing the $22.56 per bushel, not even U.S. farmers.

"That Minneapolis futures price is a futures price only, and every indication we have is that they're essentially out of wheat in the U.S., which is why the price is that high in that marketplace," Fitzhenry said.

Dwindling grain stocks amid growing demand is encouraging production around the world, which is driving demand for agricultural nutrients like potash.

The Scotiabank report said potash prices in Vancouver have set records this year, climbing from $316 per tonne in January to $412.50 in March, a 129.2 per cent gain from a year ago.

Potash prices are expected to further strengthen in the next six months, the report said, as demand soars amid current tight supply.

Last week, Canpotex Ltd., which markets potash for export outside of North America for Saskatchewan potash producers including Calgary-based Agrium Inc., concluded its annual contract negotiations with India.

The India deal was for 1.3 million tonnes at $625 a ton - $355 more per ton and a 36-per-cent increase in total volumes compared with last year.

Ashley Harris, Agrium's manager of investor relations, said the deal - though done after February's report - is a good indication of how strong the market is.

"India secured a year's supply at current market pricing, it's a big increase over what they paid last year," he said.

Hard coking coal, a type of metallurgical coal that's used for making coke by integrated steel mills, is also expected to continue to buoy the index in the coming months.

The report cited international spot prices of $275 to $330 per tonne.

The driver here is recent heavy rains and flooding in Queensland, which has three major exporters estimating production losses of 11 million tonnes.

Scotiabank revised its forecast for the coal year commencing in April, with prices for premium grade coking coal from Western Canada to Japan expected to hit $203 per tonne from the current $94.

Bob Stan, president and chief executive of Calgary-based Grande Cache Coal Corp., said the spot prices cited in the report probably represent the upper end of where things may end up.

The industry is still waiting for the major players on the steel company side and the producers side, he said, including Fording in Canada and BHP Billiton of Australia, to get together and settle annual pricing.

"We just haven't seen those well publicized settlements as of today," he said.

"But still when you compare it to last year's prices, which were in the mid to high $90's, it's a dramatic increase in the price of a commodity year-over-year," Stan said.

gteel@theherald.canwest.com