The bank says that could lift overall Canadian grain and oilseed revenues to a record high.
Canadian farmers planted record acres of canola last spring, after excessive moisture flooded out crop land in Saskatchewan, Alberta and Manitoba in 2011.
As a result, canola passed non-durum wheat as Canada’s largest seeded crop this spring, with canola grown on 8.6 million hectares compared to 7.8 million hectares for non-durum wheat.
With relatively favourable growing conditions on the Prairies this year, the bank says canola will likely emerge as a $10 billion crop with record output and prices in 2012-13.
The index also suggests that although dry conditions will constrain Ontario's corn and soybean crops, Canada's grain and oilseed revenue could hit record heights this autumn.
On the negative side, says the bank, record corn prices due to drought-like conditions will squeeze the profit margins of livestock producers in Canada and the United States. It says this will limit herd rebuilding and increase consumer prices for red meat products over the next six to 12 months.
The agricultural component of the Scotiabank commodity price index was the lone bright spot in June as the index fell for the seventh month in a row by 3.7 per cent.
The decline was led by a nine per cent decline in the oil and gas index. Metals and minerals were down 1.2 per cent and the forest products index was flat.
The bank says as in previous months, a sharp loss of business confidence worldwide linked to euro-zone financial strains led investors to shift from riskier assets.
Many investors shied away from commodities and equities in favour of the security and liquidity of U.S. Treasury securities.
Oil prices were particularly dampened by poor confidence and concern over a slowdown in China also took a toll, particularly on industrial metal prices.
However, the bank says the decline may have bottomed out in June, with commodity prices rallying back in July due to recent proposals to shore up euro-zone markets and China’s recent shift to a more aggressive pro-growth monetary and fiscal policy.