New Zealand commodity prices fell for a sixth straight month in August, taking the index to a 17-month low, led by declining dairy prices, in part due to an oversupply in China.
The ANZ Commodity Price Index slid 3.3 percent last month, and is now 12 percent below February's record high. Whole milk powder dropped 15 percent in the month, paced by a 13 percent decline in skim milk powder and a 10 percent drop in butter prices.
The survey comes ahead of the Reserve Bank's quarterly Monteray Policy Statement next week, where governor Graeme Wheeler is widely expected to keep interest rates on hold, after hiking the official cash rate 100 basis points since March to 3.5 percent. Inflation figures have come in lower than the central bank initially expected on the back of a cooling property market in Auckland and Christchurch, lower growth forecasts and a drop in commodity prices.
Prices for dairy products, New Zealand's largest export, have tumbled some 40 percent at the GlobalDairyTrade auction since the start of the year, causing Fonterra Co-operative Group [NZX: FCG] to slash its forecast farmgate milk payout for 2015 to $6 a kilogram of milk solids, from an inital $7/kgMS, as a build-up of inventory in China dents demand and weighs on dairy prices. Last week New Zealand posted its first monthly trade deficit for the month of July, as the price of logs, the third largest export, dropped some 16 percent in the year.
Among other export commodities, apples fell 4 percent, kiwifruit slipped 2 percent and sheepmeat declined 1 percent, according to the ANZ index.
Meanwhile, beef increased 13 percent, to a new record high. Aluminium prices advanced 4 percent to an 18-month high and wool prices rose 2 percent. The meat sub-group posted its eight consecutive monthly increase, ANZ said.
Prices for seafood, wood pulp, sawn timber, logs and venision were all unchanged in the month.
The ANZ NZD Commodity Price Index, which shows the price movements in New Zealand dollars, slipped 0.4 percent in August, reflecting the month's 0.9 percent decline in the trade weighted index, which is a measure of the dollar against a basket of New Zealand's major trading partners' currencies.