Commodity prices fall in December while stronger kiwi cuts export earnings
New Zealand commodity prices dropped again in December while the stronger kiwi dollar eroded export receipts for primary producers.
The ANZ Commodity Price index slipped 2.2 percent to 285.5 in December and was up 3 percent in the year. However, in New Zealand dollar terms the index dropped 3 percent to 216.6, paring the annual gain to 6.4 percent, as the trade-weighted index rose 2.7 percent in the month of December.
"This was the largest fall in world and local prices since the current upward cycle in commodity prices began in early 2016," said ANZ Bank New Zealand agri economist Con Williams.
Dairy prices dropped in late 2017, with milkfat prices leading the declines in December as an upswing in global milk supply placed pressure on all major dairy product prices and lower seasonal demand. Cheese prices dropped 11 percent and butter 10 percent in the month, while whole milk powder fell 2.2 percent and skim milk powder was down 1.4 percent. However, those movements have reversed in the new year due to lower milk supply in December, Williams said, and today's GlobalDairyTrade auction showed a 4.9 percent increase in the GDT price index.
Meat and fibre prices fell 1.8 percent in December. While lamb prices increased 1.9 percent in the month, and 15 percent in the year, beef prices fell 4.8 percent in December due to seasonal supply factors. Coarse breed wool prices fell 5.6 percent in the month on high local inventories, increased seasonal supply and continued lack of Chinese interest. Seafood prices dipped 0.2 percent.
Horticulture prices ended the month 16 percent higher, and Williams said early indications for the new season, which will begin in three-to-four months, are positive.
Aluminium prices dropped 0.7 percent in the month, but forestry products maintained momentum, with wood pulp prices rose 8 percent in the month, and 45 percent in the year.
"While seasonal inventories are still low and Chinese demand is sufficient to keep the market tight for now, prices may stabilise somewhat as demand appears to be easing," Williams said. "Log export prices inched up another 0.5 percent month-on-month with record offtake in China (ie high demand) and seasonally low inventories."