NZ commodity prices post biggest monthly decline on record, led by dairy

Tuesday 4th August 2015

New Zealand commodity prices fell at their fastest pace on record in July, notching up a fourth straight month of declines to the lowest level in almost six years, led by dairy.

The ANZ Commodity Price Index for July fell 11.2 percent to the lowest level since October 2009, and is 27 percent below year earlier levels. Thirteen of the 17 main commodities declined.

The drop was led by a slump in dairy prices, which are down 23 percent from June to the lowest level in more than 11 years. Whole milk powder prices fell 35 percent, while skim milk powder declined 11 percent and casein dropped 9.8 percent. Cheese and butter prices also declined. Excess global supply and lacklustre demand is pushing down prices for dairy products, the country's largest export commodity, reducing farm incomes and weighing on economic growth.

"International supply and demand imbalances remain as a significant headwind for dairy exporters," said ANZ Bank New Zealand agri economist Con Williams.

Elsewhere, aluminium prices fell 2.6 percent in July, and forestry prices slipped 2.2 percent amid softer Asian demand, ANZ said. Horticulture prices fell 1.1 percent as kiwifruit and apple prices declined.

Overall prices for the meat and seafood sectors were unchanged.

Beef prices recorded the only increase across the main commodity groups monitored by ANZ, helped by a strong US market. Beef's 5.4 percent increase offset a 2.7 percent decline in lamb, a 4.2 percent fall in wool and a 2.9 percent decrease in skins.

The NZD index fell 6.7 percent in July, the third-largest monthly fall since the series started in 1986. The trade-weighted index declined 3.6 percent over the month, helping mitigate a "gargantuan fall" in world commodity prices, but the local currency is not moving fast enough in response to shifts across commodities, ANZ said.

BusinessDesk.co.nz

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