Commodity prices fall as kiwi remains persistently high

Friday 15th May 2009

New Zealand commodity prices fell this week as the kiwi currency remained persistently high, according to a Commonwealth Bank of Australia survey.

The total cost of raw materials produced locally measured by the bank sank 2.6% to 133.3 on the CBA NZ Commodity Price Index, in New Zealand dollar terms, while the currency held above 59 US cents this week.

The price of milk powder declined 4.1% to US$2,144 per metric ton in Fonterra’s online auction, but the report said “volatility in most markets” meant they weren’t reading too much into it. A reported fall in the cow kill this week will probably lift export prices.

The index “decreased in New Zealand dollar terms, reflecting a significant lift in the dollar over the week,” said Chris Tennent-Brown, economist at CBA.

“The recent rally in the local currency started to look stretched, and the currency has had a downward correction from 61 US cents which could continue lower.”

Dairy prices rose 0.4% in U.S. dollar terms for the week, while sheep and beef jumped 7.8%. Forestry increased 2.6% since the last report. The currency has dropped 1.3% to 59.33 US cents since the start of the week.

Professor William Bailey, chairman of the department of agriculture at Western Illinois University, said world dairy prices are still “flat or slightly stronger” with the US government projecting 2,300 metric tons of butter and 89,300 metric tons of non-fat milk powder will be purchased this season. He says no cheese or whole milk powder is expected to be bought in this period.

ANZ National Bank said the stronger currency “outstripped the rise in world commodity prices” in April, with its Commodity Price Index falling 2.8% in New Zealand dollar terms. The bank’s base index rose 2.5% driven by increases in the price of wool, beef, sheep meat, dairy and aluminium.

Businesswire.co.nz

Comments from our readers

No comments yet