NZ commodity prices fall for third month in June to 3-year low

Thursday 2nd July 2015

New Zealand commodity prices fell for a third consecutive month in June to a three year low, on weakness in aluminium, dairy, and meat.

The ANZ Commodity Price Index for June declined by 3.1 percent, following a 4.7 percent fall in May and a 7.4 percent drop in April. The index is now about 20 percent lower than June last year.

Weaker commodity prices are weighing on New Zealand economic growth, which grew at the slowest quarterly pace in two years in the first three months of the year. Prices in the benchmark GlobalDairyTrade auction overnight dropped 5.9 percent to their lowest level in six years, stoking speculation the Reserve Bank could reduce interest rates three more times this year.

In the ANZ series, aluminium prices led declines, down 6.4 percent amid higher Chinese production. Dairy prices dropped 4.4 percent, led by a 7.8 percent fall in butter, a 5.2 percent drop in skim milk powder, a 4.7 percent drop in whole milk powder and a 1.8 percent fall in cheese prices.

"International dairy prices continue to languish, given high global production, lacklustre demand from China and the continued ban on dairy imports into Russia," said ANZ agri economist Con Williams.

Meat prices slipped 3.4 percent. Beef dropped 2.8 percent as US beef prices pulled back in recent months from record levels. Lamb prices also fell, down 3.5 percent on oversupply in New Zealand's main export markets of the UK and China.

Forestry prices were the only commodity group to increase in June, edging up 0.1 percent during the month. Horticulture prices were little changed as a lift in early season apple prices was offset by lower kiwifruit prices.

The NZD index advanced 2.9 percent as a lower New Zealand dollar buffered the impact of weaker world prices. The trade-weighted index declined 4.6 percent over the month, and Williams said the decline "will be a welcome relief for many commodity exporters, who are facing challenging international market conditions".

BusinessDesk.co.nz

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