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Commodity prices fall for fourth month

Wednesday 3rd December 2008

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New Zealand commodity prices fell for a fourth month, underlying weaker global demand for the nation's beef, wool, lumber, aluminium and dairy products.

The ANZ Commodity Price Index fell 7.2% in November, stretching its four-month slide to 21%.

Prices for dairy products fell 12% and have almost halved from their record levels a year ago. Prices for pelts tumbled 41%, the biggest decline among products tracked in the index. Beef, wool, lumber and aluminium all fell more than 10%. Seafood prices dropped for the first time in 18 months, sliding 0.6%. Lamb rose 4.3% and kiwifruit gained 0.3%.

Producers were cushioned from the slide in commodity prices by the weakening New Zealand dollar and the ANZ New Zealand Dollar Commodity Price Index was down only 1.8% in the latest month.

"Although the currency softened further in the month, it failed to match the drop in value of the commodities that we monitor," ANZ economist Steve Edwards said in a statement. "It is clear that a weaker currency is acting as a buffer to falling commodity prices."

Fonterra Cooperative Group, the world's largest exporter of dairy products, said prices for milk powder fell in its latest auction, the fifth straight decline, as slowing global growth crimped demand for commodities.

Milk powder for February delivery, Fonterra's nearest contract, fell 15% to US$2,078 a tone in this week's auction, the lowest since September 2006, according to results posted on its global Dairy Trade website. The March contract also fell 15% to US$2,284.

Fonterra last month cut its forecast payment to farmers after a 24% slide in global prices for dairy products in the past eight weeks and the prospects of a write-off of its stake in disgraced Chinese dairy company San Lu.

Meantime, the Ministry of Agriculture and Fisheries has told new Agriculture Minister David Carter to expect declining demand for agricultural commodities as the global economy slumps.

By Jonathan Underhill

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