Commodity prices fall a 5th month; pelts, aluminium drop

Wednesday 7th January 2009

New Zealand commodity prices fell for the fifth month in row, retreating from the July 2008 peak, led by pelts, aluminium, wool and dairy products as global demand weakened.

The ANZ Commodity Price Index fell 7.4% in December, stretching its five-month slide to 27%. All commodities except apples declined in December, the broadest slide since ANZ Bank began tracking a basket of New Zealand exports in 1986.

Falling prices come as the world's biggest economic zones - Europe, the U.S. and Japan - suffer the first simultaneous recession since WWII. Prices for dairy products declined more than 12% to a two-year low while prices for wool slid 12% to be just 2% above their record lows in the survey.

Milk powder prices dropped 9.3% in yesterday's online auction by Fonterra Cooperative Group, the world's largest exporter of dairy products. The average price of wholesale milk powder at the auction fell to US$2,017 per tonne, more than 50% lower than when the online auctions began in July.

Dairy products accounted for 22% of New Zealand's NZ$42.5 billion of exports in the 12 months ended October 31, according to government figures. The value of dairy shipments rose NZ$123 million to NZ$9.4 billion.

Aluminium prices fell 20% to a five-year low, based on prices on the London Metals Exchange, having reached a 20-year high in July.

"With key leading indicators at their lowest levels in over 30 years, the outlook for base metal prices is poor," said Steve Edwards, economist at ANZ Bank. "Once the ructions from the global turmoil subsides, expect the recovery in aluminium prices to be mild and gradual."

Prices for pelts tumbled 62% last month. Log prices declined 4.4%, wood pulp fell 3.7% and sawn timber dropped 2.2%. Seafood and lamb prices fell 2.4%, venison and beef were down 1.4% and kiwifruit declined 0.2%.

The ANZ New Zealand Dollar Commodity Price Index declined 6.1% in December.

By Jonathan Underhill

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