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NZ commodity prices down in January, dragged by wool and dairy weakness

Friday 3rd February 2017

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New Zealand commodity prices dipped in January, with wool and dairy weakness counteracting broad-based gains.

The ANZ Commodity Price Index fell 0.1 percent in January to 276.8 and was up 19.1 percent on an annual basis. In New Zealand dollar terms the index fell 1.1 percent in the month and rose 8.6 percent on an annual basis as the kiwi lifted against most major trading currencies apart from the Australian dollar. On an annual basis, the dollar is up 8.2 percent against the US dollar, 11 percent against the euro and 27 percent against the British pound, putting a strain on export returns particularly in the meat sector.

Wool prices dropped 8.6 percent month-on-month and are now 30 percent weaker compared to a year ago. Prices have dropped more than 5 percent every month since September 2016, mainly due to lack of interest from China, said ANZ agri economist Con Williams. 

Dairy prices dropped 0.4 percent in January, due to cheaper whole milk powder, which fell 2.3 percent in the month. Other dairy products improved in January, with skim milk powder up 1.6 percent, butter gaining 1 percent and cheese advancing 0.8 percent. Dairy prices are up 38 percent on the year, with whole milk powder gaining 55 percent since June, driven by tight global milk supplies and improved Chinese demand.

Non-dairy commodity prices gained 0.7 percent in the month. The ex-dairy index rose 7.4 percent over the year, with major non-dairy groups improving. Beef and lamb prices rose 1.9 percent and 1.6 percent respectively, with good demand from China and the Middle East for the latter, though gains are limited by the strength of the dollar against the US dollar and European currencies.

Seafood prices rose 0.9 percent for the month and 14 percent in the year, while forestry rose 0.5 percent and aluminium gained 3.2 percent in January. Log prices have found support from Chinese demand and construction activity, and wood pulp prices gained 1.4 percent with surplus inventories "snapped up by strong Chinese demand," Williams said.

BusinessDesk.co.nz

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