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NZ commodity prices gain 0.4% in February as meat, aluminium offset weak dairy

Thursday 3rd March 2016

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New Zealand commodity prices rose 0.4 percent last month as gains in the price of beef and aluminium products made up for ongoing declines in dairy prices. 

The ANZ Commodity Price Index rose to 233.4 in February from 232.4 a month earlier and was down 18 percent on an annual basis. In New Zealand dollar terms, the index was unchanged in February and down 10 percent on the year as a weaker kiwi helped offset the global decline. Non-dairy prices were up 2.3 percent in the month, led by a 10 percent jump in beef prices and a 2.6 percent monthly gain in aluminium prices. 

"The improvement in beef prices has been led by tighter supply out of Australia and New Zealand, seasonality in the US market, and a reduction in inventory levels that had built up at the end of last year," ANZ Bank New Zealand agri-economist Con Williams said in a note. "Aluminium prices were supported by tightening Chinese inventories and coincided with price improvements for the rest of the industrial metals complex." 

Still, dairy prices were weaker, falling 2.5 percent in the month. Whole milk powder, New Zealand's biggest export commodity, fell 3.2 percent. 

Williams said oversupply was still an impediment to a recovery in prices, with European production supported by the removal of quotas, good weather and cheap feed. 

"New Zealand milk supply is faring better than earlier expected as well," he said. 

Prices at Fonterra Cooperative Group's GlobalDairyTrade auction rose this week, their first gain this year, with China milk imports now expected to start increasing.  

The index is heavily reliant on dairy, which carries a 39.3 percent weighting, followed by beef at 12.4 percent and lamb at 11.6 percent. The tilt towards dairy reduced by about 8 percent due to the fall in dairy earnings over the past 12 months.

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