NZ commodity prices fall further in September - ANZ

Wednesday 3rd October 2018

New Zealand commodity prices fell in September for the fourth consecutive month, with five of the six broad categories measured weakening, the ANZ's monthly commodity price index shows.

The index fell 1.8 percent in September and is now down an annual 3 percent. However, the weaker New Zealand dollar saw the index fall just 0.6 percent in September on a currency-weighted basis, and it was up 6.5 percent from a year earlier due to the local currency's decline. The New Zealand dollar fell 0.7 percent on a trade-weighted index basis in September.

“Overall, slippage in the world commodity price index in September suggests the global economy is finely balanced at present with commodity markets having little capacity to accommodate positive supply surprises," said ANZ economist Miles Workman.

Dairy prices fell 3 percent last month and are 12 percent lower than their peak in May. Falling butter, cheese and whole milk powder prices have driven much of the recent decline, down 22 percent, 12 percent and 11 percent respectively since May, he said.

"Our central view is that further downside to dairy prices will be limited as current price levels are deemed low enough to begin attracting marginal buyers," said Workman.

The meat and fibre index fell 0.4 percent in September and declined 1.6 percent from a year earlier, weighed down by falling beef prices on the back of ample global supply. Lamb prices fell 0.4 percent in the month, but were up an annual 7.4 percent and "look to be plateauing at a high level," ANZ said.

Horticulture prices were down 1.3 percent in September and 2.6 percent from a year earlier, as a fall in apple prices offset gains for kiwifruit.

Forestry prices fell 1.8 percent in September, still up an annual 9.7 percent.

Aluminium prices fell 1.3 percent in the month and were down 2.9 percent from September 2017. The impact from supply disruptions owing to US sanctions on Russia's Rusal seem to have unwound slightly this month, but ANZ said it’s difficult to disentangle that from a wider backdrop where global growth looks past its peak and rising protectionism is having an impact on demand.

The only category that didn't slide was seafood, where prices were unchanged.

(BusinessDesk)

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