NZ commodity prices post first decline in 2019 as dairy prices weaken

Wednesday 3rd July 2019

New Zealand commodity prices fell for the first time this year last month, dragged down by weaker dairy prices, ANZ Bank's latest monthly commodity index shows.

The ANZ world commodity price index fell 3.9 percent in June and was 2.4 percent lower than it was a year ago. In local currency terms, the June index fell 4.5 percent as the kiwi dollar strengthened. It was 1.9 percent higher on the year.

Dairy prices fell 8.5 percent in June, reflecting the recent softening in dairy commodity prices, ANZ agri economist Susan Kilsby said. All of the major dairy ingredients weakened during the month with whole milk powder down 5 percent and skim milk powder off by 6.6 percent.

Earlier today, the index for dairy product prices fell at the Global Dairy Trade auction, declining for the fourth auction in a row. The GDT price index slipped 0.4 percent from the previous auction two weeks ago. The average price was US$3,302 a tonne, compared with US$3,208 a tonne two weeks ago.

In the ANZ index, the meat and fibre sub-index lifted 1.7 percent in June due to stronger prices for both beef and lamb. ANZ said that lamb supplies have eased which is supportive of prices. Beef supply is still strong but prices remain supported by strong demand from China where beef is now being consumed in greater quantities after swine fever slashed pig numbers.

The horticulture index fell 1 percent, with stronger returns for apples not enough to offset weaker prices for green kiwifruit. The forestry price index fell 3.5 percent in June, with prices now retreating for the past three months. Kilsby said a larger fall in prices is expected next month as the surge of logs into China from New Zealand and elsewhere exceeds current demand.

Prices typically weaken slightly at this time of the season due to lower offtake rates as construction activity slows during the hot summer months. However, it is not the fall in demand that is pushing down returns but a lift in supply, she said.

"The current uncertainty in the market is expected to result in a slowing in harvest activity within New Zealand as some growers will opt to keep trees standing until prices improve."

Aluminium prices eased another 1.4 percent in June with prices now 22 percent lower than a year ago. Prices are now at their lowest level in three months which is squeezing profit margins for producers in China.

(BusinessDesk)

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