NZ commodity prices weaken further in July as dairy weighs

Shipping containers piled up at Tauranga Port. Photo by Lynn Grieveson

New Zealand commodity prices dropped further in July, with five of the six categories weakening as global pressures continued, said ANZ Bank New Zealand.

"New Zealand’s goods terms of trade remain high by historical standards, but with export prices turning more mixed and import prices set to lift as global inflationary pressures build, we don’t anticipate any further record breakers any time soon," said ANZ economist Miles Workman.

The ANZ commodity price index fell 3.2 percent in July and is down 0.2 percent from a year earlier. In New Zealand dollar terms, the index fell 3.1 percent in July but was up 6.5 percent on the year due to a weaker local currency.

Dairy prices drove weakness in the month, down 6.5 percent in July with all five dairy components falling and butter prices leading declines, down 8.9 percent from June. ANZ said global supply growth and good inventory levels, particularly in China, and solid domestic milk production had pushed prices lower.

Meat and fibre prices fell 1.1 percent as beef prices were down 1.3 percent on solid global and New Zealand supply, with culling due to Mycoplasma bovis keeping domestic slaughter numbers up. Lamb prices, however, rose 0.3 percent, reflecting ongoing solid demand out of China and Europe and dry conditions hampering UK production.

Forestry growth was at a six-month high at 1.3 percent for the month and 12.9 percent for the year, which ANZ said reflected strong demand out of China due to housing construction. Wood pulp prices dipped 0.4 percent in the month but are up 30.7 percent in the year.

Aluminium prices fell 7.6 percent on the month but remain up 9 percent on the year. Base metal prices have generally weakened lately alongside growing caution around the global economic outlook, ANZ said.