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ANZ Commodity Price Index: NZD windfall

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Fuseworks Media
Fuseworks Media

The ANZ Commodity Price Index dipped 0.3% m/m in October (+10% y/y).

ANZ Senior Economist Phil Borkin said, "The fall was largely attributable to the dairy group, where all components fell. All other major groups lifted although there were differences at the subcomponent level."

"Importantly, local exporters received a further boost as the NZD continued its descent. The NZD price index was up 2.5% m/m (14% y/y) as the NZD TWI fell to its lowest level in over a year."

In terms of the sector specifics:

- Dairy prices were 3.1% m/m softer courtesy of rising milk supply in the US and Europe. Butter prices fell 6.5% as the supply-demand balance improved in Europe, while whole milk powder prices slipped 2.8% despite a slow start to milk supply for NZ’s new season.

- Meat and fibre prices eked out a 0.8% m/m increase. Beef prices (+1.7%) performed better than expected through October, with prices being supported by tight Oceania and US supply, good US retail and foodservice demand, with solid economic conditions. Wool prices fell 7% as short-term buying interest from China reduced.

- Horticulture prices lifted 2.8% m/m. Higher prices for large kiwifruit sizes and a product mix that includes more of the premium gold variety underpinned the rise. Seafood prices lifted 0.4% m/m.

- A lift in log and wood pulp prices pushed the forestry group up 1.9% m/m. Log export values underpin the market, which will force domestic processors to match overseas competitors. Wood pulp surged 8% on low inventories and strong Chinese demand.

- Aluminium prices rose 1.9% m/m (28% y/y). Prices have surged recently as China’s aluminium production is expected to be cut by 30% as mandated cuts are put in place over the November - March winter period.

"Strong NZD prices bode well for rural incomes and profitability, and this will support the economy over 2018."

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