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ANZ Commodity Price Index: Sweet 16%

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Fuseworks Media
Fuseworks Media

The ANZ Commodity Price Index slipped 0.8% m/m in August, matching the fall in July.

ANZ Agri Economist Con Williams said, "It was another mixed picture in August, with forestry prices increasing, meat prices falling, and dairy prices going sideways. The dip in the NZD against most major peers during August helped buffer local returns (+0.2% m/m). Both the world prices and NZD indexes are up 16% higher versus 12 months earlier."

In terms of sector specifics:

- Dairy prices largely traded sideways during August (-0.4%). Skim milk powder prices slipped 5.2% m/m due to high Northern Hemisphere stocks, while price moves for the rest of this basket were small.

- Meat prices had another rough month with prices falling 3.2% m/m. From the recent peak in May prices have fallen 8% in NZD terms despite the NZD depreciating against the euro and pound. Beef prices and skins both suffered during August. This is partly seasonal and partly due to higher US domestic production. Venison, lamb and sheepmeat were more resilient, and wool prices improved off recent lows (+3.6%).

- Seafood prices were unchanged.

- Horticulture prices fell 1.7% m/m. Apple prices rose 1.3%, led by the Royal Gala variety. Kiwifruit prices slid for the second month in a row (down 2.8%) as export volumes caught up from a late start to the season. Higher export volumes of the gold variety have sustained high prices.

- The forestry group increased 0.7% m/m. Log prices (+1.5% m/m) continue to be supported by Chinese demand. Local demand has experienced the usual seasonal slowdown, but unpruned demand for structural timber and posts/poles remains strong. Wood pulp fell 1.3% as Chinese demand for softwood products eased.

- Aluminium prices lifted 6.2% m/m (23% y/y). The aluminium market is clouded by uncertainty as China enforces environmental and regulatory changes and clamps down on illegal capacity.

"Still-elevated world and NZD commodity prices will provide a strong boost to rural incomes in 2018, which will diffuse through the broader economy. With the construction sector facing capacity constraints and not providing further impetus to growth (though operating at a high level), economic stimulus will have to come from elsewhere and high commodity prices is one of those areas."

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