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NZ commodity prices have strong start to 2019

By Rebecca Howard

New Zealand commodity prices rose in January, arresting the downward trend of the past seven months, ANZ Bank’s monthly commodity price index shows.

The world price index rose 2.1 percent last month but was down 2.1 percent from a year earlier. In local currency terms, the index rose 2.9 percent on the month and 3.8 percent on the year.

Dairy prices lifted 5.4 percent on the month, driven by an 18.8 percent lift in skim milk powder prices after the sale of European government-held stocks. Other dairy commodities benefited from the improved sentiment and an easing in global milk supply. Whole milk powder prices rose 3.5 percent while butter rose 9 percent and cheese prices lifted 6.9 percent on the month.

The meat and fibre index rose 0.6 percent in January as a 1.2 percent increase in international beef prices was offset by a similar fall in the price of lamb. Lamb is still up 4.7 percent on the year while beef prices are down 2.6 percent. Wool prices were up marginally in January, with some strength in fine wool and lamb wool. Coarse wool remain depressed.

The horticulture index was stable. Volumes traded were low at this time of the season with the kiwifruit and pipfruit industries now preparing for the harvest of new-season fruit. ANZ noted, however, the annual reweighting of the commodity price index based on export returns resulted in a lift in kiwifruit’s weight to 7 percent of the overall index.

Forestry prices slipped 0.6 percent in January and ANZ said future price direction for logs will depend on buying activity post the Chinese New Year holiday period. In-market stocks are low, indicating strong buying activity will be required to replenish inventories, it said. However, it also said there is a risk that demand will weaken on the back of the slowdown of China’s economy.

Aluminium prices fell 2.8 percent in January to continue the downward trend since May. Prices are expected to continue to trend down as supply restrictions end and demand softens on slowing global economic activity, ANZ Bank said.

Sanctions on Russian aluminium producer Rusal have now been lifted following a restructuring of the company, effectively lifting global supply. Demand for ‘greener’ aluminium is increasing, with Rio Tinto recently signing an agreement with Nespresso for responsibly sourced aluminium for use in its coffee capsules. Rio Tinto has also indicated the potential to use new carbon-free technology at Tiwai Point, ANZ said.


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