June provided further evidence that the terms of trade is headed south, albeit from the most favourable levels in 40 years, as prices for export commodities fell while oil prices climbed.

ANZ's commodity price index fell for the fourth month in a row, its 0.9 per cent decline taking it to 6.7 per cent below the peak recorded in February. In New Zealand dollar terms the fall was 1.1 per cent, taking the index to 13.6 per cent below its peak in March 2011.

World prices for both whole and skim milk powder fell 3 per cent last month. They fell further in Fonterra's Global DairyTrade auction yesterday, pulling its index down to the lowest level since early last year.

Log prices fell 5 per cent last month. Large stockpiles of logs have built up at Chinese ports, said Westpac economist Michael Gordon.


"Chinese log imports had reached record volumes in the early part of this year, and with weaker demand from end-users as the pace of residential construction in China slows, unpruned log prices have fallen 20 per cent from their recent peaks," Gordon said.

"We suspect they could fall further in the near term as import volumes, both from New Zealand and other suppliers, adjust."

China accounted for 72 per cent of New Zealand's $2.7 billion of log exports in the year ended May, ANZ said. Beef prices rose 2 per cent last month and lamb 0.5 per cent.

"Meat prices have risen to a 14 and a half year high and seafood prices remain at an all-time high," said ANZ economist Steve Edwards.

The 6 per cent fall in apple prices was a typical seasonal pattern for this time of year, Edwards said.

Aluminium prices rose 5 per cent, to a 14-month high.

Meanwhile, HSBC Bank reported a 2.6 per cent rise in oil prices last month to be 8.5 per cent higher than a year ago, reflecting concerns about Iraq. New Zealand spent $8 billion on imports of crude oil and petroleum product in the year ended May, 16 per cent of all goods imports.

See the full results from ANZ's latest Commodity Price Index here: