Aussie rates and commodities in focus

Dairy prices have been mostly holding steady. Photo / NZPA

Commodities prices and Australian interest rates look set to dominate the business agenda this week.

Wednesday's fortnightly Fonterra GlobalDairyTrade auction could provide some evidence that the market may have stabilised after a series of sharp price falls this year and late last year, but the signals are far from clear.

Bank of New Zealand rural economist Doug Steel said a number of factors could influence the auction.

Oil prices, which tend to be a bellwether for commodities prices in general, have softened, which may have had an impact on dairy prices.

Data from the US Department of Agriculture show prices for butter, skim and whole milk powder, butter oil and whey powder have been firming.

Some analysts have noted ingredient buyers had been hesitant to extend purchases while prices were weak. The recent firming of prices could bring those buyers back into the market.

At the Fonterra auction on June 20, dairy prices held mostly steady, with the trade-weighted index easing by 0.5 per cent compared with the previous sale on June 7. The auction's winning price rose to US$3042 ($3794) a metric tonne from US$2899.

The ANZ Commodity Price index for June tomorrow.

On the economic front, the Reserve Bank of Australia board meets tomorrow.

Economists expected the RBA board to cut rates by 25 basis points at this meeting, but that was before it became known that Australia's economy grew by a whopping 1.3 per cent in the March quarter. Now the general view is RBA will keep its official rate unchanged at 3.5 per cent.