By BRIAN FALLOW
The second consecutive monthly lift in dairy prices is raising hopes that export commodity prices have bottomed.
ANZ Bank's world commodity price index rose 0.8 per cent in September, driven by a 4 per cent rise in dairy prices, which make up about a third of the index.
Of the 17 commodities in the index, 10 rose, five were unchanged and only beef and apples fell. But the small rise in the exchange rate last month offset the improvement in world prices, leaving the index 0.3 per cent down in New Zealand dollar terms for the month, and 18 per cent for the year.
ANZ chief economist David Drage said that although the lift in dairy prices was consistent with Fonterra's comments that the price outlook had improved, prices were still 34 per cent below their peak in July last year.
The European Union has cut its export subsidy on whole milkpowder. The cut was modest compared with previous increases, but it was a step in the right direction, Drage said.
Also there has been a shift in the US' use of the export subsidies allowed under World Trade Organisation rules. Previously the subsidies were applied automatically when export prices fell below US domestic ones, until the WTO allocation ran out.
But now the subsidy is being doled out in a managed way, which should reduce the damage to prices. Beef prices fell 4.5 per cent last month, after being stable in recent months. Though 11 per cent below their peak a year ago they remain above the levels prevailing in the second half of the 1990s, Drage said.
Dairy price rise lifts hopes with it
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