New Zealand commodity prices declined for the 10th consecutive month in December, posting their biggest annual drop in 2-1/2 years, as whole milk powder prices fell.
The ANZ Commodity Price Index slipped 4.4 per cent to 273.5 last month, taking the annual decline to 17 per cent. Whole milk powder prices fell 11 per cent in the month to be 52 per cent lower than the year earlier period.
Fonterra has slashed its forecast payout to dairy farmers for the 2014/15 season to $4.70 per kilogram of milk solids from a previous estimate of $5.30/kgMS and last season's record $8.40/kgMS as oversupply and weaker demand weighed on prices. The latest GlobalDairyTrade auction overnight saw a modest 3.6 per cent lift in prices as volumes declined, stoking optimism about a recovery after prices dropped 48 per cent over 2014.
ANZ's Commodity Price Index showed nine commodity prices recorded a decrease in December and two increased while prices for the remaining six commodities were unchanged in the month.
Beef prices, which hit record levels last year on strong US demand following a drought, slid 10 per cent over the month but remained 28 per cent higher than the year earlier.
Skim milk powder dropped 9 per cent, aluminium decreased 7 per cent, cheese slipped 5 per cent, and wool declined 4 per cent, while sheepmeat and pelt prices weakened 3 per cent.
Butter outperformed other dairy products, rising 8 per cent in the month although it remained 25 per cent below year earlier levels. Kiwifruit lifted 1 per cent as the Northern Hemisphere export season tailed off.
Meantime, prices were unchanged for seafood, apples, casein, venison, wood pulp and sawn timber.
The NZD ANZ Commodity Price Index, which shows the price movements in New Zealand dollars eased 3.8 per cent in December, to be 16 per cent below the March 2011 peak.