NZ commodity prices rise for eighth month, buoyed by dairy recovery

New Zealand commodity prices rose in December, the eighth consecutive monthly gain, as dairy prices continued to improve.

The ANZ Commodity Price Index advanced 0.7 per cent in December to 277.3 and was up 16.5 per cent on an annual basis. In New Zealand dollar terms the index increased 2 per cent in the month and rose 9.4 per cent on an annual basis as the kiwi eased against the greenback and the British pound.

Dairy was the standout performer as tight global milk supplies and improved Chinese import demand continued to be the main drivers, said ANZ agri economist Con Williams. All dairy-based products improved in December, led by butter, up 6.2 per cent and whole milk powder, up 4.8 per cent. Dairy prices are now 44 per cent higher than they were a year earlier.

Non-dairy commodity prices, however, "were the disappointment," down 1.9 per cent month-on-month, said Williams. The falls were mainly centred in the meat and fibre group, with wool falling 6.2 per cent on the month on a lack of interest from China, which accounted for 50 per cent of exports in the prior season. Beef prices fell 5.5 per cent as higher US supply weighed on import prices and "some trader nervousness over holiday sales," said Williams. Lamb prices were down 2.4 per cent month-on-month, the first and only fall in 2016.

Forestry prices continued to fare well, up 0.6 per cent on the month as log prices continue to find support from China and local construction activity.

Elsewhere, moves were small with seafood up 0.2 per cent on the month and aluminium prices down 0.6 per cent.

Horticulture finished the year 8 per cent higher and remains well positioned for another profitable 2017 harvest, said Williams.