New Zealand export log prices generally declined over the past month as a gain in the New Zealand dollar made the country's products less competitive.
Most grades of New Zealand unpruned logs weakened by between $1-to-$3 a tonne, with A-grade logs falling to $124 a tonne, from $127 a tonne the previous month, according to AgriHQ's monthly survey of exporters, forest owners and saw millers. Export pruned logs bucked the trend, edging up to $164 a tonne from $163 a tonne. Nearly all the weakness stemmed from the exchange rate swinging out of exporters' favour, with the New Zealand dollar firming about 7 percent against the US dollar since mid-May, AgriHQ said.
Forest products are New Zealand's third-largest commodity export group behind dairy and meat products, and the Ministry for Primary Industries expects annual log export revenue to slowly increase from $2.22 billion through 2016 to $3.1b in 2021 as more logs are harvested and sent overseas.
"Wharfgate log values took a slight backwards step on last month, but as far as exporters are concerned, there's little to be worried about," AgriHQ analyst Reece Brick said in his report. "Fortunately, the exchange rate is where the negative vibes end," Brick said, noting that overseas demand, shipping rates and oil prices remained favourable.
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"All factors considered, sentiment through the log export sector is optimistic," Brick said. "Wharfgate values are anticipated to stabilise or strengthen a little as the year progresses, with only currency movements casting a little doubt over medium-term prospects."
Brick said there appeared to be no slowing in Chinese demand for New Zealand logs. In-market prices in China firmed through June and July to their highest level in more than three years, and the usual decline in activity during the summer months hadn't been noted this year, he said.
Meanwhile in India, the implementation of a goods and service tax on July 1 temporarily hurt demand, but Indian ports appeared to be short on log volumes and the market is expected to settle back to its normal routine after a period of adjustment, he said.
In the New Zealand domestic market, values for all log grades reported by AgriHQ were either steady or slightly firmer.
"The pull of export markets is still too strong for mills to be able to bargain the market lower," Brick said. "Many sellers are still finding a premium selling logs through the wharfgate, and it'll take a solid correction in this area to for any reprieve to come to the market."