World prices for a basket of New Zealand's export commodities fell for the fourth month in a row last month, but a weaker exchange rate fully offset the decline.
ANZ's Commodity Price Index eased 1.3 per cent to be 4 per cent off its peak in May.
However, the dollar's decline across the currencies of the country's major trading partners saw the index rise 0.4 per cent in New Zealand dollar terms, though that leaves it 11 per cent off its peak last March.
ANZ chief economist Cameron Bagrie said that, while there had been some retracement in commodity prices over the past few months, the level remained high: 94 per cent above the long-run average in world price terms and 44 per cent above in New Zealand dollar terms. "I'm amazed how well commodity prices are holding up."
With world economic growth forecasts being revised down and indicators of sentiment very weak, he would have expected commodity prices to come off pretty aggressively. But the level was still strong.
In the race between commodity prices and the exchange rate, the dollar was winning. The kiwi fell 9c or more than 10 per cent against the US dollar last month. However, commodity prices tended to be stickier and decline more slowly than the exchange rate, which went "up by the stairs but down by the elevator", Bagrie said. "So there may be some catch-up coming."
But the Asian growth underpinning export commodity prices remained strong, he said. Of the 17 commodities in the ANZ index, 10 fell last month, three rose and four were unchanged. Apples recorded the steepest fall, 23 per cent.
"This is consistent with the traditional seasonal easing in fruit prices in the Northern Hemisphere as the price premium for southern exporters peters out," ANZ economist Con Williams said. "This seasonal trend was also reflected in a 4 per cent drop in kiwifruit prices." Aluminium prices also dropped 4 per cent.
Dairy prices fell, led by butter prices, which dropped 3 per cent, followed by a 2 per cent drop in skim milk powder prices. The price of logs, beef, wool and cheese all eased by 1 per cent in September.
By contrast, seafood prices lifted half a per cent, while the prices of sheepmeat and skins rose a quarter of a per cent. Wood pulp, casein, whole milk powder and venison were unchanged.
The Reserve Bank said last month it expects export prices to "moderate somewhat" as supply conditions normalise in some key markets.
Even so it expects export prices to remain high over the next few years.APN News & Media