Commodity prices fall again in May

The ANZ Commodity Price Index fell 0.9 per cent in January. Photo / NZ Herald

New Zealand commodity prices fell for a second month in May on continued weakness in dairy products and a decline in prices of meat.

The ANZ Commodity Price Index for May declined by 4.7 per cent, following April's 7.4 per cent decline. The index is now about 18 per cent lower than in May 2014.

The commodity data comes after dairy product prices fell to the lowest level in almost six years in the GlobalDairyTrade auction overnight, amid concern about the end of milk quotas in Europe, Russia's trade embargo and sluggish Chinese demand. Fonterra last month lowered its farmgate milk payout for 2014/2015 by 10 cents per kilogram of milk solids to the lowest level in eight years.

In the ANZ series, dairy prices fell 8.2 percent in May and were down 36 percent from the same month last year. Skim milk powder dropped 13.2 per cent and whole milk powder fell 10 percent.

ANZ New Zealand agri economist Con Williams said end of season New Zealand supply has been higher than expected after improved autumn conditions, especially in the North Island. Prices were also hurt by "lacklustre China demand and increased competition from European skim milk powder," he said.

Meat prices fell 2.9 per cent in the latest month, led by a 5.7 per cent drop in beef prices. Lamb fell 4.2 per cent. The horticulture sub-group gained 1.5 per cent and aluminium rose 0.6 per cent.

Forestry prices declined 0.6 percent on weak prices for logs, while wood pulp and timber were little changed. Seafood rose 0.2 percent.

The NZD index declined 2.7 percent and was down 7.9 percent from a year earlier, reflecting the weaker kiwi dollar, and is now at the lowest level in more than two years.