Logs loaded at Centreport, Wellington. Photo / File
The ANZ World Commodity Price Index gained 0.3 per cent in May. Dairy prices lifted but prices for meat, export logs and aluminium fell.
In local currency terms, the index gained 0.7 per cent (month on month), supported by a 0.4 per cent easing of the Kiwi dollar against the US dollar.
On an annual basis the index - which includes New Zealand’s major export goods - was off 13.3 per cent (or -9.9 on a currency-adjusted basis).
But the result was a solid one, against a backdrop of falling global demand for commodities.
In April the index fell 1.7 per cent month on month and was off about 17 per cent for the year to April 30 (10 per cent in currency-adjusted terms).
Data on Friday showed New Zealand’s trade deficit narrowed to $3.2 billion in the March 2023 quarter, compared with $3.9b in the March 2022 quarter, Stats NZ said yesterday.
The main contributor to the narrowing was an increase in tourism, which increased 385 per cent compared to the March quarter of last year, to $3.8 billion.
There were some concerns in the trade data, though, with export prices falling sharply - part of a global trend as pandemic-era inflation abates.
Both export prices and import prices fell sharply in the quarter.
Falling demand out of China has been one of the big factors in recent price movements, said ANZ agri-economist Susan Kilsby.
Shipping costs continue to fall sharply.
Baltic Dry Index dropped a massive 38 per cent in the past month, indicating global economies are slowing.
The slower-than-expected recovery in China is one of the main reasons for the slump in demand for global shipping, Kilsby said.
“May is typically a busy month for shipping goods from New Zealand due to the increase in cattle processed during the season, along with the demand to shift horticultural produce.”
Dairy prices gained 3.7 per cent (m/m) in May, partially unwinding the fall in pricing the previous month. Milk powder prices firmed.
Some further softening in pricing was still anticipated during the next few months, particularly for skim milk powder, which is impacted to a greater degree by the seasonal increase in milk production in the Northern Hemisphere, Kilsby said.
Dairy co-op Fonterra last week revealed its forecast for the 2023/24 season, which started yesterday, in the $7.25 to $8.75 per kg of milk solids range, with an $8 per kg mid-point.
The co-op paid its highest price of $9.30/kg in 2021/22 and is expected to deliver $8.20/kg for 2022/23.
The meat and fibre index fell 1.8 per cent in May with prices for both beef and lamb in retreat.
Beef prices fell 3.1 per cent in May after trending higher for the previous five months.
Lamb prices fell just 1.2 per cent but are expected to come under further pressure as demand for higher-value meats is impacted by deteriorating global economic conditions, Kilsby said.
Wool prices bucked the trend, gaining 4.9 per cent during May. Wool is now priced slightly higher than it was a year ago, although price levels are still low by historic standards.
The horticulture index lifted 0.3 per cent in May. Prices for new-season apples rose 1.2 per cent.
Export volumes were well down this season due to the late summer weather events.
“Any lift in price will therefore be warmly welcomed by growers and exporters, but won’t be sufficient in revenue terms to offset the huge losses in volumes,” Kilsby said.
Kiwifruit export volumes are forecast to be 20 per cent lower than last season.
The forestry index fell 4.4 per cent in May.
Demand from China for logs has dropped sharply, pulling down the price of export logs. Logs are now worth 20 per cent less than a year ago. The log market is not expected to recover for some time and harvesting of logs has now slowed in response to market conditions and adverse weather.
Aluminium prices dropped 3.3 per cent in May, with prices now at their lowest level since October.