Farmers could be "laughing all the way to the bank" if commodity prices stay strong as the dollar weakens, says ANZ National Bank chief economist Cameron Bagrie.
ANZ yesterday issued its February world commodity price index, which hit a new high for the second month in a rowas dairy prices continued to surge.
The world price index of 168.8 was up 1.6 per cent on January and 13.1 per cent ahead of a year ago.
Dairy prices jumped 5.6 per cent last month and there were 2 per cent-plus gains for logs, wood pulp and sawn timber. If dairy prices are stripped out, there was a 0.1 per cent dip overall.
When returns are converted to the kiwi currency, the New Zealand dollar commodity price index was up 1.9 per cent for the month and 11.9 per cent annually.
Bagrie said the solid performance indicated the rural sector should not stress too much about the dollar as long as prices stayed up.
Commodity prices were a "massive buffer" against a strong dollar.
But the recent fall in the currency, which has dropped US3c in the last week, meant there was potential for farmers to "almost end up double-dipping".
"If commodity prices stay high and we see the dollar fall then they could really be laughing all the way to the bank."
While there was a danger a Reserve Bank-orchestrated rise in interest rates today could push the dollar up, Bagrie also noted the downward pressure on the currency from risk-averse investors selling the kiwi currency due to global conditions.
A potential "sting in the tail" was that a falling dollar could add to costs for imported products.
