NZ beef, lamb and dairy prices on 'reasonable' footing

Lamb prices rose 7.1% in April to hit $6 per kg. Photo / Stephen Jaquiery

Two separate New Zealand commodity price indexes have the country's exports in good health, but the strength of the New Zealand dollar remains a concern.

ANZ agri-economist Con Williams said while the headline ANZ commodity price index dipped 0.2% in April, the underlying detail for New Zealand's main commodities remained ''robust''.

The headline index was driven lower by dairy - it was down 2.5% month on month - while the non-dairy component rose 1.2% for the same period.

''Continued weakness in the New Zealand dollar also added to local exporter returns, with local prices up 0.5% month on month and 20.4% year on year.

''The New Zealand dollar index is now at its highest level since 2013-14, when milk powder prices were at record highs,'' Mr Williams said.

ASB economist Kim Mundy said New Zealand commodity prices fell in US dollar terms last week, but that had been offset by a weak local currency, meaning the index rose almost 2% in New Zealand dollar terms.

''Currently, New Zealand beef, lamb and dairy prices are all on a reasonable footing,'' she said.

It was ''quite rare'' to have all three commodities looking healthy at the same time. Dairy prices look set to reach, if not exceed, $6 per kg by the end of the 2016-17 season, and the ''stellar'' 7.1% lift in lamb prices during April sent them to $6 per kg.

While beef prices were ''healthy'', they were less certain of reaching the $6 mark as they remained about 37c below that mark.

However, she cautioned that the ASB's recently revised New Zealand dollar forecast pointed to the risk that recent gains could get slightly eroded, and could delay dairy and beef prices reaching the $6 mark in the first place.

''We have revised our New Zealand dollar forecasts higher against the US dollar, following recent US political developments,'' she said.

In particular, US President Donald Trump's failure to get his healthcare reform Bill through Congress had created uncertainty over his ability to deliver his proposed tax cuts, she said.

Because much of the recent US dollar strength was predicated on Mr Trump's tax reforms, Ms Mundy said the kiwi would strengthen against the greenback until the US enacted tax cuts.

'' But those cuts may not take place until 2019,'' she said.

Mr William's said despite some global jitters for commodity prices, New Zealand's main basket of commodities continued to perform well for now.

'' This strength has been driven primarily by supply shortages in some sectors, but also robust demand from Asia, especially China, and the US for some products.

simon.hartley@odt.co.nz