Dairy lift eases exports out of worldwide gloom

By BRIAN FALLOW

World prices for export commodities on balance held their ground last month as a small lift in dairy prices offset weakness elsewhere.

Nevertheless ANZ's world commodity price index is 9.9 per cent lower than it was a year ago, a decline largely driven by a steep fall in dairy prices. Even with August's 3.4 per cent increase, the dairy index is 37 per cent below its peak in July last year.

In New Zealand dollar terms returns were 3.3 per cent higher, boosted by the fact that on a month-average basis the exchange rate against the United States dollar was weaker than it had been in July.

Overall, export commodity prices are 21 per cent weaker in New Zealand dollar terms than at their peak in April last year, the decline due roughly equally to weaker world prices and a stronger dollar.

ANZ economist John Bolsover said milk powder markets were starting to look up while butter markets seemed to be marking time.

It was encouraging, he said, that the first meeting of the European Union milk products committee after their summer break opted to leave support at existing levels, providing a welcome respite to the downward pressure European subsidies have exerted over the past year.

Nevertheless risks from intervention remained, not only from Europe but the US, where there was pressure to open the dairy export incentive programme for the new season.

Lamb recorded a 0.5 per cent increase but beef prices in the key US market retraced some of July's gain, falling 2 per cent. Large volumes of domestic and Canadian product slightly weakened the market for imported beef despite the fact that only small quantities of New Zealand and Australian meat were on offer.

Aluminium prices fell 3.5 per cent, wood pulp and processed timber prices were unchanged, while log prices and seafood had a slight drop.