Export commodities hit 19-month high

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Export commodity prices hit new highs last month in both world price and New Zealand dollar terms.

Led by a 9.2 per cent rise in log prices, ANZ's commodity price index rose 1.8 per cent from February to eclipse the previous record in July 2008.

A stronger kiwi dollar (except against the Australian currency) pared back the increase to 0.4 per cent in New Zealand dollar terms, but that was still enough to top the previous high in August 2008.

Log prices are at an 18-month high and 50 per cent above their most recent low in the middle of last year, ANZ economist Steve Edwards said.

Aluminium rebounded 7.7 per cent, reversing February's fall.

Beef and lamb prices hit fresh highs, rising 6.8 and 4.2 per cent.

The meat, wool and skins sector has seen world prices climb by a third from their recent lows in February last year but, in NZ dollar terms, prices are little changed from a year ago.

The index's new heights come despite a 1.2 per cent fall in dairy product prices, which make up 38 per cent of the index.

International dairy prices have been falling since the new year and are about a third down on their peak in late 2007.

They had more than doubled between mid-2006 and the end of 2007, Edwards said, underpinned by a lift in demand in China and India, amplified by the effects first of Australian drought and then news the Europeans were to phase out export subsidies.

But then the global financial crisis undermined demand at the same time that fringe dairy exporters ramped up production, and prices fell again - by 58 per cent by February last year.

Less than half of that decline has been retraced at this point.

China has overtaken the US as the largest market for New Zealand's dairy products. Exports to China last year exceeded $1 billion, Edwards said.

* Results from Fonterra's monthly online auction, out today, will give the latest picture for dairy prices.