Export commodity prices bounce back after fall

Export commodity prices rebounded last month to just a touch below their record high in November and, for a change, the gains were not wiped out by a stronger dollar.

ANZ's world commodity price index rose 0.7 per cent, reversing December's fall. The rise was driven by higher prices for dairy products, lamb, wool and forest products.

In New Zealand dollar terms, the index rose 1.9 per cent as the kiwi lost ground (on a monthly average basis).

In world price terms, the commodity index is 14.4 per cent up on a year ago. In New Zealand dollar terms it is 8.7 per cent higher.

ANZ economist John Bolsover said dairy prices (up 1.7 per cent for the month and 23.8 per cent for the year) were the highest for nine years.

He said the balance between supply and demand in dairy markets was tight. The dairy season in New Zealand had a slow start, and Australian production was still feeling the effects of drought in the two previous seasons.

"On the other side of the equation, demand seems to be holding up well and does not appear to have been burned by high prices."

The other main commodity that has pushed the index to record highs is lamb, up 2.3 per cent last month to the highest it has been in the 19-year history of the index.

Bolsover said tight supplies in Britain had contributed to continuing strength in the European market.

But beef prices fell 3 per cent, correcting from a surge in the second and third quarters of last year.