Export prices stay firm

By BRIAN FALLOW

Prices for New Zealand's main export commodities continue to hold up well in the face of a slowing world economy.

ANZ Bank's world price index increased by 2 per cent last month.. Ten of the 17 commodities monitored rose and three held steady. The index has risen 15.4 per cent over the past year.

But because the New Zealand dollar appreciated during May, in local currency terms the commodity index fell 1.9 per cent, but it is still up 26.8 per cent on a year ago.

The largest increase, in world price terms, was for sawn timber, up 18 per cent in the month.

"In recent months sawn timber prices have retraced last year's losses and are now at levels briefly recorded in mid-1999 and before that in 1996," said ANZ chief economist Bernard Hodgetts.

The other main contributors to the index's rise were dairy products, which collectively rose 2.3 per cent in the month.

ANZ puts the increase down to the United States having temporarily exhausted its ability to subsidise exports under World Trade Organisation rules, negative sentiment towards European milk products because of the foot and mouth outbreak, and dry conditions in parts of Australia curtailing production there.

The commodities to fall were lamb, beef, wood pulp and apples.

Mr Hodgetts said he was surprised by the durability of New Zealand's commodity prices, given the slowdown in the global economy.

"Prices for some commodities have fallen back over the past few months, but in most cases the falls have been reasonably modest, with wood pulp and fish being the exceptions. The recent fall in lamb and beef prices follows the significant spike in prices earlier this year associated with the foot and mouth outbreak in Britain and tight beef supply conditions in the US."