Firm Kiwi dilutes farming returns

By BRIAN FALLOW

A stronger dollar wiped out further gains in the world prices of New Zealand's export commodities last month.

Led by higher beef prices the ANZ's world commodity price index rose 0.9 per cent in August to be 24 per cent higher than it was a year ago.

However, exchange rate gains against the United States dollar, yen, pound, euro and Australian dollar more than offset the higher world prices, leaving commodity prices 0.3 per rent lower in New Zealand dollar terms, or 13 per cent up on a year ago.

ANZ chief economist John McDermott said the commodity price cycle was believed to be near its peak and that moderating global growth and waning supply-side influences would see prices soften next year.

But he expected the impact of that to be partially offset by the New Zealand dollar giving ground against the major currencies.

World prices for beef and lamb are the highest they have been in the 18-year history of the index.

Beef jumped 4.9 per cent last month to levels 40 per cent up on a year ago.

In the key US market tight cow beef supplies from domestic and Australian sources, and a ban on Canadian beef, have combined to push prices up .

Lamb prices gained 1.2 per cent, wool 1.1 per cent, kiwifruit 2.8 per cent, logs 1 per cent and seafood 3.1 per cent.

Dairy prices, which make up about a third of the index, were unchanged at eight-year highs.

Wood pulp recorded the largest price decline, 3.3 per cent, as prices settled back in a traditionally quiet time of the year.

A softening of Chinese demand and higher energy prices had also dampened the market, the report said.

The other commodities to fall were apples (3.2 per cent), aluminium (1 per cent), skins (0.8 per cent) and sawn timber (0.1 per cent).