Resurgent kiwi swallows export commodity gains

Apples led the charge as the first of the new season's crop reached Northern Hemisphere markets. Photo / Thinkstock

World prices for New Zealand's export commodities hit new highs last month, but the resurgent kiwi dollar gobbled up all the gains and then some.

ANZ's commodity price index rose 1.6 per cent last month in world price terms, the eighth monthly rise in a row.

Apples led the charge as the first of the new season's crop reached Northern Hemisphere markets. Export prices for apples were up 41 per cent on the end of the last season, but they were still 7 per cent below the level at the same time last year, ANZ economist Steve Edwards said.

Lamb prices were up 4 per cent, wool up 8 per cent and skins up 19 per cent. But dairy prices fell 2.5 per cent overall, led by milk powders.

Dairy products make up 42 per cent of the ANZ index and represent nearly 25 per cent of exports.

Forest products hit a new high and aluminium prices rose 5 per cent to the highest levels since August 2008.

Overall, export commodity prices have climbed 25 per cent over the past year and have doubled from their post-crisis low in February 2009.

But the rebound in the exchange rate last month saw the index fall 3.9 per cent in New Zealand dollar terms. The dollar has offset nearly half of the increase in commodity prices from its 2009 lows.

Even so, the index has only once been higher in its 25 years in New Zealand dollar terms - in March this year.

In a speech last month Reserve Bank Governor Alan Bollard said agricultural export prices were likely to remain at elevated levels for some time. "Demand is underpinned by urbanisation and wealth growth in developing countries, especially China. However, there is potential for near-term price falls as supply becomes less weather-disrupted."

The terms of trade are the best they have been for 37 years, underpinning a higher exchange rate.

- Brian Fallow

RAW MATERIALS RULE THE ROOST

Commodities beat stocks, bonds and the dollar for a fifth straight month, the longest stretch in at least 14 years, as demand for raw materials increases with expanding economies and Federal Reserve promises to boost growth.

The Standard & Poor's GSCI Total Return Index of 24 commodities climbed 4.4 per cent in April, after reaching the highest level since October 2008. The MSCI All-Country World Index of equities advanced 3.9 per cent, the most since December, and the US Dollar Index, a gauge against six counterparts, fell 3.9 per cent, touching a 33-month low. Bonds of all types returned 0.9 per cent on average, based on Bank of America Merrill Lynch's Global Broad Market Index.

Fed Chairman Ben Bernanke signalled last week that he will keep pumping record amounts of money into the world's largest economy and reiterated a pledge first made two years ago to keep interest rates "exceptionally low".

"We're in a risk-on mode being helped by Bernanke," said Arjuna Mahendran, the Singapore-based head of investment strategy for Asia at HSBC Private Bank. The stimulus means "big walls of money going into commodities, stocks and emerging markets," he said.

The S&P GSCI Total Return Index rallied for an eighth month, the longest winning streak since 2004. Silver, coffee, cocoa and petrol led the gains in percentage terms.

- Bloomberg