Stronger dollar hits export income

The strengthening New Zealand dollar is starting to erode returns for the country's main commodity exports, says the ANZ August Commodity Price Index released yesterday.

The ANZ kiwi dollar price index, which measures commodity prices in local currency, fell 4.1 per cent during August as the exchange rate rose against other currencies.

However, the ANZ's world commodity price index, which measures commodity prices in world markets before their conversion to New Zealand dollars, rose 0.5 per cent, bucking the trend of the last two months which registered falls of 2 and 1.3 per cent.

The rise was due mainly to higher beef prices but that was unlikely to be sustained, the bank said.

Commodity prices were 10.3 per cent better in New Zealand dollars than they were last August and 7.7 per cent higher in world price terms.

ANZ chief economist Bernard Hodgetts said the kiwi dollar index confirmed that export prices for New Zealand commodities had peaked.

"But prices for many products remain at high levels, with prices on average still almost 50 per cent higher than their lows seen during 1999."

Encouragingly, Mr Hodgetts said, world market prices for some commodities were showing surprising resilience to the softer trading conditions.

Prices for key products such as meat and dairy had held up when others had eased considerably thanks to favourable market conditions, he said.

Beef prices rose 8.3 per cent in August, while skin prices were up 6.5 per cent after falls in the last two months. Venison prices rose 11.9 per cent in the month, wool prices lifted 3.9 per cent on the back of strong Chinese buying, and sawn timber rose 2.8 per cent.

On the down side, apples fell 10.8 per cent, skimmed milk powder was down 2.4 per cent, aluminium prices fell 2.9 per cent, lamb dropped 1 per cent and casein fell 5.9 per cent.

International prices for whole milk powder, butter, cheese and wood pulp held steady.

Mr Hodgetts said it seemed likely that the kiwi dollar would continue to consolidate and even further its recent gains. As a result, New Zealand commodity prices would continue to edge down over the months ahead and export revenue would continue to taper off gradually.

- NZPA