World prices for exports strengthen

By BRIAN FALLOW

World prices for New Zealand's export commodities strengthened last month, returning the ANZ's commodity price index to the level at which it started the year.

But the 0.8 per cent rise was largely negated by a stronger exchange rate. In New Zealand dollar terms, the index is 0.6 per cent lower than a month ago and 10.8 per cent down on July last year.

ANZ chief economist David Drage said it was encouraging that world commodity prices had held on to the gains recorded in the second half of last year despite unsettling factors such as the war in Iraq and the Sars outbreak.

World prices are a touch above their average over the 17-year history of the index.

"Markets for dairy products, lamb, wool, horticulture and seafood are in reasonable balance and beef appears to have troughed, pointing to a further period of consolidation during the remainder of 2003," Drage said.

The New Zealand dollar's average level over the month on a trade-weighed basis was 1.4 per cent higher than in June.

The month's largest gain was in beef prices, which rose 7.1 per cent, reflecting relatively strong demand in the United States and a seasonally light supply from New Zealand and Australia.

A further improvement in prices in the US market is forecast for the rest of the year and next year because of declining US production and despite expectations that its ban on Canadian beef will be lifted this year.

On the other hand, Japan has lifted the tariff on chilled beef from 38.5 to 50 per cent.