Commodity prices break record in December

Photo / Alan Gibson.

New Zealand-produced raw materials reached a record high last month as global demand for commodities was solid at the end of last year, according to the ANZ Commodity Price Index.

The index rose 2 per cent to 302 in December, led by a 10 per cent gain in beef prices, and a 5 per cent increase in the price of skins.

That's the fourth gain in as many months.

Commodities have been well-supported in recent months as flooding in Queensland cuts international supply of wheat and coal.

"Strong commodity prices are a key crux of support to the economy,"
ANZ economist Steve Edwards said in his report.

"At present, the flow-on to the general economy is being curtailed by adverse weather conditions impacting volumes and a rural property market that remains under pressure."

Strong dairy prices have underpinned New Zealand's economic recovery over the past year, and Reserve Bank Governor Alan Bollard is banking on the primary sector to ramp up consumer spending once they've repaid outstanding debts and can take advantage of the high prices they're receiving.

Dairy exporter Fonterra Cooperative Group reported a 3.8 per cent increase in the average price of whole milk powder in the year's first auction.

In New Zealand dollar terms, the ANZ index gained 4.5 per cent to 218.3, also a record high, with the kiwi under pressure during the month.

The currency recently traded at 76.16 U.S. cents from 76.10 cents yesterday.

Other commodities that gained last month were sheepmeat up 1.9 per cent, venison up 1.3 per cent, and aluminium, seafood and wood pulp each up by about 1 per cent. Dairy and sawn timber prices each gained by 0.5 per cent.

The price of apples, kiwifruit, cheese, butter and casein was flat, while wool prices fell 2.1 per cent from a 21-year high in November, and logs declined 1.4 per cent.