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The global dairy price continues to fall but the effect for New Zealand is being offset by rising meat prices and a weaker dollar which is boosting returns, says the ANZ Bank.
The ANZ Commodity Price Index rose 1 per cent to a new high in May, despite dairy prices falling by 1 per cent. The world dairy price index has dropped 11 per cent from its peak.
ANZ economist Steve Edwards said the fall in dairy was not as much as the previous month and had been more than offset by increases in other commodities.
Reduced supply, drought in Australia, biofuel production driving up the costs of feedstock, world economic growth and demand from emerging markets helped drive the dairy products index to 291.9 in November with 15 consecutive monthly increases.
The dairy index had fallen in all but one month since November.
Dairy producers that typically did not export had increased production and historical food trends showed prices could drop by half from a peak.
The world meat, skin and wool index rose for the ninth consecutive month by 2.9 per cent.
Beef prices were up 7.9 per cent, reflecting the continued tight supply of imported boneless beef in North America and the seasonal influence of the US barbecue season.
Venison prices were up by 4 per cent, lamb increased by 1 per cent and wool gained 2.4 per cent.
Seafood rose by 1.3 per cent in May continuing a steady increase for the last 13 months after two years of relatively flat prices. Seafood prices were being driven higher on the back of rising income and demand for wider sources of protein.
"That's a phenomenon that we're expecting to stay in there," Edwards said.
The seasonal impact saw apples return the biggest rise of 23 per cent in May - or 4.1 per cent on last year - as varieties of new season exports reached Europe, while kiwifruit rose 4.7 per cent.
The New Zealand dollar commodity price index was up by 2.5 per cent as the currency fell against all but one of the country's main trading partners.
"As soon as Dr Bollard begins the progressive dropping of the [OCR] interest rate that will flow into what's going to happen with the currency," Edwards said. ANZ was not expecting rates to ease until December.
