Commodity prices up for second month

Lamb prices rose 6.4 per cent in April, continuing a trend which began in 2007. Photo / Herald on Sunday

World prices for New Zealand's export commodities have risen for the second month in a row, led by aluminium and lamb.

But the 2.5 per cent gain in ANZ's commodity price index is off a low base and leaves export prices nearly 30 per cent below where they were a year ago, the bank said.

The kiwi dollar firmed last month - 7.4 per cent against the US dollar and 5.5 per cent on a trade-weighted basis - which swamped the gain in world prices. In New Zealand dollar terms the index fell 2.8 per cent from March.

Over the past year the exchange rate has taken much of the sting out of the drop in commodity prices. In New Zealand dollar terms ANZ's index is 7.7 per cent below where it was a year ago.

April's increase was broad-based. Eight of the 13 commodities in ANZ's index rose and only three (apples, seafood and logs) declined.

Dairy prices, which make up 40 per cent of the index, rose 3.1 per cent, while aluminium rose 6.6 per cent.

Lamb prices climbed 6.4 per cent to a new high, continuing a rising trend in place since mid-2007.

ANZ economist Steve Edwards said low prices for sheepmeat and wool for more than a decade had encouraged a shift in land use to other forms of farming in New Zealand and Australia. Droughts in both countries over the past two or three years had reduced sheep numbers further.

The national flock had fallen from 57 million sheep to 34 million since 1990 and though productivity per animal had improved a lot it had not offset the fall in numbers, Edwards said.

Prices had also benefited from lower production in Europe, the main export market, as a result of changes to subsidy regimes there.