NZ commodity prices set new record

Photo / Sarah Ivey

Prices for New Zealand-produced raw materials rose for a fifth straight month to a new record in January, as global food prices continue to climb, according to the ANZ Commodity Price Index.

The index climbed 3.8 per cent to 313.3 last month and has surged by almost a fifth since August last year as the price of 13 locally-produced commodities increased.

Three were unchanged and one declined. The gains were led by a 14 per cent increase in skim milk powder, an 11 per cent increase in wool and 7 per cent growth in whole milk powder and beef prices.

Wool and beef are now fetching record high levels since the ANZ series began in 1986.

The strength in soft commodities comes as a global food shortage spurs demand for New Zealand's products, and is pumping up support for the currency.

The index rose 2.3 per cent in kiwi dollar terms to a new record high 223.2. The kiwi dollar traded unchanged at 77.30 US cents after the announcement.

"It remains a question of time in terms of when the income boost from surging commodity prices diffuses into the broader economy," ANZ New Zealand economist Steve Edwards said in his report.

The Reserve Bank expects the strength in New Zealand's primary sector will slowly filter through to the wider economy once farms, dairy in particular, repay debt on highly-leveraged mortgages and can ramp up spending.

Fonterra Cooperative Group will hold its first online auction of the month on Tuesday in the US, and economists expect the price of milk powder will continue to climb.

Though that will eventually seep into New Zealand's coffers, it's helping unsettle global financial markets as high food prices and lingering unemployment contribute to unrest in North African and Arab countries, including Tunisia and Egypt, where the former overthrew its leader and the latter is trying to.

Other raw materials that gained last month were a 4 per cent lift in aluminium prices, 3 per cent for venison and 2 per cent for lumber. Wood pulp, sheepmeat and seafood each rose slightly in January.

The price of skins fell 0.5 per cent from December's 14-year high, while logs, kiwifruit and apples were unchanged in January.