NZ export prices fall once again

The prices fetched by New Zealand's key exports on world markets fell for the eighth month in a row during January.

The ANZ World Commodity Price Index fell 0.3 per cent, taking it to a one-and-a-half-year low as lamb prices fell 2.3 per cent and dairy prices fell 1.4 per cent.

However, exporters were shielded from the lower prices by a small depreciation by the local currency during the month. Converted into New Zealand dollars, commodity prices were actually up 1.2 per cent.

Despite the cushioning effect of the softer local currency, BNZ economist Dean Ford warned that weaker world prices would be felt at the farm gate.

"Rural service providers and others reliant on farm spending, should expect softer trading conditions this year compared with last.

"Even retailers in the city ought to be wary of falling commodity prices - such is the importance of the health of the primary sector to the wider New Zealand economy."

Ford said softer economic growth among our major trading partners and chances of a recovery by the US dollar meant world commodity prices could fall by about 10 per cent this year.

That decline should be offset by depreciation in the New Zealand dollar, but there was a risk the kiwi would continue to hold up longer than expected.

"This means farm gate prices are likely to continue to fall in the near term. Eventually the NZ dollar will come to the rescue, but it would be unwise to bank on this happening anytime soon."