By BRIAN FALLOW
A modest recovery in world prices for export commodities last month was swamped by a stronger currency.
ANZ's world commodity price index, which tracks prices for a basket of New Zealand's export commodities, partially reversed April's 1.1 per cent fall by rising 0.5 per cent, driven by higher prices for apples, wool, lamb, skins and aluminium.
But when converted into New Zealand dollar terms the index fell 3 per cent, to be 12.4 per cent lower than a year ago.
ANZ chief economist David Drage said movements in the main commodity markets had largely consolidated an increase in prices since the middle of last year, leaving the world price index 6.2 per cent higher than a year ago.
Much of that increase was due to a recovery in dairy prices - about a third of the index - from 16-year lows last July.
"But while world prices for New Zealand export commodities have held up remarkably well in an uncertain global environment, the stronger kiwi dollar has driven New Zealand dollar returns for most commodities into negative territory over the past year," Drage said.
"For example, aggregate meat and wool returns were around 18 per cent lower than 12 months earlier and aggregate forestry returns 22 per cent lower."
International dairy prices are 27 per cent up on a year ago but when converted to New Zealand dollars prices are similar to those prevailing then.
On a month-average basis the New Zealand dollar rose 4.5 per cent against the United States dollar between April and May.
Dairy prices were largely steady last month. Beef prices fell 3.8 per cent. ANZ said higher prices for domestic cattle in the US had limited the price US grinders would pay for the leaner New Zealand beef they blend with it.
Lamb prices continue to hold up well, increasing 0.4 per cent last month, and remain strong on a historical basis.
Sawn timber prices fell 2.5 per cent, with the US market oversupplied and weak. Some timber had been redirected to Australia, putting pressure on prices there, ANZ said. Logs and wood pulp were unchanged.
Stronger currency swamps recovery
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