KEY POINTS:
World dairy commodity prices are dropping and meat prices rising, although the exchange rate is swiping some gains, says the ANZ bank.
The ANZ Commodity Price Index was down 0.3 per cent in April, with the world dairy index dropping to 262.3 - down 4.9 per cent on the previous month.
The dairy products index had risen for 15 consecutive months to reach 291.9 in November but has since fallen in all but one month.
ANZ economist Steve Edwards said the dairy price index was still up 24 per cent on the same time last year.
"We've certainly seen it reach a peak and just how far it declines from that is what everyone will be looking at."
Historical food price trends showed a 50 per cent drop from a peak.
"That's potentially where it could go, but each sort of cycle is a little bit different and we won't really know until we get into it a bit more." The dairy price index in the first half of April had fallen but was flat during the second half of the month.
At 262.3 the dairy index was still more than double the most recent low point of 127.6 in August 2006.
Other dairy producers that typically did not direct a lot of produce abroad had increased production to take advantage of high international prices, Edwards said.
"The more that's produced the lower the price or the greater the price correction and it doesn't give as much of a signal to those producers to chase that extra price increase."
Beef and lamb prices were up by 6.3 per cent and 2.9 per cent respectively, while seafood rose 1.8 per cent.
"I guess that's reflecting increased incomes in some of the developing nations and that's flowing through to some of the prices," Edwards said. "For beef it's more what the Americans are throwing on their barbecue than anything else." The supply of imported boneless beef remained tight in North America, with Australia diverting to other markets and Uruguay excluded because of unresolved issues associated with E. coli protocols.
"Certainly for fresh beef it seems to be that demand is increasing faster than supply."
The meat, skins and wool world price index was up 3.5 per cent in April at 143, having risen for eight consecutive months from 126.7 in August 2007, with wool prices rising 2.7 per cent to an 11-year high in world terms.
The largest price rise in April was 9 per cent for apples, with the first shipments reaching markets in Europe. The value of the kiwi fell against all main trading partners in April, except for the Japanese yen, resulting in the New Zealand dollar commodity index being up 1.1 per cent in April.
However, the previously strong rise of the dollar had all but wiped out some gains in international commodities, Edwards said.
"For beef certainly, for lamb that's the case as well. For wool it's virtually flat when you convert it to New Zealand dollars."
Dairy products on the New Zealand dollar index were up 15.2 per cent on the same month last year. An easing in the value of the dollar would benefit farmers, he said, and hinged on when interest rates started to drop.
AT A GLANCE ANZ COMMODITY PRICE INDEX
* World dairy price drops 4.9 per cent.
* Beef price rises 6.3 per cent.
* Wool price hits an 11-year high.
* Kiwi dollar value wipes out some gains.
