By JIM EAGLES
Good news for the sheep industry led the ANZ World Commodity Price Index to shrug off expectations of a continued downward slide last month.
The index, released today, confounded pessimistic predictions for the second month in a row by achieving a modest rise.
January's 0.3 per cent rise was
followed by a 0.8 per cent increase, although the index is still 4.7 per cent below the level of a year before.
The main reason for the increase was a significant rise in wool prices. The wool index rose 11.7 per cent during the month as mills around the world found themselves short of stocks.
ANZ chief economist David Drage said the better balance in the wool market this season was encouraging. "There is a growing belief that recent gains can be sustained and built on, particularly as wool is still cheap in US dollar terms."
Increasing the good news for sheep farmers, lamb prices held up well, mainly thanks to low stocks in Europe, with the lamb index now 12.1 per cent higher than a year ago.
Skin prices, which collapsed last year, improved for the second consecutive month. Seafood prices also recovered some of the ground lost in the past two years.
Forestry signals were mixed. Sawn timber and log prices rose, with China providing a growing market for both.
Prices for wood pulp fell again and the ANZ believes it must be at the bottom of its price cycle.
Beef and venison prices both fell during the month but are still at relatively high levels.
In the crucial dairy industry, which makes up more than a third of the overall index, prices unexpectedly stabilised. Milk powders, butter and casein remained basically unchanged but the cheese index fell 5 per cent.
But Drage said that stability was not likely to continue, with the EU having moved to further increase export subsidies and the US likely to follow suit.
"Over the first two months of 2002 weakness in dairy prices has been offset by a general firming across the remaining commodities," he said.
But with dairy prices coming under renewed downward pressure it was "uncertain whether the remaining commodities will be able to garner the muscle to offset this pressure".
