ANZ Commodity Price Index

Wednesday 11 Oct 2017


The sun shone on the ANZ Commodity Price Index for the first time since June, with the index lifting 0.8% m/m in September (+12% y/y). All of the six major groups lifted in the month. At the sub-component level, 11 of 17 components rose, two were flat, and four fell in the month. Local returns received a 1.7% m/m boost (13% y/y) as the NZD fell against most major peers for the second month in a row.
  • Dairy prices continued to trade largely sideways (+0.4% m/m), but there were mixed moves for the various products. Both whole milk (-1.5% m/m) and skim milk (-1.8% m/m) powder prices slipped. Whole milk powder prices have traded a tight range in recent months with solid Asian demand and steady supply. Last night saw some further weakness, especially for WMP. This highlights buyer caution in the face of lifting global milk supply. On the other hand, milkfat prices continued to outperform in September. Both butter (+2.7% m/m) and cheese (+3.4% m/m) prices lifted, reflecting robust Asian demand and a tight supply-demand balance for butter in Europe.

  • Meat and fibre prices eked out a small increase of 0.4% m/m. Wool prices rebounded 7.7%, but off very low levels. Northern Hemisphere seasonal demand tends to pick up before the onset of winter, and there has also been low seasonal supply from New Zealand. Beef and lamb prices were fairly stable with lower seasonal supply locally and solid demand in most major markets.

  • Horticulture prices lifted 2.6% m/m. New Zealand apple prices rose 1.3% m/m as frost damage is expected to limit late-season supply from southern Germany, Belgium, Holland, the French Alp region and Eastern Europe, including the major EU producer Poland. Kiwifruit prices lifted 3% m/m, halting a two-month slide. Kiwifruit prices are up 14% y/y due to a smaller green crop and higher proportion of the gold variety in the export mix compared with last year.

  • Seafood prices lifted 0.3% m/m. Hoki (+2% m/m) and ling (+5% m/m) provided the uplift.

  • The forestry group increased 0.5% m/m with incremental rises for log and pulp products. Log prices were up 0.4% m/m, and have lifted for 12 consecutive months. Construction activity in China has entered its normal seasonal lull, reducing port offtake levels. Total log stocks on China’s ports have been tracking slowly down over recent months and radiata pine has been steady around 2 million m3. These dynamics have supported incremental price gains. Wood pulp prices also reversed last month’s fall to post a 1.3% m/m rise on renewed interest from China.

  • Aluminium prices had a further lift of 3.5% m/m (31% y/y). Prices are up 42% since their low point in November 2015 and are at the highest level in over five years. China’s environmental and regulatory changes are starting to take effect as the first smelters power down ahead of mandated cuts over the winter period to reduce air pollution.

Still-elevated NZD commodity prices will provide a strong boost to rural incomes in 2018, which will diffuse through the broader economy. This will be important with the economy entering a transition phase as some of its previous growth drivers (housing, construction, tourism, migration) peak, and we await others to step in and fill the void. Strong commodity prices, and the spill- overs, will be important to help the economy avoid a growth pothole.

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