High dollar hammers commodity gains

Fairfax Media

STRONG DOLLAR: The kiwi dollar started the month about US72c and hit a peak of almost US76c late in the month, before returning to about US72c.

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International dairy and log prices are up strongly on the back of a global recovery, but the gain is being offset by an even stronger jump in the kiwi dollar, says ANZ.

In October, international dairy prices rose 8.3 per cent, to be up 44 per cent on the low point early this year, ANZ's latest commodity price index shows.

The results of Fonterra's monthly online dairy products auction are due out today.

Last month, the auction price rose almost 6 per cent. Earlier strong gains saw Fonterra lift this season's projected milk payout 55c to $5.10.

The ANZ's dairy price index had moved "hand in hand" with the Fonterra auction price, which was expected to improve.

"If anything, for the past couple of auctions, Fonterra auction prices have been lagging," ANZ economist Steve Edwards said. The ANZ index followed a United States price for dairy products.

ANZ had not yet considered if it would revise the expected payout price for Fonterra farmers for the season.

Overall, ANZ Bank's commodity price index for October rose 4.6 per cent, to be up 24 per cent from the recent low in February.

But in kiwi dollar terms the index dipped 0.4 per cent in the month to be down 19 per cent on a year ago.

"A soaring kiwi dollar curdled the cream," Mr Edwards said.

The kiwi dollar started the month about US72c and hit a peak of almost US76c late in the month, before returning to about US72c.

In the past month there had been reasonably strong rises almost across the board for New Zealand export commodities, as the global economy improved, he said.

One of the biggest was a 15 per cent jump in log prices, with sawn timber prices also up 6 per cent in world price terms because of a lift in global demand.

Most of the logs and timber were sold in North Asia, with China starting to rebuild its stocks of wood, leading to a boost in prices, he said.

World wool prices also rose about 7 per cent and skins were up 3.5 per cent in world terms.

Beef prices dipped almost 4 per cent, reflecting the end of the United States barbecue season. Apple prices were also down slightly, Mr Edwards said.

NZPA