Glimmer of hope for commodities

Commodity prices reversed seven consecutive monthly declines by rising 1 percent in March, according to the ANZ Commodity Price Index.

However, compared with a year ago, prices are still down 31.4 percent.

Meat and dairy drove the price increases this month, with beef up 4.2 percent and lamb rising 3.9 percent. 

Dairy prices increased 2.8 percent, the first rise in over seven months after prices had fallen 58 percent from their peak.

International dairy prices rose for a second month in Fonterra's latest monthly internet auction after a lengthy period of decline in 2007.

The average price across all products and contract periods for whole milk powder was US$2,235 per tonne - 3.5 per cent higher than the month before.

"The firmer prices we're seeing are encouraging and indicate that supply and demand fundamentals are coming back into balance," said Fonterra managing director of global trade Kelvin Wickham.

The largest fall in this month's ANZ Commodity Price Index was for log prices, tumbling 12.1 percent.

Lumber prices fell 6.3 percent, seafood prices 3.5 percent and skins and venison prices fell 3.2 percent and 1.7 percent respectively.

ANZ economist Philip Borkin said the recent sharp rise in value of the New Zealand dollar had offset some of the gains in commodity prices.

"While the level of the NZ dollar has provided some insulation to exporters from the previous falls in the prices for our key merchandise exports, this latest appreciation in the NZ dollar is not favourable," he said.

"At a time when the domestic economy is still very weak, a higher NZ dollar is likely to delay any support the export sector is able to provide."

- © Fairfax NZ News