3 Sep 2015

Commodity prices drop for fifth straight month

9:32 am on 3 September 2015

Commodity prices have declined for the fifth consecutive month.

The ANZ Bank Commodity Price Index declined by five percent in August, compared with the previous month, and is at its lowest level in almost six years.

On an annual basis, the index has slumped by a quarter.

Weaker dairy products in the first-half of August led the decline, with prices falling to their lowest level since mid-2004.

But most commodity groups, including logs, green kiwifruit, lamb and aluminium, fell, though although there was a rise in beef and wool prices.

ANZ chief economist Cameron Bagrie said demand for commodities globally was generally soft.

When converted back into New Zealand dollars, Mr Bagrie said returns at the farm gate fell 4 percent, as a lower New Zealand dollar couldn't offset the fall in prices.

The index will not capture the recent recovery in dairy prices until next month.

Some economists are cautiously optimistic that dairy prices will continue to rise over the coming year.

But Mr Bagrie said he was not confident it could be sustained.

"There's still an awful lot of milk product around the globe and of course the global demand story internationally still looks pretty tepid," he said.