3 May 2012

NZ agricultural export prices may continue to fall

2:18 pm on 3 May 2012

A broad-based fall in prices for New Zealand's agricultural exports may continue in coming months as dairy prices fall and demand from China softens.

The ANZ Bank's commodity price index fell 4.5% in April, to the lowest level in 18 months.

Prices for sheepmeat fell sharply, and wool, dairy, aluminium and beef prices also slipped markedly.

Translated into New Zealand dollar earnings, commodity prices eased 4% to the lowest level in two-and-a-half years. The prices have fallen 21% from the peak recorded in March last year.

ANZ economist Steve Edwards says a 2.4% fall in dairy prices at Fonterra's online auction on Wednesday will push commodity prices even lower next month, but it's difficult to forecast what'll happen after that.

He says dairy makes up nearly 43% of the index so it's got a huge bearing and a lot will depend on the level of demand from China.

Mr Edwards says there's also a weakness in sheepmeat prices which reflects an oversupply, as there was some consumer resistance to high prices previously and now increased imports are arriving from places such as Australia.

He says wool prices reflect a weakening demand not only from China but also from India and Europe.