6 Jul 2020

Falling prices of lamb and logs pummel overall commodity prices

6:00 pm on 6 July 2020

Falling prices for lamb and logs drove down overall commodity prices last month.

Logs timber wood

Photo: Unsplash / Oliver Paaske

The ANZ World Commodity Index for June fell 0.7 percent, or 5.2 percent year-on-year.

However, the monthly drop was in the order of 4.5 percent when taking into account a strong increase in the New Zealand dollar.

The price of lamb was hit by a drop in demand for premium cuts, with prices falling by 11.2 percent.

ANZ agriculture economist Susan Kilsby said cheaper cuts of lamb also fell, as a result of high-volumes of lamb growing through the Chinese market and less people eating out.

While log prices made strong gains in May, they were not repeated in the month of June, with demand in China softening.

A spike in global shipping costs was also partly to blame, Kilsby said.

"The shipping prices have started to creep up again globally after really easing back while many countries were shut down with Covid-19."

The surge in demand for ships had been driven by Chinese demand for iron ores and soy beans, Kilsby said.

"In terms of exports, anything that is relatively low value compared to its size, once we see movement in shipping prices they're the sort of products that [rises in shipping costs] have the greatest impact on.

"So for us that tends to be our logs, which are quite bulky relative to their value."

Despite the drop in Forestry and Meat prices, there were strong signs for horticulture prices which shot up 7.5 percent.

This was reflected by growing demand for new season fruit.

Dairy prices gained a little last month, but global prices are expected to soften later in the year as people are eating out less in certain overseas markets.

Get the RNZ app

for ad-free news and current affairs