Higher prices are here to stay

Matamata Chronicle - - Rural Delivery - By HAMISH RUTHER­FORD and NI­COLA BOYES

The Re­serve Bank has de­liv­ered a bullish as­sess­ment of the fu­ture of farm gate prices, pre­dict­ing the com­mod­ity prices which have sent the New Zealand dol­lar soar­ing in re­cent weeks are here to stay.

The news is good for the Waikato, where com­pa­nies ser­vic­ing the sec­tor say they are notic­ing a slight lift in spend­ing by farm­ers who un­til now have been fo­cused on pay­ing down farm debt.

Re­search pub­lished by the cen­tral bank last week con­cluded that the rise in so-called ‘‘soft com­modi­ties’’ such as dairy prod­ucts was based on real in­creases in de­mand from Asia, which was likely to con­tinue.

While spikes in prices may have been ex­ag­ger­ated by ex­treme weather, there had been a struc­tural rise in prices which was likely to be per­ma­nent.

‘‘ Al­though in the neart­erm, prices could fall slightly as sup­ply be­comes less weather-dis­rupted, de­mand is un­der­pinned by ur­ban and wealth growth in de­vel­op­ing coun­tries, es­pe­cially China,’’ Re­serve Bank gov­er­nor Alan Bol­lard told an au­di­ence of farm­ers.

Dairy prices surged to near record lev­els in March,

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