Higher prices are here to stay
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,