ASB sees positives despite price falls

Slowing Chinese demand and trade tensions will see prices for key commodities fall this year, the ASB predicts.

Even so, the bank was maintaining a ‘‘glass half full’’ view for the forthcoming year, ‘‘just not as rosy as what we saw over 2018’’.

Offsetting the adverse projections, analyst Nathan Penny said the New Zealand dollar should remain at a favourable rate for this year, and prices for export commodities were buoyant, which offered a buffer.

In New Zealand dollar terms, prices were up 12.3 per cent over the 10-year average.

Better than expected spring and early summer weather had had a positive impact on farm production.

New Zealand was heading for a record high milk collection this season, resulting already in two revisions in the ASB’s 2018-19 milk price forecast.

Penny said China bought a fifth of New Zealand’s export goods overall, and an even greater percentage of dairy, meat and logs. Although the Chinese economy was stalling, the impact was greater in the industrial and export sectors, rather than at the household level.

‘‘Relatively firm household demand should help underpin demand for New Zealand export commodities – recall that New Zealand export commodities such as meat, dairy and fruit are more exposed to Chinese household demand and less directly exposed to slowing Chinese industrial demand.’’

In the United States, the trade tensions with China combined with rising interest rates were causing financial market volatility, while Brexit concerns were weighing on the UK and European economies.

Prices at the most recent global dairy auction rose 2.8 per cent overall, the third consecutive increase since prices started their decline in May 2018. However the positive result was partially due to a decline in offer volumes for all commodities.