European crisis drags prices lower
The European sovereign debt crisis continues to clobber export commodity prices, and whole milk powder prices took the biggest knock in June.
Dairy prices are down to their lowest levels in almost three years as world commodity prices keep falling, down another 2.4 per cent in June – the fifth monthly fall in a row, according to ANZ Bank.
Because of a sharp rise in the New Zealand dollar during the month, the value of a basket of commodities in New Zealand dollar terms fell 3.4 per cent.
The kiwi was trading just above US80 cents yesterday, up from about US75c a month ago. Economists say the currency is overvalued, but the United States dollar is weak and global jitters will keep the kiwi up.
Since world prices peaked 14 months ago, the ANZ commodity price index has fallen in every month but one, and is down 20 per cent from the peak in April last year. Prices had fallen because of greater uncertainty caused by the ongoing European debt crisis, ANZ said.
Ten commodities fell during June, with just four up and three unchanged.
Whole milk powder prices suffered the biggest drop, down 7 per cent for the month in world price terms.
Dairy prices have come down partly because of growing supplies, rather than a sharp drop in demand. A return to more normal production levels should help to underpin prices next year.
In June, the price of milk levelled off sharply at Fonterra’s monthly online dairy auction, following a 13.5 per cent surge in the previous auction, suggesting that prices might be finding a base.
Milk powder sales in the past 12 months were worth $6.7 billion – by far the largest single export product. For the three months to the end of May, milk powder exports were down $343 million on the same period a year ago, with butter down about $256m.
Aluminium prices fell 6 per cent in the past month. Total aluminium exports were worth more than $1.1b in the past 12 months, with the lion’s share sold to Japan. Prices were down 29 per cent to a 32-month low.
Wool export prices fell 5 per cent in June.
Seafood and butter prices dipped 4 per cent, and kiwifruit fell 3 per cent.
Overall, dairy product prices fell 4 per cent during the month. Dairy products underpin the index, making up 43 per cent of the total basket of exports.
Dairy prices were down to their lowest levels in almost three years, and 31 per cent below their recent peak.
Europe’s sovereign debt crisis has hit world commodity prices, but global volatility also saw the kiwi rise during the month. That made the fall in New Zealand terms even worse, down 3.4 per cent for the month.