The gains in February were broad-based, with 10 of 17 components increasing, four unchanged and three recording falls, according to ANZ agri-economist Con Williams.
He said the largest gains were for beef and aluminium, but wool tumbled further.‘‘However, the gains for beef and aluminium prices were sufficient to lift the overall index in February," Mr Williams said.
ASB rural economist Nathan Penny is upbeat about the forestry sector this year, in his release of the ASB commodities weekly report, describing it as "in a sweet spot" and "shaping up as a banner year for forestry".
Mr Williams said prices in the meat and fibre group lifted 4.4% month on month, with a large gain of 11.3% for beef, but that was offset by a further 4.2% decline for wool.
Beef prices improved from the tight Australasian supplies and US importers’ restocking.
"Wool prices experienced another large fall as Chinese demand remained absent," Mr Williams said.
Auction prices for wool stabilised in late February as producers refused to sell below the cost of production, he said. Lamb prices increased 0.5% month on month with Chinese and Middle Eastern demand strengthening for lamb flaps and forequarter cuts, Mr Williams said.
He said the resurgence in aluminium prices continued, with a 4.2% lift in February from January. Supporting the aluminium price gains were a series of supply-side issues for the base metal, a reduction in inefficient Chinese capacity and continued exuberance about global demand, he said.
Dairy prices had improved 44% year-on-year and in February were up 1.2%, Mr Williams said.
Milk powder, butter and cheese all recorded gains of between 1% and 2%, with only casein prices down in February, by 2%. The ANZ index uses USDA Oceanic prices, which do not completely mirror Fonterra’s GlobalDairyTrade movements, where there was a small decline in milk powder prices in February. Mr Williams said dairy markets’ sentiment had softened recently and milk supply conditions had improved from a "torrid" second half in 2016.
"However, Chinese import demand remains strong and this is expected to help underpin market fundamentals," he said.
While seafood prices had been a consistent "outperformer", with overall prices up 15% since April 2016, Mr Williams said overall seafood prices fell 0.5% January to February, but most products showed small lifts.
"The overall decline was driven entirely by a 5.8% fall in rock lobster prices," Mr Williams said.
Forestry prices lifted 1.5% month-on-month with both logs and wood pulp prices improving in February, while log prices rose 1.8% with favourable demand from both local processors and China continuing.
ASB’s Mr Penny said the New Zealand construction boom was driving prices to record levels, with Auckland’s demand likely to "remain a feature for years".
"In short, the local boost to prices is no flash in the pan," Mr Penny said.
Export demand "remained high", with pruned export logs at their highest level since records began in 2008, plus log volumes for the quarter to December had lifted 9% on the corresponding period a year ago.
However, he added a caution concerning whether shipping prices would stay low for exporters, and also Chinese demand, as its housing market was in a downturn which would likely put some downward pressure on log prices during the year.
