A relatively low New Zealand dollar has boosted commodity prices, with forestry prices near record highs but producers and exporters are being cautioned that the benefits seen from the weakening kiwi might not last.
ASB economist Nick Tuffley said in the bank’s weekly commodities report the New Zealand dollar had last week weakened as uncertainty ahead of the upcoming election weighed on sentiment; albeit it had recovered this week and was yesterday trading at about $US72.4c.
‘‘The relatively low New Zealand dollar explains the large chunk of the high [commodities] index level in New Zealand-dollar terms,’’ he said.
As at September 1 the ASB’s commodity price index sat just 3.2% below the record high, set back in March 2011.
‘‘While commodity prices are healthy in US-dollar terms, the index is still a significant 10.9% away from the record high,’’ he said.
Commodity prices by category were mixed, in US-dollar terms. Dairy prices were near their 10-year average and meat prices were
12% above the same measure. It was only forestry prices near record highs, with current prices just 2.6% below the record high, Mr Tuffley said.
Over the remainder of 2017 and into early 2018, Mr Tuffley said he expected commodity prices to remain flat or to push higher in US-dollar terms. ‘‘All else being equal and the fact that the NZD is relatively low to begin with, we anticipate that this may lead to some upwards pressure on the New Zealand dollar over the period,’’ he said.
