New Zealand commodity prices gained ground in February, driven by improvements in dairy and meat, but problems in the world’s trade routes are making shipping more expensive, ANZ said.

The bank said its latest World
Commodity Price Index gained 3.5 per cent, month-on-month, in February.

In New Zealand dollar terms, the index lifted 4.1 per cent, month-on-month, as the NZ dollar fell 0.8 per cent against the US dollar.

Global shipping prices are generally trending higher as problems traversing the Suez and Panama Canals are making journeys longer and more expensive, ANZ said.

“New Zealand’s smaller exporters are more exposed to the recent changes in shipping costs as they rely on gaining space on container ships, as opposed to having long-term contracts directly with the shipping providers or having the scale to utilise charter ships”, ANZ agri economist Susan Kilsby said.

Dairy prices were benefiting from reduced global milk production, particularly in the EU and the US, which has encouraged buyers to secure product while there is still ample supply, she said.

The meat and fibre index posted a solid gain in February as wool, beef and lamb prices all improved.

Despite the improvement, lamb and wool prices were still very low.

Demand for lamb products was especially weak in China, the bank said.

Elevated supply of lamb from Australia was also weighing on market prices.

Beef demand remained solid despite increased supplies with the US buying more meat than usual.

ANZ’s horticulture index remained unchanged as new season pricing was not yet available.

A record kiwifruit harvest is forecast which will test the depth of our markets, but a much smaller grape harvest is expected due to unfavourable weather earlier in the season, ANZ said.

The forestry index increased in February.

Log exporters were reporting some improved demand from China as building activity lifts again following the Chinese New Year holiday period, the bank said.

However, log returns were being negatively impacted by the lift in global shipping costs, as they are a bulky item to move.

Aluminium prices fell in February.

The aluminium market is benefitting from tighter supplies within Europe but relatively low usage of aluminium from China will temper price movements.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.