The ANZ World Commodity Price Index eased 0.2% in December but still finished the year up 24% year-on-year.
ANZ agri economist Susan Kilsby says stronger prices for dairy, meat and aluminium were not sufficient to offset lower returns from the forestry and horticultural sectors.
In local currency terms, the index gained 3.1%, to extend its record high, bolstered by a 2.8% reduction in the trade weighted index (TWI).
Global shipping costs have fallen, but remain volatile. The Baltic Dry Index dropped a further 26% during December, while falls in other shipping price indices were less dramatic. Delays at ports and limited airfreight options are expected to keep freight costs elevated throughout 2022.
Dairy prices gained 1.5% m/m in December, but growth is now stagnating. Skim milk powder and cheese sourced from NZ are currently priced a little higher than product sourced from major suppliers in the Northern Hemisphere. Milk supplies remain tight globally, which will be supportive of prices and likely offset any easing of demand associated with slower economic growth in China, and the potential negative impact from the spread of Omicron.
The meat and fibreindex gained just 0.5% m/m in December. Wool continues to underperform with returns from coarse grade wool not sufficient to cover the cost of shearing. Beef demand remains strong in both China and the US as consumers search for low priced cuts. Demand for lamb also remains robust.
The horticulture index fell 4.6% m/m in December as prices fell at the end of the season for the limited volumes of kiwifruit exports. The new export season will get underway in late summer/early autumn.
The forestryindex fell 4.9% m/m in December following a similar fall the previous month. High freight costs reduced the value of export logs which has prompted a reduction in felling, and more logs being supplied to local mills. Stockpiles of logs in China are now being worked through which is expected to eventually prompt additional demand, but activity is expected to remain muted until after the Chinese New Year.
Aluminium prices lifted 2.5% m/m in December. Global aluminium inventories are falling as production is not keeping up with demand. Aluminium production has been compromised in both Europe and China by expensive electricity and coal prices.
