Wool, dairy prices boost NZ export returns


Strong dairy prices and rocketing wool prices helped lift the terms of trade to a 37-year high in the June quarter.

Export volumes are also at their highest levels since 1990 when the statistics series began, but import volumes have been falling.

Statistics New Zealand figures show the terms of trade up 2.3 per cent in the three months. That means 2.3 per cent more imports could be paid for by a fixed amount of exports than in the March quarter.

Export prices were up 1.8 per cent in the June quarter overall, while import prices fell 0.5 per cent.

The key gains in export prices were dairy, up 4.5 per cent, oil export prices, up almost 13 per cent, meat, almost 3 per cent, and wool, up more than 12 per cent.

Wool prices have risen more than 58 per cent in the past year to their best levels since 1989. The annual rise in wool prices was the biggest since the mid-1970s.

The quarterly data coincides with a season in which Fonterra Cooperative Group is paying farmers a record $8 to $8.10 before retentions for the milk and share of other earnings.

Global commodity prices have been soaring on demand and reached a record high in May, based on the ANZ Commodity Price index, which has edged lower in the past two months.

"We have a positive medium-term outlook for the terms of trade and see it remaining high relative to history," said Philip Borkin, economist at Goldman Sachs. Still, "we do believe it is now close to a near-term peak and will moderate slightly over the next two years as export prices retreat from current high levels".

Borkin said there are signs the rural sector is starting to spend and invest more rather than simply paying down debt, which should yield "positive growth multipliers" for the wider economy.

Import prices fell for machinery by 3 per cent to 4 per cent, while transport equipment and food and drinks were down more than 2 per cent.

Seasonally adjusted export volumes rose 0.5 per cent in the June quarter, and are at their highest level since the series began in the June 1990 quarter.

Total export volumes have remained at a high level over the last three quarters.

Non-food manufactures were the major contributor to the overall rise in export volumes, while dairy had the largest offsetting contribution.

Seasonally adjusted import volumes fell 2.4 per cent in the June quarter, the first fall since the June 2009 quarter.

Capital goods and motor spirit were the main contributors to the decrease in total imports in the June 2011 quarter.


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