by Nick Clark, Manager General Policy
Dairy and meat push up commodity prices
The ANZ World Commodity Price Index lifted 2.8% in November, setting a new high. In local currency terms, the index gained 3.1%, which was also a new record high.
Dairy prices led the charge, with prices lifting 6.3% in November compared to October, with particularly strong price lifts achieved for butter and cheese. Global milk supplies are relatively tight.
There were also strong increases for meat, with the meat and fibre index up 4.4% to extend its record high. Returns for both beef and lamb are both at record highs. Wool prices were up slightly in November but remain low compared to historic levels.
Horticulture prices were up 2.0% but forestry prices were down 5.7% and aluminium prices down 10.1%.
On an annual basis, the World Price Index was up 26.1% and the NZ Dollar Index was up 22.9%.
ANZ also noted global shipping costs have eased, although pricing remains elevated and expected to remain volatile.
Dairy prices strengthen
Dairy prices were driven higher again this week, with the Global Dairy Trade auction up 1.4% compared to the previous auction three weeks ago.
All commodities on offer posted increases in prices, with whole milk powder up 0.6%, skim milk powder up 1.3%, anhydrous milk fat up 3.0%, butter up 4.6%, cheddar up 1.0%, butter milk powder up 2.9%, and lactose up 3.5%.
Overall, the average selling price was US$4,290 and 31,092 tonnes of product were sold.
The GDT Price Index has been on the upswing since August and it is now higher than its previous recent peak in March and 33.8% higher than at the same time last year. Prices haven’t been this high since 2014.
Lamb crop rises
Beef + Lamb New Zealand’s Lamb Crop 2021 report has estimated a slight increase in the lamb crop for spring 2021, A strong lambing percentage of 131.9% combined with favourable conditions from mating through to lambing for most of the country led to an overall increase in lambs tailed.
The report, produced by B+LNZ’s Economic Service, measures lambing performance and forecasts lamb and sheep exports for 2021-22.
The number of lambs processed is forecast to increase 1.0% to 18.5 million head, although average carcase weights may be slightly down on last season. Farmers reported variable lamb growth rates attributed to colder, wetter weather in October for some regions and feed supply being tight for some farms.
The number of lambs tailed in spring 2021 increased by 0.6% or 129,000 head on the previous spring to 22.7 million head. With a slight decline in breeding ewe numbers, down 0.5%, 22.7 million lambs tailed in spring 2021 compares with an average of 24.6 million head over the previous 10 years.
The average lambing percentage was 131.9%, 1.2 percentage points higher than in spring 2020 and equivalent to a record high reached three seasons ago in spring 2018.
An increase is forecast in the number of lambs processed for export in the first quarter of the 2021‑22 season (from October to December). The total number of lambs processed for export in the 2021‑22 season is expected to increase1.0% from 18.3 million head in 2020‑21 to 18.5 million head.
The number of adult sheep processed in the 2021‑22 season is expected to decrease9.5% from 3.8 million head in 2020‑21 to 3.5 million head. This result is driven by farmers seeking to maintain or recover ewe numbers.
Early season pricing for lamb is also well ahead compared to 2020. Such a positive outlook is testament to the resilience of New Zealand farmers. Hopefully this will boost their confidence.
Meat and dairy cushions fall in manufacturing
The Economic Survey of Manufacturing has shown a seasonally-adjusted 2.2% fall in sales in the September 2021 quarter compared with the June 2021 quarter.
Despite sales falls in several construction-related manufacturing industries, increased sales for meat and dairy manufacturing (up 4.6%) cushioned the blow for total manufacturing values. Excluding meat and dairy, manufacturing sales would have been down 4.8%.
The higher sales for meat and dairy manufacturing were driven by higher sales prices, with seasonally-adjusted sales volumes down 0.6%.
The monthly ANZ Truckometer has bounced back in November. Compared to October its Light Traffic Index lifted 10.6% while its Heavy Traffic Index lifted 4.6%.
However, on an annual basis (three month averages) both indexes are still lower than the equivalent period last year – light vehicles down 23.5% and heavy vehicles down 1.9%.
After huge volatility over recent months, ANZ expects the Truckometer indexes should once more be a decent GDP indicator from early next year when travel restrictions are lifted.
Job adverts jump too
Job advertisements rose 5.1% in November compared to October, according to the latest BNZ-SEEK Employment Report. This was the strongest month-on-month gain since May and saw annual growth at a strong 35.4%.
The farming, animals and conservation industry had a 5% month-on-month increase.
Compared to November 2019 – a valid pre-COVID point in time – job ad numbers were 28.9% higher. This is yet another indicator (if one was needed) of a tight labour market.
Building work slows
Statistics NZ’s Value of Building Work Put in Place has shown a Covid-induced drop in building activity in the September 2021 quarter but still relatively strong.
Total building value during the September 2021 quarter was $7.16 billion, down 1.6% on June 2021 but up 5.2% from the same quarter last year. For the year to September 2021 the value was $28.0 billion, up 15.7% on the previous year.
When adjusted for price effects and seasonally adjusted, total building volumes fell a steeper 8.6% in the September 2021 quarter compared with the June 2021 quarter. Residential work fell 6.4% and non-residential fell 12.4%.
Non-essential building activity paused due to Covid-19 alert level 4 restrictions. It should bounce back in the current December quarter.
The actual value of farm buildings put in place was $96 million for the quarter, up 22.5% on the September 2020 quarter, and $344 million for the year to September 2021, up 17.8% on the year to September 2020.
Next week’s big economic news will be on Thursday with September quarter’s GDP. Covid-19 restrictions will have weighed heavily on economic activity and it will certainly be a negative number. How deeply negative will be the question. Some of the most recent quarterly data has held up better than expected and the GDP result might not be as bad as feared earlier.
The Government also releases on Wednesday its Half Year Economic & Fiscal Update and Budget Policy Statement for the 2022 Budget.
NIWA Soil Moisture Data.
NIWA’s latest soil moisture maps (as at 9am Thursday 9 December) show some big contrasts around the country. Soils across much of the top half of the North Island are drier than usual, especially Kaipara, Franklin, North Waikato, and Bay of Plenty. Whereas North Taranaki, Horowhenua, Wellington, Golden Bay, Marlborough Sounds, Mackenzie and upper Waitaki catchment, and Western Southland are all significantly wetter than usual.
The NZ Dollar lost further ground this week, down 0.3% against the Trade Weighted Index. It was down against all our major trading partner currencies, except the Pound and the Yen.
Source: Reserve Bank of NZ
Wholesale Interest Rates
Over the course of the week, the yield for the 90 Day Bank Bill was up 3 points to 0.89% and the 10 year Government Bond yield was up 7 points to 2.47%.
The Reserve Bank will next review monetary policy settings (including the OCR) on 23 February 2022. Another increase is likely.
|This Week (9/12/21)||Last Week (2/12/21)||Last Month (9/11/21)||Last Year (9/12/20)|
|90 Day Bank Bill||0.89%||0.86%||0.83%||0.26%|
|10 Year Government Bond||2.47%||2.40%||2.51%||0.93%|
Source: Reserve Bank of NZ