Rural and regional

New Zealand’s rural sector dominates our economy. Find out what effects national and international pressures will have on the industry and its farmers.

Rural and regional reports

Commodities Weekly

This concise weekly report explores the components of the ASB Commodity Price Index in relation to the meat, dairy and forestry markets. It also presents valuable insights into other factors that might affect local commodity prices, such as currency movements and overseas tariff agreements.

Rural Economic Note

This section provides insights into key rural events such as the fortnightly Global Dairy Auctions and announcements by Fonterra, New Zealand’s multinational dairy conglomerate.

Regional Economic Scoreboard

The economic performance of New Zealand’s 16 Regional Councils is ranked using the latest quarterly regional statistics on employment, construction, retail trade and house prices. The fastest growing regions gain the highest ratings, and a good performance by the overall economy raises the rating of all regions.

Farmshed Economics

This monthly report provided insight into key rural developments from the month prior. This is a historical report, that is no longer created.

International Agri Insights

Authored by our US-based expert Professor Bill Bailey, this report gave his take on the global agricultural developments across a range of sectors. This is a historical report, that is no longer created.

Rural Loan Report

This report provided a brief summary of our interest rate view to assist rural borrowers with making informed interest rate decisions. This is a historical report, that is no longer created.

Latest reports

Commodities Weekly: Liberation Day looms
28 Mar 2025
- ASB’s commodities price index was down in all denominations again last week while the NZD remained firm and traded near 0.5740 at the end of last week
- The NZD has remained above 0.5700 for the past two weeks and is trading around 0.5740 at the time of writing
- Financial markets continue to respond to the latest tariff news
Commodities Weekly: Rain dance
19 Mar 2025
- ASB’s commodities price index was down in all denominations last week while the NZD remained firm and traded near 0.5740 at the end of last week
- The NZD has traded up towards 0.5830 this week, nearly US 3c above the January lows, but still US 5c below the 2024 peak just shy of 0.6350
- The story remains mostly about the USD, which remains around 2025 lows (measured by the DXY USD index)
ASB Regional Scoreboard: Back-to-back by Otago
14 Mar 2025
- The South Island continues to excel, securing the Top 4. Otago has impressively achieved another back-to-back victory, reminiscent of its performance in 2017-18
- With a positive outlook for Otago, we anticipate the Central Lakes region to secure a three-peat, as it did in 2023, for the second time in the history of our Regional Scoreboard rankings
- Otago boasts the country’s fourth-largest population, which should provide economic momentum, particularly in retail sales and employment
Commodities Weekly: NZD seesaw
12 Mar 2025
- ASB’s commodities price index was down in NZD terms but up in SDR and USD denominations last week while the NZD lifted over a cent to trade near 0.5720 by the end of last week
- This is a reversal of the previous week’s moves for both the indices and the NZD
- The NZD remains trading near 0.5720 at the time of writing
Commodities Weekly: Ongoing tariff uncertainty
07 Mar 2025
- ASB’s commodities price index was up in NZD terms but down in SDR and USD denominations last week while the NZD eased over a cent to trade near 0.5600 by the end of last week
- The NZD has subsequently appreciated to trade back above 0.5730 at the time of writing
- Much of the NZD/USD volatility is a function of the USD side of the equation, as market participants digest the latest tariff developments
Commodities Weekly: Commodities price index lifts in all denominations
28 Feb 2025
- ASB’s commodities price index was up in all denominations last week while the NZD lifted 0.3%, trading around 0.5750 vis-à-vis the USD by the end of the week
- The NZD has subsequently eased below 0.5700 at the time of writing
- Within the index, lamb prices were up 0.9% while beef prices lifted 0.3% (both measured in NZD terms). The combined price index up 0.9% in USD terms last week
Commodities Weekly: NZD lifts off recent lows
19 Feb 2025
- NZD/USD dropped towards USD 0.5520 earlier in the month in reaction to Trump’s announcement of widespread tariffs on Canada, Mexico and China
- Since then, Trump has announced tariffs on steel and aluminium, as well as retaliatory tariffs for other countries, and tariffs on automobiles
- However, the NZD/USD has been quite steady as the USD itself has eased
Commodities Weekly: Tariff threats get real
13 Feb 2025
- US President Trump’s tariff announcements have been a key focus over the past two weeks
- Financial markets were grappling early last week with the implications of the weekend tariff announcement and how to respond, with many global equity markets – including in the US – falling around 1-3% in immediate reaction
- The announced tariffs on both Mexico and Canada have been delayed after conversations with those countries’ respective leaders and their commitments to enhance border security
Commodities Weekly: Another strong auction supports a good milk price
11 Feb 2025
- Another strong GDT auction took place on February 5th, with overall prices lifting 3.8%, and key products performing well
- Powder prices lifted, with an impressive 4.1% gain for whole milk building on the previous event’s 5.0% price lift for the key product
- Skim milk powder prices lifted 4.7% at this event, but the annual gain in prices (+3.2%) is modest when compared with the 21.5% lift in WMP prices
Commodities Weekly: ASB lifts milk price forecast to $10.25/kgMS
22 Jan 2025
- A strong GDT auction overnight, where whole milk prices rose significantly across all the key contracts, has been a catalyst for us to nudge our 2024/25 milk price forecast from slightly below the mid-point of Fonterra’s $9.50-$10.50 forecast range, to above that $10 mid-point
- We have been cautious about the price outlook over December and early January, but recent developments have made us more confident
- Accordingly, we’ve lifted our forecast for the current season to $10.25/kgMS
Commodities Weekly: NZD continues to ease against a strong USD.
14 Jan 2025
- ASB’s commodity price index was up in NZD terms last week, but flat in SDR and down USD terms as the NZD eased against a strong USD.
- The NZD was trading around 0.5900 against the USD in early December but has fallen by more than US 3c over the past month to trade around 0.5560 at the time of writing.
- Whole milk powder prices have been declining from the recent peak, but remain significantly higher than a year ago, and above long run averages.
Commodities Weekly: NZD and dairy prices continue to drive index, while local sheep and beef prices hold steady
11 Dec 2024
- ASB’s commodity price index was up in NZD terms last week, but down in SDR and USD terms as the NZD eased and USD dairy prices lifted
- The NZD eased back below 0.5900 against the USD, back towards 0.5800 last week. The “kiwi” is still trading near 0.5800 at the time of writing
- Within the index, lamb prices eased 0.4%, while beef prices lifted 0.5% in NZD terms
Regional Economic Scoreboard: It's Otago, no more waiting!
10 Dec 2024
- Finally, Otago has climbed to the top of ASB’s Regional Scoreboard Q3 2024, after three quarters as the second runner-up.
- Otago has consistently been in the top two for two consecutive years
- The momentum of having a larger population (fourth highest in the country) has contributed to Otago topping the country in retail sales and employment growth
Commodities Weekly: Tweaks to our RBNZ OCR call and updated NZD forecasts
04 Dec 2024
- ASB’s commodity price index was down in local and foreign currency terms last week, but up in SDR and USD terms as the NZD lifted 1.6% against the USD
- Within the index, lamb prices were steady, and beef prices lifted 0.3% in NZD terms
- The overall dairy index was down 0.1% in USD terms last week, ahead of this week’s Global Dairy Trade event
Commodities Weekly: Go Kiwifruit!
28 Nov 2024
- ASB’s commodity price index was up in local and foreign currency terms last week, once again boosted by higher dairy prices and a lower NZD
- The NZD eased 0.7% over the week but has lifted above 0.5900 this week in the wake of the RBNZ’s rate cut on the 27th of November
- Within the index, lamb and beef prices lifted modestly in NZD terms, with lamb prices up 0.6% and beef prices up 0.2%
Commodities Weekly: ASB lifts forecast Farmgate Milk Price forecast to $9.75
20 Nov 2024
- The stars have been aligning over recent months for dairy farmers and the current season’s milk price
- Last week Fonterra raised the midpoint of the 2024/25 season milk price forecast from $9.00 to $9.50 per kg of milk solids (kgMS)
- Fonterra also lifted and narrowed the forecast range from $8.25 - $9.75 per kgMS to $9.00 - $10.00
Commodities Weekly: Fonterra lifts FY25 forecast Farmgate Milk Price
15 Nov 2024
- ASB’s commodity price index was up in local and foreign currency terms last week, boosted by higher dairy prices
- The NZD index was also supported by a lower NZD
- The NZD eased 0.1% over the week and has traded below 0.6000 against the USD this week
Commodities Weekly: Lower NZD continues to be helpful
06 Nov 2024
- ASB’s commodity price index was up in NZD terms last week, but down in SDR and USD terms
- The NZD eased another 0.4% over the week and has traded largely below 0.6000 against the USD over recent days
- Within the index, the overall dairy index was up 0.1% in USD terms last week (prices captured before this week’s Global Dairy Trade event)
Commodities Weekly: ASB Commodities Index helped by a lower NZD
31 Oct 2024
- ASB’s commodity price index was up in NZD and SDR terms last week, but down in USD terms
- The NZD eased 1% over the week, which offset the decline in USD dairy prices
- This week the NZD has dipped below 0.6000 against the USD, trading in a 0.5950-0.6000 range over recent days
Commodities Weekly: ASB Commodities Index up in all denominations last week
25 Oct 2024
- ASB’s commodity price index was up in all denominations last week, helped by the latest lift in the forestry index, and a 0.5% reduction in the NZD (we will cover the forestry price change in next week’s report)
- The ASB index was up 1.2% in NZD terms last week, 1.1% in SDR terms, and 0.7% in USD terms
- Within the index, the overall dairy index was up 0.5% in USD terms last week
Commodities Weekly: Dairy price movements mixed at the latest GDT event
16 Oct 2024
- ASB’s commodity price index was up 0.8% in NZD terms last week, as the NZD eased 1% over the week
- The ASB index was down in USD and SDR terms last week
- Within the index, the overall dairy index was up 0.8% in USD terms last week and remains nearly 23% higher than a year ago
Commodities Weekly: Lower interest rates and a lower NZD welcome news
11 Oct 2024
- ASB’s commodity price index was up 1.6% in NZD terms last week, as the NZD eased 3% off its recent peak near 0.6380
- The NZD has eased below 0.6100 this week, helped by the RBNZ’s decision to cut the Official Cash Rate by 0.5% at its October review
- The ASB index was down in USD and SDR terms last week, reflecting the NZD movement rather than changes in commodity prices
Commodities Weekly: North of $9 – ASB lifts milk price forecast to $9.20
04 Oct 2024
- The big dairy news last week was Fonterra’s 2024 financial year results, and revised milk price and dividend outlook
- Fonterra’s Farmgate Milk Price for the 2023/24 season finished at $7.83 per kgMS, not far off the $7.80 midpoint from the late-season guidance range
- The total dividend of 55 cents per share for the past year was the second largest since Fonterra was formed
Regional Economic Scoreboard: Gisborne gets back to the top
24 Sep 2024
- Gisborne has moved up two spots to take the top spot in ASB’s growth-based rankings this quarter
- Gisborne’s last moment on the top of the podium within the Regional Scoreboard was before COVID
- Gisborne's construction pipeline and housing market were key factors behind the region’s top ranking
Commodities Weekly: More of the same
24 Sep 2024
- ASB’s commodity price indices were up in all denominations again last week
- The NZD pressed back above 0.6200 vis-à-vis the USD, muting the lift in NZD terms to 0.2% vs. the 1% gain in USD and SDR terms
- The Kiwi was up 0.9% within the index last week and is trading near 0.6270 at the time of writing
Commodities Weekly: Dairy and meat prices keep pressing higher
20 Sep 2024
- ASB’s commodity price indices were up in all denominations last week
- The NZD remained off its peaks against the USD over the week ending 13th September but has pressed back above 0.6200 this week
- The Kiwi was down 0.6% within the index last week and is trading near 0.6240 at the time of writing
Commodities Weekly: NZD eases off peak while meat prices press higher
12 Sep 2024
- ASB’s commodity price indices were up in NZD terms last week, but down in USD and SDR terms
- The NZD has eased off its recent peak near 0.6300 against the USD
- The Kiwi was down 0.8% within the index last week and is trading near 0.6130 at the time of writing
Commodities Weekly: WMP prices ease
05 Sep 2024
- Average winning whole milk powder (WMP) prices eased 2.5% in the Global Dairy Trade event this week, following some impressive gains over August
- The WMP contract curve shown to the right captures the downward slope from very high prices for the contracts for near term delivery vs. the longer-term contracts
- This indicates some urgency to secure near-term supply, but also a reluctance to commit to paying up to secure WMP over the upcoming peak period of NZ production above US$3,300-$3,400 prices
Commodities Weekly: NZD back on the rise
30 Aug 2024
- ASB’s commodity price indices were up in all denominations last week, but a 3% lift in the NZD muted the return when measured in NZD terms
- The NZD has been on the rise, and at the time of writing has just stopped short of breaking through 0.6300 against the USD
- Our CBA colleagues have recently adjusted their FX forecasts
Commodities Weekly: Prices surge at the latest Global Dairy Trade event
22 Aug 2024
- ASB’s commodity price indices were up in all denominations last week
- The NZD was little changed over the week, while most of the underlying prices within the indices rose
- Dairy prices were up a modest 0.4% in USD terms within the index, but those prices were cut before the price surge in this week’s Global Dairy Trade event
Commodities Weekly: At sixes and sevens
13 Aug 2024
- ASB’s commodity price indices were up in all denominations last week
- The NZD eased over the week, and dairy, sheep, and beef prices lifted
- Being at sixes and sevens normally means confusion or disarray, but when it comes to sheep and beef prices, the high $6s and early $7s per kg prices continue the recent pattern of tight markets and strong prices
Commodities Weekly: NZD lifts off recent lows. GDT encouraging
09 Aug 2024
- ASB’s commodity price indices were up in SDR and USD denominated terms last week, but down in NZD terms
- That reflects a firmer NZD, which lifted off recent lows and was up 1.3% last week, after falling over the preceding weeks
- Nonetheless, the NZD is down on year-ago levels, and trading around current levels at or below 0.60 vis-à-vis the USD continues to be a positive theme for exporters now
Commodities Weekly: NZD/USD slips further and trades under 0.5900
31 Jul 2024
- ASB’s commodity price indices were down in SDR and USD denominated terms last week, but up in NZD terms
- That reflects the lower NZD, which sank 2.1% last week, after falling 1.7% over the preceding week
- A lower NZD is a positive development for exporters now
Commodities Weekly: NZD eases on lower NZ interest rate expectations
22 Jul 2024
- ASB’s commodity price indices were down in SDR and USD denominated terms last week, but up in NZD terms
- That reflects the lower NZD, which sank 1.7% last week. A lower NZD is a positive development for exporters now
- The NZD decline buffered softer USD dairy prices within the index. Higher meat prices continued to support the ASB commodity indices
Commodities Weekly: Dairy weakness weighs on ASB Commodities Indices
19 Jul 2024
- ASB’s commodity price indices were down in all denominations last week, with lower dairy prices more than offsetting higher meat prices for another week
- Dairy prices within the index were down 1.1% in USD terms last week (prices preceding this week’s Global Dairy Trade event)
- Meat prices were up in NZD and USD terms last week with tight supply supporting sheep and beef prices
Commodities Weekly: Dairy drop sends ASB Commodities Indices lower
12 Jul 2024
- ASB’s commodity price indices were down in all denominations last week, with lower dairy prices the main driver
- Dairy prices within the index were down 3.0% in USD terms last week, catching the same downdraft we observed in last week’s Global Dairy Trade event
- In contrast, meat prices were up in NZD and USD terms last week with tight supply sending lamb prices higher
Commodities Weekly: ASB commodity prices up in all denominations
04 Jul 2024
- ASB’s commodity price indices were up in all denominations last week, with firmer meat prices and a lower NZD behind the moves
- Dairy prices within the index were down 0.1% in USD terms last week
- Meat prices were up in NZD and USD terms last week with both sheep and beef prices lifting higher
Regional Economic Scoreboard: It’s seriously Southland!
03 Jul 2024
- Southland has rocketed up ASB’s latest Regional Scoreboard to dethrone Auckland from the number one spot this quarter
- After an 11th place finish last quarter, Southland has proven it is a force to be reckoned with
- Southland’s construction and housing sectors have boomed. They recorded the fastest building consent growth throughout the country, and well above average house price growth
Commodities Weekly: Dairy prices ease off recent peak
20 Jun 2024
- Dairy prices eased at this week’s Global Dairy Trade event, reversing some but not all of the gains made at the previous event earlier in June
- This week’s auction (event 358) concluded with the GDT price index down 0.5%, while the price index rose 1.7% at event 357
- This week the whole milk powder index declined 2.5% with an average price of US$3,394/MT
Commodities Weekly: Fonterra takes a cautious approach to next season
31 May 2024
- Fonterra updated its farmgate milk price forecast guidance this week
- Fonterra’s current season milk price midpoint was maintained at $7.80 per kgMS, with the forecast range narrowed to $7.70-$7.90 (from $7.50-$8.10)
- In terms of ASB’s forecast milk price for 2023/2024, we now adopt Fonterra’s midpoint of $7.80
Commodities Weekly: Eyes on the RBNZ
22 May 2024
- ASB’s commodity price indices were mixed last week, with a 2% lift in the NZD a key factor behind the moves
- Dairy prices within the index were down 1.3% in USD terms last week, with the prices capturing the market prior to last night’s Global Dairy Trade event
- Meat prices were up in NZD and USD terms last week with both sheep and beef prices lifting slightly higher
Commodities Weekly: Where next for the NZD?
16 May 2024
- ASB’s commodity price indices rose in all denominations last week, with a lift in dairy prices a key driver as the NZD held steady around $0.6000 vis-à-vis the USD
- Dairy prices within the index were up 2.9% in USD terms last week, with the sub index picking up some of the gains in the last week’s Global Dairy Trade event (covered in last week’s ASB Commodities report)
- Meat prices were up in NZD and USD terms last week with both sheep and beef prices lifting
Commodities Weekly: Dairy prices looking good
08 May 2024
- Commodity prices within ASB’s index were mixed last week, with currency movement and a drop in the forestry sub index key factors within the changes tabled
- Dairy prices within the index were up 0.4% in USD terms last week (ahead of last night’s solid GDT event)
- Meat prices were up 0.5% in NZD terms last week (up for lamb, flat for beef)
Commodities Weekly: Softer JPY weighs on NZ-Japan exports
01 May 2024
- Key global agri commodity prices were mixed last week, with currency movements the largest driver of changes within the ASB indices. NZD hit fresh 2024 lows in April and remains circa 4c below the level where it was at the start of the year.
- Meanwhile in the FX space, the big mover of late has been the weakening Japanese Yen (JPY). NZD/JPY has reached highs only seen a couple of times in the last 30 years.
- Japan is New Zealand’s fourth biggest export destination, behind China, Australia, and the US. Over the year to 31 March NZ exports to Japan have declined 14.7%, a greater decline than the 4.4% drop in overall NZ export values.
Commodities Weekly: Soaring Eagles, grounded Kiwis
24 Apr 2024
- Key global Agri commodity prices were lower in USD terms last week
- Dairy prices weakened 0.5% after a relatively undramatic auction
- With the risk of sounding like a broken record, meat prices remain the real laggard in our index, down another 1.1% in USD terms last week
Commodities Weekly: Nothing to see here
18 Apr 2024
- Key NZ agri commodity prices continued to diverge last week
- Sheep & beef prices are still stuck in a rut, with our livestock index easing another 1.2% in USD terms to reach its lowest level in nearly four years
- USD forestry prices have also shed some of their gains during April
Commodities Weekly: On the up
12 Apr 2024
- Commodity prices resumed their climb higher last week, with both our NZD and USD indices lifting
- Dairy prices ceased their deceleration per the AgriHQ data our index utilises, with USD prices as much as 3% higher
- USD meat prices managed a 0.5% lift, driven by a small bounce in lamb prices, though the index remains down 11% in annual terms
Commodities Weekly: Wringing out some late-season dairy price gains
03 Apr 2024
- Dairy ingredient prices have advanced at the latest auction, partially reversing recent downward moves
- All major products gained ground, with the exception of butter milk powder (which trades only fortnightly)
- WMP prices lifted 3.4% and the overall GDT index is up 2.7%, taking both back to roughly where they were at the beginning of March, but still below their 2024 peaks earlier in the year
Commodities Weekly: Under arrest
28 Mar 2024
- The gradual grind higher in commodity prices was arrested last week, with a chunky fall evident in our USD index
- USD commodity prices fell a little over 3% during the week
- The primary driver was a chunky fall in dairy prices – down around 5.1% – presaged by the recent easing in prices over the last few Global Dairy Trade auctions
Commodities Weekly: A March tweak from Fonterra
22 Mar 2024
- Fonterra tweaked its milk price guidance for the season yesterday, narrowing the forecast band from $7.30-8.30 per kgMS to $7.50-8.10
- The midpoint of that range is unchanged at $7.80 per kgMS, so the tweak reflects that we are increasingly close to the end of the season, and both upside and downside risks have dissipated
- Mechanically, the bulk of the season’s product has been priced and the co-op has little further hedging to do
Regional Economic Scoreboard: Just Another First For Auckland! (JAFFA)
20 Mar 2024
- Auckland has taken out the top spot on the Scoreboard for the second consecutive quarter
- This quarter’s Scoreboard ‘winners’ are those coping better than others rather than “shooting the lights out”
- Falling retail trade volumes and construction challenges continue across the country
Commodities Weekly: A rising tide doesn’t lift all boats
15 Mar 2024
- We’ve published the latest edition of the ASB Rural Quarterly
- Our latest report calls out a decent rebound for dairy and forestry prices, and an overall more positive outlook for the sector compared with previous quarters
- The outlook for global growth is looking a lot more constructive than it was, with markets increasingly hopeful that central banks won’t have to hammer the global economy too hard for too long to get inflation back under control
ASB Rural Quarterly Report - March 2024
15 Mar 2024
In this report, we discuss some of the trends and dynamics in agricultural commoditity markets over the last twelve months, before a rundown on our market expectations for the year end
Commodities Weekly: Pausing for breath
08 Mar 2024
- Commodity prices hit a fresh cyclical NZD high last week, per our ASB Commodities Index
- The NZD index lifted 0.8% to reach its highest threshold since November 2022
- This time it was currency movement that acted as the primary driver, with the Kiwi shedding 1% after the RBNZ opted not to hike the OCR at last week’s meeting or come out all guns blazing with a hawkish statement
Commodities Weekly: Supply-side solace
29 Feb 2024
- Underlying USD-denominated commodity prices continue to tick higher last week
- Leading farm expense indicators are generally also continuing to improve
- Yesterday’s dovish statement from the RBNZ has also reduced the risk that wholesale rates spike further and push their retail and business counterparts north
Commodities Weekly: Not such a Cruel Summer
22 Feb 2024
- Dairy prices are finishing off the NZ summer holding onto the bulk of the season’s gains over recent weeks
- An $8 farmgate price is in reach for this season and prices will have momentum heading into the next one
- Broader commodity prices are also enjoying a boost over the sunny season, with signs of life increasingly evident in protein prices
Commodities Weekly: Thanks, Yanks
16 Feb 2024
- Last week saw the ASB Commodities Index hit fresh circa one-year highs in both NZD and USD terms
- Some strengthening in global demand looks to be the chief driver behind higher prices
- In particular, stronger US growth estimates have pushed up our forecast for NZ trading partner growth
Commodities Weekly: ASB nudges 2023/24 milk price forecast to $8.00 per kgMS
08 Feb 2024
- Despite the season being nearly over and Chinese processors still AWOL, strong auction results continue to push our farmgate milk price forecast higher
- Consequently, we now think farmers can expect a price around the $8 mark
- The ASB Commodities Index nudged lower from recent highs last week, although it remains not too far off cyclical highs and the data precedes this week’s dairy auction
Commodities Weekly: A one-year milestone and a friendly Kiwi
02 Feb 2024
- Continuing their crawl, our commodity price indices have reached a circa 12 month high
- Dairy and horticulture remain the standouts of our index
- The Kiwi is lower than we’d expect historically given where commodity prices are sitting, providing a boost to our NZD index
Commodities Weekly: Ovine decline
26 Jan 2024
- NZD commodity prices touched a fresh nine-month high last week
- Dairy prices are the big driver behind underlying commodity prices, with a slightly lower NZD providing an additional bonus
- Lamb prices remain by far the laggard in our index, still trundling along at seven year lows
Commodities Weekly: Father Christmas delivers some year-end GDT gains
20 Dec 2023
- Dairy prices have gained further ground as the year draws to a close, with WMP up close to 3% at the last GDT of the year
- While China is still missing in action, stronger demand from other regions means that a milk price at or above the midpoint of Fonterra’s guidance range is looking pretty achievable
- We’ll review our $7.35 per kgMS forecast for the season in the new year
Regional Economic Scoreboard: Otag-land
20 Dec 2023
- There was an almighty fight for top spot this quarter, but ultimately we had to split the crown right down the middle
- Stellar performances from both Otago (taking out the number one spot for the second quarter in a row) and Auckland (who stormed up the Scoreboard from 10th place last quarter) were both deserving of gold medals
- People were the common factor between the two winning regions this quarter
Commodities Weekly: Commodity prices end the year in mixed fashion
15 Dec 2023
- Commodity prices are set to close out the year close to 9½% below where they started it in USD terms, though the weaker Kiwi has remained an enduring theme over most of the year
- Gains and losses haven’t been spread evenly, with meat prices a clear disappointment
- We’re hopeful that strengthening global growth can help bolster commodity prices over 2024
Commodities Weekly: Dairy prices cruise into December with modest gains
06 Dec 2023
- Dairy prices have recovered a bit more ground at last night’s auction, in line with futures market expectations
- Recent gains in prices can support the farmgate milk price, though Chinese demand remains comparatively muted and lower volumes are also partly behind recent gains
- Fonterra will be close to fully hedged at this stage in the season, but further lifts in NZD can still eat into the milk price. We retain our $7.35 per kgMS forecast
Commodities Weekly: Slightly higher Kiwi, slightly stronger growth outlook
01 Dec 2023
- Currency movement continues to be the dominant driver behind swings in our NZD index, with the Kiwi making solid gains last week
- Better risk sentiment is the key driver behind NZD’s step up
- Global growth forecasts are also being revised higher, providing some support on the demand side for commodities
Commodities Weekly: That was the week that was
24 Nov 2023
- Agri commodity prices continue to track sideways, with a higher Kiwi offsetting slim gains in USD prices last week
- We’ve retained our $7.35 per kgMS milk price forecast in the aftermath of this week’s GDT
- The NZ-EU FTA is a step closer to coming into force, and the new NZ government has been announced
Commodities Weekly: Resilience through diversity
17 Nov 2023
- Currency movement continues to help offset soft agri prices, with our index up 0.7% in NZD terms last week
- Prices for major agri commodities exports are diverging, with dairy and horticulture prices proving more resilient
- It’s a salient reminder that diversification is usually a prudent strategy for exporters
Commodities Weekly: Islands in the product stream
08 Nov 2023
- Diverging trends have been evident in global dairy prices overnight, with WMP snapping a four-auction winning streak, but other product streams are continuing to climb
- Tighter supply has helped dairy prices regain some ground recently, but soft demand remains a key constraint on prices
- We retain our $7.35 per kgMS milk price forecast for the 2023/24 season, with current futures market pricing potentially representing an attractive hedging opportunity
Commodities Weekly: Commodity prices giveth, and interest rates taketh
03 Nov 2023
- Our Commodities Index rises for a fourth consecutive week in NZD terms, albeit driven by the lower NZD.
- Agri commodity prices hit a near-term low in July & August and have regained a bit of ground on tighter supply.
- Unfortunately, many costs are lifting more sharply than prices for our exports, putting margins under pressure.
Rural Note: Agri Sector Resilience a key focus for RBNZ
02 Nov 2023
- The RBNZ reports that dairy sector debt servicing costs reached a fourteen year high of $1.43 per kgMS in August, in line with our forecast from earlier in the year.
- With farmers taking on additional debt to support working capital and lending rates still under upward pressure, we now think debt servicing costs could reach $1.50-1.55 per kgMS towards mid-2024.
- The RBNZ doesn’t think a single season of high debt servicing costs and a low milk price will trigger widespread distress, but the challenge will come if dairy prices remain soft for a prolonged period. In this note, we reiterate our thoughts on how farmers can build resilience into their businesses.
Commodities Weekly: A smidgen of supply side support – for some
27 Oct 2023
- Agri commodity prices continue to press higher from their August lows but remain soft in an outright sense.
- While we remain conservative on the near-to-medium term outlook for commodity demand, some re-tightening on the supply side looks to be helping support prices.
- Those relative supply shifts may help explain the divergence in price moves among our key agri exports.
Commodities Weekly: ASB lifts farmgate milk price forecast to $7.35 per kgMS
18 Oct 2023
- Prices have continued to strengthen at the latest GlobalDairyTrade auction overnight
- Recent auction gains have mechanically added more strength to our milk price estimate, while the near-term risks to the outlook are also looking more balanced
- Accordingly, we have added another 75c onto our milk price forecast to $7.35 per kgMS
Commodities Weekly: Unrest adds extra uncertainty to commodity markets
13 Oct 2023
- Conflict in the Middle East over the last week has added to the uncertainty hanging over global commodity markets, but the impact has been modest thus far
- There is scope for volatility to spike and energy prices to spike in the event of additional escalation
- Last week’s strong dairy auction has helped our commodities index recover to levels not seen since July
Commodities Weekly: Dairy prices claw back further ground
04 Oct 2023
- Prices have risen in line with expectations at the latest dairy auction overnight
- We’re still cautious on the outlook and retain our $6.60 per kgMS milk price forecast for the season, but flag some upside risk
- The ASB Commodities Index was largely flat last week
Regional Economic Scoreboard: Otago exemplifies the power of tourism
02 Oct 2023
- Otago has shot back up to the top spot in ASB’s latest Regional Scoreboard
- Meanwhile, Canterbury is proving its resilience by holding on to the second spot – marking its 9th consecutive quarter with a top three podium finish
- Gisborne shot up a massive 13 places from last place to 3rd position this quarter
Commodities Weekly: An assortment of updates
29 Sep 2023
- We’ve released our latest Rural Quarterly report – you can read it here
- We’ve also tweaked some of our forecasts, and now anticipate OCR cuts won’t kick in until 2025
- Commodity prices continue to grind a little higher but remain soft in outright terms
ASB Rural Quarterly Report - September 2023
27 Sep 2023
The big theme this issue is the slowdown in the Chinese economy and what it means for Kiwi farmers and exporters.
Commodities Weekly: Dairy prices claw back more ground
20 Sep 2023
- Whole milk prices (WMP) have recovered some more ground at the latest Global Dairy Trade event overnight, lifting another 4.6% away from three-and-a-half year lows
- It’s encouraging to see another sign that dairy prices might be finding a floor, but we remain cautious on the outlook. It was pleasing to see a return of Chinese demand at this event, and we will be watching this development at upcoming auctions
- The ASB Commodities Index declined again in NZD terms last week, with a bounce back in NZD the main culprit
Commodities Weekly: A better week, but clouds are still mounting
15 Sep 2023
- Last week’s better dairy auction has helped our Commodities Index claw back a bit of ground
- NZD’s softness remains another key support for exporters
- Nonetheless, we expect the outlook for commodity prices to remain anaemic given prevailing global headwinds, particularly in China
Commodities Weekly: WMP prices post gains from lower baseline
06 Sep 2023
- Whole milk prices (WMP) have recovered a bit of ground at the latest Global Dairy Trade event overnight but remain close to three-and-a-half year lows
- It’s an open question on whether prices might be finding a floor, but we still don’t anticipate a broader recovery for quite some time
- The ASB Commodities Index declined again in NZD terms last week, with a bounce back in NZD the main culprit
Commodities Weekly: A modest offset
01 Sep 2023
- NZ continues to trade in a lower range, partially offsetting lower underlying commodity prices
- NZD can fall further from here, though experience shows it seldom falls as much as underlying commodity prices during commodity price easing cycles
- The ASB Commodities Index lifted slightly last week
Commodities Weekly: Softer China outlook continues to constrain commodities
25 Aug 2023
- Last week’s chunky falls in dairy prices have helped sink the ASB Commodities Index to three-and-a-half year lows in USD terms
- The lower Kiwi has only very partially offset the underlying softness, with our NZD Index at a two-and-a-half year lows
- The underperformance of the Chinese economy remains the big macro theme underpinning weaker NZ agri commodity prices across the board
Commodities Weekly: Dairy prices lower for longer, OCR higher for longer
18 Aug 2023
- We’ve made a couple of forecast tweaks: we now expect a Farmgate milk price forecast of $6.60 per kgMS and for the OCR to remain at its current 5.5% level until circa August 2024
- Fonterra has also shaved the midpoint of its guidance range again
- Ahead of this week’s dairy auction, the ASB Commodities Index has fallen another 1% in USD terms
Dairy Update: ASB lowers 2023/4 milk price forecast to $6.60 per kgMS
16 Aug 2023
- A terrible GDT overnight has seen WMP prices fall 11%, dragging the overall index to five-year lows
- The market is well supplied in the near-term, and it is difficult to see a catalyst for much strengthening in demand
- To that end, we’ve revised down our farmgate milk price forecast for the season to $6.60 per kgMS
Commodities Weekly: An unpleasant milestone
10 Aug 2023
- In the aftermath of last week’s dairy auction and continued weakening in meat prices, the ASB Commodities Index has hit a fresh three-year low in underlying USD terms
- NZD Commodity prices are faring a little bit better, but not by much
- With a range of input costs set to remain high, margins for many are set to come under serious pressure
ASB Dairy Update: Fonterra's 2023/4 range matches ASB's long-held view
04 Aug 2023
- Fonterra has dropped its milk price guidance for the coming season by a full $1, now at $6.25-7.75 per kgMS (a mid-point of $7 instead of $8).
- We have long expected to see a milk pricearound these sorts of levels, with our forecast sitting around the $7.00 to7.25 per kgMS mark since we launched it at the beginning of the year.
- A milk price around this kind of ballpark will putpressure on farmer finances and add the broader headwinds facing the economy.
Commodities Weekly: Spilt milk
03 Aug 2023
- Dairy prices have tumbled in excess of market expectations at the latest auction, notching up their largest single-auction fall in nearly six years
- Broad market themes remain little changed, with there being more than sufficient global milk to meet risible supply
- Not long ago, market expectations were wildly north of ASB’s $7.25 per kgMS Farmgate milk price forecast for the season – they’ve now moved much closer to our view. But it’s early days yet
Commodities Weekly: Grain Pain
28 Jul 2023
- Wheat prices have leapt higher in the aftermath of Russia’s decision to end its Black Sea port deal with Ukraine
- Tighter grain supply can support broader commodity prices to some degree, but flagging demand remains the main thing in the driver’s seat
- The ASB Commodities Index has reached a fresh circa three-year low in USD terms this week, though a weaker Kiwi continues to somewhat limit the impact in NZD terms
Commodities Weekly: Softly, softly
19 Jul 2023
- Prices have continued to weaken at the latest GDT, with Chinese purchases still weak and buyers in no rush to secure product
- Slightly better supply and significantly weaker demand remain a recipe for a lower farmgate milk price this season
- We retain our $7.25 per kgMS forecast
Commodities Weekly: Success and failure
13 Jul 2023
- This week, we spotlight one of the big successes of the agri sector, with kiwifruit export values running close to record highs despite an array of challenges
- But there is also a less spectacular story going on, with China’s faltering economic recovery contributing to another fall at the ‘pulse’ GDT on Wednesday night
- The ASB Commodities Index fell to a two-year low in NZD terms last week
Commodities Weekly: Another status quo GDT keeps us conservative
05 Jul 2023
- Dairy prices soften again at this week’s auction, taking dairy prices back to three-year lows
- We remain conservative on the outlook for prices, with the absence of Chinese demand leaving a huge hole in the market and supply looking better placed than last season
- A lower NZD spot and forward points are driving Fonterra’s effective exchange rate in a favourable direction, but with the co-op already likely to be ~65% hedged, the impact will be progressively less from here
Commodities Weekly: Logging a fault
30 Jun 2023
- The ASB Forestry Index is at a three year low in USD terms, and an eight-year low in NZD terms
- The Forestry sector is enormously exposed to trends in the Chinese property market
- The Chinese housing sector remains weak, and we don’t expect a swift turn around
Regional Economic Scoreboard: Dark Horse ‘Naki pips the Canty Goliath for a gold medal
23 Jun 2023
- Canterbury loses its crown after seven quarters in the sun, but a resilient housing market keeps it in silver medal position.
- Taranaki mounts a huge comeback up our scoreboard to sieze the gold medal, albeit from a softer starting point.
- The return of international visitors continues to benefit tourism hotspots, with Otago joining Canterbury in second place on the podium.
Commodities Weekly: Another flat GDT keeps us conservative on the outlook
21 Jun 2023
- Dairy prices have been broadly flat at last night’s GDT event, with whopping gains for butter offset by continued weakness in SMP and a correction in near-term cheddar prices. WMP has been largely flat
- China’s absence was especially pronounced at last night’s auction, and we don’t anticipate demand from South-East Asia will be able to offset that absence forever
- Modest gains for the NZD have seen the ASB Commodities Index reach its lowest point since early 2021 in NZD terms
Dairy Update: Another flat GDT keeps us conservative on the outlook
21 Jun 2023
- Dairy prices have been broadly flat at last night’s GDT event, with whopping gains for butter offset by continued weakness in SMP and a correction in near-term cheddar prices. WMP has been largely flat
- China’s absence was especially pronounced at last night’s auction, and we don’t anticipate demand from South-East Asia will be able to offset that absence forever
- Modest gains for the NZD have seen the ASB Commodities Index reach its lowest point since early 2021 in NZD terms
Commodities Weekly: Some thoughts on China, dairy sector resilience
16 Jun 2023
- Chinese economic data has continued to disappoint, underlining the patchy shape of the domestic recovery
- In other news, we’ve released our forecasts for dairy debt servicing costs and find costs would be an average of 20-25c per kgMS higher if farmers hadn’t paid down a huge chunk of debt over the past five years
- The ASB Commodities Index is around three-year lows in USD terms, and two-year lows in NZD terms
Dairy Sector Debt and Resilience Outlook: Dairy Sector Resilience in Focus
13 Jun 2023
- Higher lending rates have added an average of 60c per kgMS to dairy farmer debt servicing costs over the last twelve months
- With the RBNZ likely finished hiking rates, we expect the debt servicing burden to only increase another 5-10c per kg from here
- Farmers have done good work to pay down debt and build resilience, and debt servicing costs could have been an additional 20-25c higher if indebtedness had remained at 2018 peaks. In this note we offer thoughts on how farmers can further build resilience into operations and balance sheets
Commodities Weekly: Struggling for direction
07 Jun 2023
- Dairy prices continue to struggle for direction, with WMP underperforming, SMP flat and fats lifting
- We remain conservative on the outlook for global dairy prices given the prevailing global demand and supply balance – along with China’s continued absence from the market
- We retain our below-market 2023/24 milk price forecast of $7.25 per kgMS, but there is a long way to go
ASB Rural Quarterly Report - May 2023
06 Jun 2023
These reports dive into the supply and demand dynamics underpinning Agri-commodity markets globally. Read our latest report below.
Commodities Weekly: ASB nudges 2023/4 milk price forecast to $7.25 per kgMS
02 Jun 2023
- We’ve nudged up our 2023/4 milk price forecast from $7.00 per kgMS to $7.25 per kgMS
- Dairy prices have moved largely in line with our expectations, but NZD continues to underperform and looks likely to extend its falls in the aftermath of last week’s RBNZ meeting
- We continue to expect a farmgate milk price in the bottom leg of Fonterra’s forecast range
Commodities Weekly: Fonterra divulges its seasonal soothsaying
25 May 2023
- Fonterra has lowered its Milk Price guidance for the 2022/23 season and begun the 2023/24 season with a wide range of $7.25-8.75 per kgMS
- We continue to expect a Milk Price at or below the bottom end of the co-op’s forecast range
- Fonterra’s guidance relies on China-driven demand gaining ground over the season – we remain cautious on this front
Commodities Weekly: Disappointment
17 May 2023
- Dairy prices have underperformed expectations at the GDT overnight
- Broader supply and demand dynamics remain largely unchanged
- Fonterra will release its guidance range in the coming weeks, but we retain our $7 per kgMS forecast for 2023/24 for now
Commodities Weekly: Supply side solace – but debt servicing costs remain high
12 May 2023
- Key farm input costs are easing, while strong population growth should help offer relief on worker shortages
- The exception is debt servicing costs, which are still looking lofty
- The ASB commodities index increased a very slight 0.2% last week in NZD terms, but commodity prices remain well down annually
Commodities Weekly: Stemming the descent
03 May 2023
- Dairy prices have managed a reasonable lift overnight, stemming some of their recent falls
- We still expect 2023/24’s milk price to be lower than it was over the past couple of seasons, though there’s a smidge of upside risk to our $7.00 per kgMS pick
- Fonterra will release its own opening guidance range in the coming weeks
Commodities Weekly: A big dip for forestry – and a note of GDT caution
28 Apr 2023
- The ASB commodities index had a very slight rise of 0.3% when measured in NZ dollar terms last week
- In underlying USD terms, our index is at its lowest level since November 2020
- The big mover this month is our Forestry Index
Commodities Weekly: Prices lift at latest Global Dairy Trade event
19 Apr 2023
- Prices have lifted in the latest Global Dairy Trade event overnight, with the GDT Price Index up 3.2%
- The whole milk powder (WMP) index up was up 1.0%, with an average price US$3,089/MT
- Futures prices earlier in the week suggested the market was expecting WMP prices to decline 2.0% at the event
Commodities Weekly: China unlikely to ride to global commodity prices’ rescue
14 Apr 2023
- Angst around the slowing pace of global growth is back to the fore this week, with the IMF releasing its latest forecasts
- The key question is still to what extent China's recovery will prop up demand for commodities amid a generalised slowdown in most other parts of the world - we still think the answer is 'only partially' given China's modest growth targets
- Strong local WMP production and subdued consumption will mean Chinese dairy demand is slow to pick up
Commodities Weekly: An Easter update on our views
06 Apr 2023
- This morning we released our April dairy update
- After another underperforming dairy auction, we think there is a risk the 2022/23 season milk price winds up towards the lower end of the $8.00-8.60 per kgMS guidance range the co-op announced on Monday
- What’s more, it looks increasingly likely the 2023/24 season gets off to a relatively subdued start given the relatively bearish demand signals at the auction, in line with our long-held view
Dairy Update: 2023/24 Dairy season kick-off lining up with ASB view
06 Apr 2023
- Dairy prices notch up another meaningful dip at this week’s GDT, with a sub-$8.30 farmgate milk price for 2022/23 in the offing and the 2023/24 season set to start on the backfoot
- We retain our $7 per kgMS farmgate milk price forecast for the next season, with the futures market steadily moving closer to us over the past month
- There is a high degree of uncertainty around the next season, but farmers should be prepared for a milk price meaningfully lower than the high payouts of recent years
Commodities Weekly: Seeing the wood from the trees
31 Mar 2023
- USD commodity prices were broadly flat last week, easing about 0.2%
- Similar themes have been evident over the last couple of months
- China accounts for about 55-60% of NZ forestry exports, so it’s a key driver
Regional Economic Scoreboard: All Canty does is win, win, win no matter what
29 Mar 2023
- This quarter, we debut the brand-spanking new, all-singing, all-dancing re-vamped ASB Regional Economic Scoreboard
- Canterbury notches up a 7th consecutive win, joining the ranks of other great Kiwi winning streaks
- It's a 'Tale of Two Islands' this quarter, with South Island regions like Otago making a comeback after their rough patch during the pandemic
Commodities Weekly: Melted cheese
23 Mar 2023
- Dairy prices have once again underperformed futures market pricing at the dairy auction this week
- It increasingly looks like this season’s farmgate milk price will be towards the lower end of Fonterra’s forecast range
- We retain our $7.00 per kgMS forecast for the next season
Commodities Weekly: Silicon Vall-atilit-ey
17 Mar 2023
- Volatility has been a big theme in financial markets over recent days
- As ‘risk assets’ in investor parlance, global commodity prices have suffered a bit of a hit too
- There’s a bit of a divergence between trends in market sentiment, and the latest views of economic forecasters
Commodities Weekly: Dairy prices taketh, the Kiwi giveth
08 Mar 2023
- Dairy prices have underperformed at the GDT auction overnight
- On the other hand, NZD has continued to trend lower, generating some upside risk for next season's farmgate milk price forecast
- We’ve adopted the $8,50/kgMS midpoint of Fonterra’s forecast range as our farmgate milk price forecast for the 2022/23 season, and retain our $7.00/kgMS forecast for 2023/24
Commodities Weekly: Watch, worry, and wait
28 Feb 2023
- This week’s Niwa soil moisture anomaly graphic captures how widespread the rainfall has been, and Metservice forecasts highlight that it’s not all blue skies on the horizon. Rain continues to fall in some areas, and more is expected
- Cyclone Gabrielle and the earlier flooding created an unexpected backdrop to the RBNZ’s first meeting of the year last week
- The RBNZ lifted the OCR by 50bp, as widely expected by the mainstream economics community and by financial markets
Commodities Weekly: Havoc
22 Feb 2023
- It has been a terrible week for many New Zealanders as Cyclone Gabrielle wreaked havoc around the country, including major disruptions to the primary sectors
- Prices were weaker than expected at the latest Global Dairy Trade event, with the GDT Price Index down 1.5%
- Overall commodity prices lifted last week within the ASB index, with a lower NZD providing a boost
Commodities Weekly: Bear Cubs and Catch-22s
17 Feb 2023
- Having been steadily revising their forecasts lower for a year or more, economic forecasters are now less pessimistic about the growth outlook for 2023
- Accordingly, the consensus estimate for economic growth among NZ’s 16 largest trading partners (based on ASB’s weighted index) has lifted substantially over the past month, from about 2.5% to around 2.9%
- Still, we see reasons for caution and still expect some easing in commodity prices over 2023
Commodities Weekly: Recovery, Risks and Resilience
10 Feb 2023
- Dairy prices have notched up a decent lift overnight, exceeding expectations and supporting our $8.65 per kgMS Farmgate milk price forecast for the present season
- We still expect dairy prices to ease over the medium term as global growth slows and retain our $7.00 per kgMS Farmgate milk price forecast for 2023/24
- There is a huge high degree of uncertainty about the 2023/24 forecast, but farmers have paid down a chunk of debt and begin the next season in resilient shape
ASB Dairy Update: Recovery, Risks and Resilience
08 Feb 2023
- Dairy prices have notched up a decent lift overnight, exceeding expectations and supporting our $8.65 per kgMS Farmgate milk price forecast for the present season
- We still expect dairy prices to ease over the medium term as global growth slows and retain our $7.00 per kgMS Farmgate milk price forecast for 2023/24
- There is a huge chunkhigh degree of uncertainty about the 2023/24 forecast, but farmers have paid down a chunk of debt and begin the next season in resilient shape
Commodities Weekly: In the red, in the green
03 Feb 2023
- Our friends at CBA have revised their currency forecasts, and we now see the Kiwi gaining further ground against the USD in the near term.
- As the year wears on though, there’s still a good chance we wind up with a lower NZD.
- A higher NZD is one headwind facing commodity exporters this year, though falls towards the latter half of the year may offer some relief.
Commodities Weekly: Crawling out of a rut
27 Jan 2023
- Local milk production shows signs of tentatively turning
- Milk solids production lifted 0.6% yoy over December – only the second year-on-year increase since July 2021
- We expect modest growth over the remainder of the season
Commodities Weekly: Starting the year on the back foot – and a forecast update
20 Jan 2023
- Commodity prices have continued to shift lower over the summer, with the largest components in the ASB Commodities Index softening
- It’s lower underlying prices rather than exchange rate movement that have driven our Index lower
- We expect commodity prices to experience more downward pressure over 2023
Fonterra Milk Price Update: ASB lowers 22/23 forecast to $8.65, opens 23/24 at $7
20 Jan 2023
- Dairy prices have failed to gain ground over the summer, despite the reopening of the Chinese economy
- The Chinese economy will recover some ground this year, but weaker demand elsewhere should weigh on commodity prices
- We’ve revised our Fonterra farmgate milk price forecast for this season down to $8.65 per kgMS, and open our 23/24 forecast at $7.00 per kgMS
Regional Economic Scoreboard: September Quarter 2022
22 Dec 2022
- It was a third consecutive top finish for Canterbury over the September 2022 quarter
- Strong employment, resilient retail spending, and an increasingly rare annual increases in house prices over the quarter contributed to the placing
- Second spot went to the Waikato and third to Tasman, the same as in the June quarter
Commodities Weekly: Soft footings
21 Dec 2022
- Dairy prices were weaker than expected at the last Global Dairy Trade event of the year, with Whole Milk powder prices dipping 4%
- Fonterra recently lowered and narrowed its forecast Farmgate Milk Price range to $8.50 - $ 9.50 per kgMS, with a midpoint of $9.00, while holding its advance rate
- ASB will review its $9.40 milk price forecast in early 2023, to incorporate the recent weakness in prices, and latest market developments
Commodities Weekly: Commodities prices end the year in softer fashion
16 Dec 2022
- NZ dollar-denominated commodity prices end the year at 14-month lows, with both softer underlying prices and a stronger NZD the key culprits
- Slowing global growth and the gradual easing in supply constraints means prices are likely to trend lower, though we’re hopeful that the Chinese reopening and residual tightness in supply will prevent a dramatic decline
- Lower levels of farm debt mean farmers are looking resilient as the current downslope continues
Commodities Weekly: The Proverbial Panda in the Room
07 Dec 2022
- Milk powder prices have advanced a teensy bit at the GDT auction overnight, in a result on the more bullish side of futures expectations.
- The absence of Chinese demand remains a headwind for dairy prices, but that is balanced against the prevaling tightness in global supply and the favourable effective exchange rate Fonterra is likely to deliver.
- We retain our $9.40 per kgMS farmgate milk price forecast for the season.
Commodities Weekly: Currency Affairs
30 Nov 2022
- Unfortunately for farmers, the NZD of late has been stronger than expected
- Having shed nearly 15 cents since the first quarter of the year, NZD/USD has lifted off its low of circa 0.5600 to claw back roughly six US cents at the time of writing
- Weak risk sentiment and narrowing interest rate differentials are a big part of why NZD/USD has been soggy over 2022
Commodities Weekly: Fair weather trends
25 Nov 2022
- If our favored weather indicators are anything to go by, farming conditions over the past few months have theoretically been quite positive
- Despite that fact, we’ve had the weakest agri output in many seasons
- Difficulty securing workers, costly inputs and the ongoing compliance burden remain constraints across the agri sector
Commodities Weekly: Reading the Xi leaves
16 Nov 2022
- Prices have made a surprise bounce at last night’s dairy auction
- Demand from China is still missing in action and it’s hard to see prices making more sustained gains until it returns – that’s unlikely barring a surprise COVID policy reversal by Xi Jinping
- We retain our lofty $9.40 per kgMS farmgate milk price forecast for the season, with tight global supply and the much weaker NZD the key ‘legs’ our forecast rests on
Commodities Weekly: Nearly normal - but with a big NZD cherry on top
11 Nov 2022
- After their bumper run over the past 18 months, global (USD-denominated) commodity prices have eased enough to be be back at ‘normal’ levels or thereabout, with weaker demand (especally from China) the main culprit.
- But the weak NZD/USD continues to offer NZ exporters a massive, massive boost, such that prices are only a little bit lower in NZD terms.
- NZD weakness is likely to continue, giving exporters a bit of additional breathing room.
Commodities Weekly: How now brown cow?
02 Nov 2022
- Dairy prices were down by even more than futures prices had suggested prior to last night’s Global Dairy Trade (GDT) event.
- Commodity prices eased by 1.0% in NZD terms last week, as the NZD strengthened.
- Having been trading around 0.5570 a few weeks ago, the NZD has traded back towards 0.5900 against the USD this week.
Commodities Weekly: Race to the Bottom
28 Oct 2022
- News around the global economy continues to look pretty mixed, with the outlook in China softening.
- While demand for agri commodities is likely to be weaker than we once expected, tight supply and the weaker NZD will help offset the impact on prices some degree - there's a race to the bottom going on.
- The upshot is that we see NZcommodity prices over the remainder of 2022 and beginning of 2023 being ‘prettygood’ or perhaps even ‘very good,’ rather than ‘incredible’ or ‘outstanding’ aswe saw earlier in the year.
Commodities Weekly: A change of view
21 Oct 2022
- This week, we’ve made some tweaks to our forecasts – both on the commodity front and the broader economy
- First up, we’ve revised our milk price forecast for the 2022/23 season from $10.00 per kgMS to a still-lofty $9.40 per kgMS
- While ultra-tight global dairy supply remains a major support for international dairy prices, the near-term demand just isn’t there at present, pushing our forecast lower
Fonterra Milk Price Forecast Update: Not ‘fantastic,’ merely ‘very good’
19 Oct 2022
- Dairy prices have eased more than either we, or the market, expected overnight
- Given the ultra-tight global supply outlook, we’re still picking dairy prices to head higher, but the demand just isn’t there right now and that weighs heavily on our forecast given prices for a huge chunk of the season’s product are being struck right now
- We’ve revised our farmgate milk price forecast lower to $9.40 per kgMS, which is still one of the highest figures on record
Commodities Weekly: Our endorsement for bird of the year
14 Oct 2022
- Underlying commodity prices have eased a lot since their Q2 peak
- But the tumble in the Kiwi has been just as dramatic during that time
- We expect NZD to remain pretty flightless over the short-to-medium term
Commodities Weekly: Give and take
05 Oct 2022
- Dairy prices have notched up a surprisingly soft performance at the latest GDT overnight
- Global dairy supply remains extremely constrained, but there is a risk demand proves less resilient than we've previously expected
- We retain our $10 per kgMS Farmgate Milk Price forecast, but we'll be keeping an eye on the next handful of auctions
Commodities Weekly: Financial market jitters intensify
30 Sep 2022
- The key theme in foreign exchange markets this year has been USD strength
- The USD index is trading at the highest level since the early 2000s, and this week NZD/USD has dipped below 0.5700 for the first time since the early days of the pandemic
- Over the past week we have seen elevated volatility in financial markets, stemming from developments in the UK
Regional Economic Scoreboard: Q2 2022
28 Sep 2022
- Another brilliant performance from Canterbury, which tops the rankings in our Regional Economic Scoreboard once again
- The strong housing sector, employment, and consumption data all support that Canterbury is enjoying the fruits of several economic factors hitting their stride
- Still, our scoreboard is cyclical in nature and as much as we love to see Canterbury continue in stride, we will be keeping a keen eye on how other regions battle the next twelve months of shifting challenges (household cost pressure) and opportunities (such as global demand for food and NZ’s recently-opened borders)
Commodities Weekly: Firming up nicely
22 Sep 2022
- Fonterra is out this morning with its FY22 financial result
- There’s not too much in the result to surprise farmers
- The co-op’s normalised profit is up 1%, with reported profit down about 3% given the impairment of Fonterra’s stake in DPA Brazil
Commodities Weekly: Going nowhere fast
15 Sep 2022
- An extremely congested logistics sector has been a feature of the global economy over the last two years, helping push prices for many goods to record highs
- There are hints that shipping capacity is starting to free up, but the magnitude depends on which barometer you look at
- Even as supply chains recover, we expect constrained production to keep prices high for most agri commodities
Commodities Weekly: Spring forward
07 Sep 2022
- Prices have risen solidly at last night’s GDT auction in line with our long-held view, and we expect further gains on the way
- Very tight dairy supply, relatively resilient demand and a favourable NZD/USD remain a recipe for a strong farmgate milk price
- We’re sticking to our $10 per kgMS farmgate milk price for the 22/23 season and explore the drivers in this edition of Commodities Weekly
Fonterra Milk Price Forecast Update: Spring Forward
07 Sep 2022
- Prices have risen solidly at last night’s GDT auction in line with our long-held view, and we expect further gains on the way
- Very tight dairy supply, relatively resilient demand and a favourable NZD/USD remain a recipe for a strong farmgate milk price
- We’re sticking to our $10 per kgMS farmgate milk price for the 22/23 season and explore the drivers in this Rural Economic Note
Commodities Weekly: Not great but heading in the right direction?
02 Sep 2022
- In a fortnight’s time, we’ll get the latest GDP figures from Stats NZ
- We expect that agricultural output has continued to tentatively recover over the Q2 and Q3
- Agri output maybe on the up, but we expect the recovery to be slow and the impact on each sector to be uneven
Commodities Weekly: The signal and the noise
26 Aug 2022
- This morning, Fonterra modestly edged down its Farmgate Milk Price forecast for the 2022/23 season
- The recent downward trend in global dairy prices is the driver
- Global production remains tightly constrained
Commidities Weekly: ASB retains $10/kgMS farmgate milk price forecast
17 Aug 2022
- Dairy prices have performed a bit better than markets expected at the auction overnight
- Prices have undergone a correction over the NZ autumn and winter, but the fundamentals continue to suggest prices will regain ground over the coming months
- On that front, the global production outlook continues to look weak
Commodities Weekly: Delicate China
12 Aug 2022
- Our weighted forecast for economic growth among NZ’s major trading partners continues to fall
- The largest of the latest revisions have been for the Chinese economy
- The softer Chinese property sector outlook poses a clear downside risk to log prices, as we’ve long signalled
Commodities Weekly: Winter chill blows through dairy prices
03 Aug 2022
- Milk powder prices fell at the Global Dairy Trade auction overnight by even more than futures markets have been recently suggesting
- The overall GDT price index is down by 5%, with prices falling in all the product sub-indices
- The whole milk powder index fell 6.1% and the skim milk powder index was down 5.3%
Commodities Weekly: Growth dips but commodity supply remains tight
29 Jul 2022
- There have been some chunky downward revisions in global growth forecasts this week
- Despite the worsening outlook, extremely tight supply conditions remain the prevailing theme for agri commodity markets
- The present slowdown will look very different from the last one
Commodities Weekly: Focus on the fundamentals
20 Jul 2022
- Milk powder prices have fallen at the GobalDairyTrade auction overnight
- The NZ spring looms as the next key inflection point for the season, so we are not stressing too much about auction-to-auction swings in pricing
- On that front, we’re still focused on the supply fundamentals, which are extremely tight
Commodities Weekly: Pigs might fly… then fall… then fly again
15 Jul 2022
- Disease worries are back in vogue for global meat markets
- Foot and mouth concerns are getting all the pick-up, but for the moment, it’s the Chinese pig herd we’re more focused on
- Unfavourable market dynamics have snuffed out the pig herd’s rapid recovery from African Swine Fever
Commodities Weekly: Hold please caller
06 Jul 2022
- Prices have fallen by more than futures markets were pegging at the latest GDT overnight
- We are sticking to our $10 per kgMS Milk Price forecast for the season
- We are still sceptical prices can fall very far in an environment where global milk supply is extremely tight
Commodities Weekly: Crying over a lack of spilt milk
01 Jul 2022
- EU dairy production is still looking pretty woeful in the latest data, covering April
- It’s already been a poor year so far for the northern hemisphere, with the EU’s three largest producers, Germany, France and the Netherlands (as well as the UK) consistently recording chunky year-on-year declines
- Output in those four largest producers ran 1-2½% behind April last year, a bad sign given this is the usual peak milk production season
Regional Economic Scoreboard: Canty clasps another title
29 Jun 2022
- Another scoreboard, another glorious performance for the home of the mighty Waimakariri River and towering Aoraki/Mount Cook, as Canterbury tops the rankings once again
- If some nifty footwork by Richie Mounga was the foundation of the Crusader's Super Rugby win, Canterbury's similarly reliable eocnomic first five-eighth is its resilient housing market.
- Still with headwinds mounting and growth set to slow over the next twelve months, its going to be a challenging period for just about every region.
Commodities Weekly: Fonterra boosts the goal posts
23 Jun 2022
- On Wednesday, we lifted our dairy price forecast for the 2022/23 season to a whopping $10 per kgMS (up from our previous pick of $9.20).
- This morning, Fonterra lifted its own guidance, bringing it closer in line with our own.
- Note that milk price futures on the NZX-SGX market continue to trade north of the upper end of Fonterra’s new guidance range.
Fonterra Milk Price Update: ASB revises 2022/23 milk price forecast to $10.00
22 Jun 2022
- We have revised our 2022/23 milk price forecast from $9.20 to $10.00 per kgMS, the first double digit milk price on record
- Global dairy supply is still woeful and we’ve dramatically adjusted our view on the NZD
- Dairy prices have underperformed the futures market a tad at the latest dairy auction, but it’s not a biggie and we are focusing on the fundamentals
Commodities Weekly: In the gutter, but looking at the stars
17 Jun 2022
- NZ agricultural output was largely flat over the first quarter of the year
- It’s not too surprising in light of the challenges faced by the sector in the first part of the year
- High input costs and logistical challenges look set to remain a feature, though the weather shows signs of tentatively improving
Commodities Weekly: Beefing up and c-lamb-ering higher
10 Jun 2022
- Meat prices are undergoing their seasonal lifts
- After reaching a low point around the $5.00/kg mark, our weighted average beef price is tentatively turning upward
- For lamb prices, the turnaround has been even more dramatic – already back near the $8.78/kg mark after hitting a low point above most previous season’s high points.
ASB Dairy Update: The worm turns
08 Jun 2022
- As we’d long predicted, dairy prices have lifted at the latest auction overnight, setting the stage for further gains despite a bit of churn in the WMP product mix
- The fundamentals underpinning our forecast haven’t changed, with global supply still ultra-tight
- Another milk price north of the $9 mark looms
Commodities Weekly: Not going out
03 Jun 2022
- Export data released earlier in the week suggests volumes for most NZ agri commodities started 2022 on a weak note
- Agri production is similarly soft in many parts of the world
- For now, higher prices continue to offset lower volumes
Commodities Weekly: A little bit of give and take
27 May 2022
- Global commodity prices have been slowly edging lower since they peaked in March.
- With global growth decelerating, we think agri prices have probably peaked for this cycle, but a substantial correction doesn’t look likely given very soft production for many goods.
- On the other hand, rising interest rates will put pressure on many producers, as the RBNZ looks to tighten monetary policy even more agressively than previously signalled.
Commodities Weekly: A fruitful index update
19 May 2022
- We have re-based the ASB NZ Commodities Index to reflect changes to the composition of our exports
- There’s been no change in the components of the index. Wool and fruit have had considerable re-weightings
- We believe our new index provides Kiwis with their most accurate measure of NZ commodit prices
ASB Dairy Update: Bull in a China strop
18 May 2022
- There’s been another decline in dairy prices at the auction overnight.
- A vexed mood among Chinese buyers has pushed prices lower over the past five auctions, but last night's decline was driven by Fonterra shuffling the mix of whole milk powder on offer.
- We are still bullish on the dairy price outlook and retain our $9.50 per kgms forecast for 2021/22 and our $9.20 per kgms forecast for 2022/23.
Commodities Weekly: A flightless bird
13 May 2022
- Recent weeks have seen a major underperformance of the NZD against the USD, with woeful risk sentiment the culprit.
- We suspect this story has a bit longer to run - the current low level of the Kiwi is a wee bit out of proportion with the fundamentals and the currency will no doubt bounce back over time, but the near-term headlines will probably re-enforce the prevailing mood.
- The softer Kiwi is a real boon for farmers and exporters - underlying USD-denominated commodity prices have come off about 10% since their March peak according to our index, but our NZD index is only down 4%.
Commodities Weekly: Don't Panic
04 May 2022
- Prices have dipped more than most expected at the latest dairy auction overnight.
- It’s important to keep this dip in context. An 8½% fall in the overall GDT index is a large move over the course of a single auction, but the result only takes WMP and SMP prices back where they were in mid-January.
- Our view is the dairy market fundamentals still look pretty favourable to prices and we retain our milk price forecasts.
Commodities Weekly: ASB Commodities Index eases over the week
28 Apr 2022
- The ASB Commodities Index decreased in NZD, SDR and USD terms last week
- The overall NZD Commodities Index was down 1.2%, having slipped 0.4% a week earlier
- Nonetheless, the NZD index is within 2% of the record high set in March and is up 16.9% on a year ago
Commodities Weekly: Prices fall at the latest GDT event
20 Apr 2022
- Dairy prices were weak at the Global Dairy Trade event overnight
- The overall GDT price index was down 3.6%, and all the product indices recorded declines
- It is the third consecutive drop in the index, from an all-time high back at the start of March
Commodities Weekly: 50 not out
14 Apr 2022
- The RBNZ hiked the OCR by 50bps to 1.50% this week, seeking to head off the risk that higher inflation becomes embedded.
- No-onecan predict exactly where the OCR will peak and when (or indeed when the cyclewill begin to unwind), but we have a good sense of the direction of travel overthe next twelve months.
- Higher interest rates are likely to widen the gaps between thewinners and losers in commodity markets as they add to the cost pressuresbusinesses are facing.
Regional Economic Scoreboard Q4 2021: The podium remains Canterbury 1st, Manawatū 2nd & Northland 3rd
12 Apr 2022
- Canterbury tops the table again, ahead of Manawatū and Northland
- Waikato, Gisborne and Otago all slide down the rankings, but Taranaki jumps up nine positions
- Despite remaining in Alert Level 3 for most of the quarter, Auckland moves from 11th to 8th place
Commodities Weekly: Shang-hai noon
06 Apr 2022
- Dairy prices edged lower overnight, wrongfooting expectations of a modest lift.
- The latest lockdown in China looks like the culprit, there’s been an awful lot of disruption to domestic Chinese supply chains, with the upshot being local dairy production has been redirected away from fresh milk and into less-perishable powders
- Don’t expect recent reticence for NZ product from Chinese buyers to last and while demand is set to ease a bit over the year, that tight supply picture should keep prices well supported - the upshot is that we’ve retained our lofty milk prices forecasts for this season and next.
Commodities Weekly: Beef and Lamb - looking through the Omicron obstacles
01 Apr 2022
- The impact of Omicron has been felt by beef and lamb processors over the past month or so.
- While processing backlogs have swelled, NZ Omicron cases have hopefully peaked, giving capacity scope to improve from here on out.
- Meanwhile, high global prices show little sign of undergoing a swift correction
Commodities Weekly: Focus on the fundamentals
25 Mar 2022
- Last week saw prices for a number of hard and soft commodities tick down, in a reversal of recent trends.
- Context is key in the current environment.
- We still think the fundamentals favour commodity prices holding their ground, with dairy and oil likely to be two of the top performers.
Commodities Weekly: A flea bite on the nose of Goliath
16 Mar 2022
- There was a surprise easing in prices at the latest GDT auction overnight.
- It’s a flea bite on the nose of Goliath given how far prices have come.
- It’s a mistake to get too hung up the auction-to-auction swings – pay attention to the broader fundamentals. They support prices holding their ground or advancing further in the near term.
Commodities Weekly: No end in sight
11 Mar 2022
- Another week, another all time high for the ASB Commodities Index in NZD terms.
- There's a bit of give and take for farmers at the moment, with both agri commodities and key input costs on the rise.
- For now, recent market dynamics mean that most farmers can expect higher revenue to offset higher input costs, but keep an eye on relative price movements.
Commodities Weekly: ASB lifts milk price forecasts for this season & next
02 Mar 2022
- Gains at the latest dairy auction overnight have been broad-based and substantial, while the dynamic in global markets suggests supply is likely to remain tight for a while to come.
- We’ve added another 25c to this season's forecast to take our best guess to $9.50 per kgMS.
- We have adjusted up our opening forecast for 2022/23 to $9.20 per kgMS, a little below the futures market.
Commodities Weekly: Trouble with a capital ‘T’
24 Feb 2022
- The ASB Commodities Index hit a new record NZD high last week, bursting through the 130 mark for the first time ever on a 1.8% lift.
- The crisis in Russia is the next big drama facing commodity markets.
- Don’t worry to much about a sharp correction in dairy prices, but the conflict is probably bad news for those hoping for some downward pressure on farm input inflation.
Commodities Weekly: Another auction, another whopper
16 Feb 2022
- To re-use a phrase that is becoming frequently exhausted: dairy prices have enjoyed another whopping auction overnight.
- We’d expected further price gains in the near term, so today’s result doesn’t impact our forecast much - recall that a record high farmgate milk price forecast is already locked in for the current season.
- The key question is how much will supply recover next season and take some of the heat out of prices.
Commodities Weekly: Soft wood
11 Feb 2022
- The outlook for the Chinese economy suggests export demand for NZ logs will get off to a soft start this year.
- Despite improving Chinese economic growth over Q4, CBA estimates real estate investment continued to decelerate (falling from -5%/yr in November to -13%/yr in December).
- Meanwhile, the ASB Commodities Index launched itself to a new record high last week.
Commodities Weekly: A couple of updates on our views
03 Feb 2022
- We've updated a few of our forecasts - both on the agri front and more generally
- Firstly, we’ve nudged up our 2021/22 farmgate milk price forecast to $9.25 per kgMS and opened our 2022/23 forecast at a bullish $8.80 per kgMS (albeit south of the futures market’s current lofty expectations).
- We also now expect the RBNZ will need to lift the OCR a bit further, reaching an endpoint of 2.75% in 2023.
Fonterra Milk Price Update: All dressed up to the nines
02 Feb 2022
- Another fortnight, another whopper dairy auction.
- We've lifted our farmgate milk price forecast for the 2021/22 season to $9.25 per kgMS.
- We open next season’s farmgate milk priceforecast at a lofty $8.80 per kgMS (albeit with a very, very, very wide marginof error at this stage in proceedings).
Commodities Weekly: Ukraine coup de main - No dairy pain again; may strain grain supply chain
26 Jan 2022
- Looming Russian agression towards Ukraine is the latest anxiety testing markets, and conventional wisdom suggests some form of conflict is likely.
- We don’t expect a repeat of 2014, where the Russia-Ukraine conflict helped trigger a crash in dairy prices.
- However, there is the potential for volatility in global feed prices thanks to Ukraine's status as a major grain exporter.
Commodities Weekly: ASB shifts 21/22 milk price forecast to $9.10
19 Jan 2022
- Dairy prices notched up impressive gains at the latest Global Dairy Trade event overnight.
- Tight global supply is the driving prices higher.
- We’ve revised our 2021/22 farmgate milk price forecast upwards to $9.10 per kgMS.
Fonterra Milk Price Update: ASB shifts 21/22 milk price forecast to $9.10
19 Jan 2022
- Dairy prices notched up impressive gains at the latest Global Dairy Trade event overnight.
- Tight global supply is the driving prices higher.
- We’ve revised our 2021/22 farmgate milk price forecast upwards to $9.10 per kgMS.
Commodities Weekly: A summer recap
13 Jan 2022
- The ASB commodities index kicks of 2022 in rude health, hovering near the all-time high it hit as 2021 closed.
- Hot weather has been hitting the country hard.
- Fonterra has revised down its forecast milk collections for the 2022 season.
Regional Economic Scoreboard Q3 2021: Canty's back baby
17 Dec 2021
- Canterbury pips Northland and the Manawatū for the top spot on our scoreboard this quarter.
- Southland remains soggy, but there are signs of a turnaround for Otago.
- Auckland takes a tumble as Alert Levels bite.
Commodities Weekly: Ending on a high
16 Dec 2021
- The ASB Commodities Index ends the year at a record NZD high, boosted by strong dairy and meat prices.
- Still, a number of smaller sectors aren't seeing the same price strength, and are being harder hit by capacity constraints.
- We expect this dynamic to continue over the first half of 2021.
Commodities Weekly: Groundhog auction
08 Dec 2021
- Another GDT, another lift for dairy prices.
- At this point in the season, a record-high farmgate price is practically guaranteed and every auction where WMP prices simply hold onto the gains they’ve already made supports that prospect.
- We retain our $8.75 per kgMS forecast for the season, with some scope for upside risk.
Commodities Weekly: Crooked timber
03 Dec 2021
- Forestry prices have recorded another sharp fall.
- Wharfgate log prices are easing, and much softer demand out of China is the culprit.
- Volatility looks set to continue.
Fonterra Milk Price Update: History doesn't always repeat
03 Dec 2021
- Fonterra has narrowed its 2021/22 forecast farmgate milk price range, taking the midpoint to a record high of $8.70 per kgMS.
- The move affirms our view we are unlikely to see a repeat of what happened last time dairy prices were this high when the co-op had to lower its farmgate price by 55c to avoid making a loss.
- That's because, this season, dairy price gains are proving broad-based, rather than concentrated among whole milk powder.
Commodities Weekly: Mind the gap
25 Nov 2021
- Yesterday, the RBNZ lifted the OCR a second time, with further hikes on the way.
- We've revised our NZD forecasts up, partly off the back of the interest rate outlook.
- Higher interest rates and a less favourable exchange rate will widen the gap between the current agri-sector winners and losers.
Commodities Weekly: This way up
17 Nov 2021
- There have been broad gains at the latest GDT auction overnight, with buyers still prepared to pay a premium thanks to tighter supply..
- The GDT contract curve implies WMP prices have further momentum to come.
- A record high farmgate milk price is all but locked-in for this season and there is increasing upside tisk to our already-bullish $8.75 per kgms forecast.
Commodities Weekly: A record NZD high
11 Nov 2021
- The ASB Commodities Index hit a record NZD high last week, bursting through the 120 mark.
- It’s gains for the dairy and meat sectors that are underpinning our index’s strength at the moment.
- We remain constructive on the medium-term export commodity price outlook
Farmshed Economics: He who dairies, wins
08 Nov 2021
- It increasingly looks like we are in for a record dairy season, with meat prices also looking on good shape.
- Labourpains, rising input costs, higher interest rates and stretched shipping capacity remain big themes.
- Thenear term looks good for dairy, beef and lamb; but the outlook is more mixedfor our other key agri exports.
Commodities Weekly: Another feather in the dairy sector's cap
03 Nov 2021
- Its been another excellent dairy auction overnight.
- The production outlook is improving somewhat, but securing product remains a focus for buyers.
- All-up, we are happy with our record $8.75 per kgMS forecast for the season.
Commodities Weekly: An update on our views
29 Oct 2021
- We now expect the RBNZ will speed up the pace of further OCR hikes, taking the OCR to a higher end point
- We’ve also revised our view on the forestry market and expect prices to normalise further from here.
- We expect gains from the recently-announced UK-NZ Free Trade Agreement to be modest.
Commodities Weekly: ASB lifts 21/22 Milk Price forecast to $8.75 per kgms
20 Oct 2021
- We’ve lifted our 2021/22 season forecast by 55c to $8.75 per kgms.
- It looks increasingly likely production will undershoot the expectations most of us held earlier in the year, while auction trends show demand maintaining momentum.
- We caution there’s still an awful lot of uncertainty, but the trends over the beginning of spring suggest that the possibility a record farmgate milk price for the season is very much live.
ASB lifts 21/22 Milk Price forecast to $8.75 per kgms
20 Oct 2021
- We’ve lifted our 2021/22 season forecast by 55c to $8.75 per kgms.
- It looks increasingly likely production will undershoot the expectations most of us held earlier in the year, while auction trends show demand maintaining momentum.
- We caution there’s still an awful lot of uncertainty, but the trends over the beginning of spring suggest that the possibility a record farmgate milk price for the season is very much live.
Commodities Weekly: The hard and the soft of it
13 Oct 2021
- Metals and energy commodities have surged over recent weeks.
- We expect agri commodities to remain well supported over the remainder of the year, but to underperform most hard commodities.
- The ASB Commodities Index has hit another record high, remaning well supported by the relatively low NZD.
Commodities Weekly: GDT underperforms, but the outlook still looks good
06 Oct 2021
- Dairy prices were flat at the latest auction overnight, but tighter supply and resilient demand are likely to keep prices well supported over the remainder of the season.
- We retain our $8.20 kgms Fonterra milk price forecast for the season.
- The ASB Commodities Index hit a new all-time NZD high last week, edgingpast the previous record it reached in June
Commodities Weekly: Commodity prices remain resilient over start of Spring
30 Sep 2021
- We are now well into spring and commodity prices continue to prove very strong.
- While we suspect our NZD index may have peaked in strength, the underlying demand and supply balance for dairy, meat and forestry products, should keep our index above long-run averages over the remainder of the year.
- Last week's export data continues to show NZ exporters benefitting from the positive outlook, despite widespread reports of freight disruption.
Regional Economic Scoreboard Q2 2021: Volatility Abounds
28 Sep 2021
- Volatility on the Scoreboard this quarter reflects regional COVID-19 recovery differences.
- The West Coast takes the lead with the most significant turn-around, with Canterbury in second place helping to narrow the North and South Island divide.
- Next quarter’s Scoreboard expected to paint a different picture after current lockdown.
Mea Culpa: ASB lifts milk price forecast to $8.20 kgms
22 Sep 2021
- Dairy prices have made further gains at the latest GlobalDairyTrade auction overnight.
- We were premature in lowering our Fonterra milkprice forecast to $7.90kgms back in July.
- We admit our mistake, say ‘mea culpa’ and returnour 2021/22 forecast to $8.20 kgms.
Mea Culpa: ASB lifts milk price forecast to $8.20 kgms
22 Sep 2021
- Dairy prices have made further gains at the latest GlobalDairyTrade auction overnight.
- We were premature in lowering our Fonterra milk price forecast to $7.90kgms back in July.
- We admit our mistake, say ‘mea culpa’ and return our 2021/22 forecast to $8.20 kgms.
Commodities Weekly: Lamb market looking far from sheepish
15 Sep 2021
- Lamb prices continue to exceed record highs.
- From a revenue perspective, we expect high prices will continue to offset any trend lower in volumes over the remainder.
- We think prices could peak at the $9.65 – 9.75 range.
Commodities Weekly: Spring dairy price gains have sprung
08 Sep 2021
- Trends have been positive at the latest dairy auction overnight.
- WMP prices are looking strong and stable across the contract curve.
- What we’ve seen looks pretty positive, supporting our view that thefarmgate milk price for the 21/22 season is likely to remain very strong in ahistorical sense.
Commodities Weekly: Meat you at the top
01 Sep 2021
- NZD meat prices have been on an absolute tear over the past couple of months.
- There’s little sign that the lifting in alert levels a fortnight ago is impacting prices, but we think they should get further support from the return of African Swine Fever in China.
- A lot will be contingent on the ability of individual producers to take advantage of high prices, given the twin challenges of supply chain disruption and the labour shortages.
Commodities Weekly: A week of it
26 Aug 2021
- We expect there to be relatively little impact on demand for most major NZ exports from the latest lockdown.
- We expect forestry prices may be the among the most impacted commoditiesthis time around too – and the lockdown has come at a time where log exportprices have fallen sharply.
- Uncertainty remains very, very high.
Commodities Weekly: Wake me up when September begins
18 Aug 2021
- Moves in dairy prices have been modest at the latest auction.
- The NZ spring will be the real test for prices as we enter the peak production months.
- On a separate note, the ASB Commodities Index hit a two-and-a-half-month low in NZD terms last week but remains very strong in a historical sense.
Commodities Weekly: A perfect storm?
11 Aug 2021
- Next week’s RBNZ meeting looks set to be a big moment for the NZ economy and we now expect the OCR to lift relatively quickly back to 1% by the end of the year.
- Prices for some commodities are starting to ease off their highs, and there’s a risk that trend could combine with a higher kiwi to crimp returns at the farmgate.
- Moves last week in the ASB Commodities Index were modest.
Commodities Weekly: Mixed signals
04 Aug 2021
- There were some mixed signals at the latest GlobalDairyTrade auction overnight.
- We retain our $7.90 forecast for the 21/22 season, but acknowledge uncertainty remains high.
- The ASB Commodities Index continues to oscillate around record highs in NZD terms.
Commodities Weekly: Battling through the logistics chaos
28 Jul 2021
- Over recent months we’ve seen lots of reports about global shipping disruption constraining trade.
- Despite all those headlines, export volumes appear to be proving resilient thus far – those recent gains in export values have been both price AND volume driven.
- Meanwhile, there was a little bit more downward movement in the ASB Commodities Index last week, but it remains not far off record highs.
Commodities Weekly: ASB revises 21/22 milk price forecast to $7.90 kgms
21 Jul 2021
- Prices wrongfooted market expectations overnight, falling by 2.9%, and beyond the headline moves, the shape of the contract curve is a clearly bearish signal.
- We knew dairy prices wouldn’t sustain their earlier heights forever, but prices are falling a bit faster than we’d anticipated.
- The ASB Commodities Index eased a shade in NZD terms last week, but remains only a hair’s breadth below record highs.
Fonterra Milk Price Forecast Update: ASB revises 21/22 milk price forecast to $7.90 kgms
21 Jul 2021
- Prices wrongfooted market expectations overnight, falling by 2.9%, and beyond the headline moves, the shape of the contract curve is a clearly bearish signal.
- We knew dairy prices wouldn’t sustain their earlier heights forever, but prices are falling a bit faster than we’d anticipated.
- The key question is where prices will find their floor, and on that front we are still positive.
Farmshed Economics: Pain and glory
15 Jul 2021
- It’s been a glorious autumn and a cracking start to winter for commodity prices.
- Dairy is the real star of the show at the moment.
- Still, worker shortages and surging costs are causing farmers some pain.
Commodities Weekly: The comeback
14 Jul 2021
- Beef and lamb prices are enjoying a remarkable comeback, with demand and supply factors fuelling the surge.
- Both beef and lamb could be in for a record season.
- The ASB Commodities Index continues to oscillate around record NZD highs.
Commodities Weekly: GDT prices lose a bit of froth
07 Jul 2021
- Prices have edged downward at the latest GDT overnight.
- The moves point to some downside risk to our $8.20 kgms forecast for the season.
- Meanwhile, last week, the ASB Commodities Index burst through a new record high in NZD terms.
Regional Economic Scoreboard Q1 2021: Island divide widens
05 Jul 2021
- The island divide continues this quarter with the North Island taking the top nine spots and the South Island the bottom seven.
- Northland retains its top spot on the scoreboard for the third consecutive quarter.
- Strong housing and construction growth across the country has boosted fortunes for many regions.
Commodities Weekly: Kiwifruit season off to another solid start
30 Jun 2021
- Kiwifruit exports are enjoying a strong start to the new season but can’t quite match last year’s frothy heights.
- Export volumes are performing strongly, overcoming a few hurdles.
- The ASB Commodities Index edged down a smidgen from its record high last week.
Commodities Weekly: NZ commodity prices hit record high
23 Jun 2021
- NZD commodity prices hit their highest level on record last week.
- All-up, NZD prices for virtually every major commodity we monitor are running ahead of 10-year averages.
- The lower NZD is turning ‘strong’ global prices into ‘eye-watering’ NZD-denominated prices.
Commodities Weekly: Whole Milk Powder prices edge down a smidgen
16 Jun 2021
- Whole Milk prices have edged down a smidgen at the latest GlobalDairyTrade auction overnight.
- We retain our $8.20 kgms forecast for the season, with risks tilting towards a slighly lower (but still historically impressive) figure.
- Meanwhile, the ASB Commodities Index continues its Cinderella run, with NZD prices lifting even closer to record highs last week.
Commodities Weekly: Primary sector export resilience on show
10 Jun 2021
- While a lot of ink has been spilled about the sharp recovery in commodity prices of late, the resilience in export volumes has been a big a driver of the export sector’s strength.
- All-up it’s a remarkable run of data given the doom-and- gloom predictions the pandemic would lead to a near collapse in international trade.
- Meanwhile, the ASB Commodities Index hit an eighteen-month high in NZD terms last week.
Commodities Weekly: Dairy prices hold their gains, ASB shifts its OCR view
02 Jun 2021
- Dairy prices have continued to hold on to most of their gains at last night’s auction.
- While this is the fifth consecutive auction where prices have eased, the real story is the continued strength in WMP prices.
- Meanwhile, the ASB Commodities Index continues to trade near record highs.
Commodities Weekly: Fonterra kicks off 21/22 with a wide opener
26 May 2021
- Fonterra has released its first milk price forecast for the range 21/22 season - and it’s a wide opener.
- The co-op has also narrowed this season’s forecast range to $7.45- $7.65 per kgms, resulting in a slightly lower midpoint of $7.55.
- Meanwhile, another ripper week sees the ASB Commodities Index just 1% shy of its record high.
Commodities Weekly: ASB revises 21/22 milk price forecast to $8.20/kgms
19 May 2021
- Prices broadly held their ground at last night’s dairy auction.
- The resilience in prices has exceeded our expectations and consequently, we’ve changed our view and now forecast a farmgate milk price of $8.20 per kgms for 21/22.
- There was some modest easing in the ASB Commodities Index last week, but it remains close to record highs.
Rural Economic Note: ASB revises 21/22 milk price forecast to $8.20/kgms
19 May 2021
- Prices broadly held their ground at last night’s dairy auction.
- Prices are holding onto their gains and we find ourselves increasingly bullish about the next season.
- Consequently, we’ve changed our view and now forecast a farmgate milk price of $8.20 per kgms for 21/22.
Commodities Weekly: Unintended consequences
12 May 2021
- Prices for forestry products have risen over 2021 thus far while shipping pressures around the world have continued to intensify.
- We expect that trade distortions overseas will drive up demand for NZ logs over 2021 and 2022.
- Meanwhile, it’s been yet another strong week for the ASB Commodities Index.
Commodities Weekly: Saturated fats
05 May 2021
- Butter prices were lower, but powders held their ground at the latest GDT overnight.
- The key takeaway for farmers is that powders are maintaining their value.
- Meanwhile, the ASB Commodities Index edged down last week.
Commodities Weekly: (Re)Open Season
28 Apr 2021
- The latest high frequency economic data show economic activity picking up – and the hospitality sector is feeling the love.
- Among major commodities, we expect meat will be the main beneficiary from the trend towards reopening in the Northern Hemisphere.
- Meanwhile, the ASB Commodities Index was little changed last week.
Commodities Weekly: ASB revises 21/22 milk price forecast to $7.50
21 Apr 2021
- Dairy prices were little changed at last night’s GlobalDairyTrade auction.
- The shape of the contract curve suggests prices maintain momentum heading into next season.
- We retain our $7.60 kgms forecast for the 20/21 season but have revised our 21/22 forecast up to $7.50 (from $7.30).
Commodities Weekly: The sweet spot
14 Apr 2021
- The NZD has continued to trade in a lower range in the last three weeks following the Government’s housing announcement.
- We still think the fundamentals support a higher NZD, and strong commodity prices are a big part of the story.
- It was another quiet week for the ASB Commodities Index.
Commodities Weekly: Dairy prices hold their gains
07 Apr 2021
- Prices were flattish at the GlobalDairyTrade auction overnight.
- Recent price gains have been led by strong demand from China, but this auction saw other regions return to the party.
- All-up, we retain our $7.60 forecast for the 20/21 season, and our $7.30 opening forecast for 21/22.
Commodities Weekly: Shooting up
31 Mar 2021
- NZD forestry prices have lifted strongly over recent months.
- The strength of the forestry sector looks to be benefitting regional New Zealand.
- Meanwhile, a weaker NZD saw the ASB Commodities Index manage a decent lift in local currency terms last week (+1.4%), edging back towards record highs.
Regional Economic Scoreboard: A tale of two islands
29 Mar 2021
- Northland retains its top spot – with almost five percent job growth year on year.
- North Island still outperforming the South Island.
- Housing and construction boom fueling growth.
Commodities Weekly: Dodging drought, a dairy deluge
24 Mar 2021
- The latest DCANZ data showed milk production growth well up over February.
- Accordingly, we have nudged up our forecast for the end of the season, and now expect production growth in the 1.4% range – a record result.
- Meanwhile, a bit of softening in dairy prices saw the ASB Commodities Index ease last week.
Commodities Weekly: ASB revises milk price forecast for 20/21
17 Mar 2021
- There was a bit of correction at last night’s GlobalDairyTrade auction.
- We have revised our forecast for the 20/21 season to $7.60 but retain our $7.30 view for 21/22.
- Meanwhile, the ASB Commodities Index continued its strong run last week.
Rural Economic Note: ASB revises 20/21 milk price forecast to $7.60 KGMS
17 Mar 2021
- Dairy prices remain very high despite a modest bit of correction overnight.
- We have revised our milk price forecast for the 20/21 season from $7.40 to $7.60, retaining our $7.30 view for 21/22.
- In other dairy news, Fonterra’s half-year financial results show a profit of $391 million.
Farmshed Economics: On the up
11 Mar 2021
- After the chaos of 2020, which saw prices for many goods crash or flatline, we’ve begun the new year with some sizable lifts.
- Markets are increasingly pegging a surge in economic activity once vaccine uptake is widespread and it’s safe for restrictions to ease.
- Prices for many of the agricultural products we monitor are also on the rise though the situation is a bit more complicated.
Commodities Weekly: On a tear
10 Mar 2021
- Last week saw huge gains for the ASB Commodities Index, underpinned by a mammoth dairy auction.
- NZD prices in our index are now nearing their highest level since it began; we expect the index to remain high over the medium term.
- Given the sharp lift in commodity prices, further strength in the NZD is likely too.
Commodities Weekly: March madness
03 Mar 2021
- Dairy prices have kicked off the month with an astonishing lift at the latest GDT auction with price gains far beyond market expectations.
- We expect prices to moderate at least little, over subsequent auctions, but ‘when’ and ‘how much’ are big questions.
- The farmgate milk prices for both 20/21 and 21/22 could finish up to 20c higher than we have currently forecast.
Commodities Weekly: Supercycle me
24 Feb 2021
- Prices for most commodities have risen markedly over recent weeks.
- Talk of a new commodity price ‘supercycle’ is getting a lot of speculation.
- Meanwhile, in line with the trend towards higher commodity prices of late, most components of our index posted gains in USD terms last week.
Commodities Weekly: Gangbusters
17 Feb 2021
- It was a whopper of a dairy auction overnight, as strengthening demand pushed prices up across the board – but particularly for whole milk powder.
- Looking ahead, we open our forecast for the 21/22 season at $7.30.
- Meanwhile, it was a quiet week for the (predominantly) agricultural ASB Commodities Index.
Commodities Index: Strong dairy prices lift ASB’s commodity index
10 Feb 2021
- It was another strong week for the ASB Commodity Price Indices last week, with the ongoing strength in dairy prices driving the index higher in all denominations.
- Overall, the index was up 1.2% over the week, while a modest dip in the NZD boosted the index gain to 1.4% when measured in NZD terms.
- Meanwhile, a big mover in financial markets over recent weeks has been interest rates.
Commodities Weekly: Dairy prices post further gains
03 Feb 2021
- Dairy prices lifted a further 1.8% at the latest Global Dairy Trade event overnight.
- The overall strength at this auction, combined with the steady gains recorded at the proceeding events, has prompted us to lift our milk price forecast for the season from $7.00 to $7.40.
- Meanwhile, it was another strong week for the ASB Commodity Price Indices last week, but the strong NZD continues to be a headwind to commodity prices in NZD terms.
Fonterra Milk Price Forecast Update: ASB revises 20/21 milk price forecast to $7.40 KGMS
03 Feb 2021
- Dairy prices have been rising steadily over recent months and posted further gains overnight.
- The overall strength in dairy prices has prompted us to lift our milk price forecast for the 20/21 season from $7.00 to $7.40.
- Fonterra lifts its guidance in the wake of the GDT event today, to $6.90 - $7.50.
Commodities Weekly: Summer hitting the regions with an uneven impact
27 Jan 2021
- In contrast to last year’s swelter – where it was hot and dry everywhere – the summer weather this year is hitting the regions rather unevenly.
- With conditions not as dry as they were this time last year, we maintain our view of a lift in dairy production over the present season, but only a modest one.
- Meanwhile, it was another strong week for the ASB Commodity Price Indices last week, with solid lifts in both NZD and USD terms.
Commodities Weekly: Dairy prices continue their ripper run
20 Jan 2021
- It was another rip-snorter of a dairy auction overnight, as prices advanced yet again.
- All the indicators continue to suggest demand for dairy products is likely to hold up well, through to the end of the season.
- Meanwhile, the ASB Commodities Index lifted a solid 2.3% in NZD terms last week, thanks to a good lift in dairy prices and a paring back in the kiwi.
Commoditie s Weekly: Beef and lamb start the year on uncertain hoofing
13 Jan 2021
- 2021 kicked off on a high note last week with the strong GDT dairy auction result, but it’s a more muted start to the year for beef and lamb prices.
- Two downside factors in paticular are weighing on the meat sector: ongoing COVID woes oversees and tentative signs the world is emerging from the global protein shortage of recent years.
- Meanwhile, the ASB Commodities Index fell 0.9% in NZD terms last week.
Dairy prices lift at first event of 2021
06 Jan 2021
- Dairy prices lift at first GDT event of 2021.
- ASB’s 20/21 milk price forecast of $7.00 gets a buffer.
- The ASB Commodities Index eased 0.5% in NZD terms last week, as the strong kiwi dollar continued to weigh on the index.
Regional Economic Scoreboard Q3 2020: Northland and New Zealand’s rural sector steal the show
18 Dec 2020
- Northland climbs seven spots to take top place.
- Rural New Zealand dominates this quarter with Bay of Plenty and Waikato rounding out the top three.
- Taranaki dropped eight spots, slipping from fourth to 12^th after a mediocre quarter.
Commodities Weekly: Ending 2020 on a more uplifting note
16 Dec 2020
- Prices edged up again at the latest GlobalDairyTrade auction overnight.
- The result reflects the fact that global demand is still holding up well, providing support for dairy prices.
- Meanwhile, the ASB Commodities Index eased 0.6% in NZD terms last week, as the strong kiwi continued to weigh on the index.
Commodities Weekly: $7th Heaven
09 Dec 2020
- Fonterra has adjusted the midpoint of its forecast range to $7.00 kgMS for the 20/21 season.
- The NZD has lifted sharply over the past month, but we don't envisage it will have much of an impact on the milk price forecast at this point in the season.
- The ASB Commodities Index rose 0.5% in NZD terms last week.
Bumper lift for dairy prices at latest GDT
02 Dec 2020
- There was a solid lift in prices at the first Global Dairy Trade auction for December.
- Thanks to solid demand, the risks to our $6.75 milk price forecast are now firmly skewed towards the upside, though the production outlook and the strength of the NZD are giving us pause.
- The strength of the kiwi is also weighing down the ASB Commodities Index, which fell 0.8% in NZD terms last week.
Commodities Weekly: Standing tall
25 Nov 2020
- Forestry prices have weathered the COVID stormbetter than most, despite sharp falls earlier in the year.
- The ongoing China-Australia trade dispute may carry anupside for NZ forestry exporters, as does the booming NZ construction sector.
- The ASB Commodities index wasunchanged in NZD terms last week, as a lift in the NZD muted the impact ofprice rises for underlying commodities.
Commodities Weekly: No news is good news
18 Nov 2020
- Prices lifted a modest 1.8% at the latest GDT auction.
- ASB retains its $6.75 forecast for the season.
- The ASB Commodities Index fell 0.1% in NZD terms amid continuing gains for the NZD/USD.
Commodities Weekly: Brexit beckons
11 Nov 2020
- Whilst the Donald Trump show hasn’t been renewed for a second season, the Brexit show hasn’t quite finished.
- Brexit negotiations matter for NZ given Britain is still a key NZ export market for many commodities, particularly beef and lamb.
- Meanwhile, the ASB Commodities index fell in NZD terms last week, amid strong gains for the kiwi over the course of the week.
Farmshed Economics: Winners and losers
11 Nov 2020
- It is around eight months since the World Health Organisation declared COVID-19 a public health emergency, and since then it’s been a wild ride for commodity markets.
- After steep falls earlier in the year, prices for many agricultural commodities have lifted off their lows and some are even touching year-ago levels.
- Still, the gains have not been evenly distributed, and the unique export mix and supply factors of each commodity have played a big part in where things have landed.
Commodities Weekly: Stirred, not shaken
04 Nov 2020
- Prices retreated at the Global Dairy Trade Auction overnight, after three consecutive weeks of increases.
- We are retaining our $6.75 WMP forecast for the 2020/21 season.
- Meanwhile, there was a decent lift in the ASB Commodities Index last week, boosted both by the falling dollar and by underlying price movement.
Commodities Weekly: Slow and steady in September
28 Oct 2020
- The latest trade data showed kiwifruit export values holding steady during September, with both prices and volumes resilient.
- Looking ahead, challenges and opporunities loom for the sector, thanks to the border closure and a mysterious disease outbreak overseas.
- The ASB Commodities index fell 1% in NZD terms last week, with currency movement the main driver.
Commodities Weekly: GDT prices firming up nicely
21 Oct 2020
- Prices rose again at the Global Dairy Trade auction overnight, the third consecutive auction where the overall index and the WMP index have risen.
- ASB’s milk price forecast remains at $6.75 for the 20/21 season.
- Meanwhile, the ASB Commodity Price Index lifted 1.1% in NZD terms last week, as a falling kiwi and rising underlying prices made for a potent combo.
Commodities Weekly: Taking stock
14 Oct 2020
- The ASB Commodity Index lifted in both NZD and USD terms last week off the back of the strong dairy auction result.
- This week we take a look at how the different commodities are coping as the pandemic continues
- Dairy and forestry have proved resilient, but meat prices are still well below year ago levels
Encouraging lift in GDT prices overnight
07 Oct 2020
- The ASB Commodity Price Index fell 0.7% in NZD terms last week, as the NZD/USD lifted 1.4%.
- Prices lifted 2.2% at the GDT auction overnight, the second consecutive lift.
- WMP is now back above US$3,000 a tonne, as downside risks to our $6.75 milk price forecast recede
Commodities Weekly: Risk sentiment buffeting NZD
30 Sep 2020
- The ASB Commodity Price Index rose 1.7% in NZD terms last week, driven by a falling kiwi.
- Risk appetite has been a big theme recently, with sudden rises and falls in share markets heavily impacting the currency.
- Meanwhile, last week’s trade data release showed kiwifruit exports were proving especially resilient.
Commodities Weekly: The relative resilience of rural
23 Sep 2020
- The ASB Commodity Price Index fell a modest 0.1% in NZD terms last week, despite gains across a broad range of commodities in USD terms.
- And although the prices of most key commodities remain well down on year-ago levels, recent data has generally highlighted the relative resilience of the rural sector.
- Maenwhile, last week Fonterra finalised the 2019/20 milk price at $7.14 and maintained its wide forecast range of $5.90-$6.90 for 2020/21.
Fonterra Milk Price Forecast Update: Fonterra’s wide forecast range is a sign of the times
18 Sep 2020
- Fonterra’s milk price for the 2019/20 season is $7.14 KGMS, plus a final dividend of 5c announced.
- Fonterra sticks with its wide $5.90-$6.90 for the 20/21 season, which is understandable in this environment. Fonterra’s 20/21 forecast earnings per share is in a 20-35 cent range.
- We are sticking with our 20/21 $6.75 milk price prediction for now, but the present risks are skewed to a number closer to the mid-point of Fonterra’s forecast range.
Commodities Weekly: Dairy prices show encouraging lift overnight
16 Sep 2020
- It was pleasing to see dairy prices firming at the Global Dairy Trade event overnight.
- Fonterra will release its FY20 annual financial results this Friday and will confirm the final Farmgate Milk Price for the 2019/20 season (its last forecast range was $7.10-$7.20).
- The ASB Commodity Price was little changed last week; the index shed 0.2% in USD terms, but a slight downward drift in the NZD exchange rate meant that the NZD denominated index fell just 0.1%.
Regional Economic Scoreboard Q2 2020: Mighty Manawatu makes its mark
15 Sep 2020
- Manawatu-Whanganui climbs six spots to take top place on the regional economic scoreboard this quarter.
- Hawke’s Bay and Gisborne both continue to be strong performers in second and third position.
- Weak retail sales and the lack of tourists kept Nelson on the bottom rung for the second quarter in a row.
Commodities Weekly: NZD eases off recent peak
10 Sep 2020
- The ASB Commodity Price Index lifted 0.4% in NZD terms last week.
- Next week could be a little more eventful, for dairy prices at least.
- ASB will review our 20/21 $6.75 forecast after next week’s events.
Commodities Weekly: Fonterra sticks with wide forecast range for 20/21
02 Sep 2020
- The ASB Commodity Price Index was down 1.4% in NZD terms last week, with a strong 3.1% lift in the NZD the main mover over the week.
- At the first Global Dairy Trade Event for September the overall GDT Price index declined another 1.0%.
- Our forecast of $6.75 for the season ahead is under some pressure, and the risks are skewed to the downside at present.
Commodities Weekly: Looking forward to AL-2!
26 Aug 2020
- The ASB Commodity Price Index was down in 0.1% NZD terms last week, and down 0.5% in USD and SDR terms.
- A few weeks of Alert Level 3 in Auckland and the associated business closures is a reminder that COVID-19 is having, and will continue to have, a significant impact on consumers.
- Moving to Alert Level 2 in Auckland next week will allow restaurants to open, and social restrictions to ease somewhat; the associated demand will be welcomed by meat processors and retailers.
Commodities Weekly: RBNZ scoping negative OCR setting
19 Aug 2020
- The ASB Commodity Price Index was flat in USD terms last week, but a 0.9% NZD decline helped the index rise in NZD terms.
- Dairy prices eased across the board at the latest Global Dairy Trade auction overnight, sending the GDT Price Index down 1.7%.
- In the wake of last week's RBNZ meeting, ASB economists changed our outlook for the OCR, and the RBNZ’s overall policy settings.
Commodities Weekly: Covid-19 continues to influence markets
12 Aug 2020
- The ASB Commodity Price Index eased again last week, led by sizeable falls for dairy, and more modest movements by the other major commodities in the index.
- COVID-19 continues to influence both supply and demand for key commodities.
- Meanwhile, NZD has eased back from its recent peak against the USD.
Commodities Weekly: Dairy prices fall overnight
05 Aug 2020
- The ASB Commodity Price Index dipped in all denominations last week.
- Meanwhile, it was disappointing to see prices fall at the Global Dairy Trade event overnight.
- Following the previous GDT event a fortnight ago, we lifted ASB’s forecast for the 2020/21 season from $6.50 to $6.75; prices need to stabilise around the current levels to support our milk price forecast.
Commodities Weekly: Whole milk powder prices hang on to recent gains
22 Jul 2020
- Whole milk powder prices (WMP) lifted 14% the 7^th June Global Dairy Trade (GDT) event, and hung onto those gains at the latest auction overnight, with the WMP index lifting 0.6%.
- Last week Fonterra revised both its 2019/20 and 2020/21 milk price forecast ranges.
- Meanwhile, the ASB Commodity Price Index rose 0.8% in NZD terms over the week ending 17^th July, boosted by a 0.6% decline in the NZD vis-à-vis the USD.
Fonterra Milk Price Forecast Update: Prices moving in the right direction
22 Jul 2020
- Last week Fonterra revised both its 2019/20 and 2020/21 milk price forecast ranges.
- ASB adopts the $7.15 midpoint Fonterra’s f/c range for the milk price for the season gone.
- We have lifted our 2020/21 forecast farmgate milk price to $6.75 to reflect some of the improvement we have seen in dairy prices at the last two Global Dairy Trade events.
Commodities Weekly: NZD lifts to six-month high, gold hits an all-time high
20 Jul 2020
- The ASB Commodity Price Index dipped 0.4% in NZD terms over the week ending 24^th July.
- NZD/USD has lifted over recent weeks, courtesy of a softer USD and support for the NZD itself from the strength in commodity prices.
- Meanwhile, the price of gold has just set a new record high of US $1,980 per ounce, beating the previous high of $1,920 set back in 2011.
Commodities Weekly: NZD continues to firm
15 Jul 2020
- The ASB Commodity Price Index rose 0.5% in NZD terms over the week ending 10^th July.
- And although it’s frustrating for exporters, the NZD continues to slowly lift.
- Overall, we expect New Zealand’s key food export prices to be well supported over the second half of the year.
Regional Economic Scoreboard Q1 2020: Gisborne the place to be for the past four quarters
13 Jul 2020
- Gisborne came out tops for the fourth consecutive quarter in the latest ASB Regional Economic Scoreboard.
- Neighboring Hawke’s Bay and Taranaki have both climbed dramatically up the rankings, with these regions looking good as the economy went into lockdown.
- The dry summer was a big challenge at the start of the year, but COVID-19 emerged to become the biggest challenge the country has faced in many years, impacting all areas.
Commodities Weekly: Whole Milk Powder prices jump
08 Jul 2020
- Prices rose strongly at the latest Global Dairy Trade Event, with whole milk powder prices (WMP) leading the gains.
- The WMP price gain is important, as it’s the key product that drives the milk price farmers receive.
- Meanwhile, the ASB Commodity Price Index dipped 0.2% in NZD terms over the week ending 3 July, with the NZD up 1.9% against the USD.
Commodities Weekly: Surging COVID-19 cases causing concerns
01 Jul 2020
- The ASB Commodity Price Index lifted in all denominations last week, and the NZD/USD is trading near 0.6420, around 1½ cents off its recent high.
- The focus in financial markets remains on the renewed increase in COVID-19 infections in the US and elsewhere.
- Reeopening is proving challenging. An important aspect of this as far as New Zealand’s key exports are concerned is the likelihood that people will continue consuming more of their food at home than usual. We are seeing some signs of this in recent data.
Commodities Weekly: Tentative recovery continues in markets
24 Jun 2020
- The ASB Commodity Price Index lifted in all denominations last week, and the NZD continued to lift off recent lows.
- Oil price moves over recent weeks have been the most volatile of the commodities we monitor within this report.
- Currencies, sharemarkets and commodity prices continue to wax and wane on changing global sentiment.
Commodities Weekly: A bout of volatility returns to financial markets
17 Jun 2020
- Late last week we got a timely reminder that market sentiment and the pace of the recovery from the COVID-19 pandemic is not a sure thing.
- The ASB Commodity Price Index dipped in all denominations last week, but a lower NZD cushioned the decline when measured in NZD terms.
- Meanwhile, prices moved in the right direction at this week’s Global Dairy Trade event.
Commodities Weekly: NZD headwind picks up for exporters
10 Jun 2020
- Commodity prices have lifted over recent weeks as sentiment regarding global growth improves.
- A notable recovery has been in oil prices, which have surged massively over April and May.
- Meanwhile, the ASB Commodity Price Index lifted in USD terms last week, but the gains in the underlying commodity price indices couldn’t offset the firmer NZD.
Commodities Weekly: Dairy prices a mixed bag at the latest GDT event
03 Jun 2020
- Dairy prices were mixed in the latest Global Dairy Trade event on Tuesday 2^nd June, with the GDT index up 0.1%.
- At this stage of the year there’s not any implications for our milk price calculations
- Meanwhile, The ASB Commodity Price Index was mixed again last week.
Farmshed Economics: Old truisms hold
02 Jun 2020
- COVID-19 has changed the world; it has brought the most social disruption that majority of us have ever seen.
- But the more things change, the more some old truisms hold.
- In NZ’s case, it remains a comfort in being a food producer in uncertain times like these.
Commodities Weekly: Excellent start
29 May 2020
- Kiwifruit exports have continued their excellent start to the season.
- However, we retain some caution as the global economy is in recession and the fallout will extend through the year, if not into 2021.
- Meanwhile, the ASB Commodity Price Index was mixed last week.
Commodities Weekly: Farm input price inflation lower for longer
22 May 2020
- Farm input inflation remained low over the March quarter.
- From here, we expect farm input inflation to remain low, and if anything, to fall further.
- Meanwhile, the ASB Commodity Price Index lifted in all denominations last week.
Fonterra Milk Price Forecast and Financial Results Update: Treading carefully
21 May 2020
- Fonterra announced an appropriately wide 2020/21 opening milk price forecast range of $5.40-$6.90/kg. We expect $6.50/kg, albeit with some downside risk to our forecast.
- Unsurprisingly, Fonterra reduced its 2019/20 forecast range to $7.10-$7.30/kg. We expect something in the midpoint of that range.
- Fonterra announced ecnouraging third quarter results, but it will be sometime before Fonterra undoes the damage of past poor performance.
GlobalDairyTrade Auction: Mixed bag
20 May 2020
- Dairy auction prices were a mixed bag overnight.
- Overall, global dairy prices are largely directionless as markets wait for a clearer COVID-19 picture.
- We maintain our cautiously optimistic milk price view, but continue to note that risks remain very high.
Commodities Weekly: NZ commodity exports soldier on
15 May 2020
- The NZ commodity export sector has continued to fare relatively well post-COVID-19.
- This fits with our expectation that NZ’s food exports would remain relatively resilient.
- Meanwhile, the ASB Commodity Price Index was down last week in USD and NZD terms.
Commodities Weekly: Horticulture land use jumps; dairy and sheep down
12 May 2020
- The strong growth in the horticultural sector has been reflected in a jump in horticultural land use.
- Fruit exports have become NZ’s fourth goods export engine, behind dairy, meat and forestry.
- Meanwhile, the ASB Commodity Price Index was mixed last week.
GlobalDairyTrade Auction: Calm after oil storm
06 May 2020
- Dairy auction prices largely stabilised overnight.
- The result is consistent with the recent rebound in oil prices after their earlier plunge.
- We maintain our cautiously optimistic milk price view, but note that risks remain very high.
Commodities Weekly: Kiwifruit exports start well - COVID-19 risks remain
01 May 2020
- Gold kiwifruit exports have started the season with a hiss and a roar.
- However, we caution that this strong start may not last.
- Meanwhile, the ASB Commodity Price Index continued to decline last week.
Commodities Weekly: Plunging oil prices ultimately grease NZ’s wheels
24 Apr 2020
- Oil prices traded in negative territory this week for the first time ever.
- Lower oil and fuel prices ultimately boosts disposable incomes and demand for NZ food exports.
- Meanwhile, the ASB Commodity Price Index declined in all denominations last week.
GlobalDairyTrade Auction: Oil spill
22 Apr 2020
- Dairy auction prices dipped overnight as sentiment from the oil price plunge spilled over into dairy markets.
- The result was notably weaker than our and futures market expectations ahead of the auction.
- Notably, this result and the oil price plunge adds to downside risks for the 20/21 season milk price.
Commodities Weekly: Farm expense deflation on the cards
17 Apr 2020
- We anticipate that the looming economic downturn will push farm expense inflation lower.
- Although feed prices are likely to buck the trend.
- Meanwhile, the ASB Commodity Price Index showed mixed movements last week.
Commodities Weekly - Double-edged sword
09 Apr 2020
- The 2020 gold kiwifruit crop is on track to set a record high.
- But the extra fruit is a double-edged sword, with global demand likely to be low post-COVID-19.
- As a result, we expect kiwifruit prices, particularly for gold, to trend towards the lower end of prices achieved over recent years.
GlobalDairyTrade Auction: Jury’s still out
08 Apr 2020
- Dairy auction prices lifted overnight, breaking a run of four consecutive price falls.
- However, it took a large (seasonal) fall in auction quantities sold to generate the price lift.
- While we won’t look a gift horse in the mouth, we remain cautious on the global market outlook as evidenced by recent our 20/21 milk price forecast revision down to $6.50/kg.
Commodities Weekly: Worst of meat capacity squeeze may be behind us
03 Apr 2020
- The worst of the meat processing capacity squeeze may now be behind us.
- In fact, easing capacity constraints are likely to help meat prices stabilise further over coming weeks.
- Meanwhile, the NZ dollar dominated ASB Commodity Price Index movements last week.
Farmshed Economics: COVID-19: what we know and what we don't
03 Apr 2020
- COVID-19 is changing our world.
- Comfortingly though, many aspects of farming will stay the same.
- However, in a number of other aspects, we are venturing into the unknown.
Commodities Weekly: Drought relief
27 Mar 2020
- Rain has brought some drought relief over the past week, with more rain forecast over the next seven days.
- While the rain is welcome, in some locations, the timing of the rain has meant that it is contributing more to setting up for next season than “saving” this season.
- The ASB Commodity Price Index dropped considerably in USD terms last week, although a weaker NZD/USD has offset the fall.
Commodities Weekly: Dollar relief
20 Mar 2020
- The NZ dollar is playing a buffering role for NZ exports amidst COVID-19 outbreak
- Indeed, while the ASB NZ Commodity Price Index has fallen to its lowest level since October 2016 in USD terms, the fall in NZD terms since the 2019 peak has been a more modest 6.8%.
- A lower NZD will help the NZ commodity export sector to rebound faster than most.
Going viral
13 Mar 2020
- The WHO has declared COVID-19 a global pandemic.
- Oil prices plunged over the week.
- While NZ commodity prices continue to hold up relatively well, even food prices may not be immune.
Regional Economic Scoreboard Q4 2019: Gisborne King of the castle as Coronavirus weighs on forecasts
06 Mar 2020
- Gisborne ended 2019 as King of the Scoreboard castle, making it three consecutive quarters on the trot.
- The Mighty Waikato jumped a whopping 11 spots to 3rd this quarter, while Hawke’s Bay fell from silver medal position last quarter to 11^th.
- Despite climbing one spot this quarter, Otago may be at risk going forward from the Coronavirus impact on tourism and education in the region.
Commodities Weekly - Hit and miss
06 Mar 2020
- Rain has relieved drought in some regions.
- But in other regions, it has been a case of too little, too late for this season.
- Meanwhile, the kiwifruit sector is preparing for a bumper harvest.
GlobalDairyTrade Auction: Down smalls
04 Mar 2020
- Dairy auction prices fell modestly overnight and are showing signs of stabilisation.
- Our view remains that the dairy market impact of the virus outbreak will prove modest and short-lived.
- We stick with our 2019/20 milk price forecast of $7.40/kg, but also note upside risks to our 2020/21 forecast.
Commodities Weekly: COVID-19 - one step forward, two steps back
28 Feb 2020
- Fonterra reaffirms 2019/20 milk price forecast.
- However, coronavirus ourtbreak goes “global”, introducing fresh risks to NZ commodity prices.
- Meanwhile, the forestry and meat sectors are bearing the brunt of the outbreak’s impacts so far.
Commodities Weekly: Drought crimping agri’s style
21 Feb 2020
- We now expect 2019/20 dairy production to finish up lower than in 2018/19.
- Meanwhile meat prices are taking a hit, declining on both the extra slaughter induced by the dry and the coronavirus disruptions to supply chains.
- In contrast, a hot and dry summer can often boost production levels in the horticulture sector.
GlbalDariyTrade Auction: Twin watch - coronavirus and drought
19 Feb 2020
- We trim our 2019/20 milk price forecast by 10 cents to $7.40/kg.
- This forecast change is the net price impact of coronavirus (down) and NZ drought (up).
- We also trim our 2019/20 dairy production growth forecast to -0.5% and note the material drought hit to farm production and incomes in some key dairying regions.
Commodities Weekly: Drought declared
14 Feb 2020
- An official drought has been declared in Northland; other regions may soon see an official declaration too.
- In terms of commodity price impacts, the drought will have mixed effects by sector.
- Meanwhile, the ASB Commodity Price Index slid 2.7% last week in USD terms.
Coronavirus - commodity prices down, but not out?
07 Feb 2020
- The coronavirus first round impacts are starting to show through in commodity price data.
- As expected, NZ commodity prices have taken a decent hit.
- There are some signs though that the impact could prove short-lived.
- Nonetheless, the situation remains fluid and price volatility is likely to continue. Indeed, risks and uncertainties remain in play.
GlobalDairyTrade Auction: It could have been worse
05 Feb 2020
- Concerns around the coronavirus outbreak drove dairy prices lower overnight.
- However, there were signs in the auction detail that virus impact on dairy markets will prove short-lived.
- We maintain our 2019/20 milk price forecast at $7.50/kg, but note ongoing risks.
Commodities Weekly: Coronavirus - understanding the risks
31 Jan 2020
- The coronavirus outbreak poses the key short-term risk to NZ’s commodity exports and prices.
- The virus outbreak poses low risk to dairy prices, but seafood exports are haevily exposed.
- Meanwhile, the ASB Commodity Price Index lifted a touch last week in all denominations.
Commodities Weekly: Heating up, drying out
24 Jan 2020
- It’s early days in the NZ summer, but drought risks are rising.
- So far the dry weather has been having a (modest) impact on agricultural production, with dairy production showing signs of slowing.
- Meanwhile, the ASB Commodity Price Index was largely unchanged last week.
GlobalDairyTrade Auction: Two in a row
22 Jan 2020
- Dairy auction prices continued their positive start to 2020.
- Emerging dry weather could put further upward pressure on dairy prices.
- All up, we maintain our 2019/20 milk price forecast at $7.50/kg.
Commodities Weekly - 2020 - Year of the Rat racing to keep up with 2019
17 Jan 2020
- After 2019’s record highs, we expect less spectacular NZ commodity prices in 2020.
- Nonetheless, we expect NZ commodity prices to remain at healthy levels on a historical basis.
- Meanwhile, a fall in the NZD/USD helped the ASB Commodity Price Index rise in NZD terms last week.
GlobalDairyTrade Auction: 2020 starts with a hiss and a growl
08 Jan 2020
- Dairy auction prices started 2020 on a positive note.
- Notably, skim milk powder prices have continued their purple patch.
- All up, we remain positive on the dairy outlook and maintain our 2019/20 milk price forecast at $7.50/kg.
Commodities Weekly: 2019 - the Year of Records
20 Dec 2019
- Lamb, beef, forestry and fruit prices all set record highs in NZD terms over 2019.
- Looking ahead, we expect NZ commodity prices to continue to remain healthy over 2020.
- Meanwhile, the ASB Commodity Price Index dipped in all denominations in the week ending 13 December.
2019: the year of the Sheep
19 Dec 2019
Auspiciously, 2019 was the ‘Year of the Pig’. As it turns out though, African Swine Fever meant that pigs were few and far between this year. For NZ farmers, this meant that 2019 quickly turned into the ‘Year of the Sheep’, with sheepmeat prices reaching unprecedented levels. Beef prices also set fresh record highs, while fruit prices also boomed. With the milk price joining the party in the second half of the year, 2019 has generally been a stellar year for farmers on the commodity price front.
At the start of the year, it was a stretch to imagine lamb prices topping the record highs of spring 2018. But top them they did! In fact, spurred on by African Swine Fever, lamb prices hit as high as $9.00/kg this year. Beef prices weren’t far behind as they also surpassed the previous record highs.
Meanwhile, 2019 has been another banner year for fruit exports. After cracking $3 billion in exports for the first time over 2018, fruit exports are set for another leg up to around $3.4 billion over 2019. The kiwifruit sector or more precisely gold kiwifruit exports have been doing much of the fruit industry’s heavy lifting.
On the whole, 2019 has been a good year for the milk price. While the 2018/19 season delivered a modest $6.35/kg milk price, the second half of 2019 saw the milk price hit the ground running. Indeed, we end the year with a bullish $7.50/kg forecast for 2019/20 in place.
Turning to financial markets, 2019 has seen interest rates tumble to record lows. However, while we expect benchmark rates to remain very low, we may be past the absolute lows in lending or customer rates.
The NZ dollar has also been a ‘star’ over 2019. As seen in the chart below, the relatively weak NZ dollar has helped boost farmgate prices in NZD terms.
GlobalDairyTrade Auction: Bung note in otherwise good symphony
18 Dec 2019
- Dairy auction prices dipped by more than expected overnight.
- However, dairy prices have generally performed strongly over the first half of the 2019/20 season.
- We remain positive on the dairy outlook and maintain our 2019/20 milk price forecast at $7.50/kg.
Regional Economic Scoreboard Q3 2019: Regions have a stable quarter on the scoreboard
16 Dec 2019
- The scoreboard remained fairly stable this quarter, with three regions holding their table position and a further six moving less than three places.
- Gisborne held onto its reign at the top of the leaderboard.
- Hawke’s Bay climbed back into medal position, taking out silver while Auckland jumped seven places to third equal after a bounce in consumer confidence.
Commodities Weekly: NZ dollar ending year on a high
13 Dec 2019
- The NZ dollar is ending 2019 on a high.
- The NZ dollar strength has followed the green shoots that have begun to appear in both the local and global economies.
- Meanwhile, the ASB Commodity Price Index rose modestly in USD terms (+0.7%) last week.
Commodities Weekly: Fonterra joins the milk price party
05 Dec 2019
- Fonterra has lifted its 2019/20 milk price forecast range to $7.00-$7.60/kg, from $6.55-$7.55/kg previously.
- Even with the lift, we still see upside to Fonterra’s milk price forecast and, to a lesser degree, to our own $7.50/kg forecast.
- Meanwhile, the ASB NZ Commodity Price Index lifted a touch in USD terms last week.
GlobalDairyTrade Auction: Catching breath
04 Dec 2019
- After a good run, overall dairy auction prices dipped a touch overnight.
- However, we anticipate that prices will lift again over coming months.
- With this in mind, we reconfirm our 2019/20 milk price forecast at $7.50/kg.
Commodities Weekly: Farm expense inflation has bottomed – may now lift
29 Nov 2019
- Farm expense inflation has bottomed, and may now lift.
- Notably, feed prices are set to rise on the back of strong farm incomes and thus increased feed demand.
- Meanwhile, the ASB NZ Commodity Price Index set a fresh record high in NZD terms last week.
Commodities Weekly: Spring production slide
22 Nov 2019
- NZ dairy production growth continues to slow.
- Although notably, the slower production has led us to revise our milk price forecast higher.
- Meanwhile, the ASB NZ Commodity Price Index rose in USD terms last week.
GlobalDairyTrade Auction: The high plateau
20 Nov 2019
- We bump up our 19/20 milk price forecast by 50 cents to $7.50/kg.
- We also set our initial 20/21 forecast at a bullish $7.50/kg, and we have lifted our long-run forecast range to $6.50/kg to $7.50/kg.
- Almost as importantly, we now believe that milk price volatility has fallen structurally.
Commodities Weekly - Rewriting the record books
15 Nov 2019
- The ASB Commodity Price Index hit a record high in NZD terms last week
- Lamb, beef and seafood prices have been leading the way.
- Looking ahead, we expect NZ commodity prices to continue to push higher over the remainder of 2019 and early 2020.
Commodities Weekly: Lamb prices - double delight
08 Nov 2019
- Lamb prices have set fresh record highs this spring.
- And the outlook is for prices to remain healthy out as far as the 2020/21 season.
- Meanwhile, the ASB Commodity Price Index posted a 0.9% gain in USD terms last week.
GlobalDairyTrade Auction: Mediocre spring may drive milk price forecast higher
06 Nov 2019
- Overall dairy auction prices firmed a touch overnight.
- NZ production growth is slowing, boosting global dairy prices.
- Indeed, we see some potential to revise our already bullish 2019/20 milk price forecast higher, if auction prices climb further over coming auctions.
Commodities Weekly: Kiwifruit export values take a September breather
01 Nov 2019
- After bumper months over July and August, kiwifruit export values slowed over September.
- Overall September export prices were 2.2% lower than in September 2018.
- A weaker NZ dollar helped the ASB Commodity Price Index modestly edge higher last week in NZD terms.
Commodities Weekly: Slip slidin’ away
25 Oct 2019
- After a solid start, dairy production growth is slowing.
- From here, we expect milk production to slow further compared to last season.
- Meanwhile, the ASB Commodity Price Index lifted in USD terms last week.
Commodities Weekly: Diwali – the festival of lights
18 Oct 2019
- India is a small export market for NZ, accounting for just 1.2% of NZ’s total good exports by value.
- NZ exports an eclectic mix of goods to India, with forestry the largest export category.
- Meanwhile, the ASB Commodity Price Index rose in all denominations last week.
GlobalDairyTrade Auction: Nearing the nitty gritty
16 Oct 2019
- Overall dairy auction prices firmed a touch overnight.
- We wait for NZ spring production data to provide further direction for global dairy prices.
- We suspect that spring production growth may underwhelm global dairy markets, putting upward pressure on prices over the remainder of 2019.
Commodities Weekly: NZD looking comfortable in a lower range
09 Oct 2019
- At the time of writing NZD/USD has ground its way back above 0.6300, but last week it was near 0.6200, the lowest level in over four years.
- On a trade weighted (TWI) basis, the NZD is down circa 5% on its average level over the past 5 years, and around 15% off the peak recorded back in 2015.
- Meanwhile, the ASB Commodity Price Index rose in all denominations last week.
Rural Loan Report: October 2019
07 Oct 2019
- The Reserve Bank cut the Official Cash Rate to a record low in August.
- We expect two more 25bp cuts in November and February 2020, taking the OCR to a record low 0.50%.
- With that in mind, interest rates are likely to remain lower for longer.
Commodities Weekly: Kiwifruit export values continue hot pace
03 Oct 2019
- Kiwifruit export values have continued their hot pace over August.
- Indeed, we ancticipate that another record export season is on the cards.
- Meanwhile, the ASB NZ Commodity Price Index dipped modestly last week.
GlobalDairyTrade Auction: Dairy rolls with the punches
02 Oct 2019
- Dairy auction prices were largely unchanged as expected overnight.
- Global dairy prices remain relatively resilient in the wake of the increasingly shambolic geo-political backdrop and slowing global growth.
- The result overnight reaffirms our 2019/20 milk price forecast of $7.00/kg while we wait for NZ spring production data to provide further direction for global dairy prices.
Farmshed Economics: Records tumble in all directions
01 Oct 2019
- Records have tumbled in all directions over the last three months.
- That is, the rural and financial sectors have set record highs in the case of lamb prices and record lows in the case of interest rates.
- Records have tumbled in the wrong direction too, with Fonterra posting a 2018/19 record loss.
Commodities Weekly: Dairy production off to solid start
27 Sep 2019
- Dairy production has made a solid start to the 2019/20 season.
- Indeed, a kind winter has helped production start strong but from here, we expect milk production to slow compared to last season.
- Meanwhile, a softer NZ dollar helped the ASB Commodity Price Index lift higher in NZD terms last week.
2018/19 Fonterra Annual Results: The wrong records tumble
26 Sep 2019
- Fonterra has posted a record loss for a second successive year.
- Despite the earnings result being largely as expected, we find very little to be rosy about.
- On paper, Fonterra has a new simplified and sensible strategy, but we remain healthily sceptical given the string of poor results.
Commodities Weekly: Forestry price falls contained for now
20 Sep 2019
- After taking a tumble in recent months, forestry prices have stabilised at least for now.
- A swift fall in local harvest has helped limit the decline in prices.
- Meanwhile, a softer NZ dollar helped the ASB Commodity Price Index rise modestly higher in NZD terms last week.
GlobalDairyTrade Auction: Dairy calm in the global storm
18 Sep 2019
- Dairy auction prices posted modest price gains overnight.
- Notably, global dairy markets remain healthy despite slowing global growth and the US-China trade war.
- The result overnight reaffirms our 2019/20 milk price forecast of $7.00/kg.
ASB Regional Economic Scoreboard - June 2019 Quarter
09 Sep 2019
- Gisborne has leapfrogged the sunny Hawke’s Bay to take out top spot this quarter.
- Wellington takes out the silver medal, climbing two spots to second.
- Northland reverses its fortunes, climbing 10 spots to claim the bronze medal.
- The Bay of Plenty and Manawatu-Whanganui dipped seven places each to 15^th and 9^th place respectively.
- The West Coast remains stubbornly at the bottom of the scoreboard.
GlobalDairyTrade Auction: Steady prices, higher volumes
04 Sep 2019
- Whole milk powder prices were down marginally, as expected, with overall dairy prices roughly flat.
- Meanwhile, auction volumes are lifting as spring production looms.
- We maintain our 2019/20 milk price forecast of $7.00/kg.
Commodities Weekly: Lamb prices - double eight
30 Aug 2019
- Lamb prices have cracked the $8/kg mark for the second successive year.
- And at this juncture, we think that there is a 50/50 chance that lamb prices set fresh record highs over spring.
- Meanwhile, the ASB NZ Commodity Price Index was largely unchanged last week.
Commodities Weekly: Farm expense inflation softening
23 Aug 2019
- Farm expense inflation is softening.
- Notably, feed price inflation has slowed over 2019.
- Meanwhile, a softer NZD/USD pushed the ASB Commodity Price Index 0.5% higher in NZD terms last week.
GlobalDairyTrade Auction: WMP and cheddar prices up, others ease overnight
21 Aug 2019
- Whole milk powder prices rose 2.1% at the latest GDT event overnight, with an average price of $3,100.
- Cheddar prices also lifted 0.8%, to be up 12% on year-ago levels.
- All up, we maintain our 2019/20 milk price forecast of $7.00/kg.
Commodities Weekly: Beefing up
16 Aug 2019
- Beef prices are climbing fast and may set record highs in some cases this spring.
- The Chinese market is dominating demand for NZ beef exports, with African Swine Fever and the US-China trade war contributing to strong Chinese demand.
- Meanwhile, the ASB Commodity Price Index fell across the board last week.
Commodities Weekly: Trade war! What is it good for?
09 Aug 2019
- The trade tensions between the US and China have escalated to a full-blown trade war over the last two weeks.
- However, NZ food exports are relatively well-placed to weather any trade storm.
- In fact, NZ food export prices may actually rise on the back of the trade war escalation.
GlobalDairyTrade Auction: Watching brief
07 Aug 2019
- Dairy prices dipped as expected overnight.
- With the price fall coming against the backdrop of an escalating US-China trade war.
- All up though, the price fallout from the trade war escalation was relatively modest. Nonetheless, we keep a watching brief for further downward price pressure.
GlobalDairyTrade Auction: Comfort food
03 Aug 2019
- The NZ dairy (and the broader food) sector is better placed than many others to manage the considerable fallout from COVID-19.
- While we retain our relatively positive outlook for the NZ dairy sector, we have nonetheless adjusted our 19/20 milk price forecast down to $7.30/kg.
- Meanwhile, Fonterra is reporting early signs of turning its performance around.
Commodities Weekly: Kiwifruit export values take a June breather
02 Aug 2019
- After a red hot start to the season, kiwifruit export values slowed over June.
- That said, we still anticipate total export values will reach a record of around $2.25bn by season end.
- Meanwhile, the ASB Commodity Price Index was mixed last week.
Commodities Weekly: Timberrrrr
25 Jul 2019
- Forestry prices have tumbled, ending a record-breaking run.
- Looking ahead, we anticipate prices will stay near these new lows at least over the remainder of 2019, if not well into 2020.
- Meanwhile, the ASB Commodity Price Index fell last week.
Commodities Weekly: Beef prices - the only way is up
23 Jul 2019
- Beef prices are poised to surge over the remainder of 2019.
- As African Swine Fever has ripped through the Chinese pork industry, and Chinese demand for other proteins lifts to fill the gap.
- Meanwhile, the ASB Commodity Price Index fell across the board in the week ending 5 July.
Commodities Weekly: Government and farmers reach emissions consensus
19 Jul 2019
- The Government and farmers have reached agreement on farm-level Greenhouse gas emissions pricing.
- Our early take is that achieving the Government’s net zero carbon target by 2050 will come with costs and a subsequent lift in commodity prices.
- Meanwhile, the Commodity Price Index was mixed last week.
Rural Economic Note: Breaking a weak run
17 Jul 2019
- Dairy prices posted healthy gains overnight.
- The positive result broke a weak run of recent auction results.
- All up, the auction result is consistent with our $7.00/kg milk price forecast for 2019/20.
International Agri Insights: “To meat or not to meat”
11 Jul 2019
- There’s been a major new initiative for meat alternative products by US based Tyson’s Foods, one of the world’s largest food companies.
- US fast food chains have begun selling protein-based burgers in addition to traditional hamburgers and potential exists for considerable growth in meat alternatives at the expense of traditional meat products.
- However, meat alternatives are a very new product, thus the consumer and meat industry response is very uncertain.
Commodities Weekly: A season of two halves
05 Jul 2019
- The overall lift in 2018/19 season dairy production masked a season of two halves.
- Looking to 2019/20, we expect flat production growth.
- Meanwhile, a stronger NZD/USD led to a fall in the ASB Commodity Price Index in NZD terms last week.
GlobalDairyTrade Auction: Treading water
03 Jul 2019
- Dairy prices largely trod water overnight.
- Milk fat prices continued their recent weak run, while key WMP prices were unchanged.
- All up, the auction result is consistent with our $7.00/kg milk price forecast for 2019/20.
Commodities Weekly: Gold kiwifruit crop overtakes green
28 Jun 2019
- The gold kiwifruit crop overtakes green for the first time.
- Also, both gold and green prices have started the export season strongly.
- Meanwhile, the ASB Commodity Price Index was a mixed bag in the week ending 21 June.
Farmshed Economics: When pigs can't fly
28 Jun 2019
- The outbreak of African Swine Fever is leading to a boost in beef and lamb prices.
- The gold kiwifruit crop has passed the green crop for the first time on record.
- Meanwhile, the steady downward march of farmers’ borrowing rates over recent years may be coming to an end.
Commodities Weekly: Lamb prices - $8/kg on the cards again this spring
25 Jun 2019
- Lamb prices are on the move again.
- With prices set to crack $8/kg again this spring.
- Meanwhile, a weaker NZD led the ASB Commodity higher in NZD terms last week.
GlobalDairyTrade Auction: Dairy prices ease, we stick with $7kgms forecast
25 Jun 2019
- Prices eased again at last night’s GDT auction, with the GDT price index down 3.8%.
- WMP prices eased again, by 4.3%, slightly more than expected.
- We retain our $7.00/kg milk price forecast for 2019/20.
Commodities Weekly: Mexican standoff
07 Jun 2019
- US President Donald Trump has said that his administration will impose tariffs on Mexico, beginning Monday 10 June.
- For NZ commodity exporters, the implications are limited at this stage
- Meanwhile, the ASB Commodity Price Index rose 0.3% in NZD terms last week, boosted by a weaker NZD/USD.
GlobalDairyTrade Auction: Cheesy dip
05 Jun 2019
- Last night’s GDT auction saw a sharp correction in cheese and butter prices.
- WMP prices continued to consolidate, broadly in line with expectations.
- We retain our $7.00/kg milk price forecast for 2019/20.
Regional Economic Scoreboard Q1 2019: Winter may be coming but the North is heating up
04 Jun 2019
- The sunny Hawke’s Bay tops the Scoreboard for the second quarter in a row.
- The central North Island dominates with the Hawke’s Bay, Gisborne and Manawatu-Whanganui taking out the medals.
- Gisborne was this quarter’s fastest mover, jumping a massive 10 spots to third.
Commodities Weekly: Kiwifruit export season off to another fast start
31 May 2019
- The kiwifruit export season has gotten off to a flying start.
- The strong start bodes well for the rest of the season.
- Meanwhile, the ASB Commodity Price Index dipped 0.4% in NZD terms last week.
International Agri Insights: US-China trade tensions: thrust and counter-thrust
24 May 2019
- The US Congress has not yet formally ratified the US Mexico Canada Agreement – the replacement for the North American Free Trade Agreement – and its ratification faces potentially significant Congressional opposition.
- The EU and the US are attempting to reach an agreement to begin negotiations on a broad range of trade issues, with the EU insisting agriculture will not be part of the negotiations and the US insisting it must be included.
- President Trump is currently negotiating directly with the Prime Minister of Japan on tariff reductions on US agriculture, but no final outcome is yet in place.
Commodities Weekly: Two steps back, one forecast forward
23 May 2019
- Fonterra has effectively cut its 2018/19 milk price forecast by 10 cents.
- At the same time, Fonterra’s business performance continues to disappoint, with a cut to its 2018/19 earnings forecast also announced.
- Looking ahead, Fonterra has set its 2019/20 season opening forecast at a relatively healthy level.
Fonterra Milk Price Forecast Update Preview & GlobalDairyTrade Auction: Starting on the front foot
22 May 2019
- Tomorrow we expect Fonterra to lift its 18/19 milk price towards the upper end of its current $6.30 to $6.60/kg range.
- In addition, we expect Fonterra to set its opening 19/20 forecast at or around $7.00/kg.
- Meanwhile, overall dairy prices fell modestly overnight, breaking a run of 11 consecutive rises.
Commodities Weekly: Farm expense inflation cools, but temporarily so
17 May 2019
- Farm expense inflation has cooled a little lately.
- However, we anticipate that feed cost inflation, in partiuclar, may fire again later in the year.
- Meanwhile, the ASB Commodity Price Index fell in USD terms last week.
Rural Loan Report: May 2019
17 May 2019
- Benchmark interest rates have touched record lows.
- The Reserve Bank cut the Official Cash Rate this month, and may cut once more this year.
- While benchmark interest rates could track lower this year, we flag the risk that rates rise in the longer term.
Commodities Weekly: Trump tightens trade screws
10 May 2019
- Last weekend, President Trump put back a 25% tariff on $200bn worth of Chinese goods on the negotiating table.
- But late this week, he backtracked insisting a trade deal “could still be reached.”
- Meanwhile, the ASB Commodity Price Index was largely flat last week.
GlobalDairyTrade Auction: Holding pattern
08 May 2019
- Dairy auction prices consolidated further overnight.
- The recent slide in NZ production now looks to be fully-priced in by markets.
- All up, we maintain our bullish milk price forecast outlook.
Commodities Weekly: March dairy production not as solid
01 May 2019
- Hot weather has led to a marked drop in dairy production.
- With strong growth in previous months, we are still on track for a good season – though a weaker one than previously expected.
- Meanwhile, the ASB Commodity Price Index lifted modestly in NZD terms over the week.
Capital Gains: Government's tax-tical retreat
24 Apr 2019
- The government's surprise decision not to implement a capital gains tax is likely to boost confidence in the agri-sector.
- The decision may also lead to an uplift in investment activity in the sector, whilst supporting rural land prices.
- Meanwhile, the ASB Commodity Price Index rose 0.9% in NZD terms, and fell 0.2% in USD terms.
Commodities Weekly: Beef and lamb in China - Better ungulate than never
17 Apr 2019
- After long trailing demand for pork, Chinese demand for beef and lamb is rising, and that should continue thanks to African Swine Fever.
- For Kiwi sheep and beef farmers, higher Chinese demand will mean prices are well supported moving forward.
- Meanwhile, the ASB Commodity Price Index was stable, up 0.4% in USD terms and unchanged in NZD terms.
GlobalDairyTrade Auction: Butter up
17 Apr 2019
- Butter prices have skyrocketed this year.
- This price lift reflects the sudden slowdown in NZ production and robust demand.
- The very tight butter (milk fat) market suggests upside to our $7.00/kg milk price forecasts for 2019/20.
Commodities Weekly - M. bovis: Where there's a will, there's a Norway
12 Apr 2019
- MPI confirms ambitious plan for NZ to join Norway in becoming M. bovis-free.
- MPI’s confirmed plan may boost farmer confidence – at the margin.
- Meanwhile, the ASB NZ Commodity Price Index fell in USD terms last week.
International Agri Insights: The Year of the Pricey Pig
12 Apr 2019
- African Swine Fever (AFS) is likely to reduce China’s hog herd, resulting in a 5% drop in production.
- And while pork is China’s most consumed protein, there are indications Chinese consumers are moving from pork to other proteins – beef, sheep and chicken.
- China’s imports of pork, beef and chicken meat will increase to compensate for reduced pork production.
Rural Loan Report: April 2019
05 Apr 2019
- Benchmark interest rates have touched record lows over the past couple of weeks.
- However, for farmers, proposed increases to bank capital requirements may offset some of these falls.
- All up, we expect interest rates for rural borrowers to remain very low by historical standards over 2019.
GlobalDairyTrade Auction: Finishing strong
03 Apr 2019
- Overall dairy prices consolidate recent gains overnight.
- Beneath the relatively modest headlines, we note that butter, casein and cheese prices continued to surge.
- All up, the auction result reinforces our $6.60/kg and $7.00/kg milk price forecasts for 2018/19 and 2019/20, respectively.
Farmshed Economics: The goal posts might shift, but it's still footy
02 Apr 2019
In this edition of Farmshed Economics, we have added a Special Topic on the proposed capital gains tax, titled The goal posts might shift, but it’s still footy. In it, we outline our thoughts on the Tax Working Group’s proposal. Note though that we have kept our thoughts at a fairly high level as there’s a good chance that the proposal gets watered down. And let’s not forget, there’s also a chance we don’t see it all. That is, if the Government doesn’t get re-elected in 2020, a National-led government is likely to unwind the changes.
RBNZ prepares to stick its Orr in, sending NZD down
29 Mar 2019
Frustrated by soft growth, the RBNZ signals it is willing to cut the OCR.
The NZD/USD fell on the RBNZ annoucement.
The ASB Commoditiy Price Index lifted in USD and NZD terms.
International Agri Insights - Postcards from Paradise
22 Mar 2019
In this latest edition of International Agri Insights, our US-based expert, Prof. Bill Bailey, shares his notes from his recent drive from Auckland to Palmerston North.
- National dairy herd peaked in 2014 and is slowly declining.
- Though the average dairy herd size has increased 30% since 2005.
- Fewer beef, sheep and deer were seen during the drive than in 2005.
- More Pioneer maize and green John Deere farm equipment noted.
- Forestry land is transitioning to pasture.
GlobalDairyTrade Auction: Ending on a high and a dry
20 Mar 2019
- We lift our 2018/19 milk price forecast by 35 cents to $6.60/kg.
- As hot and dry NZ weather has put the squeeze on production and dairy prices too.
- We also see upside risk to our already-bullish 2019/20 milk price forecast of $7.00/kg.
GlobalDairyTrade Auction: Dairy prices march on
06 Mar 2019
- Dairy prices post the seventh consecutive price gain overnight.
- NZ production growth has peaked, while global demand is strong.
- These factors bode well for the farmgate milk price for this season and next.
Regional Economic Scoreboard Q4 2018: Sunny Hawke's Bay shines brightest in Q4
04 Mar 2019
- The sunny Hawke’s Bay tops this quarter’s Scoreboard.
- Otago grabs the silver medal, but it’s Dunedin leading the way for the region.
- Canterbury was this quarter’s fastest mover, jumping a massive 11 spots to 4th.
Rural Loan Report: February 2019
21 Feb 2019
- Benchmark interest rates touched record lows earlier this month.
- The Reserve Bank remains on hold, but has indicated that the Official Cash Rate needs to stay lower for longer.
- We expect benchmark interest rates to stay low this year, but we flag the risk that rates rise in the longer term.
GlobalDairyTrade Auction: Dairy price cycle emerging from hibernation
20 Feb 2019
- Conditions for a new dairy price cycle have begun to emerge.
- Global dairy supply is tightening, with little backstop in terms of stocks.
- As a result, we see upside to our 2018/19 milk price forecast of $6.25/kg and set our 2019/20 forecast at a bullish $7.00/kg.
GlobalDairyTrade Auction: Don't look a gift horse in the mouth
07 Feb 2019
- Dairy prices surprised by surging overnight.
- It appears dairy markets are factoring in the risk of drought disrupting NZ production.
- On the back of this result and earlier gains, we lift our 2018/19 milk price forecast by 25 cents to $6.25/kg.
International Agri Insights: Flying blind
01 Feb 2019
- Closure of US government offices has slowed implementation of new Farm Bill programs.
- The absence of USDA market information during the closure has made US dairy farmers’ spring production decisions more difficult.
- With this in mind, the US government shutdown has introduced downside risks to the US production outlook.
History never repeats
31 Jan 2019
- NZ commodity export incomes posted solid gains over 2018.
- Meat exports led the way, jumping by $814m to $7.4bn over 2018.
- However for 2019, we anticipate a more mixed story for export receipts.
Dairy production still on record-setting pace
23 Jan 2019
- So far, 2018/19 dairy production has been very strong.
- Moreover, we can reconfirm our 2018/19 season production growth forecast of 5%.
- Meanwhile, the ASB New Zealand Commodity Price Index posted solid gains last week.
Lamb prices running out of steam
18 Jan 2019
- The last 18 months or so have been stellar for lamb prices.
- But lamb prices, so far over 2019, are hinting that they are running out of steam.
- Meanwhile, the ASB New Zealand Commodity Price Index lifted in USD terms last week.
EU comes to the aid of the dairy party
16 Jan 2019
- Dairy prices have started 2019 positively.
- As the EU finally sells down its intervention stocks.
- This development has taken away some of the downside risks to our 2018/19 milk price forecast of $6.00/kg.
Commodities Weekly: Clouds gather for the Year of the Pig - 2019
10 Jan 2019
- Clouds are gathering for commodity prices over 2019.
- As economic growth in NZ’s major export market, China, slows.
- We expect this slowing to lead to more modest demand and thus easing NZ commodity prices.
Global Dairy Trade Auction: Fats grease the start to 2019
07 Jan 2019
Dairy prices up in first auction for 2019, making 3 rises in a row.
Prices rose for all key products, albeit in the lightest sales volumes since July.
NZ production is looking strong, which we expect will constrain prices in the near term
Farmshed Economics: 2018 - a year of two halves
21 Dec 2018
- 2018 has been a year of two halves for the rural economy.
- Indeed, the dairy sector has epitomised the year of two halves.
- Meanwhile, lamb prices have been 2018’s star performer.
International Agri Insights: It's milk Jim, but not as we know it
21 Dec 2018
- Major US agricultural giant partners with California dairy biotechnology company.
- Company’s technology will produce whey and casein without dairy cows.
- Current dairy industry could face significant challenges from laboratory-produced dairy products.
Commodities Weekly: 2018: a year of two halves
20 Dec 2018
- NZ commodity prices strengthened through the first half of 2018, but then gave back all the gains over the second half.
- Compared to long-run averages, however, 2018 commodity prices have fared well.
- Looking to 2019, we expect NZ commodity prices to soften a little as slowing global growth finally weighs on prices.
Regional Economic Scoreboard Q3 2018: Southland steps up to top spot
19 Dec 2018
- Waikato moo-ves northward, climbing 10 places and nabbing the silver medal.
- Auckland heads south slipping to sit in last spot alongside Canterbury.
- The weather’s warming but Northland and the Bay of Plenty cool off.
GlobalDairyTrade Auction: Ending 2018 on a positive note
19 Dec 2018
- Dairy prices end 2018 on a positive note.
- Despite the rise, dairy prices end 2018 weaker than where they started.
- Moreover, with the NZ production outlook still strong, dairy prices are likely to start 2019 soft.
Commodities Weekly: Wet start to summer
14 Dec 2018
- The NZ summer has started wet.
- For the dairy and meat sectors, the wet weather has proved a production boon.
- Meanwhile, rising dairy prices led the ASB Commodity Price Index a touch higher last week.
Commodities Weekly: US and China call trade war truce, but will it hold?
07 Dec 2018
- US and China have called trade war truce.
- But recent developments have clouded the agreement.
- Meanwhile, the ASB New Zealand Commodity Price Index fell in NZD terms last week.
Fonterra Milk Price Forecast Update: Top-heavy
06 Dec 2018
- As expected, Fonterra has trimmed its 2018/19 milk price forecast range to $6.00-6.30/kg from $6.25‑$6.50/kg.
- Fonterra cited stronger-than-expected global production as the key reason for the forecast drop.
- We see Fonterra’s forecast as a tad optimistic - our own forecast of sits at $6.00/kg or the bottom of Fonterra’s range.
GlobalDairyTrade Auction: Looking a gift horse in the mouth
05 Dec 2018
- Dairy prices snap the run of seven consecutive falls overnight.
- However, we suspect that currency movements explain most of the price gain.
- With that in mind and signs of further NZ production strength, we anticipate that dairy auction prices are more likely to stay soft than rise over the next few months.
Farmshed Economics: Mixed blessings
30 Nov 2018
- November has been a busy month for rural and financial market developments.
- Over the month, we trimmed our 2018/19 milk price forecast by 25 cents to $6.00/kg.
- Meanwhile, the lamb and kiwifruit sectors continue to charge ahead.
Commodities Weekly: Kiwifruit - rollin', rollin', rollin', rawhide
29 Nov 2018
- Kiwifruit export values continue to roll on.
- In particular, export volumes have surged over September and October.
- Meanwhile, falling dairy prices led the ASB Commodity Price Index down last week.
Commodities Weekly: October dairy production sets record high
23 Nov 2018
- October dairy production has set a new record high for any month.
- We have lifted our 2018/19 season production growth forecast from 4% to 5%.
- Meanwhile, the ASB Commodity Price Index fell 1.4% in NZD terms in the week ending 16 November.
GlobalDairyTrade Auction: Too much of a good thing
21 Nov 2018
- We trim our 2018/19 milk price forecast by 25 cents to $6.00/kg
- As record October NZ milk production drives dairy prices lower again.
- Indeed, the forecast revision proves you can have too much of a good thing.
Commodities Weekly: Lamb prices - from a boil to a simmer
16 Nov 2018
- Lamb prices have moved from a boil to a simmer.
- Despite recent falls, the 2018/19 season is shaping up as a healthy one overall for farmers.
- Meanwhile, The ASB Commodity Price Index fell 1.1% in NZD terms in the week ending 9 November.
International Agri Insights: US Mid-term results divide legislature
15 Nov 2018
- US elections result in divided legislature – Democratic House and Republican Senate.
- Gridlock is not expected as Congressional leaders assume the mantle of responsibility for their actions.
- A new Congress is expected to approve Trump’s trade agreement with Canada and Mexico while potential farm legislation changes could have positive impacts on NZ agriculture.
Commodities Weekly: Wool prices drifting lower
09 Nov 2018
- Wool prices set to drift lower over coming months.
- Although, mid-micron prices may fare better.
- Meanwhile, the ASB NZ Commodity Price Index dipped 1.9% in NZD terms last week.
GlobalDairyTrade Auction: Production building up a head of steam
07 Nov 2018
- Dairy prices were weak overnight.
- As strong NZ milk production continues to weigh on prices.
- In the short term, we anticipate further production strength and accompanying price weakness.
Commodities Weekly: Kiwifruit and horticulture - the fourth engine
02 Nov 2018
- Annual kiwifruit export values have cracked $2 billion for the first time.
- We now view the kiwifruit and broader horticulture sector as New Zealand’s fourth export engine.
- Meanwhile, the ASB Commodity Price Index fell in USD terms in the week ending 26 October.
Farmshed Economics: Trick or treat?
01 Nov 2018
- Strong dairy production is more of a trick than a treat for farmers.
- Although, lamb prices are still in treat territory.
- Meanwhile, the NZ dollar has not been spooked by the recent global sharemarket plunge.
Commodities Weekly: Dairy production set for new record high
26 Oct 2018
- The 2018/19 dairy production season has started with a hiss and a roar.
- Production is on track to set a new record high; we have doubled our 2018/19 production growth forecast from 2% to 4%.
- Meanwhile, the ASBCommodity Price Index lifted 1.3% in USD terms in the week ending 19^thOctober.
International Agri Insights: If at first you don't succeed, tri, tri again
23 Oct 2018
- US, Canada and Mexico have surprisingly reached agreement on tri-lateral trade talks.
- The agreement is similar to what Mexico and Canada accepted in the new Trans Pacific Partnership and puts a potential brake on increased trade with China for US, Mexico and Canada exporters.
- The agreement will have very limited impact in New Zealand agricultural exports.
GlobalDairyTrade Auction: Production giveth, production taketh away
17 Oct 2018
- We trim our 2018/19 milk price forecast by 25 cents to $6.25/kg.
- The revision stems from stronger than expected NZ production this season.
- Indeed, 2018/19 production is on track for a new record high.
Fonterra Milk Price Revision: Fonterra reduces 2018/19 milk price forecast
10 Oct 2018
- Fonterra shifts its 2018/19 milk price forecast to a $6.25-6.50/kg range from $6.75/kg.
- Strong global (and NZ) production cited as a reason for the forecast drop.
- Our 2018/19 milk price forecast of $6.50/kg continues to carry some downside risk.
Commodities Weekly: Forestry still sitting pretty
05 Oct 2018
- Forestry prices are still sitting pretty in NZD terms.
- And we expect prices will remain firm over the remainder of the year.
- Meanwhile, the ASB Commodity Price Index dipped in USD terms last week.
Farmshed Economics: Spring is in the air
04 Oct 2018
- With weather favourable, agricultural production has started the new season strongly.
- But additional production could put downward pressure on our milk price forecast.
- Meanwhile, current financial market conditions are supportive for the rural sector.
ASB Rural Economic Note: NZ production hits the ground running
03 Oct 2018
- Dairy prices posted a broad-based fall overnight.
- With recent price weakness reflecting strong NZ production.
- For now, we maintain our 2018/19 milk price forecast of $6.50/kg, but continue to note downside risks.
Commodities Weekly: Reserve Bank cautiously on hold
28 Sep 2018
- The Reserve Bank kept the OCR on hold this week.
- Current risks are skewed to an OCR cut.
- Meanwhile, the ASB Commodity Price Index fell in NZD terms last week
Commodities Weekly: US-China trade frictions ratchet up another notch
21 Sep 2018
- Trade frictions between the US and China have ratcheted up another notch.
- Although at this juncture, the repercussions for NZ commodity export prices are limited.
- Meanhwile, NZ commodities prices were largely unchanged last week.
GlobalDairyTrade Auction: NZD cushioning dairy drop
19 Sep 2018
- Dairy prices posted a broad-based fall overnight.
- Although, the fall was less than expected.
- All up, we maintain our 2018/19 milk price forecast of $6.50/kg, but note downside risks.
Regional Economic Scoreboard: June 2018 quarter
18 Sep 2018
- Otago is top dog this quarter, climbing three places to take out the top spot.
- Hawke’s Bay and Manawatu/Whanganui regions were big movers, both jumping 10 places.
- Horticulture continues to shine through, boosting Bay of Plenty, Hawke’s Bay and Gisborne.
Commodities Weekly: One final cut
14 Sep 2018
- Fonterra trims 17/18 milk price one final time;
- And also announced its first ever annual loss.
- Meanwhile, the ASB Commodity Price Index fell in USD terms last week.
Fonterra Annual Results 2017/18: Milk price, but still no cream
13 Sep 2018
- Fonterra has posted its first ever annual loss.
- While the Danone and Beingmate writedowns were large and grabbed headlines, the underlying business performance also deteriorated.
- Meanwhile, Fonterra reaffirmed its 2018/19 farmgate milk price forecast at $6.75/kg.
Farmshed Economics: Financial leg up
07 Sep 2018
- The weak NZ dollar is supporting rural sector incomes.
- Meanwhile, very low interest rates are helping keep a lid on costs.
- Turning to commodity markets, lamb prices continue to head for the sky, whereas August was not a month to remember for dairy farmers.
Commodities Weekly: Rising feed prices driving farm expense inflation
06 Sep 2018
- Rising feed prices are driving farm expense inflation.
- Looking over the year ahead, we expect input prices to continue rising at a similar pace.
- Meanwhile, the ASB Commodity Price Index fell 0.4% in USD terms in the week ending 31^st August.
GlobalDairyTrade Auction: Seasonal drift
05 Sep 2018
- Dairy prices drifted lower overnight as NZ production nears its seasonal peak.
- Overall prices are at their lowest since October 2016.
- All up, we maintain our 2018/19 milk price forecast of $6.50/kg, but note downside risks.
Commodities Weekly: Kiwifruit sector humming
31 Aug 2018
- The kiwifruit sector continues to hum, with Kiwifruit export prices particularly strong over July.
- Indeed, export receipts could crack $2 billion for the first time this season.
- Meanwhile, falling dairy prices led the ASB Commodity Price Index down last week.
Commodities Weekly: Beef prices - looks can be deceiving
22 Aug 2018
- On the surface, beefs price are healthy.
- However, by the end of the year, we anticipate that beef prices will feel the pressure of increased global supply.
- Meanwhile, the ASB Commodity Price Index rose 0.9% in USD terms in the week ending 17^th August.
GlobalDairyTrade Auction: Dairy auction fall trumps recent currency gains
22 Aug 2018
- Milk fat prices lead dairy prices lower overnight.
- Moreover, the overnight fall trumps the recent gains from the fall in the NZ dollar.
- All up, we maintain our 2018/19 milk price forecast of $6.50/kg, but note downside risks.
Commodities Weekly: NZD comes to the aid of the party
17 Aug 2018
- The weaker NZD is boosting NZ commodity prices in local terms
- For us, the fall in the NZD means we can now re‑confirm our 2018/19 milk price forecast at $6.50/kg.
- Meanwhile, the ASB Commodity Price Index rose 1.3% in NZD terms in the week ending 10^th August.
International Agri Insights: US fluid milk sales running dry
15 Aug 2018
- With the US dairy market often leading industry trends, there are lessons for the global dairy sector from steadily declining US fluid milk consumption.
- Without change, declining US demand for fluid milk may increase industry efforts to grow US exports of dairy products at the expense of other exporting countries and/or induce US farmers to reduce dairy production.
- However, new supply chain technology such as blockchain could help industry address consumer concerns and give US fluid milk a new lease on life.
Rural Loan Report: August 2018
14 Aug 2018
- Benchmark interest rates have declined to near record lows over recent months.
- The Reserve Bank is on hold, but indicating that the Official Cash Rate needs to stay lower for longer.
- All up, we expect benchmark interest rates to stay low this year, with some chance they may go lower.
Commodities Weekly: Fonterra - cut 1 of a 2 cut story
10 Aug 2018
- Fonterra has cut its 17/18 milk price forecast by 5 cents to $6.70/kg.
- We also expect Fonterra to cut its 18/19 forecast of $7.00/kg to near our $6.50/kg forecast later this month.
- Meanwhile, the ASB Commodity Price Index rose in NZD terms last week.
Farmshed Economics: Eight ways to Sunday
09 Aug 2018
- In this month’s edition of Farmshed Economics, we celebrate lamb prices cracking the $8.00/kg mark for the first time on record.
- Meanwhile, dairy auction prices have headed in the other direction and a Fonterra milk price forecast cut is on the cards.
- Looking at currency markets, the key move for farmers has been the NZD gaining ground against the Chinese yuan, given that China is our largest food export market.
GlobalDairyTrade Auction: New, lower, stake in the ground
08 Aug 2018
- The overnight dairy auction result was unremarkable, with overall prices unchanged.
- However, the result confirmed that key Chinese demand has shifted lower and taken prices with it.
- On the back of this price shift lower, we place our 2018/19 milk price forecast of $6.50/kg under review.
Commodities Weekly: Lamb prices crack $8/kg
03 Aug 2018
- Lamb prices crack $8.00/kg
- In fact, our data suggest that lamb prices now sit at their highest ever levels, eclipsing 2011 record highs.
- Meanwhile, the ASB Commodity Price Index lifted in the week ending 27th July.
Commodities Weekly: Distortions on top of distortions
27 Jul 2018
- In a further muddying of the US-China trade waters, President Trump has pledged this week to provide a $12bn aid package to US farmers impacted by Chinese tariffs.
- From an NZ point of view, we anticipate that the package will have a small-to-negligible negative impact on NZ beef and dairy exports.
- Meanwhile, the ASB Commodity Price Index fell in all denominations in the week ending 20^th July.
Commodities Weekly: 2018 grape harvest jumps on 2017
20 Jul 2018
- The 2018 grape harvest has jumped on the 2017 level.
- The larger harvest will support export volume and value growth this year but could put some downward pressure on prices.
- Meanwhile, the ASB Commodity Price Index rose 0.4% in NZD terms in the week ending 13^th July.
GlobalDairyTrade Auction: It could be worse
18 Jul 2018
- Overall dairy auction prices dipped modestly overnight.
- As dairy markets remain nervous around the US-China trade tensions.
- However, when you factor in currency movements the recent price moves could have been worse.
Commodities Weekly: Tariffs may be a small positive for NZ beef prices
11 Jul 2018
- For now, NZ could gain modestly from the recent lift in Chinese tariffs on US beef imports.
- Indeed, the tariffs could have a small positive impact on NZ beef export prices.
- Meanwhile, the ASB Commodity Price Index fell in all denominations in the week ending 6^th July.
Commodities Weekly: Lamb prices in rude health
06 Jul 2018
- For the fourth month in a row, lamb prices were the highest on record during a June month.
- Healthy lamb prices see the sector in a good position to weather potential storms.
- Meanwhile, the ASB Commodity Price Index rose 1.5% in NZD terms in the week ending 29^th June.
Farmshed Economics: Trade Tensions temperature rising
04 Jul 2018
- Global trade tensions have escalated further over June.
- For rural NZ, the escalation is becoming more real as China and the US have included agricultural products in their protectionist measures.
- The weaker NZD is providing some offset, however, there is an increasing risk that for some sectors that offset might not be enough.
GlobalDairyTrade Auction: Trade nerves
04 Jul 2018
- Dairy auction prices dipped to a six-month low overnight.
- The fall likely reflects nervousness around the potential for dairy market fallout from the US-China trade tensions.
- We stick to our positive dairy market view, but note the increasing potential for further dairy market fallout.
Commodities Weekly: Short-term gain, but long-term pain
28 Jun 2018
- Global trade tensions have risen further over the past few weeks.
- The escalation in trade tensions could lead to some short-term gain, but at the expense of long-term pain for NZ commodity prices.
- Meanwhile, the ASB Commodity Price Index dipped 0.6% in USD terms in the week ending 22^nd June
Commodities Weekly: Triple down
22 Jun 2018
- 2017/18 dairy production has ended down on the 2016/17 level and by our records, this is the first time that that has occurred.
- Looking at 2018/19, we have pencilled in a 2% increase in dairy production compared to the previous season.
- Meanwhile, the ASB Commodity Price Index dipped 1.3% in USD terms in the week ending 15^th June.
International Agri Insights: Trade war games
21 Jun 2018
- China imposes 25% tariffs on US agricultural imports, including dairy and beef.
- US beef exports are not particularly exposed to this move, but US dairy exports are.
- It follows that New Zealand and the EU stand to gain at the US’s expense.
GlobalDairyTrade Auction: Late season production rally
20 Jun 2018
- NZ 2017/18 production ends marginally down on 2016/17, helped by a late-season rally.
- The late-season rally and recent US dollar strength have taken some of heat out of dairy prices in USD terms.
- In particular, very supply-constrained global butter markets have welcomed the additional production.
Commodities Weekly: Bumper 2018 kiwifruit crop
12 Jun 2018
The 2018 kiwifruit crop looks like it’s going to be a bumper one.
On the back of higher total production and a firm overall price, we anticipate record-high industry revenues for the 2018 season.
Meanwhile, the ASB Commodity Price Index lifted in USD terms in the week ending 8^th June.
International Agri Insights: What if US-China trade turns bad?
12 Jun 2018
- The US is China’s leading export destination, while China ranks third as a destination for US exports.
- Both countries have proposed tariffs on imported products and discussions continue, both in public and in private, to address the existing trade conflicts.
- Although there is no clear indication of a peaceful resolution of the conflict, it appears the impact on New Zealand agriculture would be limited.
Farmshed Economics: Spanner in the works
08 Jun 2018
- Mycoplasma Bovis is proving a real spanner in the works for parts of the rural sector.
- However, with the phased eradication plan in place, farmers can turn their attention to how they adapt.
- Also putting Mycoplasma Bovis to one side, the rural outlook is strong.
Regional Economic Scoreboard: March 2018 quarter
07 Jun 2018
- Northland takes top spot on the ASB Regional Economic Scorecard.
- The Bay of Plenty was the big mover this quarter, up nine spots to third place.
- Meanwhile, drought dragged down the Taranaki and Manawatu-Whanganui regions this quarter.
Commodities Weekly: The path of least regret
06 Jun 2018
- Last week, the Government announced that it will continue with plans to eradicate Mycoplasma bovis.
- In the first instance, the decision gives some clarity to the agricultural sector.
- We expect beef prices to be largely unaffected by the decision, however it is likely to add to upward pressure to dairy prices over the next year.
GlobalDairyTrade Auction: Taking stock
06 Jun 2018
- Dairy prices were soft in the auction overnight.
- This price softness may reflect firm NZ production over April.
- However, we suspect the global butter shortage remains acute and that this price weakness will be short‑lived.
Commodities Weekly: Kiwifruit export season off to a flying start
30 May 2018
- Kiwifruit exports for April hit a record monthly high.
- The strong start bodes well for the rest of the season.
- Indeed, we anticipate that kiwifruit export values are likely to crack $2 billion for the first time this season.
Mycoplasma Bovis eradication - initial thoughts
28 May 2018
The NZ Government’s big decision around Mycoplasma Bovis was either to continue attempting to eradicate or move to managing the presence of the bacterium. The Government has chosen to continue to attempt to eradicate, noting that the current estimates of eradication costs are smaller than the estimated costs of managing the bacterium. No country has yet successfully eradicated the disease, but the Government doesn’t want to regret not trying. There is still the risk that a greater spread of the bacterium than assumed will switch the sums more in favour of managing the bacterium’s presence. Spring testing (results in December) will give further information on which to assess the probability of success of eradication.
The revenue impact on the dairy industry as a whole is not clear cut. The potential loss in dairy production could be partly or completely offset by higher dairy prices. For beef prices, the size of the cull needs to be put in context with the usual (high) cattle slaughter figure.
Commodities Weekly: EU free trade deal a step closer
24 May 2018
- A free trade deal between NZ and the EU is a step closer.
- From a NZ perspective, the announcement provides a modest counter to the rise in global protectionist rhetoric in recent years.
- Meanwhile, the ASB Commodity Price Index hit a seven-year high in NZD terms last week.
Fonterra 2018/19 Opening Season Farmgate Milk Price Forecast: Fonterra opens with bullish salvo
23 May 2018
- Fonterra has set its opening 2018/19 milk price forecast at a bullish $7.00/kg.
- This is higher than our forecast of $6.50/kg and an informal market expectation of $6.60/kg.
- Meanwhile, Fonterra’s 2017/18 milk price forecast has lifted 20 cents to $6.75/kg, but the dividend range has been cut 10 cents to 15-20 cents per share.
Rural Loan Report: May 2018
17 May 2018
- The new Reserve Bank Governor has clearly stated that the next move in the OCR could be “up or down”.
- Despite this message, credit market pressures have lifted short-term interest rates over recent months.
- All up, the outlook is for interest rates to remain low, although longer-term rates are likely to creep higher.
GlobalDairyTrade Auction: Double happy
16 May 2018
- Butter prices are spiking higher as the global butter shortage becomes acute.
- Meanwhile, the falling NZD/USD is giving dairy prices an additional boost in NZD terms.
- As a result, we see upside to both our 2017/18 and 2018/19 milk price forecasts.
Commodities Weekly: Mycoplasma bovis more likely to be "managed"
15 May 2018
- Yesterday MPI confirmed that a farm in Cambridge has tested positive for Mycoplasma bovis, the first confirmed case in the Waikato.
- Mycoplasma bovis is now more likely to become a “managed disease”, like it is in other major dairy exporters.
- Longer term, the disease has the potential to reduce NZ industry productivity via increased animal health costs and lower production of infected animals.
Commodities Weekly: Lamb prices - no news is good news
09 May 2018
- Lamb prices are at record highs for this time of the year.
- And we expect prices to remain strong through the remainder of 2018.
- Meanwhile, the lower NZD is continuing to boost commodity prices in NZD terms.
Farmshed Economics: Commonwealth Games Special
03 May 2018
- In this month’s edition of Farmshed Economics, we get into the spirit of the Commonwealth Games and hand out medals to the best performing sectors.
- In a dead-heat, lamb and forestry share the gold medal, while dairy grabs the silver.
- Beef picks up the bronze, and just out of the medals, but finishing fast, is the New Zealand dollar.
Commodities Weekly: NZD takes a tumble against the USD
02 May 2018
- The NZD has taken a tumble against the USD, reaching its lowest level this year.
- Notably, the drop owes more to USD strength than it does to NZD weakness.
- As a result, the lower NZD is boosting commodity prices in NZD terms.
GlobalDairyTrade Auction: It's all about the dollar
02 May 2018
- Headline dairy auction prices fell a touch overnight.
- However, the sharp move lower in the NZD has more than trumped the price fall.
- As a result, we continue to see upside to both our 2017/18 and 2018/19 milk price forecasts.
Commodities Weekly: Dairy production limping into season end
24 Apr 2018
- NZ dairy production is limping into season end.
- As a result, we have lowered our 2017/18 production growth forecast to -1%.
- With this in mind, we now expect higher dairy prices than we anticipated previously and have placed our milk price forecasts under review.
GlobalDairyTrade Auction: Butter price squeeze back on
18 Apr 2018
- The squeeze is back on butter prices.
- Butter prices are already ahead of where they were this time last season and the seasonal lull in NZ production is still to come.
- As a result, we anticipate that butter prices will set fresh record highs over coming months.
Commodities Weekly: China's Xi offers trade olive branch
17 Apr 2018
- US-China trade tensions eased late last week, following an encouraging speech from Chinese President Xi Jinping.
- Despite the positive signs, an agreement between the US and China remains some way off.
- Nonetheless, this development lowers the risk of NZ’s trade interests being caught in the cross fire of a potential of US-China trade war.
Commodities Weekly: Forestry – let the good times roll
10 Apr 2018
- Forestry prices have set fresh record highs in NZD terms.
- And, we expect the good times to roll on over at least the first half of 2018.
- Meanwhile, the ASB Commodity Price Index posted a 0.4% rise in USD terms in the week ending 6 April.
International Agri Insights: US-China trade tensions - The Art of the Deal
09 Apr 2018
- Looking through President Trump’s brinkmanship, I expect the most likely outcome of the US-China trade tensions is a negotiated settlement where both sides give a little and gain roughly the same in return.
- On this basis, the impact on both US and NZ agricultural trade, including with China, is likely to be small.
- However, until this settlement is reached there remains some limited potential for significant disruption to global agricultural trade.
Commodities Weekly: Tit for tat - the Empire strikes back
04 Apr 2018
- In a tit-for-tat move, China has imposed tariffs on US imports.
- So far though, these measures are relatively minor and have little or no impact on NZ commodity export prices.
- Meanwhile, NZ commodity prices drifted lower in the week ending 30 March.
GlobalDairyTrade Auction: Business as usual, for now
04 Apr 2018
- Dairy prices were a mixed bag overnight.
- Notably, there were no signs of dairy market panic from the US-China trade skirmish.
- For now, global dairy markets remain well-balanced with prices at a healthy level.
Farmshed Economics: March madness
29 Mar 2018
- March has been a very busy month for agricultural and financial market developments.
- Lamb prices have been the star over the month, while in the opposite camp, we have had mycoplasma bovis and Donald Trump.
- Meanwhile, Fonterra lifted its 2017/18 milk price to $6.55/kg, but at the same time announced a half-year loss.
Rural Loan Report: March 2018
28 Mar 2018
- The Reserve Bank has a new Governor, Adrian Orr.
- Despite the change in Governor, we expect the Reserve Bank to keep the OCR unchanged until August 2019.
- However there is change afoot offshore, and as a result, long-term interest rates may drift higher over the year.
Commodities Weekly: Mycoplasma bovis update - MPI to cull 22,000 cattle
27 Mar 2018
- MPI has decided to cull all cattle on properties infected with Mycoplasma bovis.
- Importantly, the decision to cull now reflects MPI’s view that Mycoplasma bovis is not well-established in NZ.
- Meanwhile, the ASB Commodity Price Index was largely flat in the week ending 23 March.
Rural Economic Note: Fonterra milk price forecast update and interim results
21 Mar 2018
- Fonterra has lifted its 2017/18 milk price forecast by 15 cents to $6.55/kg.
- Given that it is late in the season, we align our own forecast with Fonterra at $6.55/kg.
- However, Fonterra’s half-year profits have taken a hit and the value of its Beingmate investment has been cut by a whopping $405m.
Commodities Weekly: Baby steps
20 Mar 2018
- NZ dairy production remained weak last month.
- On this basis, we expect dairy prices to remain firm and we maintain our slightly bullish milk price view.
- Meanwhile, the ASB Commodity Price Index posted a 0.5% fall in USD terms in the week ending 16 March.
Commodities Weekly: Lucky Seven
13 Mar 2018
- Lamb prices have set a record high for March, lifting above $7 per kg.
- Procurement pressures have driven the recent lamb price lift, while underlying demand is also strong.
- Meanwhile, the ASB Commodity Price Index rose a modest 0.3% in USD terms in the week ending 9 March.
Regional Economic Scoreboard: December 2017 quarter
08 Mar 2018
- South Island regions have swept the medals in this quarter’s Scoreboard.
- In addition, we suspect that Auckland’s halo-effect is acting in reverse.
- Meanwhile, Wellington and Canterbury are poised to climb the Scoreboard over 2018.
Commodities Weekly: Trump fires trade salvo
07 Mar 2018
- Late last week, US President Donald Trump announced that he planned to impose tariffs on steel and aluminium.
- If this goes ahead, retaliatory measures by other steel and aluminium exporters are likely to ensue, prompting the fear of a trade war between the likes of the US, the EU and China.
- Meanwhile, the ASB Commodity Price Index fell 0.5% in USD terms in the week ending 2 March.
GlobalDairyTrade Auction: As one storm cloud passes, another one gathers
07 Mar 2018
- In a quiet auction overnight, dairy prices were down a touch as expected.
- And for once, all was quiet on the weather front.
- However, another storm cloud is gathering in the form of Donald Trump.
Farmshed Economics: Wet 'n' wild
02 Mar 2018
- February has been wet and wild for many parts of the country.
- We have revised down our 2017/18 dairy production forecast to equal to last season, from +1% previously.
- Meanwhile, there is plenty of love to go around in the meat sector with February prices the highest ever on record for the month for both lamb and beef.
Commodities Weekly: Milk production turning around... slowly
27 Feb 2018
- We have revised our 2017/18 production forecast to equal with last season, from +1% previously.
- The revision follows weaker-than-anticipated January dairy production.
- Meanwhile, the ASB Commodity Price Index posted a 1.0% gain in NZD terms in the week ending 23 February.
GlobalDairyTrade Auction: You can't keep a good cow down
21 Feb 2018
- Dairy prices were largely unchanged overnight as expected.
- The result follows better NZ weather and an improved production outlook.
- All up, the result is consistent with our 2017/18 milk price forecast of $6.50/kg.
Commodities Weekly: Farm expense inflation is back
20 Feb 2018
- After a lull, farm input prices are rising again.
- We expect input prices to generally rise further over 2018.
- Meanwhile, the ASB Commodity Price Index posted a 1.6% gain in USD terms in the week ending 16 February.
Rural Loan Report: February 2018
15 Feb 2018
- Benchmark interest rates have mostly been steady over recent months, although 5-year rates have lifted a touch.
- Meanwhile, all rates remain low compared to their 10-year averages.
- From here, we expect more of the same: little change in short-term rates, but long-term rates may drift higher.
Commodities Weekly: RBNZ on hold, but leaves door ajar to cuts
12 Feb 2018
- The RBNZ was on hold last week, but left the door ajar to rate cuts.
- As a result, the NZD fell against the USD following the RBNZ announcement.
- Meanwhile, dairy prices led the ASB Commodity Price Index higher in the week ending 9 February.
International Agri Insights: EU intervention stocks cast shadow over dairy prices
09 Feb 2018
After the removal of quotas, European dairy production has grown a modest 1%.
However despite modest growth, European skim milk powder intervention stocks have grown to be (very) large.
As a result, the large stocks are likely to hamstring global dairy prices over 2018.
Commodities Weekly: Rinse and repeat
07 Feb 2018
- We expect another strong year for beef prices over 2018.
- The main risk to beef prices is a stronger NZD/USD.
- Meanwhile, the ASB Commodity Price Index posted a 0.5% gain in USD terms in the week ending 2 February.
GloablDairyTrade Auction: Weather's wild ride
07 Feb 2018
- Dairy prices lifted overnight, supported by the recent stall in NZ dairy production.
- The price strength reaffirms our 2017/18 milk price forecast of $6.50/kg.
- However, on the back of recent rain we expect that some of the auction price strength will prove temporary.
Farmshed Economics: 2018 - the year of the dog
01 Feb 2018
- Weather aside, 2018 has gotten underway with most rural sectors in good spirits.
- Beef and lamb prices have started 2018 where 2017 left off.
- Finally, the Kiwi dollar has made a flying start to 2018.
Commodities Weekly: 17/18 lamb season shaping up as one to remember
31 Jan 2018
- Lamb prices have remained very healthy so far in 2018.
- We expect lamb prices to remain over $6.00/kg for the remainder of the season.
- Meanwhile, the ASB Commodity Price Index lifted 0.6% in USD terms in the week ending 26 January.
Commodities Weekly: Kiwi dollar makes flying start in 2018 against USD
24 Jan 2018
- The NZ dollar has made a strong start to 2018 against the USD.
- We expect the NZD to remain firm over coming months and this may cap commodity price gains in NZD terms over the same period.
- Meanwhile, The ASB Commodity Price Index lifted in all denominations in the week ending 19 January.
GlobalDairyTrade Auction: Mixed blessings
17 Jan 2018
- Dairy prices lifted overnight, supported by the impact of dry weather and production forecast downgrades.
- The price strength reaffirms our 2017/18 milk price forecast of $6.50/kg.
- However, with the weather since improving, we expect that some of this price strength will prove temporary.
Commodities Weekly: Wet, dry and wild
16 Jan 2018
- 2017/18’s wild weather is continuing to throw up surprises for NZ agriculture.
- As a result, we have cut our nationwide 2017/18 dairy production growth forecast to 1%, from 3% previously.
- Meanwhile, the ASB Commodity Price Index fell in NZD terms in the week ending 12 January.
Farmshed Economics: 2017: surprises and comebacks
21 Dec 2017
- 2017 was a year of surprises, consistency, comebacks and consolidation.
- Lamb prices surprised by surging over the year, while beef prices were consistently strong.
- Meanwhile butter made a stunning comeback over 2017, helping the dairy sector consolidate its position with another positive year.
GlobalDairyTrade Auction: Everything has its limit
20 Dec 2017
- Dairy prices ended 2017 on a weak note.
- With price resistance to record high butter (milk fat) prices a likely culprit.
- From here, we expect lower butter prices to start attracting consumers back, stabilising prices as a result.
Commodities Weekly: 2017 - Sharing the love
19 Dec 2017
- 2017 has been a solid all-round year for commodity prices.
- Beef prices have been the 2017 star, closely followed by forestry prices.
- Meanwhile, the ASB Commodity Price Index fell in NZD terms in the week ending 15 December.
International Agri Insights: US Farm Bill - Its bark is worse than its bite
18 Dec 2017
- The Trump administration is now turning its attention to US farm legislation.
- We anticipate only minor adjustments in commodity programs and some modification of nutrition programs.
- As a result, and unlike some previous versions, we expect the impact of the 2018 Farm Bill on NZ agriculture to be small.
Commodities Weekly: Fonterra removes cream from milk price forecast
12 Dec 2017
Last week, Fonterra trimmed its 2017/18 milk price forecast by 35 cents to $6.40/kg largely as expected.
For our part, we stick with our slightly more optimistic forecast of $6.50/kg.
Meanwhile, the ASB Commodity Price Index fell in all denominations for the week ending 8 December.
Rural Economic Note: Two cuts, a hint and an emerging dry
07 Dec 2017
- Fonterra has cut its 2017/18 milk forecast by 35 cents to $6.40/kg.
- Fonterra has also cut its 2017/18 production forecast to flat on 2016/17, from a 1% lift previously.
- Meanwhile, we stick with our slightly more optimistic forecast of $6.50/kg.
Commodities Weekly: From big wet to big dry
06 Dec 2017
NZ summer has started hot and dry.
And drought risk to NZ agricultural production is increasing.
Meanwhile, NZ commodity prices fell in all denominations last week.
GlobalDairyTrade Auction: Trimming Fonterra's sails
06 Dec 2017
- Tomorrow, we expect Fonterra to revise down its 2017/18 milk price forecast from $6.75/kg.
- At this juncture, we expect a 2017/18 milk price of $6.50/kg, while the market consensus is around $6.30/kg.
- Meanwhile, dairy auction prices consolidated overnight.
Farmshed Economics: Lamb's moment in the sun
01 Dec 2017
- Lamb prices are enjoying a moment in the sun.
- Meanwhile, we trimmed our 2017/18 milk price forecast by 25 cents to $6.50/kg.
- At the same time, the NZD remains weak and continues to lift all sector boats.
Regional Economic Scoreboard: September 2017 Quarter
30 Nov 2017
- Retail a big driver of regional economic activity.
- Post-Lions blues affect major centres.
- Bay of Plenty is the region to watch heading into 2018.
Commodities Weekly: Forestry prices set fresh record highs
30 Nov 2017
- The weaker NZD has lifted forestry prices to a fresh record high.
- However, we expect forestry prices to ease over 2018.
- Meanwhile, NZ commodity prices were mostly unchanged in USD terms last week.
GlobalDairyTrade Auction: Turning on a dime
22 Nov 2017
- We trim our 2017/18 milk price forecast by 25 cents to $6.50/kg.
- As the weak run of dairy auction results extends to a fourth auction.
- And as NZ production rebounds from wet weather sooner than expected.
Commodities Weekly: Milk production rebounds following 'big wet'
20 Nov 2017
- NZ dairy production has rebounded over October.
- The improved production outlook is likely to cap any underlying improvement in dairy prices.
- Meanwhile, NZ commodity prices fell in USD terms last week
Commodities Weekly: Wool: past the bottom
15 Nov 2017
- The worst appears to be over for wool prices.
- Indeed, we expect prices to rise generally over the next six months or so.
- Meanwhile, NZ commodity prices dipped across the board last week.
Rural Loan Report: November 2017
14 Nov 2017
- Shorter-term benchmark interest rates have been steady over recent months, while longer-term rates have lifted a touch.
- All rates remain low compared to their 10-year averages.
- From here, we expect short-term rates to stay around current low levels, however longer-term interest rates are likely to drift higher.
Rural Economic Note: NZX WMP futures study
13 Nov 2017
- NZX's WMP futures market has continued to see growth in trading volumes.
- Trading volume in 2017 is due to double from 2015 levels.
- The WMP futures market is on course to becoming the benchmark derivative market for dairy in this region.
GlobalDairyTrade Auction: Dairy prices fall more than expected
08 Nov 2017
- Dairy prices eased more than expected overnight, with the GDT index down 3.5%.
- Prices were down for four of the eight products on offer. Whole Milk Powder prices were down 5.5%.
- The weakness is at odds with weak NZ spring production, and poses a downside risk to our Fonterra Milk Price Forecast
International Agri Insights: South American dairy: Is the threat real?
02 Nov 2017
- South American dairy production will likely grow over time.
- However, South American consumer demand is likely to absorb most of the production increase.
- As a result, South American dairy exports are unlikely to pose a serious threat to NZ dairy’s export fortunes.
Farmshed Economics: Weak NZD lifting all boats
01 Nov 2017
- The materially weaker NZ dollar since the election is lifting all agri sector boats.
- Dairy production has stalled.
- Meanwhile, we expect lamb prices to remain elevated this season
GlobalDairyTrade Auction: Red Herring
18 Oct 2017
- Dairy prices eased a touch overnight.
- With the fall coming despite materially weak NZ spring production.
- With that in mind, we downplay this auction result and maintain the view that prices rise by year end.
GlobalDairyTrade Auction: Prices ease off recent highs
04 Oct 2017
Dairy prices eased overnight, as very large volumes of product sold at the latest event.
Butter prices eased modestly off the record high set at the previous event.
We continue to see potential for a combination of recent wet NZ weather and surging global butter demand to support prices over coming months.
Farmshed Economics: What say you, Winston?
29 Sep 2017
- Fonterra made financial par over 2016/17.
- Meanwhile, the seasonal peak in lamb prices is nearing.
- And beef prices have been largely stable over September.
GlobalDairyTrade Auction: Recipe brewing for higher dairy prices
20 Sep 2017
Overall dairy prices lifted a touch overnight.
Butter prices set a fresh record high - the eighth record high this year.
Meanwhile, we see potential for a combination of wet NZ weather and surging global butter demand to lift prices over coming months.
International Agri Insights: NAFTA - Every which way but loose
19 Sep 2017
NAFTA negotiations are underway, and anything is possible at this juncture.
Regardless of the outcome, NZ dairy is an interested party and potentially could stand to gain.
However, failed NAFTA negotiations could lead to a broader slowdown in global trade liberalisation.
Rural Loan Report: September 2017
11 Sep 2017
- Benchmark interest rates have fallen over recent months and remain low compared to average.
- From here, we expect short-term rates to stay around current low levels.
- However, longer-term interest rates may still drift higher.
GlobalDairyTrade Auction: It's raining...again
06 Sep 2017
Overall dairy prices were largely unchanged overnight.
While whole milk powder (WMP) prices dipped unexpectedly, butter prices have neared a fresh record high.
Meanwhile, we see potential for a combination of wet NZ weather and surging global butter demand to lift prices over coming months.
Farmshed Economics: Farewelling a legend
30 Aug 2017
Butter prices took a breather over August, but the slowdown may be temporary.
Meanwhile, lamb prices have cracked the $7.00/kg mark.
Lastly, farm expenses remain in check, however, feed-related costs are set to rise.
Regional Scoreboard: June 2017 quarter
29 Aug 2017
Nelson makes it 3 quarters in a row atop the ASB/Main Report Regional Economic Scoreboard.
Neighbour, Tasman, has claimed 2nd place, climbing three spots.
Meanwhile, Otago was this quarter’s biggest mover, shooting up eight places to 4th.
GlobalDairyTrade Auction: Lack of direction may be deceiving
16 Aug 2017
Overall dairy prices were effectively unchanged overnight.
This result continues the recent holding pattern for WMP and overall prices.
However, we suspect milk fat prices may yet get a second wind and drag overall prices higher.
International Agri Insights: India - the next frontier
11 Aug 2017
After China, India is the next frontier for agricultural trade.
While opening its markets will take many years, India is starting to discuss liberalising trade.
Indeed with its population growing and getting richer, food exporters such as NZ and the US stand ready to gain.
Commodities Weekly: Spanner in the beef works
04 Aug 2017
Japan has moved to increase tariffs on beef imports.
This will hurt overall beef export prices as, of our major beef markets, Japan is the highest paying.
Meanwhile, commodity prices lifted a touch in USD terms last week.
Farmshed Economics: Bringing back an old favourite
03 Aug 2017
Surging butter demand is good news for the NZ dairy sector.
Meanwhile, the picture is similarly rosy for lamb prices.
However, there is a spanner in the works for beef prices.
GlobalDairyTrade Auction: Pit stop
03 Aug 2017
Overall dairy prices dipped at the auction overnight.
In particular, butter prices took a breather following their recent record-setting run.
However, we anticipate that butter prices may surge again over coming months.
International Agri Insights: US-China take two steps forward, Trump takes one step back
25 Jul 2017
Recent US-China trade agreements have the potential to significantly lift beef and dairy exports to China.
However despite the positive trade outcomes, President Trump is again criticizing Chinese foreign policy.
For NZ, this is likely to mean more competition from US dairy producers in the Chinese market, but the impact on beef exports may be blunted to a degree.
GlobalDairyTrade Auction: Butter butters better
19 Jul 2017
Overall dairy prices were largely unchanged overnight.
While WMP prices rose a touch, this was marginally less than expected.
Notably, butter prices set a fresh record high, surpassing US$6,000/MT for the first time.
GlobalDairyTrade Auction: Holding Pattern
05 Jul 2017
Overall dairy prices dipped a touch overnight.
Although WMP prices rose, beating expectations.
All up, we expect prices to remain in a holding pattern until at least until the spring.
Farmshed Economics: Lions Tour Special
04 Jul 2017
In addition to our standard fare, this month we bring you a Lions Tour Special. We’ve linked each section to some of our favourite All Blacks. Our regular readers will notice that we’ve also included a Lions Tour Fact or Fiction, which actually calls on some of the author’s family trivia. Also, Farmshed Economics wouldn’t be complete without a prediction. We expect 27-20 victory for the ABs.
GlobalDairyTrade Auction: A little bit of this and a little bit of that
21 Jun 2017
Overall dairy prices dipped a touch overnight.
With WMP prices weaker than expected.
Meanwhile, milk fat prices continue their charge, setting fresh record highs.
International Agri Insights: Trump cools his jets
09 Jun 2017
Trump moderates initial US protectionist trade positions.
However, an uneasy peace has emerged regarding the North American Free Trade Agreement.
Indeed, the recent US-Canada dairy and lumber trade spat highlighted that tensions remain.
GlobalDairyTrade Auction: Butter up
07 Jun 2017
Dairy prices lifted a touch overnight.
Although, whole milk powder prices fell as expected.
Meanwhile, butter prices set a fresh auction record high.
Farmshed Economics: Singing in the rain
02 Jun 2017
Dairy has its mojo back.
The sheep meat sector has a skip back in its step.
Beef prices are very healthy and remain on track to surpass $6.00/kg in the early spring.
Commodities Weekly: Beef markets abuzz on potential Indian slaughter ban
02 Jun 2017
World’s 2nd-largest beef exporter, India, may ban cattle slaughter
Other beef exporters, like NZ, stand to gain.
This development reinforces our expectation that NZ beef prices hit record highs in 2017.
Regional Economic Scoreboard: Nelson still atop
29 May 2017
Nelson continues its reign atop ASB/Main Report Regional Economic Scoreboard.
Northland claimed 2^nd place, jumping seven spots.
Meanwhile, Manawatu-Whanganui was this quarter’s biggest mover, shooting up nine places to 4^th.
Commodities Weekly: Fonterra bullish on season ahead
26 May 2017
Fonterra announced a bullish first cut at next season’s milk price of $6.50/kg milk solids
Beyond the opening forecast, we expect the milk price to end the season at $6.75/kg.
Meanwhile, NZ commodity prices rose across the board last week.
Rural Economic Note: Fonterra 2017/18 opening milk price forecast
24 May 2017
Fonterra has set its opening 2017/18 milk price forecast at $6.50/kg, close to our own $6.75/kg.
At this level, a clear majority of farmers are on track for a season in the black.
Meanwhile, Fonterra’s 2016/17 milk price forecast has also lifted 15 cents to $6.15/kg.
Rural Economic Note: Dairy's getting its mojo back
22 May 2017
We expect Fonterra to open the 2017/18 season next week with a milk price forecast of $6.00/kg or above.
By season-end, however, we expect the milk price to lift to $6.75/kg.
We also expect Fonterra to lift its 2016/17 forecast to $6.20/kg from $6.00/kg.
Prices lift at final auction of 16/17, eyes turn to the outlook for 17/18
17 May 2017
Dairy prices lifted at the latest GlobalDairyTrade Event overnight, with AMF and butter lifting the most.
The Whole Milk Powder lift contrasts with futures pricing, and provides a chance of a lift for this season’s $6 milk price.
Fonterra’s opening milk price forecast for the 2017/18 season is made next week, bringing a focus on the year ahead.
Lessons from the dairy downturn - Part II
11 May 2017
In contrast to the widely-held belief, NZ can do something about farmgate milk price volatility.
Indeed, how the NZ dairy sector adapts to price shocks is largely within its control.
With that in mind, we believe a shorter duration milk price system can make NZ supply more adaptive to market shocks, and in turn reduce price volatility.
Farmshed Economics: Six dollar trifecta
03 May 2017
Beef, lamb and dairy prices all look healthy.
It isn’t often that all three sector are healthy at the same time.
But there is a risk that a stronger NZD could erode price gains.
Overcooked
03 May 2017
Dairy prices lifted by more than expected overnight.
As dairy markets react further to the potential for recent wet weather to disrupt NZ supply.
However, we think this price lift has been overdone, and prices may give back some of these recent gains
Rural Economic Note: Wet Wet Wet
19 Apr 2017
Dairy prices have lifted in the wake of Cyclones Cook and Debbie.
The severe weather has stymied a strong end to the NZ production season and may lead to a slow start to next season.
As a result, we now see some upside to our 2016/17 milk price forecast of $6.00/kg.
GlobalDairyTrade Auction: Sideways
05 Apr 2017
Dairy prices lifted a touch overnight, largely as expected.
The better-than-expected NZ summer and autumn production is now largely priced in.
From here, we expect prices to largely track sideways, before drifting higher later in 2017.
Farmshed Economics: Shot in the arm
31 Mar 2017
On the back of a Brazilian meat scandal, we expect NZ beef prices to remain high over 2017.
In addition, lamb prices have kicked on following last month’s gains.
Meanwhile, we have revised down our 16/17 milk price forecast to $6.00/kg, but have retained our $6.75/kg forecast for 17/18.
Rural Economic Note: Life is like a box of chocolates
22 Mar 2017
Dairy prices firmed at the auction overnight, beating expectations.
Meanwhile, Fonterra’s half-year profit results were a touch softer than expectations.
On balance, the combined results see us retain our positive dairy sector outlook.
Regional Economic Scoreboard: Nelson claims top spot
13 Mar 2017
Nelson has moved one step higher to grab gold as NZ’s best-performing region.

Across the country, construction continues to be one of the biggest drivers of economic activity.

The Kaikoura earthquake has had an impact on Wellington and Marlborough.
Rural Economic Note: Dairy detour
08 Mar 2017
We revise our 2016/17 milk price forecast down by 50 cents to $6.00/kg.
The revision comes on the back of sliding dairy prices at the auction overnight.
However, while this puts a damper on this season’s milk price, our healthy outlook for 2017/18 remains in place.
Farmshed Economics: Bucking the trend
28 Feb 2017
It’s happy days for lamb and beef prices.
Dairy production has seen a partial recovery while the forestry sector is in a sweet spot.
Meanwhile, currency markets continue to hold their collective breath
Rural Economic Note: Singing in the rain
22 Feb 2017
Dairy prices fell overnight in line with expectations.
With better than expected NZ summer production driving the fall.
This result and the better production outlook adds downside risk to our 2016/17 milk price forecast of $6.50/kg.
Commodities Weekly: Lamb prices buck usual February trend
17 Feb 2017
Lamb prices have bucked their usual February trend.
It’s a similarly improving story for mutton.
Meanwhile, the ASB NZ Commodity Price Index softened in USD terms last week.
ASB Rural Loan Report February 2017
15 Feb 2017
All rates remain very low compared to average.
From here, we expect rates to largely track sideways over the next six months or so.
We see the greatest risk of rising rates at the longer end, with that risk later in the year rather than sooner.
Commodities Weekly: RBNZ on hold, NZD slides
10 Feb 2017
On Thursday, the Reserve Bank of New Zealand kept the OCR on hold at 1.75%.
The NZD slid on the central bank’s signal that rates would be on hold for the foreseeable future.
Meanwhile, the ASB NZ Commodity Price Index rose in USD terms last week.
Rural Economic Note: No news is good news
08 Feb 2017
Looking over recent months, dairy market fundamentals have not changed much. Supply remains tight, although NZ summer production so far has fared better than the very weak spring. Meanwhile, demand is firm, although risks remain in play. Dairy, like other markets, will continue to fret over the ‘Trump factor’ and the potential for protectionism impacting on dairy trade.
However at this juncture, no news is good news. For dairy markets ‘no news’ is likely to translate into one of those rare periods where prices hold steady at or near current levels. Of course given that this level is a relatively healthy one by historical standards, this is ‘good news’ for this year’s milk price.
As a result, we reconfirm our 2016/17 milk price forecast of $6.50/kg. Also, the current market dynamics bode well for a relatively strong start to the 2017/18 season. With that in mind, we note our 2017/18 forecast remains $6.75/kg.
Commodities Weekly: For now the Trump effect sees a weaker USD
03 Feb 2017
For now the 'Trump effect' sees a weaker USD.

The Trump presidency is likely to have a mixed impact on NZ’s agricultural trade prospects.

Meanwhile, the ASB NZ Commodity Price Index rose in USD terms last week.
International Agri Insights: The Trump factor
03 Feb 2017
The Trump Presidency will have an impact on NZ’s trade prospects in a variety of ways, both good and bad.
Broad US agricultural policy is not expected to change, but the TPP will not become law.
Meanwhile, Trump’s immigration policies could hurt US dairy production and competitiveness versus NZ.
Farmshed Economics: Crowing about 2017
02 Feb 2017
2017 is the year of the rooster, and figuratively speaking we expect that the rural sector will have its fair share to crow about this year. Indeed, we expect favourable NZ commodity prices over 2017 compared to 2016 and long-run averages. With that in mind, we expect dairy sector to lead from the front.
Rural Economic Note: Backfire
18 Jan 2017
Production flexibility is a good thing. When used well production can be switched to higher-priced products from lower-priced ones. On this basis, the milk price can be maximised.
But it is not a one-way bet. In particular, Fonterra must tread lightly when it comes to whole milk powder (WMP) – because it has pricing power.
In our view, recent moves to take advantage of higher WMP prices have come at a cost. The extra WMP offered has depressed the price significantly compared to what we anticipated it would be. And despite a higher weighting for higher-priced WMP, the overall result is likely to be a lower overall milk price.
All up, the recent weak auction results have introduced some slight downside risk to our 2016/17 milk price forecast. But for now, we stick with $6.50/kg.
Rural Economic Note: Lessons from the dairy downturn - Part I
01 Jan 2017
In this report, we reflect on the recent dairy downturn. For starters, our aim is to pull out some key lessons based on our observations during this latest dairy cycle. Later in the year, we would like to point out ways that the sector may adapt to or even influence the global dairy cycle. We suspect, for example, that NZ farmers aren't entirely hostage to the whims of global dairy markets. But that's for later, for now; here are the three key lessons we have learnt.
Farmshed Economics: Upsets, comebacks and lessons
23 Dec 2016
Looking at developments over December, we lifted our 2016/17 milk price forecast by 50 cents to $6.50/kg on 21 December. At the same time, we nudged our 2017/18 forecast higher by 25 cents to $6.75/kg. With that in mind, dairy farmers can take time out over Christmas and look forward to better times over 2017.
Turning to the meat sector, beef prices continue to hold at healthy levels. Looking at lamb markets, prices are taking baby steps towards improvement.
Also, we expect rural land prices to lift over 2017. Indeed, the recovering dairy sector is likely to see both a greater number of farm sales and lifting prices.
Lastly, interest rates are on the up, following US rates higher. All up though, interest rates are likely to remain low over 2017 and into 2018 compared to historical averages. Meanwhile, Donald Trump’s election victory has put a rocket under the US dollar. Since his election, the NZD has dived from around US$0.7380 to US$0.6920
2016: the year of comeback kids and underdogs
23 Dec 2016
For NZ commodities, 2016 has been the year of comebacks.
Accounting for much of the commodity price lift has been dairy or the ‘comeback kid’.
Meanwhile, the ASB NZ Commodity Price Index lifted 0.8% in NZD terms.
Rural Economic Note: Full circle
21 Dec 2016
We revise up our milk price forecasts for 2016/17 and 2017/18 to $6.50/kg and $6.75/kg, respectively.
In particular, we expect lingering global production weakness to support dairy prices well into 2017.
While the revisions are welcome fillip for dairy incomes, we remain wary of the “next” dairy cycle.
US Fed hikes; USD spikes
16 Dec 2016
The US Federal Reserve has hiked interest rates for only the second time in the last ten years.
In the wake of the hike, the US dollar has spiked.
Meanwhile, the ASB NZ Commodity Price Index gained in all denominations last week.
Spinning a yarn
09 Dec 2016
Wool prices have sunk over spring.
However from here, we expect prices to stabilise, if not lift.
Meanwhile, the ASB NZ Commodity Price Index was largely flat in USD terms last week.
Rural Economic Note: GlobalDairyTrade Auction
07 Dec 2016
Dairy prices further solidified their large gains overnight.
Weak NZ (and global) dairy production is pushing prices higher.
Meanwhile, we continue to see clear upside risk to our $6.00/kg milk price forecast.
Regional Economic Scoreboard: Otago now the nation’s top dog
02 Dec 2016
Otago has risen from sixth place last quarter to the top of the Regional Economic Scoreboard.
Meanwhile, RBNZ investor restrictions have slowed house sales nationally, with a particular effect on Auckland.
Lastly, construction has been the star performer for most regions.
Farmshed Economics: Trump, earthquakes and $6
02 Dec 2016
Donald Trump’s victory surprised financial markets.
Closer to home, and as we have long predicted it would, Fonterra lifted its 2016/17 milk price to $6.00/kg.
Meanwhile, there is some light at the end of the tunnel for lamb prices.
Light at the end of the lamb tunnel
02 Dec 2016
There is some light at the end of the tunnel for lamb prices.
With the Chinese market, in particular, showing signs of improving demand.
Meanwhile, the ASB NZ Commodity Price Index largely flat in USD terms last week.
Commodities Weekly: NZ dairy - a few less rules; more transparency
18 Nov 2016
- Last week, the NZ Government announced changes to the Dairy Industry Restructuring Act (DIRA) – the Act that regulates Fonterra’s domestic dominance of the NZ dairy market.
- From our viewpoint, the regulatory changes are roughly in line with what we expected.
- Meanwhile, the ASB Commodity Price Index slid 2.1% in NZD terms last week, largely on the back of a less favourable NZD/USD.
Commodities Weekly: Wool wearing the brunt of trade war
18 Nov 2016
- In contrast to NZ food exports, wool prices have been impacted by the US-China trade war.
- With no clear prospect of a trade agreement in sight, we anticipate that fine and medium wool prices will remain under pressure over 2019.
- Meanwhile, the ASB NZ Commodity Price Index was mixed last week.
Dairy butters up the NZ commodity price cycle
04 Nov 2016
We expect NZ commodity prices to rise above their long-run averages over the remainder of 2016 and 2017.
The surge at this week’s dairy auction cements dairy prices at a higher level.
Meanwhile, the ASB NZ Commodity slipped across all denominations this week.
Six dollars on track
02 Nov 2016
Dairy auction prices jumped overnight by more than expected.
With wet weather slamming the brakes on NZ dairy production.
This result reconfirms our $6.00/kg milk price forecast, and also adds some upside risk.
As one door closes, another opens
31 Oct 2016
US beef’s re-entry into China could put the squeeze on NZ beef exports.
At the same time, US consumers’ increasing shift to grass-fed beef presents an opportunity for NZ.
Whether NZ loses or gains from this could depend on traceability requirements at either end.
Farmshed Economics: Springs both ways
28 Oct 2016
Dairy sector production has been slammed by very wet weather.
Meat prices have been moving both ways, with beef prices firm and falling lamb prices.
Lastly, feed grain prices are starting to hint at a lift, going forward.
Beef's echo boom
28 Oct 2016
Beef prices haven’t moved much in recent months.
However, lack of supply both locally and from Australia is keeping NZ beef prices high.
Meanwhile, the ASB NZ Commodity Price Index edged up in USD terms last week.
Big wet cements NZ dairy production fall
21 Oct 2016
Wet weather in the North Island has slowed NZ milk production.
This compounds an already weak production outlook.
Meanwhile, the ASB NZ Commodity Price Index slipped in USD terms last week.
The big wet
19 Oct 2016
Dairy auction prices lifted overnight, albeit by less than expected.
Indeed, it appears markets need more convincing that wet weather is weakening production.
From here, we expect choppy prices over coming auctions, before prices lift again over the rest of the season.
Pound dives as Europe plays Brexit hardball
14 Oct 2016
The British Pound dived last week.
Putting lamb and wine exports at risk.
Lastly, the ASB NZ Commodity Price Index slipped in USD terms last week.
Lamb prices make a late run
07 Oct 2016
Lamb prices have made a late September run.
However, this lift may be temporary and prices are likely to stay subdued compared to previous years.
Meanwhile, the ASB NZ Commodity Price Index rose last week.
Farmshed Economics: Springing back into action
05 Oct 2016
The dairy sector sprang back into action this month.
Meanwhile the meat sector was busy too, with the green light for Silver Fern Farms deal highlighting the month.
Lastly, we view the sheepmeat sector as most vulnerable to a high NZD.
Time to reflect
05 Oct 2016
Dairy auction prices fell overnight largely in line with expectations.
As dairy markets take a breather and reflect on August and September’s price surge.
From here, we expect prices to track sideways, before lifting again later in the season.
Oil price speculation rippling through markets
30 Sep 2016
Oil price speculation is rippling through commodity markets.
Meanwhile, Westland Milk Products confirmed its payout at $3.87/kg for 2015/16; expects $4.55-4.95/kg for 2016/17.
Lastly, the ASB NZ Commodity Price Index slipped a touch last week.
Rural Economic Note: Making par
25 Sep 2016
- Fonterra delivered 2016/17 financial results towards the bottom of its guidance range.
- Indeed, the rising milk price over the season put the squeeze on its profits.
- Meanwhile, Fonterra reaffirmed its 2017/18 farmgate milk price forecast at $6.75/kg.
Fonterra surprises, RBNZ steady
23 Sep 2016
Fonterra surprises by lifting its milk price by 50 cents to $5.25/kg.
Meanwhile, the Reserve Bank held the OCR steady.
Lastly, the ASB NZ Commodity Price Index dipped in USD terms.
Turning around the milk tanker
22 Sep 2016
After a poor 2014/15, Fonterra has posted improved 2015/16 results.
And, signals further improvement over 2016/17.
For our part, we are cautiously optimistic on further financial improvements, while maintaining our confidence on a lifting milk price.
Welcome surprise
21 Sep 2016
Fonterra lifts its 2016/17 milk price forecast by 50 cents to $5.25/kg.
As dairy auction prices consolidated their recovery.
We expect prices to remain firm over the remainder of this season, leading to a final milk price of $6.00/kg.
Back to the future
20 Sep 2016
The US Department of Agriculture will buy cheese to support dairy prices using 80-year-old legislation.
This could indicate a return to more interventionist US agricultural policy.
Indeed, in a more protectionist world, NZ stands to lose.
Time to take a breath
07 Sep 2016
The first step in dairy’s price correction is complete.
As prices have now corrected higher on the back of a pullback in global supply.
From here we expect prices to consolidate, before prices lift again later in the season.
Farmshed Economics: Dairy back on track
31 Aug 2016
Dairy prices are back on track.
Meanwhile, meat prices are a mixed bag.
The Reserve Bank cut the Official Cash Rate as expected on 11 August.
Regional Economic Scoreboard: The Bay of Plenty’s hot streak continues
25 Aug 2016
The Bay of Plenty hot streak continues – five quarters in a row on top of the Scoreboard!
Booming house prices and record low interest rates are now translating into a construction boom across the country.
Nelson is the big mover this month, jumping 5 spots in the rankings to 4th.
Regional Economic Scoreboard: Two in a row for the Bay of Plenty
25 Aug 2016
The Bay of Plenty has retained its status as NZ's top-performing region in the latest ASB/Main Report Regional Economic Scoreboard.
Auckland sits in second place, where it has been for all but one quarter of 2015.
This quarter also highlight one of NZ's’s major economic driving forces: tourism, with Otago (Queenstown) performing very strongly.
US food labelling - a sea change
12 Aug 2016
In a first, the US now requires food labelling to indicate presence of GM ingredients.
With 80% of US food containing GM ingredients, this provides a wake-up call to US food producers.
The new US legislation opens the door for GM-free NZ products.
Farmshed Economics: Rio Olympics Gold - Kiwi gold
29 Jul 2016
The Kiwifruit industry has struck gold both literally and metaphorically.
In the Olympic theme, beef prices claim the silver medal.
Meanwhile, the Reserve Bank has signalled that is prepared to cut interest rates below 2%.
Farmshed Economics: Brexit - cutting off your nose to spite your face
05 Jul 2016
The UK vote to leave the EU – Brexit – shocked bookmakers and financial markets alike.
Meanwhile, the agricultural market reaction so far has been modest.
In terms of direct impact on agriculture, Brexit is most likely to impact lamb, wine and to a lesser degree fruit exports.
Brexit: the long and short of it
30 Jun 2016
In the short term, Brexit’s impact on NZ agriculture is limited, but longer term, it sets a dangerous precedent.
In particular, Brexit may signal the start of a backlash against global integration and free trade agreements.
For example, the ongoing progress of the TPP could be one potential casualty.
Farmshed Economics: Playing it safe
02 Jun 2016
Fonterra played it safe with its opening season milk price forecast of $4.25/kg on 26 May.
While we expect the Reserve Bank to cut the OCR on 9 June, there is a clear risk that they too may play it safe.
Meanwhile, meat prices have sprung back to life.
Regional Economic Scoreboard: The Bay of Plenty's still top dog
23 May 2016
For the fourth straight quarter, The Bay of Plenty continues its run as New Zealand’s top-performing region in the latest ASB/Main Report Regional Economic Scoreboard.
Auckland remains in second place, but is snapping at the Bay’s heels for top spot.
The Hawke’s Bay proved to be this quarter’s biggest mover on the Scoreboard, moving up a star rating to four stars.
Trans Pacific Partnership - A one-hit wonder?
20 May 2016
As in New Zealand, the TPP has seen growing US opposition over the past 10 months.
Indeed mirroring the US presidential elections, a Washington-agricultural heartland split is emerging. While I expect Congress to pass the TPP, a new US President may take US trade policy in a new direction.
As a consequence, for NZ over the coming years, these political developments have the potential to slow the progress of freeing up agricultural trade with the US and its neighbours.
ASB Rural Loan Report - May 2016
09 May 2016
All rates remain very low, despite the unchanged Official Cash Rate last month.
However, we expect the Reserve Bank will be pressed to cut rates over coming months.
In turn, we expect floating and short-term interest rates to fall, while long-term rates will at least stay low, if not fall.
US Beef Market - All good things come to an end
20 Apr 2016
The US beef herd, after shrinking to near a record low size, has started to get bigger again.
As the US herd grows over the next five years, beef prices will decline, exports increase and imports drop.
Lower prices should lead to higher US per capita beef consumption, particularly for more expensive cuts.
ASB Rural Loan Report - January 2016
14 Jan 2016
We expect floating and short-term rates to fall over 2016.
We base this expectation on our view that the Reserve Bank will cut the OCR by 50bp to 2% this year.
At this stage, we also expect medium and some longer-term rates to fall as well, but risks are that they don’t necessarily decline.
Regional Economic Scoreboard: Bay of Plenty top of the pops
25 Nov 2015
Bay of Plenty tops the scoreboard, knocking Auckland back into 2nd equal.
Northland gains a star to 4 stars, with the Auckland housing market “halo effect” in action.
Auckland and Canterbury retain 5 stars.
Q2 2015 Regional Economic Scoreboard
20 Aug 2015
Auckland remains New Zealand’s fastest-growing city in the Regional Economic Scoreboard.
Bay of Plenty was boosted to second place on the scoreboard with strong jobs growth and its strong housing market.
Waikato continues to beat the dairy blues with its move into third place on the scoreboard.
ASB Rural Loan Report – July 2015
10 Jul 2015
We expect the Reserve Bank to cut the OCR three times this year.
In this event, we expect floating and short-term rates to fall further.
At this stage, we also expect medium and some longer-term rates to fall as well, but risks are that they don’t necessarily decline.
ASB Rural Loan Report May 2015
29 May 2015
With inflation staying very low, we expect the Reserve Bank to cut the OCR later this year.
At this stage, we also expect longer-term rates to fall as well, but risks are that they don’t necessarily decline.
In general, we are in for lengthy period of low interest rates.
ASB Rural Loan Report February 2015
19 Feb 2015
We expect the Reserve Bank to be on hold for the foreseeable future.
Also at the moment, gaining some certainty by locking in a medium- or long-term rate is inexpensive. Meanwhile, rates could potentially head marginally lower this year before rising in 2016.
All up, we are in for lengthy period of low interest rates.

Contact us

All enquiries from the media should be directed to our economics team:

Nick Tuffley

ASB Chief Economist

Since starting out in 1997 as an economist, it's fair to say Nick has seen a few hair-raising moments over the years, including the Asian Financial Crisis and the Global Financial Crisis.

One of Nick's strengths is his ability to communicate complex ideas in a readily understandable and entertaining way. He thrives on helping people understand the economic environment to help enrich the quality of their business or personal life. He’s proud to lead a team that has won two Forecast Accuracy Awards from Consensus Economics, and has a strong track record with their Official Cash Rate and dairy price forecasts.

Nick grew up in Christchurch and graduated with a Master of Commerce degree from the University of Canterbury. He learned his economic ropes at the Reserve Bank of New Zealand before a long stint as a Senior Economist at Westpac, and joined ASB as Chief Economist in 2007.

Email: Nick

Mark Smith

Senior Economist

Mark joined ASB in 2017, with over 20 years of public and private sector experience working as an economist in New Zealand and the UK.

His resume includes lengthy stints at ANZ and the Reserve Bank of New Zealand, and he has also worked at the Bank of England, HM Treasury and the New Zealand Transport Agency. Mark's areas of specialisation include interest rate strategy, macro-economic analysis and urban economics.

Born and bred in the Waikato, Mark studied at Waikato University where he graduated with a Master of Social Sciences, majoring in Economics.

Mark's key strengths are the ability to use his extensive experience, inquisitive nature, analytical ability, creativity and pragmatism to dig a little deeper and to deliver common sense solutions to tackle complex problems.

When not at work Mark likes to travel, keep fit and spend time with his friends and family.

Email: Mark

Chris Tennent-Brown

ASB Wealth Senior Economist

Chris has worked as an economist for ASB and Commonwealth Bank of Australia in Sydney since 2005. His work has involved monitoring and forecasting trends in the New Zealand economy, with a focus on drawing implications for financial markets and investments. Chris is passionate about savings issues, and much of his current work is focussed on broadening peoples understanding of investments. Chris obtained a Bachelor of Commerce at Auckland University, majoring in Economics, and prior to joining ASB worked in the funds management industry for Bankers Trust and BT Funds Management. With over 20 years' experience in finance, Chris has also spent several years farming, and was a New Zealand representative cyclist. When not at work, Chris likes to travel, cycle, and spend time with his family and numerous pets.

Email: Chris

Kim Mundy

Senior Economist

Kim joined ASB in 2015 and has worked for both ASB and the Commonwealth Bank of Australia in Sydney over the last 8 years. Kim enjoys all facets of working as a bank economist, including economic forecasting as well as more in-depth macro-economic analysis. She has a particular expertise in foreign exchange strategy and a keen interest in sustainable economics. She also enjoys getting out and about to help people better understand the economic environment they are operating in.

Kim grew up in Northland before heading to Auckland University where she graduated with a BA/BCom (1st class honours) in Economics, Statistics and Politics. She also interned with the New Zealand Treasury while completing her studies before starting her career as an economic consultant.

Email: Kim

Yen Nguyen

Economist

Yen Nguyen joined ASB Bank in June 2024, bringing over 10 years of experience as a policy analyst in the Vietnamese government. Her expertise lies in macroeconomic and policy analysis, with a strong focus on economic strategy and regulatory frameworks.

Yen grew up in Hanoi, Vietnam and holds a Master’s Degree in International Studies from Korea University (Seoul) and a Ph.D. in Economics from the University of Auckland. Her current focus is on New Zealand’s housing market and regional development, delivering clear, practical insights to help New Zealanders understand market trends, and the economic factors influencing their communities.

Yen is passionate about applying her skills to address real-world economic challenges and supporting sustainable development.

Email: Yen

Wesley Tanuvasa

Economist

Wesley Tanuvasa joined ASB in February 2025.

He was previously in the Reserve Bank of New Zealand's forecasting team as a sector analyst for GDP and the labour market. He also worked in the prudential policy team, focusing on improving capital and solvency requirements for New Zealand banks.

Beyond the Reserve Bank, Wesley's experience includes roles in wealth management research and corporate advisory at Jarden and Astris Advisory Tokyo, as well as trade policy implementation at the New Zealand Ministry of Foreign Affairs and Trade.

Wesley holds a Master of Commerce, majoring in Finance and International Business from the Victoria University of Wellington. He is a current CFA I candidate.

Wesley's current focuses include analysis on economic growth and opportunities to bolster New Zealand's productivity.

Email: Wesley

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