Agribusiness

Terms of trade slips on lower dairy prices

export stock image

Falling global prices for milk powder and butter meant overall export prices dropped 1.7 percent in the December 2018 quarter, Stats NZ said.

Due to lower export prices, and rising import prices, the terms of trade fell 3.0 percent in the December 2018 quarter, the biggest fall since the September 2015 quarter.

Despite the latest fall, the terms of trade remained near the historic high in the December 2017 quarter.

The terms of trade measures the purchasing power of New Zealand’s exports abroad and is an indicator of the state of the overall economy. A fall in the terms of trade means the country can buy fewer imports for the same amount of exports.

Overall, dairy product export prices fell 5.7 percent in the December 2018 quarter. Prices for milk powder, a key export, fell 6.2 percent; butter prices also fell from their recent high levels. Dairy product volumes fell 1.3 percent, while values fell 6.8 percent.

“While the Global Dairy Trade price index has been increasing recently, there’s often a lag between an auction price and when that order is filled,” business prices delivery manager Sarah Johnson said.

“The export price fall in the December (2018) quarter likely reflects falling global dairy auction prices between June and November 2018.”

Import prices rose 1.4 percent in the December 2018 quarter, driven mainly by crude oil, diesel, and petrol prices; petroleum and petroleum product prices rose 7.5 percent overall.

“Petroleum product prices have increased for the last five quarters. Prices for crude oil, diesel, and petrol were all up in the December (2018) quarter – 10 percent, 4.5 percent, and 3.9 percent, respectively.”

Petroleum and petroleum product volumes fell 15 percent, while values fell 8.6 percent in the latest quarter.

Source: Stats NZ

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