Overall commodity prices are at record highs, with the war in Iran generating risks and rewards for New Zealand exporters.
By Nona Pelletier of RNZ
The ANZ World Commodity Price Index rose 4.1% in March over February (month on month) - an increase second only to the outbreak of the Russian-Ukraine three years ago.
All components of the index rose in March except horticulture, which was between seasons, with market prices unavailable until the new season's produce reached its destination.
A 2.8% drop in the value of the New Zealand dollar last month also supported export price growth, and helped drive the NZD Commodity Price Index up 6.4% month on month to a record high.
Global dairy prices rose 5.9% month on month as importers increased purchases to secure supply.
ANZ agriculture economist Matt Dilly said global dairy prices were rising even before the current Middle East conflict started, with current events pushing prices even higher.
"Importers have increased purchases in response to concerns about supply chain disruption. However, global milk supply remains healthy, so higher prices might not be sustained once purchasing behaviours return to normal," he said.
Aluminium prices were up 9.8% month on month, with damage to a large aluminium smelter in the United Arab Emirates further supporting prices, as the damage was expected to take several months to repair.
Meat and fibre prices increased 2.4% month on month with higher overseas prices for beef and lamb.
The meat and fibre index increased 2.4% month on month in March and is up 19% year on year.
"Overseas demand remains strong for both beef and lamb, despite recent events, and supply is constrained," Dilly said.
"This could change in the coming months as New Zealand supply increases on a seasonal basis."
Wool prices dropped 2.8% month on month but had risen 49% year on year.
The forestry index rose 3.1% month on month but was down 5.3% year on year as China's construction activity remained a concern.
"Higher shipping costs, mostly due to fuel surcharges, will further erode margins on New Zealand log exports."
While exporters could pass on the indirect and direct cost of fuel, he said it would be more difficult for suppliers to pass those costs on to domestic consumers.
In addition, he said market volatility could quickly change global demand for commodities.
"There's a lot we don't know about what's happening in the Middle East, and sometimes the ripple effects of a shock like this can have intended and unexpected consequences," Dilly said.
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