December 13, 2010

New Zealand's dairy export prices show increase

New Zealand's terms of trade index rose for a fourth straight quarter, as Chinese demand supported dairy export prices in the three months through September, according to a government report.

A 7.1% gain in milk powder and butter prices outweighed declines in lumber, oil and kiwifruit, limiting the drop in overall export prices to 0.1% in the third quarter, Statistics New Zealand reported. Import prices fell 3%. The trade index rose 3%, about twice the pace predicted by economists.

Chinese demand for New Zealand milk powder and lumber has helped push the terms of trade, a measure of the amount of imports the nation can buy from a fixed quantity of exports, toward a 36-year high and boosted farmers' income. Fonterra Cooperative Group Ltd., the world's biggest dairy exporter, raised its forecast payment to farmers by 4.5%, citing global price increases.

"Rising export prices have largely been a key driver of improving export incomes over the past year," said Jane Turner, an economist at ASB Bank Ltd. in Auckland. "Over the next year, we expect improved export incomes to gradually filter through the economy and help stimulate domestic demand."