Timber price slump knocks back commodity index

World sawn timber prices fell 21.3 per cent in July, the main factor knocking back the world commodity index by 2 per cent in the month, according to the latest ANZ Bank figures. The fall in international commodity prices was down 0.5 per cent in the month on the New Zealand dollar index, reflecting a weaker exchange rate. The index covers world market prices for New Zealand's 17 main export commodities, but even in international terms, prices are still up 7 per cent on a year ago. The New Zealand dollar-based index is just 2.5 per cent off its all-time highs in April, when meat prices were riding high after the foot and mouth outbreak in Britain. The index remains 50 per cent up on levels two years ago, up from about 105 on the index in 1999 to 155 now. "Many people expected to see a large fall in commodity prices due to the global slowdown," according to ANZ Bank chief economist Bernard Hodgetts. But supply factors in individual markets were important and were working in New Zealand's favour, he said, with a boost from the persistent weakness in the New Zealand dollar. The heavy fall in sawn timber partially retraced increases in the past five months. In May, New Zealand timber producers shipped just $14 million of lumber to Australia, down a whopping 57 per cent from the same month a year ago. Year-to-date sales are down 45 per cent. However, sales of timber to the United States were up 58 per cent in May, though that was not enough to balance the slump in Australia. But ANZ Bank said timber prices may find some support from the Australian market as a sharp rise in housing starts begins to flow through in coming months as a result of new government subsidies. Aluminium prices were also hit in the past month, down 3.1 per cent. The metal was one of the first commodities to show price rises when prices generally started to rise in 1999. Aluminium prices are sensitive to the pace of global industrial activity, which has been slowing since the middle of last year, ANZ said. Lamb prices fell 3.6 per cent in June, back to levels seen just before the outbreak of foot and mouth in Britain in February. Even so, world meat prices remain 24 per cent above levels of a year ago. Animal hides were down 2.7 per cent in July and seafood was off a bit, down 0.5 per cent in the month. But beef prices have improved, up 3 per cent in the month, along with wool up 4.8 per cent, apples (up almost 5 per cent), kiwifruit (up 2 per cent) and venison, 4 per cent.