A Dairy Surge Has Positive Impact On New Zealand's Terms Of Trade

Friday, 6 September 2013 at 12:49pm

Statistics New Zealand released the terms or trade results at the beginning of September, showing a 4.9 per cent rise for the second quarter from the first three months of the year.

The stats show that prices of dairy products climbed 14 per cent in the latest quarter, even as volumes fell. Milk powder had the greatest impact, with prices up 15 per cent.

Improved weather conditions across the country have seen an easing in supply concerns and in turn global dairy prices remain very high. The reasons for this have been discussed in previous blogs, but generally relate to China’s expanding middle class.

For now, the effects of the recent Fonterra contamination scare on global dairy demand and prices appear limited and the medium-term outlook for export growth is positive as global demand continues to grow.

Economists are predicting that rising dairy prices will push the terms of trade to a 39-year high later this year. 

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