Largest drop in terms of trade in a decade as dairy export prices sour

Lower export prices for dairy, meat, and logs in the September 2020 quarter led to the biggest drop in terms of trade since June 2009, Stats NZ said today.

Export prices fell in the September 2020 quarter, down 8.3 percent from its highest ever level in June 2020. This is the third largest fall in export prices since the series began. Import prices fell 3.7 percent, resulting in a terms of trade fall of 4.7 percent.

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.

“Export prices for dairy products fell 12 percent overall in the quarter,” business prices manager Bryan Downes said.

“Global dairy trade (GDT) prices rose overall in the same period; however, the GDT only represents a proportion of the dairy products exported by New Zealand.”

“Dairy values have been the most affected with a 16 percent drop in the quarter compared with a 3.3 percent fall in dairy volumes exported,” Mr Downes said.

Quarter endedDairy products – values
Dec-152790563.668
Mar-162764413.222
Jun-162638861.655
Sep-162704550.365
Dec-162979737.549
Mar-173135685.79
Jun-173612519.045
Sep-173530709.12
Dec-173672597.246
Mar-183364102.471
Jun-183528541.98
Sep-183888655.512
Dec-183561566.48
Mar-193907053.392
Jun-193791017.777
Sep-193795938.806
Dec-194153731.181
Mar-204290343.536
Jun-204223899.282
Sep-203544380.085
Quarter endedDairy products – volumes
Dec-152038.283228
Mar-161964.896015
Jun-162042.778329
Sep-162159.03103
Dec-162040.272659
Mar-171831.933373
Jun-172066.503236
Sep-172032.04623
Dec-171947.628817
Mar-181896.182515
Jun-181978.109615
Sep-182056.88531
Dec-181971.938241
Mar-192287.32592
Jun-192077.318074
Sep-191911.603154
Dec-192110.309581
Mar-202086.97768
Jun-202062.319287
Sep-201994.257282

“Dairy is one of New Zealand’s top exports, along with travel services, both of which have seen falls in value this quarter.”

See COVID-19 keeps a lid on international travel for more on travel services.

Also contributing to the fall in export prices were lower forestry products prices, which fell 11 percent in the September 2020 quarter, following an 11 percent rise last quarter. Forestry products export volumes rose 27 percent in the quarter.

Meat prices also fell 8.8 percent in the quarter with beef prices down 7.4 percent and lamb prices down 10 percent.

Import prices fell 3.7 percent in the September 2020 quarter with a fall in electrical machinery and apparatus prices influenced by lower prices for laptops and television imports.

The Reserve Bank of New Zealand’s trade weighted index (TWI) rose 3.4 percent in the September 2020 quarter, while the New Zealand dollar to US dollar exchange rate rose 7.2 percent over the same period. The trade weighted index (TWI) is a measure of the value of the New Zealand dollar (NZD) relative to the currencies of New Zealand’s major trading partners.

Quarter endedNZD – USD exchange rate (mid-rate for NZ$1.00)
Dec-150.6658
Mar-160.662866667
Jun-160.690966667
Sep-160.722033333
Dec-160.711966667
Mar-170.711833333
Jun-170.704566667
Sep-170.7302
Dec-170.696766667
Mar-180.727466667
Jun-180.705066667
Sep-180.668466667
Dec-180.6708
Mar-190.681433333
Jun-190.663
Sep-190.648733333
Dec-190.643966667
Mar-200.635033333
Jun-200.6175
Sep-200.6618
Quarter endedTrade weighted index
Dec-1572.14
Mar-1672.15666667
Jun-1673.63
Sep-1676.97
Dec-1677.64
Mar-1777.95666667
Jun-1776.47666667
Sep-1777.11333333
Dec-1773.77333333
Mar-1874.90333333
Jun-1873.79666667
Sep-1872.35666667
Dec-1873.5
Mar-1973.99
Jun-1972.66666667
Sep-1971.95333333
Dec-1971.37333333
Mar-2070.93666667
Jun-2069.67666667
Sep-2072.02

“The New Zealand dollar rebounded from a fall last quarter which has had a downwards influence on both export and import prices,” Mr Downes said.

Fuel

Petrol and petroleum products prices rose 0.4 percent in the September 2020 quarter. This followed a 35 percent fall in the June 2020 quarter. Petrol and petroleum volumes rose 25 percent in the September 2020 quarter compared with a 42 percent fall in the June 2020 quarter.

“Prices for primary fuels such as crude oil recovered significantly following a sharp 44 percent fall last quarter,” Mr Downes said.

“However, this increase was offset as imports of processed fuels continued to fall in price, as low global demand led to a glut of processed fuel.”

Quarter endedFuels and lubricants – primary – volumeFuels and lubricants – processed (not motor spirit) – volume
Dec-151346.95531705.9572218
Mar-161522.0339671165.484127
Jun-161260.7983061769.210527
Sep-161294.1085971127.40268
Dec-161337.2818681434.906924
Mar-171222.8452641531.006915
Jun-171456.7054261683.631058
Sep-171414.65641413.449289
Dec-171385.5916191210.528129
Mar-181472.7404741792.009966
Jun-18981.49852732846.997551
Sep-181655.8615491746.682714
Dec-181500.2209431244.452582
Mar-191435.1394281822.063018
Jun-191434.414051641.842755
Sep-191449.1263451520.40955
Dec-191377.558891747.765033
Mar-201497.4049351835.210951
Jun-20595.38936911449.349359
Sep-20581.36295662484.326886

Volumes for primary fuels fell 2.4 percent while processed fuels rose 71 percent during the September quarter. Fuel values and volumes are not seasonally adjusted.

“The slight fall in volumes of primary fuels imports and spike in volumes of processed fuel imports reflect a shift to importing processed fuels rather than refining primary fuels domestically,” Mr Downes said.

“The last time there was such a divergence in primary and processed fuel volumes was in the June 2018 quarter when the Marsden Point Oil Refinery was closed for maintenance and no primary fuels could be processed.”

/Stats NZ Public Release. The material in this public release comes from the originating organization and may be of a point-in-time nature, edited for clarity, style and length. View in full here.