ANZ Commodity Index Climbs 0.6% as Oil Lifts Milk Powder

New Zealand's export commodity prices rose in September, ANZ Research said, with the ANZ World Commodity Price Index up 0.6% from August and 1.0% higher than a year earlier. A sharp rise in oil and gas prices tied to the Middle East conflict drove the gains, while a weaker New Zealand dollar magnified the returns for local exporters. Prices rose across most categories, with only beef and milk fat declining. In local currency terms, the NZD Commodity Price Index climbed 2.8%.

Context — why the September commodity print matters now

The September reading extends a year of modest but positive momentum for New Zealand's export basket. The index is up 1.0% y/y, a slim margin that reflects how narrowly the gains are concentrated. Strip out dairy and aluminium, and the picture would be considerably softer. That concentration is what makes the oil channel so important to understand.

The catalyst chain starts in the Middle East. Disruption to production and exports there pushed oil and gas prices sharply higher through September. Skim milk powder has been tracking oil prices more closely, ANZ said, which is why a 9.2% monthly jump in the dairy sub-component coincided with the energy move. Aluminium, up 1.1% in the month, drew separate support from supply tightness as Middle East production and exports remained disrupted.

The currency layer amplified everything. The New Zealand dollar weakened through September, partly because higher US interest rates kept pressure on the kiwi. A softer local currency raises the New Zealand-dollar value of any given offshore price, so the 2.8% gain in the NZD index is roughly five times the 0.6% move in world terms. ANZ noted that this currency benefit comes at the expense of dearer imports, a trade-off that matters for the broader inflation picture.

For the Reserve Bank of New Zealand, the report sketches a two-sided problem. Stronger local-currency export returns support farm incomes and the terms of trade. Higher freight and import costs push the other way, adding to domestic inflation pressure.

Data — what the numbers show

The headline move is small in world terms and large in local terms. The ANZ World Commodity Price Index gained 0.6% m/m and 1.0% y/y. The NZD Commodity Price Index rose 2.8%, reflecting the currency translation effect.

Dairy prices rose 1.0%, with skim milk powder up 9.2% in September and up 41.1% from a year earlier. Butter fell 5.1%, which ANZ attributed to stronger milk production in the Northern Hemisphere. The divergence inside dairy is stark: skim milk powder is the energy-linked component, while butter is responding to Northern Hemisphere supply.

The meat and fibre index slipped 0.8% as lower beef prices outweighed gains elsewhere. Horticulture and forestry both firmed. Aluminium rose 1.1% in September and is up around 23% on the year, supported by tight supply as Middle East production and exports remain disrupted.

Category	September move
ANZ World Commodity Price Index	+0.6% m/m
NZD Commodity Price Index	+2.8%
Skim milk powder	+9.2% m/m, +41.1% y/y
Butter	-5.1%
Aluminium	+1.1% m/m, ~+23% y/y
Meat and fibre	-0.8%

Freight rates have climbed on disruption in the region. ANZ said higher shipping costs are preventing modestly stronger overseas log prices from flowing through to New Zealand harvesters and exporters.

Analysis — what it means for markets and sectors

The second-order effects run through New Zealand's export economy. Dairy processors and exporters capture the skim milk powder strength directly, and the weaker kiwi means those returns translate into more local currency per tonne shipped. Aluminium producers with exposure to tight Middle East supply see pricing support that has now compounded to roughly 23% over the year.

The forestry channel is the clearest loser in the report. Overseas log prices firmed modestly, but ANZ said higher shipping costs are stopping that improvement from reaching New Zealand harvesters and exporters. The freight line item is eating the price gain. That dynamic applies more broadly to any New Zealand exporter shipping bulk product into disrupted routes.

The limitation to flag is the concentration risk. The 0.6% headline rests heavily on oil-linked components. If the Middle East supply disruption eases, the skim milk powder rally that has driven dairy could unwind quickly, and the 41.1% y/y gain would be the number to watch for reversal. Butter already shows what happens when a dairy component faces its own supply dynamics rather than an energy tailwind.

On positioning, the flow is toward New Zealand's energy-linked export exposures. A weaker kiwi on higher US rates keeps the local-currency story attractive to exporters, while the import-cost side is a headwind for domestic-facing businesses. ANZ's next update is due on November 4.

Outlook — what to watch next

The single most important variable is the trajectory of oil and gas prices tied to the Middle East conflict. Skim milk powder's run depends on that channel holding. Any easing in oil prices could quickly reverse milk powder's gains, given how closely ANZ says the two now track.

The second catalyst is the New Zealand dollar. If US rates keep pressuring the kiwi lower, the local-currency boost to export earnings is likely to persist. A reversal in the currency would compress the 2.8% NZD index gain back toward the 0.6% world-terms figure.

The third is freight. Shipping costs have climbed on regional disruption, and their path determines whether forestry exporters eventually capture the firmer overseas log prices. ANZ's next commodity update on November 4 will show whether the September pattern extended through October.

Frequently Asked Questions

What does the ANZ commodity index measure?

The ANZ World Commodity Price Index tracks the offshore prices New Zealand receives for its main export commodities, weighted by their importance to the export basket. The companion NZD Commodity Price Index converts those same prices into New Zealand dollars, so it captures both the underlying commodity move and the currency effect. In September, the world index rose 0.6% while the NZD index rose 2.8%, a gap explained almost entirely by the weaker kiwi.

Why did skim milk powder rise so much in September?

ANZ said skim milk powder prices are tracking oil prices more closely, and September brought a sharp rise in oil and gas prices tied to the Middle East conflict. That link pushed skim milk powder up 9.2% in the month and 41.1% from a year earlier. Butter moved the opposite way, down 5.1%, because it is responding to stronger milk production in the Northern Hemisphere rather than to energy prices.

How does a weaker New Zealand dollar affect exporters?

A weaker kiwi raises the New Zealand-dollar value of any given offshore price, so exporters receive more local currency for the same shipment. That is why the NZD Commodity Price Index rose 2.8% in September while the world-terms index rose just 0.6%. ANZ noted the benefit comes at the expense of dearer imports, which adds to domestic inflation pressure and complicates the Reserve Bank of New Zealand's task.

Bottom Line

Oil-driven gains and a weak kiwi lifted New Zealand's September export prices, but the concentration in energy-linked dairy is the risk.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.