By Tina Morrison
New Zealand commodity prices rose for a second straight month in October, helped by rebounding dairy prices.
The ANZ Commodity Price Index increased 6.9 percent last month, following September's 5.5 percent gain. The index is 12 percent below year earlier levels.
The increase was led by a jump in dairy prices, which gained 18 percent from September, continuing their recovery from "extreme lows" in early August, ANZ said.
Whole milk powder led the gains, up 26 percent, followed by a 14 percent increase in skim milk powder and a 7.8 percent rise in butter.
Dairy products are New Zealand's largest commodity export and traders are eyeing Tuesday's GlobalDairyTrade auction in the expectation prices may retrace earlier gains..
"A slow start to the New Zealand milk production season, an El Nino premium, bargain hunting from buyers, some natural recoil of extreme lows and restricted whole milk powder supply through the GDT platform appear the main drivers," ANZ rural economist Con Williams said in his report.
"However, the market has begun to question the sustainability of recent rises, and the GDT auction overnight will be watched closely for signs of pullback."
Meanwhile, prices for other commodities fell for a sixth straight month in October, declining 2.2 percent to be 14 percent lower than year earlier levels.
Meat prices slid 3.6 percent, weighed down by a 13 percent drop in beef prices amid higher US supply and concern about demand. Aluminium prices weakened 4.9 percent following a slowdown in investment in China.
Still, sheep meat prices improved in the month and prices for forestry, horticulture and seafood were largely unchanged.
The NZD index advanced 2.9 percent as a strengthening local currency trimmed gains, ANZ said.