ANZ’s NZ dollar Commodity Price Index hit a record high in March, driven mostly by the impact of the US and Israel’s war against Iran.

On average, the NZD/US dollar was 2.8% weaker in March, the bank said.

This change helped the NZD Commodity Price Index rise 6.4%, month on month, to a record high.

ANZ’s World Commodity Price Index rose 4.1% in March.

The Middle East conflict, which broke out at the end of February, drove many commodity prices higher in March, the bank noted.

It was the second-highest month on record for the index in world price terms, eclipsed only by its March 2022 reading, which spiked higher on the outbreak of the war between Russia and Ukraine.

All components of the world price index rose in March except horticulture, which is between seasons.

Dairy prices rose 5.9% in the month as importers increased purchases to secure supply.

“Global dairy prices were rising even before the current Middle East conflict started, but current events have pushed prices even higher,” ANZ said.

“Importers have increased purchases in response to concerns about supply chain disruption.

“However, global milk supply remains healthy, so higher prices might not be sustained once purchasing behaviours return to normal.”

Aluminium prices rose 9.8% in March after a large smelter in the United Arab Emirates sustained major damage, which will take several months to repair.

Gulf Co-operation Council countries usually account for 8-9% of global production.

The meat and fibre index increased 2.4% in March and is up 19.1% year on year.

Overseas demand remained strong for both beef and lamb, despite recent events, and supply is constrained, ANZ said.

This could change in the coming months as New Zealand supply increases on a seasonal basis, it said.

Wool prices dropped 2.8% in March but have risen 48.9% year on year.

The horticulture index was unchanged in March.

The New Zealand harvests for apples and kiwifruit are well underway, but in-market prices are unavailable until the new season’s produce reaches its destination.

The forestry index rose 3.1% month on month in March but was down 5.3% year on year.

China’s construction activity remained a concern, ANZ said.

Higher shipping costs, mostly because of fuel surcharges, will further erode margins on New Zealand log exports, the bank said.

The majority of New Zealand’s logs are sold to China, where they are used in construction.

Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.