The upside of high $

02/05/2013

Petrol prices fell 12 cents during April and could drop below $2 a litre according to the Automobile Association.

The price of 91 octane petrol fell to $2.05 per litre in the main centres, while diesel fell 10 cents per litre to $1.42 a litre at most service stations, the lowest price since July 2012.
 
“Since mid-March, petrol prices have fallen 16 cents per litre, and diesel 13 cents. In all, fuel prices have fallen on seven consecutive occasions, the most number of sustained drops since June 2012,” says AA PetrolWatch spokesperson Mark Stockdale.
 
“However, the AA’s monitoring of commodity prices shows that since the last retail price increase in mid-February, the imported cost of petrol has fallen nearly 19 cents per litre, and diesel 16 cents. That means fuel companies have not passed all of the lower costs onto motorists, although some service stations have discounted prices below $2 a litre.”
 
This time last year we were paying $2.20 a litre for 91 petrol and $1.57 a litre for diesel, meaning motorists buying 40 litres of petrol today will be saving about $6 a time, or about $158 a year for a typical 2-litre car.
 
“International fuel prices have been consistently falling due to lower global demand, and increased supply as refinery production comes back after shutting down for maintenance,” Mr Stockdale said.
 
“Although in the last few days oil prices have risen slightly, at current trends there is a good chance the price of 91 octane petrol will fall below $2 a litre soon, the first time since June and July last year,” Mr Stockdale added.

The value of our dollar also plays a role in the price of fuel.

The upside of the higher exchange rate which makes export prices more expensive is that it makes imports cheaper.

LabourGreen say they’ll bring the value of the dollar down.

Bigger economies than ours have tried to do that with no success and at a very high cost.

If they did succeed it would immediately devalue everyone’s purchasing power as the cost of essential imports, including fuel, would rise.


How far is too far for fuel?

24/06/2009

The petrol station at Hampden, north of Moeraki on State Highway 1, has closed.

There are fuel stops at Herbert and Maheno about 10 and 14 kilometres further north so it’s not too much further for travellers, but how long will petrol stations stay in very small towns?

When I stopped for fuel at a small town petrol station yesterday the owner told me that if he hadn’t recently put in new tanks he’d have been tempted to stop selling petrol and diesel and stick to servicing vehicles because the margins on fuel were hardly worth the trouble.

I’m training myself  to check the fuel gauge before leaving bigger towns on long journeys because it can be a long way to the next petrol station, especially outside business hours.

However, the training isn’t complete and I’ve been fortunate to find bowsers which enable you to pay by credit or Eftpos card which have saved me from running out of fuel late at night a couple of times.

Travellers not used to long distances between fuel stops could easily get caught short.

It’s also a problem is for people living in or near the small towns which no longer have fuel outlets. Some, particularly the elderly, do most of their driving within a relatively confined area of where they live and they’re forced to do a longer trip simply to refuel.


Electronic transactions down

05/01/2009

The value of electronic transactions was 2.8%  lower in November than in October.

It was the largest monthly drop since records began in October 2002 and was mainly a result of a fall in the price of fuel.

That could mean people had more money to spend on other things but anecdotal reports from retailers suggest that the volume and value of sales is down.

Although things may not yet be as desperate as this:

scan10002


PPI inputs and outputs up again

20/11/2008

The high cost of fuel was the main contributer to the increase in producers’ prices in the September quarter.

Producers’ output prices went up 2.8% and input prices rose 3.7%

The wholesale trade outputs index rose 4.3 percent in the September 2008 quarter. In the year to September the wholesale trade outputs index rose 17.3 percent, the largest annual increase since the series began in the June 1994 quarter.

The wholesale trade inputs index rose 8.1 percent in the latest quarter, with higher imported crude oil prices being the major driver of this movement. In the year to the September 2008 quarter, the wholesale trade inputs index rose 25.2 percent, which is also the largest annual increase since the series began.

Increases in the price of milk at the farmgate and the price of  dairy manufacturing inputs were second to fuel in contributing to the increases in the input and output indexes.

The outputs price for dairying increased 24.4% and the inputs for dairy manufacturing  went up 20.2%.

Overall the PPI outputs index rose 9.8 percent and the inputs index rose 13.6 percent in the year to September.


CPI rise highest since 1990

21/10/2008

The Consumer Price Index rose 5.1% in the year to September – the highest it’s been since the year to June 1990.

Steep rises in the price of electricity, fuel, food and electricity were the major contributers to the increase.

Food prices rose 10.8% in the year to September, the highest increase since the year to April 1990 (which included an increase in GST from 10 to 12.5%)

All five subgroups recorded upward contributions to the annual increase, with the most significant contribution coming from the grocery food subgroup (up 12.8 percent). Within this subgroup, higher prices were recorded for cheddar cheese (up 61.6 percent), bread (up 16.5 percent), and fresh milk (up 12.6 percent).The remaining four subgroups recorded the following upward contributions: fruit and vegetables (up 17.9 percent), meat, poultry and fish (up 8.8 percent), restaurant meals and ready-to-eat food (up 6.3 percent), and non-alcoholic beverages (up 6.9 percent).

 

The 61.6% increase in the price of chedder cheese is huge, but when the increase for milk was about a fifth of that (12.6%) it can’t be all blamed on farmers.
 


Power pushes up producers’ prices

19/08/2008

The price of power was the main contributer to the increase in the Producers’ Price Index  in the three months to June, Statistics New Zealand said today.

Ouptput prices went up 3.5% and input prices rose by 5.6%.

The rise in the outputs index is the largest quarterly rise since the June 1985 quarter, while the rise in the inputs index is the largest since the March 1980 quarter. Both indexes were mainly driven by higher prices for electricity generation and supply.

One business’s output becomes another’s input, so for example milk and grain are outputs for farmers but inputs for cheese makers and bakers.The electricity generation and supply outputs index rose 30.9 percent in the latest quarter, the largest rise since the series began. Higher output prices for electricity generation were recorded, with lower lake levels pushing up spot prices. In the year to the June 2008 quarter, the electricity generation and supply index rose 41.7 percent, which is also the largest annual rise since the series began.

 

Electricity producers cover those inolved in generation, transmission, distribution and retail and their inputs include fuel, business services, rent and power itself. I’m not sure how much the healthy dividends the Government gets from the power companies it owns contributes to the price rises.

Within the inputs index, electricity generation and supply rose 50.8 percent in the latest quarter and 85.4 percent in the year to the June 2008 quarter. Both movements are the largest since the series began in the June 1994 quarter. Lower lake levels were the cause of higher costs for electricity generation this quarter.

Ouch. We pump water for irrigation which makes power one of our bigger costs.

Another contributer to the PPI indexes is the wholesale trade which covers fuel and fertiliser and they are also big budget items for farmers.

Wholesale trade also made a contribution to both the PPI output and input indexes. The wholesale trade outputs index rose 6.0 percent in the June 2008 quarter, while the inputs index rose 6.4 percent. In both cases the increase was driven by higher prices in the mineral, metal and chemical wholesaling sector.In the year to the June 2008 quarter, the PPI outputs index rose 8.5 percent and the inputs index rose 11.8 percent.

 

If these input costs, most of which have a large imported component, went up when our dollar was relatively high they will almost certainly be higher in the next quarter because the dollar has been lower.

The increase in inputs has been greater than that for outputs which means we’re absorbing some of the costs. But even so each trip to the supermarket is a reminder that some of the increases get passed on to consumers.

I couldn’t find any 1kg blocks of cheese at the supermarket today, and the 700g block of edam I did find cost $11.99. I wonder if this is because there would be consumer resistance if they tried to sell bigger blocks at that per kilo price?


Lower dollar good news and bad news

12/08/2008

The good news about the falling dollar, down to an 11 month low of US69.84c this morning, is that we get more for our exports.

However, the lower value of our currency also increases the price of imports which is particularly bad news for farmers when two of our biggest budget items – fertiliser and fuel – are already highly priced.

One reason for the dollar’s fall is the Reserve Bank’s decision to relax its guard against inflation by lowering the official cash rate.

Several commentators said this would be good for exporters, but I’m not sure how much better off we are if the gains on the swings of increased returns for our produce is countered on the roundabout of increased prices for inputs.

Nor do I think that a weak currency is a good recipe for a strong economy.

And I am definitely not relaxed about a little bit more inflation. The memory of the economic disaster which resulted when all the little bits more became a lot and led to inflation rates of more than 20% in the 1980s, and the painful process of bringing it down again, are still too fresh.

I’m with Don Brash who, when he was governor of the Reserve Bank, told a public meeting that a little bit of inflation was like being a little bit pregnant, it doesn’t stop at a little bit.

The B- I got for stage one Economics, as it was then known, doesn’t qualify me to debate this issue. But The Visible Hand in Economics and Show Me The Money  and Brian Fallow  are qualified and they all warn about the dangers of going soft on inflation too.

The falling dollar is a good news-bad news story for exporters and if it contributes to higher inflation the bad will more than outweigh the good.


Solid growth ahead for primary sector

07/08/2008

The Ministry of Agriculture & Forestry  is forecasting sunny times for the primary sector over the next five years in spite of a stormy outlook for domestic and international ecnonomies.

The 2008 Situation and Outlook for New Zealand Agriculture and Forestry (SONZAF) 2008 report , expects international demand for food products to keep key commodity prices buoyant for the next five years.

MAF says while traditional Western markets are slowing, this is expected to be offset by continued growth in fast-developing Asian economies such as China, India and other developing and oil exporting markets.

“Individual sectors all face their own challenges, but overall the combination of strong commodity prices, growing global food demand and new market developments – such as the China FTA signing – presents positive opportunities for the primary sector over the next five years,” MAF Director-General Murray Sherwin says.

Challenges at home include the 2008 drought, which continues to have a significant affect across the sectors. In the meat sector, this has resulted in wide-spread de-stocking that will lead to falling beef and lamb export volumes next year.

Export returns, most noticeably in the meat, kiwifruit and forestry sectors have also been eroded by the high New Zealand dollar. And high fuel and fertiliser costs have undermined improved commodity returns. The economic outlook in some of the key markets, such as the United States, is also constrained.

Lamb and beef prices are improving and the outlook is brighter in both sectors than it has been for sometime, Mr Sherwin says.

Beef export earnings, for example, are projected to increase by more than 40% over the forecast period.

Based on Treasury assumptions of easing exchange and interest rates, MAF also expects farm gate returns to be boosted.

This is encouraging – but the low dollar which increases returns also increases the price of major inputs including fertiliser, fuel and machinery.


Ausssie farmers want ag out of ETS

16/07/2008

Australian farmers  want their Government to keep agriculture out of its Emissions Trading Scheme.

AUSTRALIA’S proposed emissions trading scheme (ETS) could affect international food and fibre prices at a time of food crisis, the nation’s farm sector has warned.

National Farmers’ Federation vice-president Charles Burke said rarely did governments pursue policies like the ETS that could have such broad-reaching ramifications.

”If we don’t get this right, this could become a new and additional factor putting pressure on global markets, affecting both supply and prices in Australia,” he said on the eve of the release of the Federal Government’s green paper on emissions trading.

Mr Burke said Australian farmers’ input costs – fuel, electricity, fertiliser and chemicals – may increase regardless of agriculture’s role in an ETS.

All of this sounds very similar to what farmers are saying on this side of the Tasman.

Westpac’s senior agribusiness economist, Justin Smirk, said global markets responded immediately to any event, be it floods in Iowa, food export tariffs in Argentina or aggressive US and European biofuels policies.

”Actions, events and seasonal conditions in Australia and their impact on our farm sector are no different, reverberating through global markets,” he said.

”Markets are closely watching the complex problem of climate change, its potential impact on global farm output, and the policies proposed to mitigate global warming emissions.”

Competitors will also be working out if they could use the ETS to impose non-tariff barriers to imports.

NFF president David Crombie warned against including agriculture in the ETS, citing the difficulty in measuring, monitoring or verifying the sector’s emissions. No country had included agriculture in an ETS, he said, with the exception of New Zealand, ”where farmers are now looking at margins reducing by up to 160% as a result”.

And how silly is that when it won’t do anything to reduce the global carbon footprint?


On-farm inflation 9.7%

15/07/2008

A 9.7% increase in costs for sheep and beef farmers in the year to March 2008 is the highest rate of on-farm inflation since 1986-87 when input prices rose 13.2%.

The previous year the price of inputs increased 2.7%.

Major increases were:

Fertiliser, lime & seeds:         30%

Fuel:                                      23.5%

Feed & grazing:                     13.7%

Interest:                                 9.0%

Electricity                               7.2%

Local Govt. rates                    6.6%

Although the high dollar reduced the price of imported goods, fertilsier, lime and seed prices still increased by 30%. The price of fertiliser increased from $260 to $480, another 60%, between March and June, June but that is not included in these figures.  

Local Government rates increased 6.6 per cent. This was the second largest increase in 17 years and in the last five years the overall increase was 33 per cent, an average of 6.6 per cent per year. The overall cumulative increase over 5 years to March 2008 was 22.7 per cent, while over 10 years the increase was 37.0 per cent.

In comparison the CPI rate of increase over 5 years was 14.0 per cent, well below the 22.7 per cent for sheep and beef farm input prices

If interest is excluded, the underlying rate of on-farm inflation in 2007-08 was up 8.3 per cent.

Meat & Wool Economic Service figures for the annual on farm inflation percentage change in the past 10 years:

including interest        (underlying % change) excluding interest

1998 -99         -2.0%                                          0.9%

1999-00                 2.8                                                             1.4

2000-01                 5.2                                                             6.0

2001-02                 1.7                                                             2.8

2002-03                 3.6                                                             3.4

2003-04                -0.2                                                             0.0

2004-05                 4.1                                                             3.7

2005-06                 4.8                                                             5.2

2006-07                 2.7                                                             2.7

2007-08                 9.7                                                             9.8

 


Sky High Fuel Price for Helicopter

10/07/2008

A helicopter pilot who does most of his work in agricultural spraying tells me his monthly fuel bill has gone up from $12,000 to $18,000 this year.


Wheat Rising Bread Will Too

20/06/2008

The floods which have destroyed corn crops in the United States will bring improved prices  for cropping farmers here.

Federated Farmers Grain & Seed chairman Andrew Gillanders said grain growers were being advised to closely follow world markets before committing to sales, otherwise they could miss out on improved prices.

“The New Zealand grain growers should not be tempted into signing contracts because their input costs are rocketing up and the New Zealand dollar is dipping everything is about to rise again.”

The price of corn reached nearly $8 a bushel in the United States this week because of a wet spring and floods in the Midwest which are forcing farmers to replant their crops or replace them with soya beans.

This will have a flow on effect on the price of beef because so much US stock is grain fed.

New Zealand farmers are facing cost increases of around 50% for chemicals, fuel, fertiliser and transport so the prospect of improved returns is welcome. But of course higher prices for grain will flow on to the domestic market making bread and cereals more expensive. 


$1/km for stock transport and rising

10/06/2008

The owner of a transport company told us a couple of weeks ago he bdugeted on $1 a kilometre for stock trucks.

That was before today’s price rise about which Poneke opines here.


Petrol up 6c

10/06/2008

Ouch: Caltex has put the price of petrol up by 6 cents to 206.9 cents/litre for 91 octane; 95 is 211 and diesel is 179.9.

The first impact is on everyone’s pockets; it will also boost inflation because transport is involved somewhere in just about everything we do.

The continually rising price of fuel is also one of the reasons that extra money thrown at health, education and other taxpayer-funded sectors hasn’t made much impact on services – it’s gone on rising costs leaving less for the front-line services.


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