COVID-19 pandemic knocks down producers’ prices
As the COVID-19 global pandemic spread, falling prices for crude oil, milk, and meat led to a drop in producers’ costs of production in the June 2020 quarter, Stats NZ says this week.
The costs producers paid fell 1.0 per cent in the June 2020 quarter, although the prices they received for their goods and services only dipped 0.3 per cent in the period.
Crude oil prices fell the most of any key commodity this quarter.
“As the pandemic spread in the first half of 2020, demand and prices for fuel slumped, with far fewer people travelling by air or road during lockdowns around the world,” says business prices delivery manager Bryan Downes.
“This meant much lower crude oil input costs for petroleum and coal product manufacturing in New Zealand, but a fall in demand also saw a fall in the output prices they received."
Cheaper crude oil led to a 6.8 per cent fall in costs across various forms of transport, including rail, water, and air.
There was also a significant increase in prices received in the transport sector (up 14 per cent), following COVID-19 travel restrictions.
Milk and meat down, forestry up
Dairy product manufacturers paid less for raw milk in the June 2020 quarter.
At the same time, the output prices received by dairy product manufacturers for many goods rose in the quarter. Whole milk powder, cheese, and butter prices drove the overall rise.
An increase in milk powder prices was also seen in the global dairy trade auction prices late in June, after a decline earlier in the year.
Meat processing companies paid farmers less in the June quarter, down 4.3 per cent, while the prices the processing companies received fell almost as much, down 2.9 per cent.
“Due to COVID-19, the meat processing industry was hampered by social distancing requirements across processing plants, which meant a lower production capacity than normal.
“Meat prices paid to farmers reflected an oversupply of livestock earlier in the year. Dry conditions meant feed shortages on some farms, which led to more stock being sold, for lower prices.”
The prices received by the forestry and logging sector rose 3.8 per cent this quarter.
“Export log prices were low early in 2020, but saw a recovery this quarter as exports to China picked up. A lower exchange rate for exporters during the quarter and cheaper shipping prices created favourable conditions."
Other impacts of COVID-19
Prices received by rental and hiring services dropped by 9.4 per cent, while prices received by accommodation and food services providers dropped by 4.0 per cent.
These decreases were largely driven by a decline in international tourist numbers, with border restrictions in place for the whole quarter.
See International travel: June 2020 quarter for more information on the impact of COVID-19 on travel.
The information media services industry saw a price decrease (3.5 per cent) as cinemas closed and film production stopped during lockdown.