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Middle East Conflict Lends Near-Term Support to New Zealand Agricultural Commodity Prices, Westpac Says

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The impact of the Middle East conflict will probably be supportive of New Zealand agricultural commodity prices in the short term, but prices could soften under a scenario of prolonged hostilities as product is diverted to markets that already have sufficient supply, Westpac said in a Friday report.

The bank expects beef and lamb export prices to stay higher, it said, adding that forecasts for beef also account for the speed of rebuilding for the US beef herd as well as strong US consumer demand for protein.

Lamb prices are influenced by limited production in New Zealand and Australia, weak consumption in China, and price resistance in the UK and the European Union, according to the report.

Kiwifruit and apple export prices are likely to stay stable or be slightly softer, while log export prices could firm a bit in the near term due to tighter supply, although the upside is restricted by weak construction demand in China, the bank said.

New Zealand's agriculture sector is not isolated from the impact of the oil shock, but "it is better placed to navigate the current crisis than most other sectors of the economy and relative to key international competitors," Westpac said.

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