Navigating Commodity Volatility: Strategic Entry Points in a Post-Tariff World

In the ever-shifting landscape of global markets, the ANZ Commodity Index has emerged as both a barometer of economic turbulence and a beacon for opportunity. Over the past two years, the index has oscillated between sharp declines and robust recoveries, driven by a confluence of currency dynamics, trade policy shifts, and sector-specific demand. For investors, this volatility is not merely a challenge but a call to action—particularly in a post-tariff world where long-term demand for key commodities remains resilient.

The Volatility of the ANZ Commodity Index

The ANZ World Commodity Price Index has experienced a rollercoaster of performance since 2023. In July 2025, it fell 2.3% month-on-month (m/m), primarily due to a collapse in dairy prices—a sector that has historically dominated the index's movements. Meanwhile, the New Zealand Dollar (NZD) Commodity Price Index plummeted 3.4% m/m, exacerbated by a stronger local currency that eroded export competitiveness. Yet, just months earlier, in March 2025, the index surged 3.0% m/m as all sectors except horticulture contributed to the gain.

This volatility is not random. It reflects the interplay between global demand, currency fluctuations, and trade policy. The NZD's strength against the Trade Weighted Index has been a double-edged sword: while it boosts the value of imports, it depresses the index in local terms. For instance, in June 2025, the index rebounded 1.9% m/m as dairy and aluminium prices recovered, yet the NZD's 3.2% rise in the Trade Weighted Index muted the gains for local investors.

Tariff Turmoil and Trade Policy Uncertainty

The escalation of U.S.-China trade tensions in early 2025 introduced a new layer of uncertainty. Tariffs on goods surged to as high as 145% from China to the U.S. and 125% in the reverse direction, before being temporarily eased to 10%. These measures disrupted global supply chains, with China's exports to the U.S. falling 21% year-on-year in April 2025. The ripple effects were felt in commodity markets, as demand for dairy and meat products—key exports for New Zealand—wavered amid trade diversion.

Yet, as the data shows, these disruptions are temporary. By June 2025, the index had rebounded, driven by stronger dairy and aluminium prices. The resilience of these sectors underscores a critical insight: while tariffs can create short-term turbulence, they cannot override the long-term fundamentals of demand.

Long-Term Demand: A Foundation for Strategic Entry

The global demand for dairy, meat, and aluminium is underpinned by structural trends that transcend trade policy. According to the FAO/OECD Agricultural Outlook 2025–2034, per capita consumption of animal-source foods is projected to rise by 6% by 2034, with lower middle-income countries seeing a 24% increase. This growth is fueled by urbanization, rising incomes, and the shift toward protein-rich diets.

For aluminium, the outlook is equally compelling. The global market, valued at $179.67 billion in 2024, is expected to grow at a 6.24% CAGR through 2034, driven by the automotive and aerospace industries' demand for lightweight materials. Electric vehicles (EVs), in particular, are a game-changer. Automakers are increasingly substituting steel with aluminium to meet emissions targets, a trend that will accelerate as EV adoption surges.

Strategic Entry Points in a Volatile Environment

The recent dips in the ANZ Commodity Index present opportunities for strategic entry. Consider the following:

1. Dairy in June 2025: After a 2.3% m/m decline in July 2025, dairy prices have entered a potential oversold territory. Given the sector's dominance in the index and its long-term demand drivers, this dip could signal a buying opportunity.

2. Aluminium in April 2025: The 0.4% m/m decline in the index in March 2025, despite gains in beef and dairy, suggests undervaluation in the aluminium sector. With global demand projected to grow 40% by 2030, this could be a timely entry.

3. Meat and Wool in February 2025: A 1.8% m/m rise in January 2025, driven by meat and wool, indicates a sector primed for further growth. The resilience of meat prices, despite currency headwinds, highlights their inelasticity to short-term shocks.

Investors should also consider hedging against NZD volatility. A stronger currency can dampen local returns, as seen in the 3.4% m/m drop in the NZD Commodity Price Index in July 2025. Diversifying into non-NZD-denominated commodities or using currency futures could mitigate this risk.

Conclusion: Balancing Caution and Opportunity

The ANZ Commodity Index's volatility is a testament to the fragility of global markets in the face of trade policy shifts and currency fluctuations. Yet, within this volatility lies opportunity. The long-term demand for dairy, meat, and aluminium—driven by urbanization, industrialization, and technological innovation—provides a robust foundation for strategic entry.

For investors, the key is to balance caution with conviction. Short-term dips, such as those in dairy and aluminium in mid-2025, offer attractive entry points for those who can look beyond the noise. By aligning with structural trends and hedging against currency risks, investors can navigate the turbulence and position themselves to benefit from the inevitable rebound.

In a post-tariff world, the ANZ Commodity Index is not just a reflection of economic uncertainty—it is a canvas for opportunity. Those who approach it with a long-term lens and a strategic mindset will find themselves well-positioned to capitalize on the next phase of global demand.