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When wool buyers walked into selling centres to start the week, Australian wool was more expensive for exporters before bidding began. This set the tone for a shift in wool prices this week as the Eastern Market Indicator (EMI) finished 18¢ lower to 1134¢/kg.

The US economy and the macroeconomic influences that dictate its performance are complex but put simply the US economy continues to stagnate. Q1 GDP growth estimates per the Bureau of Economic Analysis was modest at 1.6% (released late April) and inflation in the US is persistent. When the Federal Reserve did not cut rates last week, this further sowed seeds of concern as the forecast for anticipated rate cuts looks further away than previously thought.  The response was an appreciation of the Australian dollar to the US as the exchange rate sat above US 66 cents to end last week, impacting buyers from the get-go.

AWI noted in its weekly commentary that the competition between the usual buyers was still strong, albeit at the new lows dictated by the movement on the exchange rate front. Whilst the national pass-in rate was up week on week to 9.4%, it wasn’t too far off this season’s average of 8% (Last season’s pass-in rate was 12.5% for reference). Demand is persistent with over 34K bales sold this week, but buyers aren’t ‘desperate’ this time of year as we approach the end of the 23/24 wool-selling season.  

The steepest losses were confined to the finer end of the offering, in line with the trend of this season. 17MPG in Sydney lost 43¢ to 1665¢/kg and 18MPG in Melbourne dropped 37¢ to sit at 1501¢/kg.  Crossbreds weren’t immune from the turning tide either, as 26MPG in Melbourne lost 35¢ to 505¢/kg.

The Western Market Indicator (WMI) was 14¢ lower this week finishing at 1273¢/kg and led the league this week for pass-in rate (13%) and withdrawals (5.4%).  The 18MPG category in WA eased 32¢ to 1488¢/kg.

Crossbred wool volumes, prices and values were investigated by Andrew Woods this week (read here).  For the fourth season running crossbred sales volumes have increased at Australian auctions.  Whilst this level of supply provides downward pressure on average prices, the supply chain’s willingness to absorb the increased volumes should be reassuring to industry participants.  

The week ahead….

The RBA’s own decision to not change rates did put some Ice on the exchange rate mid-week, easing some of the tension in the Australian economy. However, it was too late for the wool markets for this week and at the time of publishing the exchange rate for AUD/USD had already jumped back above 66¢ mark.

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Data sources: AWEX, AWI, Mecardo

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