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 that the new lows were 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. While 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.
