THE deep retraction in prices in the wool auction market had only a minor impact on the forward markets this week.

Prices for came off around 20 cents, while the spot market reduced 50 to 80 cents particularly in the finer microns. Most forward interest surrounded the 18 and 19 microns as buyers held their forward prices, especially into the spring, having anticipated the fall as demand became constricted by historically high levels.

Volumes were low as both buyer and seller struggled to ascertain fair value with such volatility. The 19 micron index traded close to its cash level for May and June (1800 cents) and at 1725 cents into the new season.

More growers were looking to options to manage their risk this week. Their strategy was to pay between 2-3 percent option premium to protect their downside, while being able to participate should the market reverse the current downward correction.

We expect bidding interest to be maintained at these lower levels as we move into the Easter recess.

Anticipated trading levels next week

May/June                           19 micron 1770 to 1790 cents and 21 micron 1360 to 1370 cents

August/September         19 micron 1710 to 1730 cents, 21 micron 1330 to 1350 cents

Trade summary

May                       19 micron                             1800 cents                                                 5 tonnes

June                      19 micron                             1800 cents                                                 7.5 tonnes

June                      19 micron Put option 1800 cents strike 50 cent premium     5 tonnes

July                        18 micron Put option 1950 cents strike 50 cent premium     5 tonnes

July                        19 micron Put option 1770 cents strike 55 cent premium      5 tonnes

Aug                        19 micron                            1725 cents                                                   5 tonnes

Sept                       19 micron                            1710 cents                                                  2.5 tonnes

Oct                         19 micron                             1700 cents                                                2.5 tonnes

Oct                         20 micron                            1440 cents                                                2 tonnes

Total                                                                                                      39.5 tonnes

Source: Southern Aurora Wool.