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Strong auction wool market prompts forward action

by Michael Avery, Southern Aurora Wool, 10 March 2017

THE physical market’s continued positive direction, particularly on the fine Merino and crossbred wools, was reflected in the forward prices paid this week.

Most activity occurred in the new season. Volume was split fairly evenly between the 19 and 21 micron contracts. The key 19 micron contract traded in August at 1720 cents, in October at 1695, November at 1685 cents and into January 2018 at 1675 cents and in June at 1650 cents.

Volumes remain steady, with over 100 tonnes traded, around 2 percent of the spot offering. With prices for most micron groups in uncharted territory exporters, growers and industry analysts are divided on the timing and depth of any retracement.

The uncertainty is reflected in the trading levels as we see a fairly linear discounts out to the early new year, where prices tend to flatten. This pattern is likely to continue as both buyer and seller look to find a balance between risk and certainty when searching for fair value.

Short term we see trading levels to hold around the following levels.

March/April     19 micron     1840-1860 cents     21 micron     1440-1470 cents

May/June         19 micron     1750-1780 cents     21 micron     1420-1450 cents

August/Sept     19 micron     1710-1730 cents     21 micron     1380-1390 cents

Oct /Dec            19 micron     1680-1700 cents     21 micron     1350-1370 cents

Trade summary

April                     19 micron     1840 cents                          5 tonnes

May                      21 micron     1460/1465 cents               5 tonnes

June                     18.5 micron   1870 cents                         3 tonnes

June                     19 micron      1750/1760 cents             17 tonnes

June                     19 micron Put Option strike 1730 cents 30 cent premium 2.5 tonnes

July                       19 micron     1725 cents                           6 tonnes

July                       21 micron     1439/1450 cents              24.5 tonnes

Aug                       19 micron     1715/1720 cents              10 tonnes

September          19 micron     1670 cents                           5 tonnes

September          21 micron     1380 cents                         22 tonnes

Oct                        19 micron     1695 cents                           2 tonnes

Nov                       19 micron     1685 cents                           5 tonnes

Nov                       21 micron     1375 cents                           7 tonnes

Jan 2018              19 micron      1675 cents                          2.5 tonnes

June 2018            19 micron     1650 cents                           5 tonnes

Total                                                                                       121.5 tonnes

Source: Southern Aurora Wool.

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