Auction wool price retraction impacts forward prices and volumes

Mike Avery, Southern Aurora Markets, February 16, 2018

A STRONG Aussie dollar with lower demand triggered by the Chinese New Year has led to spot auction prices retracting from their record levels, impacting forward market prices and trading volumes.

This was most evident in the fine wools, as exporters question the ability of the market to sustain these levels into the autumn and beyond.

Some demand destruction is to be expected especially in the micron groups where supply is not as constricted. This supply imbalance has seen a movement of 100 cents in the 19-21 micron spread since January, from 342 cents to 242 cents.

Supply of 21 micron remains tight and this was reflected in the solid forward prices being received for the autumn with March trading at 1845 cents, in April at 1825 cents and in May at 1820 cents.

Most exporters and processors are anticipating a continuation of the volatile conditions in the short term ahead of a correction back to a longer-term trend line. Much will depend on the impact of the sustained price rally on demand and the oscillating Australian dollar.

Anticipated trading levels

Month                                                19 micron                           21 micron

Feb                                                      2100 cents                         1840 cents

March                                                2080 cents                         1820 cents

April                                                    2060 cents                         1800 cents

May                                                    2050 cents                         1780 cents

June                                                    2030 cents                         1740 cents

Trade summary

March                  21 micron            1840 cents                        5 tonnes

April                      19 micron            2095 cents                        5 tonnes

April                      20 micron            1940 cents                        5 tonnes

April                      21 micron            1820/1825 cents               6.5 tonnes

May                      19 micron            2070 cents                         2 tonnes

May                      21 micron            1820 cents                         8 tonnes

July                       19 micron            2040 cents                       12 tonnes

Total      43.5 tonnes

Source: Southern Aurora Markets.


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