IN a season where volatility has reigned supreme, this week’s spot auction wool market was overall quiet and stable, with the exception of the crossbreds, and prices mostly realigned after last week’s dramatic rise.
The forward market was a little dull as sellers’ expectation of a continuation of the relief rally were quickly quashed. Interest from the buy side waned as the medium micron lost momentum and forward interest from processors still lagged behind cash. With consumer confidence receding and ongoing trade concerns, the ability for the market to hold at this current level is doubtful.
The interest in the crossbreds continued with 28 micron and 30 micron bid over cash early in the week and trading at 740 cents for 30 micron. Bids remained solid, lifting as the spot prices rose, with January to June bidding closing at 880 to 900 cents for 28 micron. There were solid bids on the 21 micron contract with 2050 cents on the bid out to June.
The retention of bidding levels one and two years out — 19 micron at 1930 cents for November 2019 and 1880 cents for November 2020 — gives rise to the confidence that a base will be formed well above the long-term 10-year average of 1470 cents for 19 micron and closer to the three-year average of 1840 cents.
A forward hedging strategy is important for all participants in the pipeline to reduce risk and increase confidence. Bringing growers and end-users closer together to share risk, manage margins and moderate volatility should be a collective goal.
Expectations remain that the last two weeks of auctions will follow a similar pattern, with buyers selectively filling commitments where necessary and avoiding holding stock over the break. The result will be varying differences on specific lots, with good style and high strength commanding premiums. The overall tone is expected to be moderate.
19 micron August 2035 cents 5 tonnes
30 micron January 740 cents 5 tonnes
30 micron February 740 cents 15 tonnes
30 micron April 740 cents 2 tonnes
Total 27 tonnes
Projected forward trading levels for next week
Month 19 micron c/kg 21 micron c/kg
Dec 2170 cents 2120 cents
Jan 2160 cents 2100 cents
Feb 2100 cents 2050 cents
March 2060 cents 2050 cents
Apr/May 2040 cents 2050 cents
June/July 2025 cents 2050 cents
Aug/Sept 1985 cents 1920 cents
Oct/Dec 1950 cents 1900 cents
Source: Southern Aurora Markets.