Wool Market Reports

Eastern Market Indicator contract set for wool forward trading

Guest Author, March 15, 2024

Southern Aurora Markets partner Mike Avery.

IT was interesting and eventual week for the spot auction market, after the southern states’ public holiday split the start to the auction series.

Sydney and Fremantle sales provided a positive start for the third consecutive week and followed the sound results of last week.

The buyers in the forward market reacted by lifting their post-Easter levels to a slight premium. Sellers remained reluctant to engage expecting the recent positive momentum to be maintained.

With all three centres selling Wednesday, the market lost thrust and gave ground. The week finished with all microns showing net losses.

The forward market traded just once, with April executed at 1375 cents, almost 40 cents over the close of 1336 cents. This trade highlights not only the importance having target levels but also the unpredictable nature of the current environment.

The macro influences on the market remain erratic at best. Market change will likely be influenced more by short-term fluctuations of supply and demand, currency, and logistic movements. Any change in longer term direction will rely on a shift in confidence in the global economy and consumer support. That will require positive change around the current regional conflicts and a return to more stable logistical environment.

The highlight of the forward market was the Australian Securities and Investments Commission approval of an addition to the exchange suite of products – an Eastern Market Indicator (EMI) contract.

Hopefully this will help improve liquidity by attracting participants outside the general wool pipeline who are looking for exposure and investment in the commodity.

Next week’s roster of 45,000 bales will provide a similar test for the market. We expect buyers will remain keen to hedge their forward sales and deliver some certainty to their positions.

Levels will probably start more conservatively than the premiums of this week. Buyers will need to see a more proactive response from sellers or improvement in demand signals. Valuing certainty over the fear of lost opportunity will be the key.

Source – Southern Aurora Markets.


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