IT was a disappointing week all round for the spot and the forward markets, although the week started firmly with reports of modest demand following last week’s retraction in prices.
Buyers grabbed nearby cover at small discounts to cash. The forward market gap between bid and offer widened as growers stuck firmly to cash levels out to June. Buyers unable to attract offshore business at these levels are bidding conservatively.
Early indications of the market finding a base were quashed on Thursday as the market continued its downward trajectory from the mid-February highs. Both the spot and forward markets were hampered by a stronger Australian dollar.
The market drivers remain unchanged, with balance between tight supply and sluggish demand the key to medium term direction. Risk remains high along the pipeline.
The challenge for all participants is the establishment of fair forward values, but growers are faced with conflicting factors. Firstly, a price trend that clearly, with the benefit of hindsight, debunked the forward discount that has been in place over the last few years. Opposed to that are the outright price levels forward. Although historically high and representing sound margin management, it does represent fair value.
In this high-risk landscape, some insurance and certainty are important. Forward levels from the exporters will be guided by the processors and their anticipation of the degree of demand destruction bought on higher prices, coupled with embedded costs of running machinery and building stocks.
We expect next week to track in similar fashion, with any demand interest likely to be reflected in better bidding in the forwards. Volatility in this tight supply environment the likely constant.
19 micron April 2285 cents 10 tonnes
21 micron March 2260 cents 5 tonnes
Total 15 tonnes
Month 19 micron c/kg 21 micron c/kg
March 2300 cents 2245 cents
April/May 2260 cents 2210 cents
June/July 2230 cents 2170 cents
Aug/Sept 2170 cents 2070 cents
Oct/Dec 2140 cents 2070 cents
Jan/Feb 2110 cents 2030 cents