News

Forward market trades limited to fine wools

Guest Author, April 29, 2022

Southern Aurora Markets partner Mike Avery.

THE myth that currency drives the wool market was once again shattered this week.

The US dollar has risen 4.5 percent against the Australian dollar over the Easter recess.

It was hoped that this would stimulate the market after the disappointing March series of auction sales were followed by a lacklustre run up to the recess.

Although most qualities were marginally dearer in Australian dollar terms, all fell in US dollar terms, with the benchmark Eastern Market Indicator down US40 cents for the week to drop below 1000-cent mark for the first time since January.

Forward market volumes remain frustratingly low with price levels relatively stable. Activity was limited to the finer wools, with trades spread across winter into early spring relatively flat to cash.

Buyers are still wary of the risks as we move forward. Offshore customers continue to be cautious committing too far forward with logistical and pandemic concern still in the front of their minds. This mentality on risk has not impeded bidding into 2023 as buyers look to hedge long-term positions, but understandingly tempered pricing.

The 19 micron contract is bid at 1650 cents throughout 2023 and this level represents a 2.5pc discount to cash and sits in the 65th percentile of prices for the last decade.

Next week, we anticipate much of the same. Hopefully, the lower dollar will stimulate better export activity, but the headwinds are the same. Buyers will hopefully be looking to hedge some short and medium-term sales and present growers with some opportunities.

We expect these will be at best around cash with modest discounts into the spring. Valuing price certainty the well-worn theme for the week.

This week’s trades

May 19 micron                                                1690 cents                        5 tonnes

July 19 micron                                                1680 cents                         5 tonnes

July 19.5 micron                                             1530 cents                         2 tonnes

Aug 19 micron                                                 1680 cents                         5 tonnes

Sept 19 micron                                                1670  cents                       10 tonnes

Total 27 tonnes

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