FORWARD wool market prices traded down again last week in sympathy with the physical auctions.

Fine wool prices dropped to year lows with 19 micron values dropping to the levels of last May.

The 21 micron wools fell to the previous season low of November and the market drivers remain weak.

The demand destruction bought on by record prices of the last four years has been exacerbated by continued friction between United States and China, and anticipated poor global growth.

The sudden price realignment between the forward and physical markets has caught most participants by surprise as tight, drought-induced supply was thought to keep prices in a relatively stable.

Forward levels of the last few weeks have indicated a weakening bias into the spring, but off higher base levels. Spring 2019 forward levels have fallen, but not to the degree of the spot market. The physical market has fallen 150 cents since early May, while spring forward levels are back 80 to 100 cents.

The 19 micron forward contract traded between 2025 cents and 2060 cents in August and September. The 21 micron contract has traded out to October between 1980 cents and 2030 cents.

We expect trading next week to again focus on the spring and early summer with exporters looking to get limited cover around the 2000-cent level. Further falls in the spot market are expected with prompt business difficult to capture at current levels. The quicker we find a stable base in the auction spot and the forward market the better.

The volatility of the last two years has taken its toll along the pipeline. Finding a commercial sound price point is more critical than ever. Outside influences of drought, poor global consumer confidence and disruptive trade policies are adding to overall risk and sustainability of all those involved in the value chain. Greater importance needs to be placed on the use of forward pricing to mitigate and share some of that risk for both the buyer and seller.

Hopefully the upcoming G20 Summit in Japan this month will provide some confidence and easing of tensions.

Projected forward trading levels for next week

Month                                 19 micron            21 micron            28 micron

June                                     2080 cents          2050 cents          1040 cents

July                                      2100 cents          2060 cents          1040 cents

Aug/Sept 2000                  1970 cents          1040 cents

Oct/Dec                              1980 cents          1950 cents          1000 cents

Jan/June 2020                   1960 cents          1930 cents             930 cents

July/Dec 2020                    1950 cents          1920 cents             850 cents

Trade summary

19 micron August                            2035/2060 cents                15 tonnes

19 micron September                     2025/2040 cents               10 tonnes

21 micron August                            2030 cents                         15 tonnes

21 micron October                          1975/1980 cents               17 tonnes

28 micron August                            1080 cents                         10 tonnes

Total 62 tonnes