BIDS on the forward wool market sprang back into life with the auction market this week.
On the first day of auction sales, forward bids came right up to closing cash levels and flowed into early next year.
On Wednesday, the spot market moved further ahead and as yet bids have not moved. It will depend on how well the exporters’ phones have been ringing over the last couple of days as to whether we can get the next leg up in the forward bids.
Hopefully, with the Australian dollar continuing to be under pressure there will be some fresh business done. Not surprisingly, the offer side of the board is a bit thin after the long downward trend. Some nimble growers were able to get set on realistic offers after the first day’s rally.
Summary of trades
18 micron Dec 2020 1340 cents 5 tonnes
19 micron Oct 2020 1180 cents 5 tonnes
19 micron Oct 2020 1190 cents 5 tonnes
19 micron Jan 2021 1170 cents 5 tonnes
So, what to do from here? With the 19 micron Micron Price Guide over 1200 cents, prices are back in the $1500/bale region. Forward bids are getting near that into the New Year with 1170 trading in January.
Given the way the season has started and is forecast to develop, feed costs should be significantly lower than last year. Hedging target levels should be adjusted to reflect the potential lower cost of production. The better season is also reflected in the fine price premium. The 17-19m basis is now over 400 cents, which is well above the 10-year average.
Fundamentally, little has change in the outlook in the last week. It appears the market realised that it had overshot on the downside and that wool was cheap. We may well see it kick on in the near term although this correction will likely drag wool from store.
For growers, it is important to have a plan for incremental hedging. The last couple of weeks have shown that prices move quickly and without orders in the market opportunities will be missed.