THE wool forward market chugged along this week as the spot auction sector tried to cope with the uncertainty that has become the new normal.
Trade volume was slightly higher, but prices reflected the increased risk that uncertainty brings.
Forward prices mirrored the auction with spring levels, peeling back 100 cents.
Early in the week, buyers factored a spot to spring/new year price discount of 100 cents (1750 cents spot to 1650 cents forward for 19 micron). By week’s end, the spot auction 19 micron index had fallen to 1653 cents and the October 19 micron forwards were trading at 1550 cents.
Trade was restricted in the main to spring 2020 through to winter 2021. This is, in some part, due to the uncertainty around nearby supply chain issues and flow of letters of credit. The weakening Australian currency has seen the EMI fall 18.6 percent in US$ terms this week.
Just where we go next week is anybody’s guess. Much will depend on the containment measures being put in place, their effectiveness and their short-term effect on supply chain flows.
Looking at the forward market, we are seeing some demand into the spring at discounted levels. The 19 micron contract is bid at 1550 cents in September through to October.
Forward prices in the near-term window will likely be harder to come by as exporters manage cash flow, volatility and contract execution.
Anticipated trading levels
19 micron 21 micron
April/May/June 1600 cents 1570 cents
July/Aug/Sept 1560 cents 1500 cents
Oct/Nov/Dec 1550 cents 1510 cents
Jan/Feb/Mar 1520 cents 1480 cents
May 28 micron 855 cents 5 tonnes
Sept 19 micron 1650 cents 5 tonnes
Sept 21 micron 1605 cents 12 tonnes
Oct 19 micron 1550/1650 cents 15 tonnes
Nov 19 micron 1650 cents 5 tonnes
Dec 19 micron 1650 cents 5 tonnes
Mar 2021 19 micron 1650 cents 5 tonnes
May 2021 19 micron 1650 cents 5 tonnes
June 2021 19 micron 1650 cents 5 tonnes
Total 62 tonnes