EXPECTATIONS of lower spot auction prices came to pass this week as the market drifted down for the third consecutive week.
Demand has waned as top makers continue to be unable to pass the current price structure down the pipeline.
The forward market levels remained relatively stable out into spring with trading levels only slightly off. The 19 micron contract traded at 2225 cents and 21 microns traded in September at 2130 cents and in October at 2115 cents.
These prices represent the 80th percentile for the last four years, giving growers a solid base into the new season and delivering some confidence for the processors. Exporters also are disinclined to sell the current market short at discount levels that processors demand without any cover.
The opportunity is ripe for growers for be price makers not price takers. Levels need to be set with short, medium and long term goals based around production costs, margin management and historical price structures.
We anticipate the market will continue to drift, but look to find a level. Retractions during the last part of this upward cycle have been in the order of 100 to 150 cents before finding a new base. The market for fine and medium Merinos has risen 200 cents since the new year and given up 40 percent of that rally to date. Analysts have the spot market losing a further 40 cents before looking for relief.
19 micron June 2250 cents 3 tonnes
19 micron September 2225 cents 10 tonnes
21 micron March 2270 cents 5 tonnes
21 micron May 2230 cents 5 tonnes
21 micron June 2250 cents 5 tonnes
21 micron September 2130 cents 5 tonnes
21 micron October 2115 cents 14 tonnes
Total 47 tonnes
Month 19.0 micron c/kg 21 micron c/kg
March 2300 cents 2245 cents
Apr/May 2285 cents 2210 cents
June/July 2230 cents 2195 cents
Aug/Sept 2200 cents 2120 cents
Oct/Dec 2160 cents 2100 cents
Jan/Feb 2150 cents 2050 cents
Source: Southern Aurora Markets.