A SOLID week at Australia’s wool auctions has led to most Merino fleece microns have risen 30 to 40 cents.
The cheaper Australian dollar that did little for the market last week was given the credit for this week’s rise.
That theory could be tested with the dollar falling, rising and falling 2 percent on three consecutive days to finish where it started.
Whether this will further shake the confidence of exporters and processes that is already being tested by logistical and policy issues that are limiting consumer access is yet to be seen.
The forward markets by contrast have been relatively stable. Activity is mixed across the time frames. The short-term window has been relatively active around flat to a slight premium to cash with exporters looking to lock in margins for their short-term sales and growers wanting to add a little certainty in a generally risky landscape.
The medium-term view of the forward market is a little more bearish with the early spring trading at a discount for 19 micron contract, but a little closer to cash for the 21 micron contract.
The general feeling is that exporters and processors alike require a bit of motivation, by way of discount, to take on the current risk that the increased Spring supply will bring while the pipeline still comes to terms with the persistent challenges of transport delays, cost hikes and lockdowns.
We expect next week will deliver similar outcomes. There should be opportunities for growers to hedge in the May/June window at solid levels as buyers look to lock in margins in the ever-changing market conditions. A further lift in prices could trigger some further hedging activity in Spring, but will need to be reasonable to meet current grower levels.
This week’s trades
April 19 micron 1700 cents 10 tonnes
May 19 micron 1690 cents 5 tonnes
May 21 micron 1325 cents 3 tonnes
June 20 micron 1405 cents 7 tonnes
June 21 micron 1325 cents 5 tonnes
July 17 micron 2585 cents 2 tonnes
Aug 21 micron 1325 cents 5 tonnes
Sept 19 micron 1670 cents 15 tonnes
Sept 21 micron 1295 cents 2 tonnes
Total 52 tonnes
Anticipated wool forward levels