AUSTRALIA’S wool auction certainly delivered disappointing results this week and as Martin Luther King Jr. said: “We must accept finite disappointment, but we must never lose infinite hope.”
With a solid close and lighter volumes in the absence of a Western Australia sale, expectations were for a base being formed in the spot market.
The lack of follow up offshore business was not helped by a stronger Australian dollar.
As the chart below clearly illustrates, the AUD/USD rate is not the driver of the market. A weak AUD will at best dampen the impact of falling markets or accelerate the rises. This is confirmed in the shorter term by the seasonal highs in February occurred with the AUD ranging from US69.5 to US70 cents.
A closer look at the last decade would again show the cyclic nature of the wool market, in this case the 17 and 19 microns.
Interestingly, the only trades on the forward markets this week were in 2024, with January and February trading at 1550 cents (cash closed at 1521 cents), highlighting the value of certainty for the forward buyer and seller.
The front months continue to be bid cautiously, with buyers concerned with the lack of positive signals. We expect interest to come forward for the Spring and late Summer as we draw close to the end of the selling season.
While fair value is challenging to predict at this point it is difficult to see a premium to be had in the seasonal peak volume of spring.
This week’s trades
January 2024 19 micron 1550 cents 5 tonnes
February 2024 19 micron 1550 cents 5 tonnes
Total 10 tonnes
Source – Southern Aurora Markets.