“The only role of economic forecasting is to make astrology look respectable” – J.K. Galbraith
AUSTRALIA’S spot auction wool market last week continued the rally that began the previous week with most Merino qualities rising 2 percent in value.
The rise was even more impressive when you consider that the USD has weaken 2pc since the close of sales the previous week.
This reinforces the long-held belief that although the vast majority of wool is transacted in USD the driver of the market is the result of the balance between supply and demand.
Throughout this season supply has been steady, but demand was intermittent at best. Last week’s uptick in demand did more cover the negative impact of the fragile USD.
Activity in the forward market continued to disappoint. Exporter/trader bidding remained conservative to begin the week, but moved up ahead of auctions on Tuesday. That confidence was supported by the stronger market and improved offshore interest.
New forward levels set by buyers toward the close of the week have November and December priced marginally under spot and January and February flat to a modest premium. The lack of forward hedging offers from the growers continues to stagnant the market.
This week should provide hedging opportunities with exporters keen to cover some of their forward exposure. With risk still high on the agenda, hopefully the improved levels will prove attractive.
Source – Southern Aurora Markets.