FORWARD wool trading increased this week as the spot auction market improved strongly against a backdrop of lower commodity prices and increased risk perception.
The magnitude of Wednesday’s auction price rises — 100 cents across most Merino qualities — caught most by surprise, but translated into better forward levels and longer dated positions.
The forwards traded out to September 2021, but were also priced out to September 2022. Forwards on 19 micron traded to a high of 1570 cents for May and June 2021, which was a 35 cents premium to the close of the spot market.
The weaker close in Fremantle saw the prompt months lose momentum and bids at the end of the week fell back to 1500 cents. The spring and later new season prices remain solid and at a premium to spot. September, October and November traded Friday 19 micron at 1550 cents and 21 micron at 1280 cents.
Expectations for next week seemed to be adversely influenced by the Fremantle close. The traders are factoring that the market will give back part of its New Year gains. The fine Merinos (17-18.5 micron) have risen between 150-200 cents since the open and the medium Merino have lifted 100-130 cents. A retraction 50 to 80 cents seems likely.
We anticipate that the forward market will likely buffer some of this volatility, even taking into account that it ran ahead of the spot mid-week.
Indicative wool forward trading levels. Source – Southern Aurora Markets.
This week’s trades
Feb 21 micron 1270 cents 5 tonnes
April 21 micron 1260 cents 5 tonnes
May 19 micron 1550/1570 cents 21.5 tonnes
May 21 micron 1300 cents 5 tonnes
June 19 micron 1560/1570 cents 4.5 tonnes
Aug 19 micron 1500 cents 2 tonnes
September 19 micron 1450/60 cents 5 tonnes
September 21 micron 1300 cents 5 tonnes
Total 53 tonnes
Source – Southern Aurora Markets.
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