Forward wool market trading volumes improve

Michael Avery, Southern Aurora Markets partner, February 5, 2021

THE forward wool market traded in better volumes this week as the spot auction closed with prices regaining most of their losses of Tuesday.

The soft close to Fremantle last week and a more risk on attitude of the general commodity markets had buyers wary of the pipeline’s reaction to the recent price surge. The modest retraction on Merino wools of 5 to 25 cents was felt most by the broader merinos with finer than 19 micron virtually unchanged.

The forward market executed flat to cash for the early months out to the end of the season as the buyers evaluated the risk after the surge in prices last week. Anticipated better supply on the rally has buyers wary, but still wanting hedge some of their forward positions. Just as importantly, the interest was maintained through the spring and into 2022 with more than 60 tonnes traded at an average premium of 30 cents over spot cash.

The 19 micron contract traded at 1550 cents and 21 micron traded at 1280 cents from September 2021 through to January 2022. Bids into the early spring at this premium to cash were filled this week, but some residue demand remains for Summer and out to June 2022.

The 19 micron contract bid from December to June at 1550 cents (cash 1530 cents), 5 tonnes each month, and the 21 micron contract bid from December to June at 1265 cents (cash 1243 cents), 5 tonnes each month.

We anticipate that opportunity to hedge will remain through next week, with small premiums likely to be paid in the prompt window from March to June and better premiums into the new season and 2022.

Volatility is likely to remain with us as demand ebbs and flows on all commodity markets. Key drivers continue to be global sentiment around vaccine roll-out timeframes and its impact on economic recovery in our key consumer markets.

Indicative trading levels next week

This week’s trades

February 28 micron                                       550 cents             5 tonnes

March 17 micron                                         2080 cents             4 tonnes

March 19 micron                                  1520/1530 cents          10 tonnes

May 19 micron                                             1540 cents                2.5 tonnes

September 19 micron                                 1550 cents              10 tonnes

October 19 micron                                      1550 cents             10 tonnes

October 21 micron                                      1280 cents             10 tonnes

November 19 micron                                  1550 cents                5 tonnes

November 21 micron                                  1280 cents             10 tonnes

January 2022 21 micron                             1280 cents             19 tonnes

Total 85.5 tonnes


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