FORWARD wool marketing activity is going longer-term as the auction market experienced another challenging series of sales last week.
The temporary embargo on South African wool exports to China caused a sharp reaction to a spot auction market that is already under short-term supply pressure. The volatility that has been consistent over the last year continued, with the stand-alone sale in Melbourne rallying strongly on Tuesday, with Chinese indent buyers dominating. This enabled growers who had orders in the market to fill their forward hedges.
The auction price rally held on Wednesday, with all centres aligning as Sydney and Fremantle matched Melbourne levels. The spot auction market closed Thursday irregular as forward orders failed to eventuate, and the market gave back half of the earlier gains.
Forward activity was highlighted by 19 microns trading out almost two years to January 2021 and the continued interest in the spring and summer of 2019/2020 cents. The June 21 micron contract peaked at 2260 cents and 28 microns traded at 1000 cents, a new forward high.
Forward levels next week are a little hard to predict. Buyers are expected to be a little cautious having had to absorb another round of record levels at auction. Middle Merinos (20 microns and coarser) and crossbreds, breeched records set back in September 2018. With 50,000 bales on offer next week the ability of the market to hold at this level will be tested.
The supply of good quality medium micron wool will again be limited. The impact of demand destruction, indicated by the poor first half export figures (down 20 percent), will be the key in the short to medium term direction of both the spot and forward markets. Early indications are that the autumn forward levels will hold around 2280 cents for 19 micron and 2250 cents for 21 micron through May and June. Interest on crossbreds is maintained at 1000 cents for 28 micron and 900 cents for 30 micron from March through June.
19 micron May 2310 cents 10 tonnes
19 micron June 2260 cents 3 tonnes
19 micron Oct 2180/2260 cents 30 tonnes
19 micron Nov 2180/2225 cents 25 tonnes
19 micron Dec 2125 cents 3 tonnes
19 micron Jan 2020-2150/2155 cents 7.5 tonnes
19 micron Feb 2020-2200 cents 7.5 tonnes
19 micron Oct 2020-2075 2 tonnes
19 micron Dec 2020-2075 2 tonnes
19 micron Jan 2021-2075 2 tonnes
21 micron Feb 2290 cents 2 tonnes
21 micron June 2240/2260 cents 4 tonnes
21 micron Oct 2100/2150 cents 5 tonnes
21 micron Nov 2100/2150 cents 5 tonnes
21 micron Dec 2100 cents 2.5 tonnes
28 micron May 998 cents 6 tonnes
28 micron June 1000 cents 4 tonnes
Total 117.5 tonnes
Projected forward trading levels for next week
Month 19 micron c/kg 21 micron c/kg
Feb 2330 cents 2300 cents
March 2300 cents 2260 cents
Apr/May 2300 cents 2250 cents
June/July 2280 cents 2250 cents
Aug/Sept 2180 cents 2100 cents
Oct/Dec 2160 cents 2080 cents
Jan/Feb 2150 cents 2040 cents