Wool Market Reports

Forward wool marketing is an avenue for risk reduction

Simon Hood, Southern Aurora Markets, February 17, 2020

BUYERS and sellers in the forward wool market retreated to the sidelines as continued uncertainty in the auction room kept players conservative.

With bid/offer spreads wide, there was little chance of any forward business being done as exporters were more focussed on dealing with the short-term impacts of delayed shipments and large pass in rates.

Nevertheless, the auction room held up remarkably well given the price movements in some of the other internationally traded commodities.

For growers the thought process needs to be longer term. The macro conditions of global demand remain reasonably good – coronavirus aside. Recent rain will likely see a steadying of the local supply shrinkage assuming good follow up autumn rains. This will potentially flow through to the micron price relativities as supply moves down the micron curve.

Sheep meat demand is unlikely to wane, so wool prices will need to compete with the protein buyers – witness the significant jump in sheep prices in the last week.

In the short-term, there will be a build-up of wool in brokers’ stores from withdrawals and pass-ins, balanced against a pipeline that will have supply gaps — plenty of uncertainty.

A “normal” year would favour prices rising seasonally until Easter and then trailing off. We haven’t had a normal year for some time.

For growers, the best action is to focus on the things you can control, with forward sales being one avenue of risk reduction. Prices are likely to stay volatile in the short-term which may provide some medium-term hedging opportunities. The only way to capture these moves will be to have orders in the market as opportunities may be short-lived.

Source: Southern Aurora Markets.


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