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Forward wool markets energised by strong physical auction results

by Mike Avery, Southern Aurora Markets, 13 October 2017

FORWARD wool markets traded strongly this week, buoyed by continued strength in Australia’s physical auctions.

The 18.5 micron forwards broke new ground, trading at 2000 cents in November, 1955 cents in January and 1950 cents in April. The forward curve has flattened on all micron groups, with Merino qualities all showing spot prices of in excess of the 90th percentile.

Volumes improved marginally this week with 74 tons traded. This only represents only 1.6 percent of the underlying auction throughput this week. With prices at record spring levels, growers are yet to embrace the value of certainty over the fear of lost opportunity. Too much emphasis is being placed on the backwardation of forward curve and not on the absolute price being offered both pre- Christmas and into the New Year.

In dollar terms per bale autumn forwards represent 18.5 microns at $2400/bale, 19 micron at $2200/bale and 21 microns at $1900/bale. Pre-Christmas levels are at a 2pc premium to these levels.

Anticipated trading levels next week

18.5 micron         19 micron            21 micron

November                        2000 cents          1870 cents         1560 cents

December                           1980 cents           1850 cents           1550 cents

Jan to March                      1950 cents           1830 cents           1530 cents

April to June                       1930 cents           1810 cents           1500 cents

Trade summary

November                          18.5 microns       2000 cents      2.5 tonnes

January                                18.5 microns       1955 cents    10 tonnes

February                              19 microns          1820 cents      3 tonnes

February                              21 microns          1530 cents    10 tonnes

March                                   20 microns         1600 cents       2 tonnes

March                                   21 microns          1510/1530 cents  6.5 tonnes

April                                       18.5 microns      1950 cents       3 tonnes

April                                       19 microns          1800/1825 cents  16 tonnes

April                                       21 microns          1505/1530 cents  21.5 tonnes

Total 74.5 tons

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