FORWARD wool markets held their ground despite another difficult week for the wool market and commodities in general.
Fundamentals were again out the window with focus on major exporters’ currency fluctuations and the back and forth rhetoric between China and the USA.
Tariff increases on Australian barley and suspensions on some beef exports dominated local headlines.
The spot auction performed poorly with the finer wools most affected. The AWEX 19 micron index lost 50 cents for the week and 21 micron 20 cents.
Forwards tended to hold their ground with the spring discount to spot continuing to tighten (see charts below), but in light trading. The 19 micron contract that traded late last week at 1350 cents found continued bidding support into the spring at 1315/1320 cents, but saw no follow up grower selling interest to entice buyers to bid up. The 21 micron contract traded out to November at 1260 cents, but remained bid over at that level, even as the spot auction weakened to close at 1269 cents.
We expect interest to remain on the buy side as the forward curve continues to flatten. With limited forward orders into the spring and buyers’ willingness to factor no forward risk, even at these historically lower levels, it is difficult to see the curve move into premium.
Early indications are that some selling interest will return to the market at around 1340 cents for 19 micron and 1280 cents for 21 micron. Whether this will stimulate better bidding is probably going to be influenced by general economic sentiment and the volume and nature of the twitter barrage.
Anticipated trading levels
19 micron 21 micron
May/June 1330 cents 1285 cents
July/Aug/Sept 1320 cents 1275 cents
Oct/Nov/Dec 1320 cents 1260 cents
Jan/Feb/Mar 1310 cents 1250 cents
June 21 micron 1285 cents 5 tonnes
August 19 micron 1310 cents 3 tonnes
October 19 micron 1315 cents 5 tonnes
November 18 micron 1490 cents 5 tonnes
November 19 micron 1350 cents 10 tonnes
November 21 micron 1260 cents 5 tonnes
December 19 micron 1350 cents 2 tonnes
Total 35 tonnes