FORWARD wool markets opened after the Easter recess, bidding well on the back of a weaker Australian dollar.
This confidence translated into a stronger auction market in $A terms (AWEX EMI up 17 cents to 1960c/kg), but down in $US terms (US EMI down 22 cents).
Most evident in the spot market was the lack of participation of the usually dominant Chinese indent buyers. Demand is still sluggish and medium term off shore confidence is low. This is leading to the spring still being discounted and nearby months flat to cash.
Grower selling is only sporadic, with the ongoing drought and production concerns clouding forward strategy decision making. The 21 micron contract traded for June at 2250 cents near cash (2260 cents) and in October at 2125 cents. This spring discount still places the price in the 80th percentile range of the last four years and reflects the current long-term view of the processors.
We expect forward levels to remain solid, with trading volumes again light. Sellers remain focused on the discount to cash rather than the outright level. Buyers are unable to commit to levels that the processors and consumers are still finding unpalatable. Evaluation of fair value remains difficult with the low drought-induced supply balance the demand destruction that is inevitable with continued high prices.
Increased forward flows will only come when both sides of the market value certainty above the fear of lost opportunity.
21 micron June 2250 cents 5 tonnes
21 micron October 2125 cents 14 tonnes
Total 19 tonnes
Projected forward trading levels for next week
Month 19 micron 21 micron 28 micron
May 2265 cents 2250 cents 1200 cents
June 2265 cents 2250 cents 1200 cents
July/Aug/Sept 2220 cents 2150 cents 1100 cents
Oct/Nov/Dec 2180 cents 2100 cents 1050 cents
Jan/March 2020 2150 cents 2080 cents 990 cents
April/June 2020 2140 cents 2000 cents 930 cents
July/Dec 2020 2100 cents 1970 cents 900 cents
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