Forward wool traders take risks at discounted rates

Michael Avery, Southern Aurora Markets partner, August 30, 2019

FORWARD wool markets traded solid volumes to start the week, with levels indicating continued price easing in a market looking to find support.

Exporters were willing to take on some risk at moderate discounts to cash.

Most activity was confined to pre-Christmas, but modest trading in January and February was the first positive glimmer in what has been a difficult August for everyone in the wool pipeline.

Commodity markets have reacted to the intensified trade tensions between USA and China. Consumer confidence has been on the wane, but the impact on wool prices has been masked, particularly in the medium wools, by the drought-induced shortfall in supply.

As Mecardo analyst Andrew Woods pointed out in his report this week: “Polyester (and cotton and viscose) have been plumbing five-year lows, while Merino wool prices were trading at 70th-90th percentiles.

“As of yesterday the 21 MPG rank was back at its 40th percentile in $US terms.”

China announced overnight that it would back down from further tariff escalation and urged the U.S to continue negotiations. How this feeds back into the market is the question on everyone’s lips.

Most traders view the current price correction has been overdone. Unfortunately, new export orders remain few and far between. More participation on the forwards, a low $A/$US exchange rate, a more conciliatory approach from both sides in tariff discussions, technical chart support levels and continuing tight supply all point to near-term price stabilisation. The timing of this support will be critical due to the magnitude and rate of the recent falls.

September 19 micron                     1655/1665 cents            15 tonnes

September 21 micron                     1620 cents                      30 tonnes

September 28 micron                       830 cents                       5 tonnes

October 21 micron                          1620/1625 cents             7.5 tonnes

October 28 micron                             850 cents                      5 tonnes

November 19 micron                      1640/1660 cents           20 tonnes

November 21 micron                      1600 cents                     15 tonnes

December 19 micron                      1640/1660 cents           12.5 tonnes

December 21 micron                      1600 cents                        5 tonnes

January 19 micron                           1610 cents                       3.5 tonnes

January 21 micron                           1570 cents                       3.5 tonnes

February 19 micron                         1610 cents                        5 tonnes

Total 127 tonnes


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