News

Forward wool trades increase despite auction result

Michael Avery, Southern Aurora Markets partner, April 8, 2022

Southern Aurora Markets partner Mike Avery.

THERE was more activity from buyers and sellers on the wool forward markets this week, with growers achieving desired hedge levels.

This was despite it being a week of contrasts for the auction wool market, with mixed reports from the drivers leading to varied opinions on the outcome.

Reports on the impact of the recent outbreak of Foot and Mouth Decease in South Africa were diverse and protocols put in place to mitigate the impact have not, to date, had the desired effect.

The result has been that wool sales have temporarily been suspended and an export embargo to China in place.

The potential of an interim supply squeeze had a bullish tone in the conversation at the start the week. This played out with the auction market opening Tuesday with solid gains across all Merino types.

This appeared to frank the base that the spot action had formed the last week after the steady declines throughout February and March had seen prices fall yearly lows.

Forward trades were restricted to the latter part of this season with 19 micron trading at a slight premium to cash through to the end of June.

Unfortunately, the spot auction rally was short-lived. Fresh lockdowns across key logistic and demand areas of China saw the modest and hard-fought gains of the last three trading days reversed on Wednesday.

Bidding in the front months of forward markets subsided, but interest in Summer and throughout 2023 remains with levels unchanged at around a 2pc discount to cash.

Pleasingly, the rally early in the week not only had growers able to hedge for the balance of the current season, but also bought out a new round of target levels for the Spring and Summer of next season.

Sellers seem to be targeting in a range from 1680 to 1720  cents for their opening hedge levels. This is certainly a little out of reach for buyers at this point, but is importantly giving them something to present to downstream clients.

This week’s trades

April 19 micron                                                 1700/1710 cents                             10 tonnes

May 19 micron                                                1700 cents                                       10 tonnes

June 17 micron                                                2550 cents                                          4 tonnes

June 19 micron                                                1700/1710 cents                             15 tonnes

Total 39 tonnes

HAVE YOUR SAY

Your email address will not be published.

Your comment will not appear until it has been moderated.
Contributions that contravene our Comments Policy will not be published.

Comments

Get Sheep Central's news headlines emailed to you -
FREE!