FORWARD wool markets pre-empted last week’s auction market fall, with growers and the trade selling early in the week.
Even in low supply the poor demand and current sentiment led to all Merino qualities in the physical auctions coming off 80 cents. The selection of medium wools (21 and 22 microns) was so limited that AWEX were unable to provide a Micron Price Guide (MPG) quote in the eastern states.
On the forward markets, the 19 micron contract traded at 2045 cents for August pre-auction, but slipped to 1985 by the week’s end. September and October traded early at 1950 cents, but had fallen to 1900 cents by the close Thursday. The pattern in bidding and trading on the 21 micron contract was similar. Bidding in the early spring months around 1950 cents was ignored. December traded at 1900-1920 cents and closed bidding at 1875 cents.
Opinions remain divided on the length and depth of the current spot market retraction. Major cycle times have varied in from 6-12 months and the retraction from 20-40 percent. Fundamental indicators are hard to establish, with exporters are finding it difficult to write early spring/summer business.
Processors are remaining on the sidelines, with concerns over the ongoing trade tensions freezing any action.
There is some speculative forward bidding in modest volumes. These levels indicate early stage support on 19 microns at around 1870-1900 cents for September to December and 1850-1880 cents for 21 micron.
These levels are 21pc and 23pc respectively under the peaks reached on those microns. The 19 micron contract peaked at 2462 cents in August 2018 and in February this year for the 21 micron contract. A break of these levels would point to a deeper retraction.
From a percentile point of view, 1900 cents represents the 62nd level for 19 micron and 1880 cents the 74th level for 21 micron. The difference (basis) between 19 micron and 21 micron is still predicted to remain tight.
The current auction market has 21 micron trading at a premium to finer microns due to the lack of supply. Forward bidding indicates that the fine wool premium will return with the better spring selection, but will remain modest.
Projected forward trading levels for next week
Month 19 micron 21 micron 28 micron
July 1930 cents 1900 cents 1000 cents
August 1920 cents 1900 cents 950 cents
September 1910 cents 1890 cents 930 cents
October 1900 cents 1880 cents 910 cents
Nov/Dec 1890 cents 1870 cents 900 cents
Jan/June 2020 1850 cents 1800 cents 870 cents
July/Dec 2020 1850 cents 1800 cents 850 cents
19 micron July 2025 cents 5 tonnes
19 micron August 1985/2045 cents 7.5 tonnes
19 micron September 1905/1950 cents 7.5 tonnes
19 micron October 1900/1915 cents 7.5 tonnes
21 micron December 1900/1920 cents 14 tonnes
Total 41.5 tonnes
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