News

Forward wool trading suffers lack of depth as auctions struggle

Michael Avery, Southern Aurora Markets partner March 10, 2023

Southern Aurora Markets partner Mike Avery.

AUSTRALIA’S wool auction market has continued its downward trend, with all Merino qualities losing ground this week.

The decline has been a combination of stronger supply, especially in the last month, and sluggish demand.

The market has worked through what is anticipated as the peak supply period. Result has been a fall from the early February highs of about 5 percent with the broader qualities most affected. The 19 micron micron price guide indicator has decreased 80 cents to 1696 cents. The two-year average is 1664 cents). The 21 micron indicator has dripped 100 cents to 1448 cents, but is still well above the two-year average of 1334 cents.

The forward trading market again suffered from a lack of depth. Buyers started the week with expectation of a steady spot. Bids were about 1pc under spot for the nearby shipping window. Those bids failed to attract the attention of growers in any meaningful volume and soon disappeared once the prospect of a solid market were dashed. The only nearby trades were 21 micron in March executed at 1460 cents, 12 cents above the closing cash.

The “where to from here” will likely be dominated by the macro-economic factors. The currency influence will be secondary as we saw again this week, with a 2.5pc strengthening of the USD unable to stop the spot market decline.

Activity post the China lockdown remains sporadic. The general positive rhetoric has not yet translated to encouraging market action with most commodities under performing in the main.

Cotton has fallen around 6pc in USD terms since early New Year highs, but thankfully Aussie growers have been somewhat sheltered in AUD. The wool-to-cotton ratio remains in its recent range around 5 to 1.

It is expected bidding will remain conservative to start the week unless the weekend brings out better demand signals. We envisage bidding to be once again just slightly under cash at 1680 cents for 19 micron and 1440 cents for 21 micron into the March/April export window.

Spring interest is very haphazard, but full year 2024 pricing remains resolutely at 1670 cents for 19 micron, slightly above the two-year average.

This week’s trades.

March 21 micron                                                           1460 cents                         10 tonnes

September 28 micron                                                    410 cents                             2.5 tonnes

Total 12.5 tonnes

HAVE YOUR SAY

Your email address will not be published. Required fields are marked *

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!