LIGHT forward wool market bidding and continued price weakening at physical auctions is expected as exporters look to find processor levels.

Australia’s physical wool market had its largest decline since November 2018 this week.

Offshore sentiment has soured on the back of continued trade tension and the signalling of increased tariffs on Chinese goods exported to the United States of America.

Forward markets reacted in a similar pattern, but still traded at historically strong levels. The October 21 micron contract traded at 2130 cents. The four year 75 percentile for 21 micron is 2015.

Crossbred prices, having risen more than 50 percent since Christmas (28 micron 865 to 1320 cents), retreated 10pc this week. Growers hedged out to August 2020 at 1000 cents, to August 2019 at 1100 cents and to June 2019 at 1200 cents, prior to the most significant fall Thursday.

Where to from here is the question? Much will be driven by factors outside our control. Offshore sentiment and demand, already lowered by the current price structure, is being heavily impacted by the China/USA tariff battles and weak global growth.

China still accounts for 75-80pc of Australian wool exports. It consumes roughly half domestically, but relies on exports of tops, yarn and finished goods for the other half and USA is a major consumer.

Finding fair value for both buyer and seller in this high volatile environment will be interesting. Growers need to look at their cost of production and manage margin from there. Processors will be looking to estimate the likely end user re-entry point for new business and look to offset risk in the forwards.

Trade summary

19 micron June 2019                 2185 cents                           5 tonnes

October 2020                              2125/55 cents                   14.5 tonnes

21 micron June 2019                 2170 cents                            5 tonnes

August 2019                                 2130 cents                            5 tonnes

October 2019                               2130 cents                          14 tonnes

28 micron June 2019                1200 cents                            5 tonnes

August 2019                                1100 cents                            5 tonnes

January 2020                              1020 cents                          2 tonnes

August 2020                                1000 cents                          4 tonnes

Total 59.5 tonnes

Projected forward trading levels for next week

Month                                 19 micron            21 micron            28 micron

May                                     2150 cents          2130 cents          1100 cents

June                                    2150 cents          2130 cents          1100 cents

July/Aug/Sept                  2100 cents          2080 cents          1100 cents

Oct/Nov/Dec                    2050 cents          2030 cents          1050 cents

Jan/Mar 2020                  2050 cents          2000 cents            990 cents

April/June 2020              2050 cents          2000 cents            930 cents

July/Dec 2020                  2050 cents          1970 cents            900 cents