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.
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
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