Southern Aurora Markets partner Mike Avery.

“True genius resides in the capacity for evaluation of uncertain, hazardous, and conflicting information.” – Winston Churchill.

AUSTRALIA’S spot auction wool market resumed after the one-week Easter recess with no more clarity or direction than before the break.

Buyers and sellers were a little more cautious, resulting in an easing of prices of between 1-2 percent and a passed-in rate lifting significantly for the first time this year to more than 15 per cent.

The forward market offered little or no direction with the only trade going through being November for 21 micron at 1455 cents, a slight discount to cash. The nearby window — May and June — is conservatively bid around 3pc under spot and offered flat. Spring buyers are absent with sellers maintaining their focus on the 21 contract flat to cash.

The lack of liquidity in the forward market for the last 12-18 months raises the question of its viability and more over its accuracy and value to the pipeline. Conventional opinion suggests a forward market needs to be trading around 5pc of the underlying physical market to provide pertinent forward signals to industry participants. Annual turnover is running at less than 1pc.

A recent article on the subject by Andrew Woods suggested that a liquid forward market would be nice to have in the wool industry; we just have to work out how to make one work. Where this problem sits among the myriad of issues most markets not just wool have to address is the vexing question.

Buyers and sellers populating the forward market with prices is a good starting point, but easier said than done. As suggested by Churchill, navigating the uncertain, conflicting and every changing information requires true genius.

Hopefully, the uncertainty will dissipate over time and the pipeline can be reinvigorated by demand. Supply will continue to be an issue as we move through the balance of the season. With only a little over 30,000 bales on offer next week and the USD looking a little bit stronger, a steady if not dearer spot market should help bring some bidding back to the forwards.

Trades this week

21 micron November                                                     1455 cents                           14 tonnes

Source – Southern Aurora Markets.