Solid wool auction results spur on forward traders

Michael Avery, Southern Aurora Markets partner, May 13, 2022

Southern Aurora Markets partner Mike Avery.

MOST wool micron groups rose 1-2 percent in another solid week at wool auctions, creating some forward trading interest.

Crossbred wool prices rose 4 percent, coming off their low base as the weaker Australian dollar continues to stimulate the market in general.

As mentioned last week, the wool market tends to be influenced but not ruled by currency movements. The chart below illustrates this.

The rapid rise in 2010/2011 occurred in the face of a 10pc increase in the A$ and the subsequent fall hardly attributed to the neutral move in the currency. This pattern prevails across the decade.

The current price situation has wools finer than 19 micron achieving four and five-year highs this week. This has bought out some nearby activity with growers happy to lock in good levels and exporters happy to hedge some short sales stimulated by uptrend.

Generally forward prices were a little better and volumes slightly improved. Buyers were looking to buy in May/June close to cash. Spring and Summer buying levels remain a little hesitant, with the 19 micron contract pegged firmly at the recent high of 1700 cents. The broader 21 micron contract attracted interest at 1325 cents — a new high for August — but buyers stubbornly resisted the opportunities offered by growers in September and October at 1330 cents and 1340 cents respectively. With the 21.0 micron contract offering historically the best value, this may likely change should the current trend continue.

Anticipated forward trading levels next week

19 MPG                               21 MPG

May to July 2022                                            1720/1740 cents               1320/1340 cents

August to December 2022                            1690/1700 cents               1310/1320 cents

January to July 2023                                      1690/1700 cents               1270/1300 cents

August to December 2023                            1680/1700 cents               1280/1310 cent

This week’s trades

June 17 micron                                 2670 cents                         5 tonnes

June 18 micron                                 2180 cents                         5 tonnes

August 19 micron                            1670 cents                         15 tonnes

August 20 micron                            1325 cents                         10 tonnes

September 19 micron                     1700 cents                         20 tonnes

November 19.5 micron                  1525 cents                         5 tonnes

January 2023 19 micron                 1700 cents                         5 tonnes

October 2023 21 micron 1295 cents                         10 tonnes

Total 75 tonnes



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