Spring hedge levels break new ground in forward wool markets

Michael Avery, Southern Aurora Wool, May 5, 2017

IT was another positive week on the forward wool markets.

There was modest trading in the prompt months, with most grower interest centred around the spring and early summer. Stimulated by the strong spot market, which saw new highs across most Merino types, spring hedge levels broke new ground.

The 19 micron index traded through 1800 cents and 21 microns went to 1430 cents out to October. The strong spot also drew out buying interest on the finer microns into 2018.

Growers were able to cover August 2018 19 microns at 1650 cents. Although this represents a significant discount to the spot price, it is important to note that it is higher than any daily index price for 19 microns for the August to December period.

Interest in options continued this week, with growers looking to manage the volatility by locking in guaranteed minimum prices. High volatility meant that growers needed to look at lower strike prices to keep premiums in the 30 to 40 cent range.

Trade summary

May         21 microns                1480/1500 cents                             9 tonnes

June         18.5 microns            Put Option 2035 strike 35 cents   2.5 tonnes

June         19 microns                1920 cents                                        5 tonnes

June          21 microns               1475/1480 cents                           10 tonnes

June          22 microns               1415/1420 cents                           11.6 tonnes

July            18.5 microns           Put Option 2000 strike 40 cents   2.5 tonnes

July            21 microns               Put Option 1480 strike 35 cents   3 tonnes

Aug            19 microns               1800/1850 cents                           12.5 tonnes

Aug             21 microns              1420/1435 cents                             9.5 tonnes

Sept            19 microns              Put Option 1725 strike 40 cents   5 tonnes

Sept            21 microns              1420/1430 cents                             4.5 tonnes

Oct              19 microns              1810 cents                                        7 tonnes

Oct              21 microns              1425/1430 cents                           23 tonnes

Jan 2018     19 microns             1680 cents                                         2.5 tonnes

Feb 2018    19 microns              1675 cents                                         2.5 tonnes

Aug 2018    19 microns              1650 cents                                         5 tonnes

Total 115.1 tons

Source: Southern Aurora Wool.


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