Stronger Australian dollar starts to impact wool forward trading levels

Mike Avery, Southern Aurora Markets, January 21, 2018

WOOL’S spot auction market finally succumbed to the pressure of a strong Australian dollar and high price levels, impacting forward trading levels.

The auction market has been on a steady and at times strong, rising trajectory, since the end of September, putting funding pressure on exporters and processors alike. All Merino microns 18 microns through to 22 microns fell 20 cents.

Forward markets traded steadily early in the week at anticipated levels with 19 micron reaching a high of 2140 cents and 21 micron hitting 1760 cents. Forward prices held during Tuesday and into Wednesday, but the falls in the spot market began to impact the forward levels particularly into the late autumn.

Bidding interest remains, but at slightly cautionary levels. Exporters are still looking to manage their risk as volatility is expected to continue throughout the year. We expect opportunities for growers to hedge, particularly in the Autumn window, to still be there, but possibly on restricted volumes.

Anticipated trading levels

Micron                   19 micron                             21 micron

Feb                        2100 cents                            1750 cents

March                   2100 cents                            1730 cents

April                       2080 cents                            1720 cents

May                       2060 cents                           1710 cents

June                      2040 cents                           1700 cents

Trade summary

March                   19 micron     2135/2140 cents                        18 tonnes

April                       19 micron     2115/2125 cents                           5 tonnes

April                       20 micron     1930 cents                                  17.5 tonnes

April                       21 micron     1750/1760 cents                       12.5 tonnes

May                     19 micron      2100 cents                                    2 tonnes

May                     19.5 micron   2025 cents                                    5 tonnes

May                     21 micron      1720 cents                                    2.5 tonnes

July                      18 micron   Put option, 2050 strike, 30 cents premium  5 tonnes

Total 67.5 tonnes

Source: Southern Aurora Markets.


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