AUSTRALIA’S wool auction market had another strong week, with low supply pushing Merino qualities higher and forward price discounts being offset by the tight supplies.

Crossbreds reached record levels as processors looked to cheaper alternatives to feed their machinery.

Forward wool contract price levels traded higher as exporters looked to cover some risk even with their processor clients claiming that current levels are unsustainable.

Wool volumes were again light this week with growers only committing modest volumes. The forward discounts that the market is requesting, due to the lack of demand, is continually offset by the tight supply. This conundrum has hampered the market through the extended rise in prices. That said forward trade levels reached new highs with 19 micron contracts executed at 2285 cents for March through to 2240 cents for May.

Pleasingly, interest lifted in the spring and summer. The 19 micron contract traded at 2125 cents early in the week and bidding lifted to 2150 cents as processors looked to shore up some inventory. We expect to see interest at similar levels next week with continued demand in the pre-Easter as exporters look to cover short-term risk.

We are hoping that interest in the Spring and Summer remains, as this is when the potential and more significant risk lies for growers. Setting hedging targets based around the managing of return margins will be key in what we expect to be a volatile year in the commodity landscape.

Trade summary

18 micron June                                 2350 cents                          3 tonnes

19 micron March                             2250/2285 cents            17.5 tonnes

19 micron April                                 2250 cents                           3 tonnes

19 micron May                                 2240 cents                           7.5 tonnes

19 micron Nov                                 2125 cents                            4 tonnes

19 micron Dec                                  2125 cents                            3 tonnes

19 micron Jan                                   2020/2085 cents                  2 tonnes

21 micron April                                 2200/2220 cents               20 tonnes

28 micron May                                    975 cents                         10 tonnes

Total 70 tonnes

Projected forward trading levels for next week

Month                                                19 micron c/kg                  21 micron c/kg

Feb                                                      2300 cents                         2260 cents

March                                                2285 cents                         2240 cents

Apr/May                                            2270 cents                         2220 cents

June/July                                           2230 cents                         2170 cents

Aug/Sept                                           2180 cents                         2100 cents

Oct/Dec                                             2160 cents                         2080 cents

Jan/Feb                                              2130 cents                         2040 cents