Volatility and risk converge in the wool market

Michael Avery, Southern Aurora Markets partner, April 3, 2020

VOLATILITY and risk came back to the wool market with a bang this week.

The prices at the auction came off at a rapid rate and triggered strong selling interest again in the forward marker.

For the second week in a row the spring and summer period dominated the trade window. The forward market traded down 100 cents with 19 micron executed at 1440-1450 cents in September and October. In the auctions, the 19 micron index was quoted down 170 cents for the week, falling 110 cents on Tuesday and 60 cents on Wednesday.

What were termed disaster insurance levels at 1520-1550 cents last week on the forwards now look like sound hedging as the 19 micron index dipped below 1500 cents for the first time in four years.

‘Where do we go from here?’ is the question on the lips of buyers and sellers. The unprecedented volatility has seen prices move more than 30 cents in a single day for the tenth time this year.

In the 19 micron category, the forward market closed Wednesday evening bid at 1370 cents and offered 1450 cents throughout the spring, having traded to a low of 1415 cents in January and February 2021.

Growers looking for price insurance into the spring will need to target close to 1400 cents to attract the attention of downstream processors in the current environment. Hopefully, buyers will be looking at the technical charts to find long-term support levels.

Anticipated trading levels

19 micron                            21 micron

April/May/June                                1450 cents                          1400 cents

July/Aug/Sept                                   1400 cents                          1360 cents

Oct/Nov/Dec                                    1400 cents                          1340 cents

Jan/Feb/March                                1380 cents                          1320 cents

Trade summary

September 19 micron                     1440/1450 cents                15 tonnes

October 19 micron                          1440/1450 cents                  9 tonnes

January 2021 19 micron                 1415 cents                            5 tonnes

February 2021 19 micron               1415 cents                            5 tonnes

Total 34 tonnes


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