IT was another week of high volatility in the wool spot auction and forward markets last week.

The rise of Tuesday, fuelled by a lower Aussie Dollar, quickly turned Thursday. The strong bidding in the forwards all but disappeared as offshore interest failed to materialise as the week progressed.

The need to keep machinery running is always balanced by the ability to pass the raw material price along the pipeline. This balancing act plays out by demand shifting between fibres, origins and microns. This is probably best illustrated by the basis changes over the last few months.

To reduce the impact of the rise in prices we have seen the difference between 19 and 21 micron change from 350 cents to 130 cents since the Christmas recess. Similar shifts have been seen in the crossbreds, with 28 microns outperforming the finer microns as the price pressures impact Merino demand.

The current bull run in prices differs from previous peaks, as it has continued relatively unabated for 24 months. This could indicate that the impact on demand reduction could be less than previous dramatic rises that have led to just as dramatic falls. To put that into perspective new season (August) openings were:

Year                      19 micron            21 micron

2015                     1365 cents          1320 cents

2016                     1497 cents          1470 cents

2017                     1838 cents          1536 cents

Current                2098  cents         1967 cents

The rise has accelerated over the last eight months particularly in the 21 micron index.

The forward trade levels early in the week for 19 micron were 1960 cents and 21 micron were 1800/1855 cents. This reflects the difficulty for buyer and seller to judge fair value while minimising the risk to their respective businesses.

Anticipated levels next week

Month                                 19 micron                           21 micron

May                                     2040 cents                         1930 cents

June                                     2040 cents                         1910 cents

July                                      1950 cents                         1850 cents

Aug                                      1900 cents                         1750 cents

Sept                                     1880 cents                         1740 cents

Trade summary

May                      19 micron            2050 cents                        2 tonnes

May                      21 micron             1960 cents                        5 tonnes

June                      21 micron            1930/1940 cents          22 tonnes

August                  19 micron            1960 cents                        3 tonnes

August                  21 micron            1800/1855 cents              7 tonnes

August                  28 micron               860 cents                        4 tonnes

March 2019        21 micron             1660 cents                       2 tonnes

Total 45 tons