VOLATILITY is becoming the new normal in the wool spot auction and forward markets.
The spot market fell nearly 100 cents on Tuesday giving back almost half of the of the hard-fought October gains in two trading days.
Exporters looked to immediately cover some positions around the new spot levels. November traded 19 microns at 1310 cents and 21 microns at 1145 cents, as buyers looked to secure margins even with the macro outlook softening.
Buyers continue to look price certainty over some of their commitments in this sawtooth market.
Activity on the buy side is somewhat muted as volatility along the pipeline has magnified the credit and contractual risks. These risks are being primarily shouldered by the local exporters.
We expect this rollercoaster pattern to continue, with the overall bias dictated by the medium-term macro-economic and health outlook. Rallies should still be viewed as opportunities to obtain some base level cover. Goal setting should be implemented ahead of time especially in the current uncertain times.
The recent spike in infection rates in Europe and the pending US elections will only add to the unpredictability of the market.
Near-term bidding was steady around cash to close the week, but lifted Thursday evening on better off shore enquiry. December 21 micron is trading over cash. There is some moderate interest on the bid side out into the New Year, but little or no indication of growers setting levels to draw the attention of exporters.
Indicative trading levels
19 micron 21 micron
Nov/Dec 1300 cents 1170 cents
Jan/Feb 1270 cents 1150 cents
Mar/Apr 1300 cents 1120 cents
May/June 1300 cents 1100 cents
This week’s trades
November 19 micron 1310/1335 cents 15 tonnes
November 21 micron 1145/50 cents 17.5 tonnes
December 21 micron 1190 cents 11 tonnes
TOTAL 43.5 tonnes