THE Australian spot wool auction market continued its steady decline, with the AWEX Eastern Market Indicator dropping 21 cents/kg this week.
The market index recorded a loss for the eighth consecutive trading day, for the first time since June 2015.
The forward markets opened the week with bidding stable and held as the week progressed.
Growers were still remained reluctant to enter the market or set target levels. Little guidance was coming from offshore, with our major consumer, China, in the middle of their “Golden Week” festival.
Consumer activity in this holiday week provides a guide for the local Chinese processors of short-term demand and overall confidence. A weaker Australian dollar on Thursday saw buyers take a little cover above cash for November — 19 micron at 2350 cents and 21 micron at 2200 cents — and raise their bidding levels through to Christmas and beyond.
Activity on the forward markets has fallen to below 1 percent of the underlining clip for the last two months at a time when record prices were being set in the auction and forward levels into 2019 were being offered at the 90th percentile of prices for the last year.
While the market appears to be looking to find a level, volatility will most likely be common for the foreseeable future. Tight supply will definitely be a factor going forward, but fluctuating demand at these price points and generally uncertainty in the globally trade scene will have an impact.
We expect solid forward pricing out to March 2019 in the early part of next week from the exporters. Hopefully, this will provide good hedging levels for growers and allow exporters to engage more confidently with the downstream processors.
November 19 micron 2350 cents 2 tonnes
November 21 micron 2150/2200 cents 7.5 tonnes
Projected forward trading levels for next week:
Month 19 micron 21 micron
Oct 2280c/kg 2180c/kg
Nov 2260c/kg 2180c/kg
Dec 2220c/kg 2145c/kg
Jan 2200c/kg 2130c/kg
Feb 2200c/kg 2130c/kg
May/June 2150c/kg 2050c/kg
July/Dec 2120c/kg 2020c/kg
Source: Southern Aurora Markets.
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