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.

Trade summary

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.