WOOL forward market sellers cleared the last remaining bids that had provided attractive hedge levels for growers over the past month.
The 19 micron contract traded August and December at a 3 percent discount to cash.
The 21 micron contract traded at 1265 cents for August and 1250 cents for December. The spot auction 21 micron index fell to 1259c/kg clean, the lowest level since October 2105.
The fragile nature of all markets was once again on display this week. The spot market gave up the hard-fought gains of the last few weeks. Having starved off an 8pc rise in the Australian dollar over the last three weeks, most Merino qualities came off 30 cents at auction.
Where to from here
Indications are that the bumpy ride will continue. The market confidence around smooth sailing into an orderly restart to major economies was over-optimistic, to say the least. Recovery will come, but will probably have to endure setbacks in the form of second waves of the virus. How this plays out for the wool market is difficult to ascertain. In global markets, players looked to risk-off strategies that saw the US dollar and gold gain ground, due to their safe-haven status.
Short-term hedging opportunities for growers might be limited, as buyers are likely to reassess demand in the light of this week’s change in sentiment. This only highlights the importance for growers to be proactive in setting hedge levels to take advantage of the mood swings that will likely come up in this reactive landscape.
On a brighter note, it was encouraging to note fashion designers talking about a reset in thinking leading to a swing away from fast fashion and return to more sustainable, natural and ethical textiles. This can only be to the long-term advantage of wool.
Indicative forward levels
19 micron 21 micron
June/July 1320 cents 1220 cents
Aug/Sept 1310 cents 1200 cents
Oct/Nov 1290 cents 1200 cents
Dec/Jan 1280 cents 1200 cents
Trade summary this week
August 19 micron 1320 cents 2.5 tonnes
August 21 micron 1265 cents 5 tonnes
November 21 micron 1250 cents 5 tonnes
December 19 micron 1320 cents 2 tonnes
December 21 micron 1250 cents 5 tonnes
Total 19.5 tonnes