THE wool forward market pushed higher early in the week, pre-empting the consolidation in the spot auction sector on Wednesday.

After three weeks of steady decline that saw the key 21 micron index lose 120 cents, the auction market found a base to rebound to.

The forward markets were bid around spot market out to Christmas, but failed to attract much grower interest. Trading focus is predominantly in the New Year, with levels executed around last week’s spot level.

The highlight was June 2019 trading at 2165 cents per kilogram, which is over the 80th percentile for the last two years. Finer microns were well sought into the New Year, trading at 2510c/kg for 18 microns out to May 2019. This was a little surprising considering their fairly muted recovery in the spot auction market.

With some relief to the extended dry conditions throughout much of eastern Australia this last week, and rain forecast again next week, grower forwards enquiry lifted, but has yet to translate into firm offering.

Exporter and processor bidding has seen the invert in the later months, providing ample opportunity for growers to transfer some price risk down the pipeline.

We anticipate the spot auction market to consolidate the gains of this week in the short term, particularly in the medium wools. Just how much demand destruction and substitution will factor into the supply/demand balance remains to be seen in the run to Christmas.

Valuing certainty of return this season might prove more important than the fear of lost opportunity.

Trade summary

Month                                                Micron                 Price c/kg                           Tonnage

October                                             18 micron            2520 cents                         2 tonnes

January                                              21 micron            2200 cents                         4 tonnes

February                                            18 micron            2500 cents                         2.5 tonnes

March                                                21 micron            2155/2160 cents               7 tonnes

April                                                    18 micron            2495 cents                         4 tonnes

April                                                    21 micron            2165 cents                       10 tonnes

May                                                    18 micron            2510 cents                       10 tonnes

May                                                    21 micron            2130 cents                          2 tonnes

June                                                    21 micron            2165 cents                          5 tonnes

Total 46.5 tonnes

Projected forward trading levels for next week

Month                                 19 micron c/kg                                 21 micron c/kg

Oct                                       2350 cents                                        2210 cents

Nov                                      2320 cents                                        2200 cents

Dec                                      2270 cents                                        2180 cents

Jan                                       2230 cents                                        2160 cents

Feb                                       2220 cents                                        2140 cents

May/June                           2180 cents                                        2130 cents

July/Dec                              2150 cents                                        2050 cents

Source: Southern Aurora Markets.