Wool forward market sentiment turns as auction prices fall

Michael Avery, Southern Aurora Markets, October 19, 2018

MARKET sentiment underwent a complete turnaround in the physical auction and forward sectors this week.

The grower interest in the post-Christmas period that we saw last week, evaporated early in the week following the positive spot auction close last Thursday.

Trading was restricted to the nearby months of November and December, with exporters and processors dominating the selling. November opened the week trading at 2240 cents, but was sold down to 2180 cents on the close. We expect bidding to be cautionary, as traders weigh up the extent of the demand reduction bought on by the sustained high prices of the first two months of the new season, the ongoing trade war tension and the stubbornly firm Australian Dollar.

Volatility will remain as the only constant. Opportunities should arise for buyers and sellers as the balance of supply and demand fluctuates. The lack of consistency in the volume of bids and offers on the forward market reflects the under valuing of price certainty right along the wool pipeline. This is at odds with most agricultural commodity forward markets showing higher volumes in current high risk landscape.

Trade summary

November                                         18 micron            2470 cents                         5 tonnes

November                                         21 micron            2180/2240 cents           17 tonnes

December                                         18 micron            2450 cents                         5 tonnes

December                                         21 micron            2185 cents                         5 tonnes

Total 32 tonnes

Projected forward trading levels for next week

Month                                 19 micron c/kg                  21 micron c/kg

Oct                                       2280 cents                         2210 cents

Nov                                      2260 cents                         2175 cents

Dec                                      2210 cents                         2120 cents

Jan                                       2170 cents                         2100 cents

Feb                                       2170 cents                         2100 cents

May/June                           2140 cents                         2070 cents

July/Dec                              2110 cents                         2030 cents


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