THE wool forward market traded at a premium to cash ahead of the spot auction opening on Wednesday this week, bringing further selling interest from growers and traders.
Trade buyers covered the quantity out to May with more than 50 tonnes executed flat to cash as they looked to reposition their forward books.
Buyers and sellers remain wary of the unprecedented volatility of the last twelve to eighteen months. Volumes going through the forward market remain light as the pipeline focuses on immediate and potentially more pressing issues. The challenges faced by growers of the ongoing drought and recent bush fires have been well-documented.
The tension around the ongoing tariff saga between the United States and China has been replaced by the uncertainty that surrounds the coronavirus outbreak. Disruption on the wharves in China has caused delays in the supply chain and is adding pressure to the already stretched financial capabilities of the exporter fraternity.
To date, these recent disruptions to the supply/demand flows have yet to impact the spot market. The firming trend continued throughout the auction week, with the Fremantle sale closing dearer than the eastern states.
Forwards closed on their high with 21 microns for May trading at 1810 cents. The 1800 cent index level represents a gross return of around $2250 per bale for fleece and has been the trigger level for grower selling. Buyers have shown intermittent interest at and slightly above these levels, but only in the near-term. The pricing stand-off into the new season spring and summer remains. Exporters are getting few pricing signals offshore, while growers focus on the environment and stock management.
Predicting activity for the next few weeks is a challenge for all in the pipeline. The spot market remains firm, but incredibly vulnerable. The conversation around the build of domestic stocks and the potential impact of any changes to selling flows varies. The only consensus being that the market would be unlikely to meet the challenge of any major inflow of wool hitting the supply chain.
Trading levels last week
February 21 microns 1780 cents 10 tonnes
March 19 microns 1825/1830 cents 17.5 tonnes
March 21 microns 1805 cents 5 tonnes
March 28 microns 880 cents 11 tonnes
April 21 microns 1785 cents 5 tonnes
May 19 microns 1825 cents 15 tonnes
May 21 microns 1810 cents 5 tonnes
Total 68.5 tonnes