WOOL growers would be prudent to consider forward marketing into the New Year as global conditions and market indicators point to a continued decline in prices.

It was another positive week for the auction market, with all indicators registering modest gains and a small premium working its way back into the finer microns. Buyer interest before auction centred on the nearby months as exporters were keen to lock away anything of value from the forward market as well as the physical offer board. A couple of early trades set the sentiment for a positive week for wool.

The front of the board has solid bidding out to October against patchy offers in 19 micron and 21 micron. From a grower’s perspective, selling wool in spring above 2000 cents is usually a no-brainer. The challenge comes from seeing it higher earlier in the year. Having realistic offers up against bids helps exporters selling forward, knowing they are able to offset some risk through the forwards. For growers, it is always easier to sell into a rising market than to be chasing bids on the way down. While the auction market is in recess the exporters are still conducting business and usually keen to offset some risk onto the forward market.

So while it is sensible for growers to consider hedging spring exposures around market levels, looking at covering New Year sales is also prudent. Analysts continue to highlight the current poor global economic conditions, wool’s current overvalued position in relation to competing apparel fibres and the historic cyclic nature of the wool market, as indicators point to a continued decline in prices into the New Year.

The only way of ensuring you will participate in any forward business is by having orders in the market. This week saw April 2020 trade at the same level as October 2019 micron for 21 micron, at about 130 cents under the cash rate. For a nine-month forward that is a reasonable discount. Witness the last couple of months to see just how quickly value can be taken out of the market.

Projected forward trading levels for next week

Month                                 19 micron                           21 micron                           28 micron

August                                 2020 cents                         2000 cents                         1000 cents

September                         2000 cents                         1975 cents                           990 cents

October                              1950 cents                         1925 cents                           970 cents

Nov/Dec                             1930 cents                         1905 cents                           960 cents

Jan/June 2020                   1900 cents                         1875 cents                           930 cents

July/Dec 2020                    1850 cents                         1825 cents                           900 cents

Trade summary

20 micron                           August 2000 cents                       7.5 tonnes

21 micron                           September 1975 cents                  5 tonnes

October 1900 cents                     18 tonnes

April 1900 cents                            5 tonnes

28 micron                           December 955 cents                    2.5 tonnes

Total 38 tonnes