Wool market uncertainty highlights value in hedging strategies

Michael Avery, Southern Aurora Markets partner, November 19, 2018

VOLATILITY continued in the wool auction and forward markets last week, highlighting the value in growers implementing hedging strategies.

On the forward market the week opened with trade selling dominate, indicating that overseas buyers were yet to come back to the table and a support level yet to be found. Sentiment improved as the week progressed with buyers holding levels and sellers less aggressive. This played out into the spot auction which closed firmer and most qualities finishing the week unchanged retracing the losses of Wednesday.

Forward market volumes were solid with 70 tonnes traded with more interest in the nearby months. The 19 micron contract continued to trade out in November and December 2019.

Bidding into the early New Year is now coming through and likely to delivery reasonable hedging opportunities as we lead into the Christmas recess. The current uncertainty and volatility highlights the value of hedging strategies that sets price targets to take advantage of short term rallies.

Trade summary

Month                                                Micron                 Price c/kg            Tonnage

January                                              19                         2040                       5 tonnes

November 2019                               19                          1930                     10 tonnes

December 2019                               19                          1930                     10 tonnes

November 2018                21                          2000/2040         30 tonnes

December 2018                               21                          1990                      5 tonnes

May 2019                                          21                          1910                    10 tonnes

Total 70 tonnes

Projected forward trading levels for next week

Month                                 19 Micron c/kg                  21 Micron c/kg

Nov                                      2070                                    2040

Dec                                      2060                                    2020

Jan                                       2040                                    2000

Feb                                       2000                                    1960

March                                 2000                                    1960

Apr/June                             1940                                    1910

July/Dec                              1930                                    1850


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