First steps

“The first step in calculating which way to go is to find out where you are.” – Margaret Thatcher

The wool spot market trundled along with most indicators rising less than half a percent. The notable exception were the broader merinos (21.0 plus) which pushed up nearly two percent. The week finished at best steady with finer microns easing back as export orders where filled. Momentum is still there with the EMI posting a gain for the tenth consecutive session something not achieved since 2017. Movement has been steady with the cumulative rise 70 cents (5.6%).

The impetus has been similar on the forward markets, but volumes remain disappointingly low. Trades have centred around the spring and early summer with and accent on the medium microns which are currently sitting at an historically high level in the spot of 1508. Growers have taken advantage and hedged at 1500 for November 2025, a level not seen since March 2020. Tight supply of medium wools rather than increased demand has seen the basis (difference in price) between the key indices 19 and 21 contact to below average levels. Buyers reaction to this has been to bid the forward market a little more aggressively on the fine wools. Currently the bids are 20 cents over spot on the 19.0 contract (1575) and flat to spot on the 21.0 (1500).

Generally, the buying side has been more aggressive with exporters looking to hedge some of their forward sales, to keep a relatively balanced book, in this uncertain commodity landscape. Sellers remain perplexed with due cause. Although prices have improved throughout the season so have costs.

As to the future I will quote Donald Rumsfeld, former US Secretary of State.

“There are known knowns, things we know that we know; and there are known unknowns, things that we know we don’t know. But there are also unknown unknowns, things we do not know we don’t know.”

Although it is often said that the language is tortured the points are valid and reflects the process we need to go through when weighing up a strategy managing risk in the difficult time.

Known knowns – supply, current price, historical prices, current seasonal conditions.

Known unknowns – demand, (impacted by tariffs, general consumer confidence and global economic situation. Future environmental impacts and general geopolitical uncertainty.

Unknown unknowns are just that.

With a similar size offering next week and a steady dollar opportunity should arise for hedging. Current bidding for the balance of the season (to July) is relatively conservative at 20 cents under spot. This has yet to be truly test with little offering. April 21.0 is bid at cash but presently is attracting little attention. Spring and summer are bid 20 cents over cash for 19.0 (1575) and yet to be put to the test. 21.0 MPG for the same period traded at 1500 but no follow up bid or offering to gauge to verify the depth.

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