Royal Easter flop

Fibre | 28th March 2024 | By Mike Avery

Wool Market Update 29th March 2024

Another disappointing week on the spot auction. Not even the signature Royal Easter Show venue could stop the rot. Merino qualities lost between one and two percent for the week. Crossbreds were generally unchanged, and cardings continue to remain solid.

After trading on Monday April 2024 18.0 relatively flat to cash the forward market suffered from discouraging demand signals in the short and medium term. This translated into little or no bidding or offering early in the week. Mid-week saw the return of the market marker in the nearby months. Although the spreads were relatively wide there no activity to narrow them in.

On a more optimistic note, bidding in 2025 and 2026 continues to consolidate. March 2025 19.0 traded at 1470. This is 5 percent over the spot of 1402. Interest remains throughout 2025 and out to June 2026 at 1470. There are two small outlier bids of 19.0 at 1500 and 19.5 at 1450 (approximately 100 over spot) for January 2026.

This activity highlights the potential importance of a liquid forward market. It is generally accepted that a forward market requires volumes around 5% of the under lying commodity to give valuable robust market signals. We are currently running less than one percent of the underlying. To put that into perspective on a standard auction week of 40,000 bales we would need to see 2,000 bales or 250 tons of activity to deliver accurate signals and opportunity to the pipeline.

Whilst it is unlikely in the current price environment to see a marked increase in activity now is the time increase awareness and understanding. Price Risk Management has again become topical with vast swings in many rural commodities. Unlike some other commodities wool has an independent, robust, and dependable auction reporting system off which hedge products are settled. Education all along the pipeline is required if we are to build the liquidity that will convey the correct messages to the market.

Thus endth the sermon. Have a happy and safe Easter Recess. Sales recommence week beginning the 8th April.

This report is provided by Southern Aurora Markets, please subscribe to their service or contact them for a chat about any price risk management needs in fibre markets.


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