The longest time
Wool Market Update 12th May
A week is a long time in all markets these days. Consistent falls plagued almost all agricultural commodities. A strong AUD had supported the wool market after the Easter recess providing a flat to premium curve on the forward market and confidence that we were moving through the strong supply period unscathed. The hard-earned gains of the previous five auction sessions were give back this week. Demand remains steady at best and the market remains vulnerable to outside influences. These came thick and fast with concerns over USA finances and poor Chinese trade figures headlining the general negative tone of global reports.
The forward markets pre-empted the softer auction market with sellers taking out the best bids available prior to the opening Tuesday. Majority of trades centred around the strong bidding on the 19.0 contract. Twenty tons were executed at 1660 (47 over the close of 1613) in December and the first quarter of 2024. Bidding for the remainder of 2024 and the first half of 2025 is still at a 1% premium to cash at 1630 reflecting the weakness in the spot market.
Generally, sellers remain resilient with passed in rates at auction high and forward levels not discounted.
It is difficult to see the situation changing with close to 50,000 bales on offer next week. Exporters continue to struggle under the financing pressure of extended cycle times (purchase to payment) with dumps and packers continually stretched. Front months are now bid around 30 under cash and offered flat to cash. Spring growers are looking to hedge flat to cash but exporters and processors are unable to match and are yet to show their hand to any degree.
Currency movements will only mask the general trend which looks to continue in a negative direction. The wool market will remain at the whim of macro-economic and political sentiment which continues ebb and flow. Reducing risk and providing margin certainty seems to be on the agenda but both buyer and seller are finding it difficult to ascertain fair value.
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