Bank­ing on eas­ing back­fires in surge

Tasmanian Country - - THE STOCK REPORT -

THERE were 38,000 bales ros­tered for sale in all three cen­ters this week and the mar­ket opened with a bang across all mi­cron cat­e­gories.

The Eastern Mar­ket In­di­ca­tor has reached new highs in both lo­cal and US cur­rency terms and cross­bred types have surged higher.

Last week we were un­sure how the mar­ket would open after the re­cess with many in­flu­enc­ing fac­tors are at play. Hind­sight is a won­der­ful thing, and it has be­come clear China and In­dia were ex­posed with very low stocks and have had to meet the mar­ket.

Aus­tralian ex­porters tried to tell the ma­jor In­dian pro­ces­sors the mar­ket wouldn’t be cheaper but they were bank­ing on the open­ing sale be­ing soft. The pro­ces­sors made the de­ci­sion to with­hold in­dent or­ders for the first week, which meant they had to dou­ble their or­ders in a rel­a­tively small of­fer­ing this week. This is what has put the fire un­der this mar­ket.

I’ve touched on how in­dent or­ders work be­fore but in a nut­shell they are quan­ti­ty­based or­ders. For ex­am­ple, some­one want­ing to buy three con­tain­ers of a 20-mi­cron type for the week can sim­ply give in­struct buy­ers to pay mar­ket rate. If the mar­ket keeps ris­ing, their lim­its rise and away we go. Throw an ac­tive China into the mix and there’s not enough wool to go around.

Word out of China is they have fol­lowed the mar­ket up so after Wed­nes­day’s strong close new busi­ness was done at the higher level, point­ing to some sus­tain­abil­ity at least for the im­me­di­ate term.

The third dom­i­nant player, Italy and Europe in gen­eral, is re­port­edly en­joy­ing im­proved mar­ket con­di­tions for yarn and fab­ric sales. This is an­other very good sign, par­tic­u­larly for Tas­ma­nian qual­ity.

The only cat­e­gory to buck the trend is card­ings. They were cheaper last week and un­changed this week.

How­ever, his­tor­i­cally they are still at very good lev­els.

To the prices: 18 mi­cron closed on Wed­nes­day at 2165c clean, 21 mi­cron at 1654c and 28 mi­cron at 855c – a stag­ger­ing 10 per cent gain for the cat­e­gory in less than two weeks.

We are see­ing a lot of for­ward ac­tiv­ity for 12 months out as grow­ers lock in a por­tion at good money. Even fac­tor­ing in a rel­a­tively large dis­count to the spot mar­ket the for­ward money is very at­trac­tive com­pared to the long term av­er­age.

There are only 37,000 bales ros­tered for sale next week over two days.

Email ques­tions to rcalvert @robert­sltd.com.au.

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