Wool EMI continues to drop 21c/kg

THE spot auction market continued its steady decline with the Eastern Market Indicator dropping 21 cents/kg this week and the index recording a loss for the eighth consecutive trading day (the first time since June 2015).

The forward markets opened the week with bidding stable and held as the week progressed.

Growers remained reluctant to enter the market or set target levels. Little guidance was coming from offshore with our major consumer, China, in the middle of their “Golden Week” festival.

Consumer activity in this holiday week provides a guide for the local Chinese processors of short-term demand and overall confidence.

A weaker AUD Thursday saw buyers take a little cover above cash for November (19.0 micron at 2350c/kg and 21.0 at 2200c/kg) and raise their bidding levels through to Christmas and beyond.

Activity on the forward markets has fallen to below 1 per cent of the underlining clip for the last two months, at a time when record prices were being set in the auction and forward levels into 2019 were being offered at the 90th percentile of prices for the last year.

While the market appears to be looking to find a level, volatility will most likely be common for the foreseeable future.

Tight supply will definitely be a factor going forward but fluctuating demand at these price points and general uncertainty in the global trade scene will have an impact.

Forward pricing, out to May 2019, is expected to lift prior to the opening of auction.

Hopefully this will provide good hedging levels for growers and allow exporters to engage more confidently with the downstream processors.