Buy­ers un­cer­tain in wool mar­ket

Warwick Daily News - South West Queensland Rural Weekly - - News -

THE for­ward mar­ket was stag­nant this week, with par­tic­i­pants look­ing for di­rec­tion from off shore.

The spot mar­ket lost ground with the soft­ness in the medium wools, ev­i­dent last week, seep­ing into the finer qual­i­ties.

Sen­ti­ment is quite mixed, with the buy­ers un­cer­tain on the bal­ance of fac­tors that are in­flu­enc­ing both the spot and for­ward mar­kets.

The cur­rent price struc­ture is damp­en­ing short- and medium-term de­mand, with end users un­able to ex­e­cute new busi­ness at these lev­els. Coun­ter­ing this bear­ish out­look is the cur­rent low level of stocks off shore and the sup­ply con­cerns for the com­ing sea­son, which has the lat­est clip fore­cast at

-5.7 per cent and anec­do­tal ev­i­dence even lower.

Bid­ding in the for­wards was a lit­tle muted as buy­ers re­assessed risk.

How­ever, lev­els still re­main in the 85–90 per­centile range with 19.0 mi­cron bid in Novem­ber at 2260 cents per kilo­gram, De­cem­ber at

2240c/kg and Jan­uary at

2200c/kg.

Sim­i­lar lev­els are bid for

21.0 mi­cron with Novem­ber at

2180c/kg, De­cem­ber at

2160c/kg and 2100c/kg for Jan­uary.

While, with the ad­van­tage of hind­sight, grow­ers could ar­gue there was no need for a for­ward hedg­ing strat­egy over the past two years given the sus­tained rise in the auc­tion mar­ket over this pe­riod, the cur­rent volatile price dy­nam­ics tell an­other story.

Grow­ers should be look­ing at be­com­ing price mak­ers, not price tak­ers, for their clip.

By un­der­stand­ing the cost of pro­duc­tion and set­ting tar­geted profit mar­gins through for­ward hedg­ing, grow­ers can gain cer­tainty over their wool re­turns.

The per­cent­age of the clip to hedge will vary de­pend­ing on the in­di­vid­ual grower’s ap­petite for risk and any pro­duc­tion con­cerns.

By Mike Avery South­ern Aurora Mar­kets

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