Volatil­ity as sup­ply and de­mand fluc­tu­ates

Warwick Daily News - South West Queensland Rural Weekly - - Grains Feature - By Mike Avery South­ern Au­rora Mar­kets

WITH volatil­ity the only con­stant in the wool mar­ket at the mo­ment, as the bal­ance of sup­ply and de­mand fluc­tu­ates, there are plenty of op­por­tu­ni­ties for wool grow­ers and buy­ers to use for­ward con­tracts to man­age price risk.

But there’s a lack of con­sis­tency in the vol­ume of both bids and of­fers on the for­ward mar­ket, re­flect­ing the un­der­valu­ing of price cer­tainty right along the wool pipe­line. This is at odds with most agri­cul­tural com­mod­ity for­ward mar­kets show­ing higher vol­umes in the cur­rent high-risk land­scape.

We saw a com­plete turn­around in sen­ti­ment in both the auc­tion and for­wards last week. The grower in­ter­est in the post-Christ­mas pe­riod that we saw the week prior, evap­o­rated early in the week fol­low­ing the pos­i­tive spot auc­tion close last Thurs­day.

Trad­ing was re­stricted to the com­ing months of Novem­ber and De­cem­ber with ex­porters and pro­ces­sors dom­i­nat­ing the sell­ing. Novem­ber opened the week trad­ing at 2240 cents per kilo­gram but was sold down to 2180c/kg on the close.

We ex­pect bid­ding to be cau­tion­ary as traders weigh up the ex­tent of the de­mand re­duc­tion brought on by the sus­tained high prices of the first two months of the new sea­son, the on­go­ing trade war ten­sion and the stub­bornly firm Aus­tralian dol­lar. Volatil­ity will re­main as the only con­stant.

Sen­ti­ment re­mains bear­ish into the start of this week. Re­ports of dif­fi­cult do­mes­tic con­di­tions in China with their mills de­lay­ing com­mit­ting or­ders to the mar­ket un­til ab­so­lutely nec­es­sary will add to the down­ward pres­sure. A weaker Aus­tralian may mod­er­ate the fall, but volatil­ity and risk re­main high.

In this cur­rent cli­mate it is im­por­tant all par­tic­i­pants in the pipe­line con­sider the value of cer­tainty over the fear of lost op­por­tu­nity.

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.