Forecast lures woolgrowers to forward trade

Forecast lures woolgrowers to forward trade


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Wool classer, Glenn Wallace, skirting fleeces at "Oakbank", Temora, NSW.

Wool classer, Glenn Wallace, skirting fleeces at "Oakbank", Temora, NSW.

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WOOLGROWERS are taking advantage of record prices by turning to the forward wool market.

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WOOLGROWERS are taking advantage of record prices by turning to the forward wool market, as experts predict wool to rally further in 2018.

The Eastern Market Indicator is forecast to average 1630 cents a kilogram in 2017-18 - a 15 per cent increase on last financial year, according to Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES).

With the average for the first half of this season at 1596 c/kg, the remainder of the season would need to average 1660c/kg for the ABARES forecast to be realised.

While this appears high, National Council of Wool Selling Brokers of Australia executive director Chris Wilcox said the ABARES average was achievable with the EMI closing the 2017 at 1760 c/kg.

“In my 25 years’ experience of analysing the wool market, I have never seen such a sustained upward run in prices,” Mr Wilcox said.

ABARES expects shorn wool production this season to be 349 million kilograms, and the value of Australia’s wool exports to hit $4.339 billion.

This marks the highest value for a season since 1988-89, when the value hit $5.8b, and Australia produced a record level of 1030m kilos greasy.

The positive outlook has lifted opportunities for growers to hedge, with forward trades secured out to 2019.​ 

Mecardo analyst Mily Wilson reported deals occurring in the fine micron category, 18, 18.5 and 19 microns, with 18 micron traded for April at 2255c/kg, May at 2195c/kg, June at 2160c/kg and October at 2060c/kg.

Trades in 19 micron went as far as February 2019 at 1750, while 21 micron had deals ranging from 1680-1700c/kg for March 2018, to May from 1620-1655c/kg. 

In 2019, the medium category trades at 1500c/kg in February and 1400c in August.

Ms Wilson reported options market activity, coinciding with auction recess, with two minimum price contracts set to expire in May and June 2018 for 18 micron at a premium of 50c and 60c and a strike price of 2050c and 2000c respectively. 

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