THE pull through for wool supply from international buyers has auction prices at record highs, but it’s also helping fuel interest in wool futures contracts.
Buoyant prices at physical auctions has not only resulted in wool growers locking in dates to market their wool at Sydney and Melbourne sales, it’s also generated additional phone calls to brokers to discuss alternative marketing options.
For many wool growers, futures have not been on their radar due to low offer prices. All that’s changed as international wool demand ramps up.
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Riemann’s Scott Still said the bounce in confidence had spurred much more consistent trading.
“In November there were 500,000 kilograms of wool traded on the Riemann platform, which demonstrates the robust nature of the market,” Mr Still said.
He attributed the much more consistent futures trading to higher wool prices, the robustness of the market and a lot more market participants. “We now have four brokers who can execute trades on the platform,” he said.
And even with a shorter trading month in December due to Christmas, Mr Still estimated there could be just as much, maybe even more, volumes of wool traded on the Riemann platform this month.
“We have already seen trades out as far as February 2019 at 1750c/kg,” he said.
Mecardo’s Robert Herrmann said the solid futures volumes were a reflection of the fact that wool growers tended to only engage with the market when the prices were good.
“There’s not always the incentive to engage with futures, but at the moment the prices are giving growers the security to do business,” he said.
“It’s been a good opportunity for growers to lock in prices at current values.
“Certainly this last kick in prices has been extraordinary. Only this week we’ve had growers lock in prices out to August 2019.”
Mr Herrmann said much of the lift in the physical wool market was part of the normal cycle of commodities, but what was making this lift even more extreme was the record low wool production.
“We are in a situation where freshly shorn wool is mostly being sold hand to mouth,” he said.
“On top of that we have a number of growers who have shorn early to take advantage of the higher wool prices.
“That means the supply situation will continue to be tight into the first half of 2018.”
However, such a dramatic rise rarely goes without a corresponding correction of some degree and the three-week recess does give people plenty of time to mull over their next move.