The AWEX EMI closed on 1127c down 4c at auction sales in Australia this week. Unlike last week where the market opened strongly and fell away, this week’s opening day revealed a weaker trend, followed by a positive sentiment.
The catalyst I believe was the appreciating USD overnight which brought the AUD prices into a more achievable range resulting in a stronger closing day. From the 42,465 bales offered, 92.3% was cleared to the trade with just 5.3% of the offering withdrawn before the sale commenced.
Crossbreds and oddments posted the highest pass in rate which seemed to be lots that fell outside the standard specifications for types destined for China, India and Europe. The EMI is now exactly 200c (or 15.1%) below the closing sale of the 2023 calendar year (30/06/23) where it posted an EMI of 1327.
|We have not heard a lot of dialogue about forward contract prices for a while, possibly due to the suppressed market conditions. Over the past few weeks, we have seen some business written for 19μ and 21μ contracts at or slightly above the cash for October delivery, whilst prior to that there was a tranche of contracts written out for delivery for July through to December 2024.
Something to consider for producers who are holding their clips for higher market levels is a strategy known as reverse hedging. That is sell the physical wool and replace it with a contract.
Once the contract is purchased you retain the exposure to the market but get the use of the cash in your enterprise. There are many options of how to manage these strategies- so if you have wool unsold consider contacting your WTO for some insight into your options.
The early market sentiment for next week is expected to be similar levels to this week’s closing market, but all eyes will be on the AUD exchange rate against the USD. Whilst the AUD rate fell last week against the USD it remains strong against may other currencies. Next week’s offering is expected to reach 42,500 bales.