The wool market’s record run has continued, with the Eastern Market Indicator bolting to a high of 2116 cents a kilogram.
The surge in prices for most wool categories was more than 100c/kg and much more for some well-prepared lines.
The record-breaking prices were on the back of a solid market on Wednesday where a 99c/kg rise was the largest daily increase since 2002.
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Australian Wool Exchange market information manager Lionel Plunkett said currency movement, a reduced offering and buyer concern over upcoming supply have all contributed to producing a remarkable week.
“Some small faults were increasingly overlooked as buyers attempted to secure meaningful quantity in the rapidly rising market,” Mr Plunkett said.
“Worth noting, the regional market indicators, and the individual micron price guides for 18- through to 21-micron, rose to unprecedented levels in all three selling centres.”
The Southern Market Indicator was up an astounding 120c/kg on Thursday to hit 2087c/kg.
Individual micron price guides climbed even higher, such as the 18-micron indicator, which settled on 2659c/kg - up 179c/kg on last week’s market.
Many of the big rises were at the fine end of the market – 17-micron hit 3006c/kg (up 175c/kg), while 19-micron settled at 2459c/kg (up 131c/kg).
Crossbred wools also recorded strong gains.
The 28-micron price guide was 98c/kg dearer at 984c/kg and the 30-micron wools were up 63c/kg to average 736c/kg.
The strength of the market was also reflected in the passed-in rate, which sat at just 1.5 per cent.
How will this impact forward trading?
Buyers and sellers are battling to find fair value for forward contracts in what is an incredibly competitive market.
That’s according to Southern Aurora Markets partner Michael Avery, who said some processors are looking to lock-in supply for as far out as 2020.
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Mr Avery said when prices move so rapidly, it’s possible to see volatility, which makes selling at these prices in advance difficult.
He is predicting a “rocky road” ahead.
“Processors will be saying they don’t want to buy at these record prices 12 months out,” he said.
“And while growers will be lifting their base prices, they’re going to have to sell at a discount, but that will still mean they’re earning way above the cost of production.”
He said it’s worthwhile for growers to explore these opportunities.
“It’s a business strategy that people should look at, and risks that they should think about taking,” he said.
Mr Avery said the magnitude of this week’s price rise took people by surprise, and there could be more uncertainty to come.
“The higher the prices get, the closer we get to hitting a tipping point,” he said.
“But we thought we would hit a tipping point at 1900c/kg, and we didn’t, we just kept going, and now we’re above 2100c/kg, so who knows.”
But he said supply is tight, and will continue to be tight, so demand will only continue to strengthen.