DESCRIPTION OF THE SFE New Zealand 36 to 40 Micron Wool Indicator

 

 

The SFE New Zealand 36 to 40 Micron Wool Indicator is a subset of Tectra’s crossbred indicators and has been specifically designed for Sydney Futures Exchange’s New Zealand Broad Wool Futures contract to provide a measure of wool prices which is directly comparable from one sale to another regardless of the types of wool offered at those sales.

 

About the Sydney Futures Exchange

 

Established in 1960 as the Sydney Greasy Wool Futures Exchange, SFE Corporation (SFE) has been providing a wool futures market almost continuously for 40 years. 

 

SFE Corporation Limited and its subsidiary companies, Sydney Futures Exchange Limited, SFE Clearing Corporation Pty Ltd and Austraclear Limited, provide exchange traded and over-the-counter (OTC) services throughout the Asia Pacific region and in other major financial cities in the world. SFE is one of the major derivatives exchanges in the Asia Pacific Region and, at this time, the only wool futures market in the world.

 

SFE will be listing a New Zealand Broad Wool Futures Contract on Tuesday 29 June 2004. Committed to growing its Wool Futures market, SFE is running training workshops in New Zealand for prospective users of the new Broad Wool Futures contract and the existing SFE Wool futures contracts based in Australia.

 

For participants in the New Zealand wool market, the SFE provides:

-         a proven and successful wool futures market

-         transparent and competitive futures prices

-         contract specifications consistent with the global standards

-         dedicated spread trading markets

-         a broad range of access and clearing alternatives; and,

-         initial margin offsets.

 

 

Contract Specifications

 

The New Zealand Broad Wool Futures Contract has the following specifications:

 

Contract Unit:

2,500 kg clean weight of NZ Broad Wool (first and second shear wool in the 36 to 40 micron range).

Contract Months:

February/ April/ June/ August/ October/ December up to 18 calendar months ahead

Commodity Code

NW

Minimum Price Movement:

Prices are quoted in cents per kilogram clean weight. (The minimum fluctuation of 1 cent per kilogram is equal to NZ$25.00 per contract).

Last Trading Day:

The last day of trading shall be the 3rd Friday of the contract month, or if that day is not a Business Day the Business Day immediately following that day.

Settlement Day:

The cash settlement day of the contract will be the first business day after the last trading day.

Trading Hours:

3.00pm – 4.00pm NZ time

Cash Settlement Price:

The Settlement Price shall be the SFE New Zealand 36 to 40 Micron Wool Indicator published by Tectra Limited. All bought and sold contracts in existence at the close of trading will be settled by SFE Clearing at the Settlement Price. The SFE New Zealand 36 to 40 micron wool indicator will be announced to the market no later than 4pm NZT on the Last Trading Day.

 


Background

 

The SFE New Zealand 36 to 40 Micron Wool Indicator  is very similar to the Strong Segment Indicator (SSI) which has been in use since 1987.  The methodology used in its calculation is basically the same as for the SSI.  There are two differences:

 

1)      the range of wool covered by the SFE New Zealand 36 to 40 Micron Wool Indicator  is restricted to 36 to 40 microns (instead of 32 to 41 for the SSI); and,

 

2)      the set of weights used is constant; which makes it possible to compare indicator values across seasons.

Method

The Types comprising the 36 to 40 micron range of the clip are divided into eight Groups based on category, and length.   There are around 150 Types defined in the process.  These are defined in terms of diameter, category, style, and processing length.  Definitions for Groups and for some Types are provided in this document.


The price averaging process is done in three steps.   First, the selling prices of all lots of the same Type are averaged to produce Type prices for the sale.   Second, the prices of all Types within each Group are averaged to produce Group prices.   Finally, all the Group prices are averaged to produce the SFE New Zealand 36 to 40 Micron Wool Indicator.   Weighted averaging is used throughout.

This method is used so that, should a Type not be present at the sale, a price can be estimated for it on the basis of the prices of other Types within the same Group.  Prices of Types within each Group are assumed to behave similarly; so it is more likely that the price of a Type will move in the same way as the average price of its Group than in the same way as the overall SFE New Zealand 36 to 40 Micron Wool Indicator.  For this purpose, the ratio of the price of each Type to its group price is calculated and updated each sale.   Ratios of group prices to the SFE New Zealand 36 to 40 Micron Wool Indicator are also maintained and used to estimate prices for the Groups with little or no wool in the sale.

Both Type and Group ratios are updated using a process which smoothes out random fluctuations, but allows the ratios to follow any genuine trend.

Type Prices


The average price of a Type is the total value divided by the total clean weight of all the wool of that Type sold at the sale.  Type prices are calculated only when there are at least two lots of the Type at the sale.

Group Prices


The Group price is a weighted average of all types within the Group, with the prices of Types not present at the sale being estimated by multiplying the Group price by the Type ratios. In essence, the process calculates the average price of the Types present at the sale, and then adjusts it by the average ratio of those Types so that the result is not affected by the composition of the offering.   The ratios used are those calculated from the previous sale.

Type Ratio Updating


Once the Group prices are known, the ratios of Type prices to their Group prices are calculated for use at the following sale.   The ratios are updated from their previous values using double exponential smoothing.

SFE New Zealand 36 to 40 Micron Wool Indicator Calculation


The SFE New Zealand 36 to 40 Micron Wool Indicator is a weighted average of Group prices and is calculated exactly as above, using the Group data instead of Type data.   Group ratios are calculated, smoothed and adjusted in the same way as Type ratios.

SFE New Zealand 36 to 40 Micron Wool Indicator Publication

 

The SFE New Zealand 36 to 40 Micron Wool Indicator will be published by Tectra along-side its existing wool price indicators. Tectra publishes its wool price indicators every week in:

 

·        various newspapers and other publications on the day following the sale day, including the NZ Farmers Weekly, Wool Record Weekly Market Report, the New Zealand Herald, Dominion Post, Christchurch Press, Otago Daily Times and other regional newspapers;

·        on Tectra’s  web-site – www.tectra.co.nz ; and,

 

 

Table 1 - The Eight Groups

 

Group

Catgy

Diameter

style

length

Fleece

F

35.5-40.4

All

105-124

2ndShear long

F

35.5-40.4

All

95-104

2ndShear med

F

35.5-40.4

All

65-94

2ndShear short

F

35.5-40.4

All

55-64

Cotts

G,H

35.5-40.4

All

88-112

Bell/Nks/Pcs

B,N,P

35.5-40.4

All

38-112

2nd Pieces

S

35.5-40.4

All

35-64

Crutchings

K

35.5-40.4

All

38-62

 

 

Table 2 - Some of the 150 Types

 

Type

Weight

Diameter

Catgy

Style

Length

C360B100 

17170

35.5-36.4

G,H

1

88-112

C360C100 

42523

35.5-36.4

G,H

2

88-112

C360D100 

58871

35.5-36.4

G,H

3

88-112

C360E100 

37070

35.5-36.4

G,H

4

88-112

C370B100 

24730

36.5-37.4

G,H

1

88-112

C370C100 

97202

36.5-37.4

G,H

2

88-112

C370D100 

109169

36.5-37.4

G,H

3

88-112

C370E100 

29910

36.5-37.4

G,H

4

88-112

C380B100 

32417

37.5-38.4

G,H

1

88-112

C380C100 

146610

37.5-38.4

G,H

2

88-112

C380D100 

77677

37.5-38.4

G,H

3

88-112

C380E100 

27960

37.5-38.4

G,H

4

88-112

F360B100 

261258

35.5-36.4

F

1

95-104

F360B110 

649229

35.5-36.4

F

1

105-114

F360B120 

587819

35.5-36.4

F

1

115-124

F360B60  

201402

35.5-36.4

F

1

55-64

F360B80  

175048

35.5-36.4

F

1

75-84

F360B90  

126216

35.5-36.4

F

1

85-94

F360C100 

312741

35.5-36.4

F

2

95-104

F360C110 

714207

35.5-36.4

F

2

105-114



HISTORICAL DATA


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