Be sure to discuss with your broker the implications if the physical price and the futures price do not come together when the contract is liquidated. Ensure that the expected quantity of wool to be sold exceeds the amount included in the futures contracts. If the amount contracted exceeds the amount to be delivered, then the excess cover is speculative. This is because the quantity covered by the futures contracts is not matched by the quantity of physical wool. Trading in Wool Futures alone is a speculative rather than a hedging exercise.
Market rises above contract.
The grower will sell wool as follows. This calculation assumes that the physical and the futures prices are the same when the wool is sold and the contracts are liquidated by buying them back. The prices actually received will be slightly lower than the above calculation because of the futures selling charges. When the physical and futures prices are not the same, the difference is unlikely to be large. Its availability does not imply suitability to other areas, and any interpretation or use is the responsibility of the user.