Lumber inventories at the wholesale, retail, and manufacturing levels remained flat during the July-August period. Buyers continued their pattern of buying just what they need and expected prompt deliveries. This low inventory scenario has the potential for adding volatility to the lumber market going into the third quarter of this year.
Sudden news of more production curtailments, a pickup in housing construction, or a surge in builder confidence could impact the market at any time. Speculation on lumber has been limited this year as buyers have been unwilling to take any big positions.
ECONOMIC BACKGROUND
Economic growth estimates of around 2 percent for the rest of the year were tempered by the escalating trade dispute with China and its impact on the global economy.
Recent indications by the Federal Reserve Bank to lower interest rates reinforced the economic outlook that manufacturing growth is slowing. However, recent figures on July consumer spending showed encouraging signals about the health of the American consumer.
Looking forward, keep your eye on the Fed, interest rates, and a possible compromise to the U.S.-China trade dispute to keep the economy on track.
JULY -AUGUST LUMBER PRICES
Lumber markets were mostly lower with SPF dimension, SPF stud prices, and SYP dimension prices lower.
Western SPF 2 by 4 dimension #2 and better prices were down over the period by about $30/m or 8 percent. Eastern 2 by 4 spruce moved down 6 percent. SPF 2 by 4 8-foot studs were down 6 percent.
Western 2 by 4 #2 SYP prices declined modestly in the period, down about 5 percent. Treated SYP moved in line with the change in bright stock prices.
WHAT SHOULD YOU DO?
We still think lumber is a good bargain. If we look historically at the previous five-year averages, today’s lumber prices are below the five-year averages and below prices last year at this time.
Supply-side factors will limit the risk of owning lumber. Lower lumber inventories are a strong indicator that could have an effect on the volatility of lumber prices. Prompt wood is a premium in today’s market. Up until now it’s been readily available. What happens when it’s not?
Just-in time buying limits your ability to make money. If you don’t take chances when the market is cheap, you miss out on windfall profits and you may pay a premium for quick delivery.
