March 11, 2022

GET READY AND… HOLD ONYou will enjoy the changes to lumber futures limits if you like volatility. This past Monday, March 7th, the Chicago Mercantile Exchange expanded the daily trading limits from $30mbf per day to $57mbf per day until May 2022. Additionally, for days in which the limits are reached, the following days will have expanded limits of $86mbf. So the only advice I can give is to get ready for the ride! So on that note, let’s cut to the chase and jump right in and check out what transpired this past week in the place I like to call: ‘The Wonderful World of Wood.” Enjoy…

The concerns buyers had from the previous week’s action remained as the headaches continued as traders reached for the Excedrin. Worries of rising inflation and sky-rocketing fuel prices were a few of the attention-getters. Lumber pricing continued on the move higher, as a sense of a near-term apex was a common theme. For the week, 2×4 2/Btr KDHF climbed higher by nearly 3-2/3%, nearly doubling the previous week’s 1-1/2% effort. Over the past month, we have seen 2×4 2/Btr KDHF post gains totaling north of 11-1/3%, while it stands more than 27-3/4% above its mid-March 2021 level.

2×6 2/Btr KDHF followed a similar trend, as it too closed the week out higher. However, once Friday arrived, 2×6 2/Btr KDHF gained 3-1/2%, increasing momentum compared to the prior week’s 2% nudge higher. Looking back, we see that 2×6 2/Btr KDHF is up nearly 12-3/4% over the past 4-weeks while positioned more than 19-2/4% above its price point posted one year ago.

The softer tone seen last week with the wider dimensions shifted gears slightly as pricing gained a little octane. For the week, 2×10 2/Btr KDHF posted gains totaling more than 2%, adding to last week’s 1-1/4% effort. For the month, 2×10 2/Btr KDHF finished up nearly 10-1/4%, arriving at the middle of March almost 16% higher than it stood one year ago.

2×12 2/Btr KDHF struggled compared to its narrow counterpart as it crawled slowly higher. This week, 2×12 2/Btr KDHF posted gains under 1/2% for the week, following a similar pattern compared to the previous week’s 3/4% effort. As a result, 2×12 2/Btr KDHF closes out the last month higher by more than 5-1/2% than its mid-February 2022 mark while finding itself nearly 7-1/2% above its trading level from one year ago.

Green DF Timbers gained more than 3-1/4% by Friday, outpacing last week’s 3-3/4% effort. Over the past 4-week’s, Green DF Timbers have seen activity north of 12-2/3% while remaining positioned 8-1/2% above its mid-March 2021 level from one year ago.

Logistical challenges continued hampering the market, as a gaggle of producers opted to go off-market due to the overwhelming shipping struggles. As a result, 2×4 Western S-P-F 1650fb MSR rose another 2-1/3%, as it mirrored the previous week’s 2-1/3% gain. Over the past month, we have seen 2×4 Western S-P-F 1650fb MSR increase by 11%, while it stands north of 27-3/4% above its early-March 2021 level.

Caution was vital this week, as traders sat back and assessed the market dynamics as world events took center stage. As a result, 2x4x8′ PET KDHF Solid Studs ended the week unchanged, as it showed a shifting tone compared to the previous week’s 1-3/4% effort. Looking back over the past month, we see that 2x4x8′ PET KDHF Solid Studs find themselves upwards of 10% higher, as they now stand 36-2/3% above their mid-March 2021 trading level.

Is the canary back? That very well could be the case, as 2x4x9′ PET KDHF Solid Sawn Studs posted red ink again for the first time since November 2021. The shuck-and-jive experienced a few weeks ago that was muted had the tone change this week. This week, 2x4x9′ PET KDHF Solid Sawn Studs dipped by 1-1/2%, a very welcome sight compared to last week’s near 1/3% rise, as hopes of a market shift finally came to fruition. Over the past month, 2x4x9′ PET KDHF Solid Sawn Studs find themselves nearly 3-1/2% above their mid-February level while positioned more than 5% above their price posted exactly one year ago.

Limited availability muted trading and price volatility, as buyers were left frustrated again with little to no material to procure. As a result, the price deceleration seen last week continued, as 4x8x1/2” CDX Plywood edged higher a bit more than unchanged, as it added to the previous week’s 3/4% surge. As we hit our stride in March, 4x8x1/2” CDX Plywood finds itself 10-3/4% higher over the past 4-weeks, while it remains positioned just north of 2-3/4% above its price posted one year ago.

A significant shit in upwards momentum was seen in the plywood floor sheathing category, as it barely inched higher during the week. 4x8x3/4″ T&G UDLX Plywood inched higher by just 1/4%, as it slowed dramatically compared to the previous week’s 3-1/4% jump. Year-on-year, 4x8x3/4” T&G UDLX Plywood finds itself standing more than 14-2/3% above its trading price posted from this time in March 2021 while remaining more than 11% higher over the past month.

IS THE STORY CHANGING? Availability concerns became less dominant as the market’s sense of urgency dissolved, with traders opting to sit on their hands late in an attempt to assess the market’s next move. As Friday arrived, the “Commodity King” matched the previous week’s move, as 4x8x7/16” OSB inched higher by nearly 2/3%, continuing on the pace of the previous week’s 2/3% move. The king ends the past 4-weeks more than 16-1/3% higher and now sits upwards of 47-1/3% above its mark from precisely one year ago.

The slowing trend is seen from both products, still managed to push the OSB to Plywood premium a little higher, as it closes in on its historical high of 14.7% posted back in 2020. We finish the week with 7/16″ OSB vs. 1/2″ CDX at a PREMIUM of 13.2%, a slight increase from the previous week’s 12.5% mark.

The upwards momentum shift was also experienced in the OSB floor sheathing category, as the softening trend infected a gaggle of products. Cautious buyers kept the pricing of 4x8x23/32” T&G OSB on the rise, but at a measured pace, with gains totaling a little over 1/2%, halving last week’s 1% rise. Over the past month, we have seen 4x8x23/32″ T&G OSB gain almost 15-1/4% while leaving it more than 47% above its price point from precisely one year ago.

The easing of upwards activity of both plywood and OSB helped grow the PREMIUM of OSB vs. plywood as it finished at 9.6% compared to last week’s 9.4% mark.

A pulling back of the reigns on several products helped begin the market’s shifting tone but could not trump the upwards strength of the dimensional products. As a result, the second week of March pushed my composite higher, as it added $27.1mbf, rising nearly 2%, to close at $1417.1mbf.

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Weakness in the futures market helped stall S-P-F trading, as uncertainty was the dominant tone. 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill finished unchanged, a dramatic change compared to the previous week’s 2-1/2% rise. Over the past month, we have seen 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill rise by more than 9-3/4% as it stands 36-2/3% above its price point from precisely one year ago.

After explaining the expanded lumber futures limits in my opening remarks, the March contract experienced a very dynamic trading week, as it traded in a wide range. On Monday, we saw the high of the week touch $1480mbf, to the low of $1310mbf mid-day on Friday, before the contract surged higher, ending the day at $1410mbf. As a result, the March 2022 contract ended up closing the week with a 1.43% premium, significantly above the previous week’s 3.71% mark, as it closes in on expiration, which will occur this coming Tuesday.

The newly birthed volatility helped extend the price discounts posted from the previous week’s action. The May 2022 contract faltered, closing the week with a 17.2% discount, closing in on upwards of triple the prior week’s 6.37% discounted mark. The July 2022 futures to cash discount plummeted as well, finishing at 28.9% versus the previous week’s 16.43% mark. The swing was also achieved with the September 2022 futures to cash mark, as it ended at a 34.29% discount compared to last week’s 23.26% mark. The November 2022 contract also took a hit, closing the week with a 39.29% discount, worsening from the previous 29.29% mark. Looking to next year, the January 2023 contract buttoned up the week with a futures-to-cash discount of 37.23%, compared to last week’s 31.37% mark. And finally, the March 2023 contract left us with a 38.4% discount, sizeably lower than the previous week’s 30.66% discount. Until next week… Shoe out!

Jim Schumacher
Shoe’s Lumber Report
(425) 219-6118