July 8, 2022

ARE THE BULLS BACK FOR SUMMER? As the arrival of July 5th and the ‘official’ first day of summer arrived for those of us in the Puget Sound region, we have much to be thankful for. Besides the long-overdue arrival of summer weather, we have even more great news regarding lumber futures.

GREAT NEWS FOR FUTURES TRADERS IN THE PNW! Commencing on August 8, 2022, the Chicago Mercantile Exchange (CME) will add several species to its current lumber futures trading. Those species are Western and Eastern S-P-F, Douglas Fir, Fir&Larch, and Hem-Fir. To say I am excited would be an understatement. Those of us in the Pacific Northwest will now be able to trade lumber futures with the species we use in our market and will no longer be required to create historical correlations from S-P-F. 😊 HIP-HIP-HOORAY!

If that introduction wasn’t a mouthful, I don’t know what is. So grab a deck chair, kick back, and check out all that transpired this past week in the place I like to call: ‘The Wonderful World of Wood.” Enjoy…

IF THE SHOE FITS – WEAR IT! If your summer schedule hasn’t allowed the time to subscribe to SHOE’S LUMBER REPORT, now is the time to sign up. I offer three subscription options to choose from, with the most popular annual subscription, for only $99/year. A heck of a deal! For a minuscule investment, you are sure to be kept up to date on the fluctuating commodity lumber and panel market and save thousands of dollars every year, as many have been doing since 1995. Thanks for your support!

As expected, sales volumes remained moderate (at best) following the extended July 4th weekend. Traders focused on covering near-term commitments as skepticism of the market’s recent bounce remained top of mind. The holiday-shortened week left 2×4 2/Btr KDHF rose by nearly 1-2/3%, slightly slower than the previous week’s 3-1/3% move. Nevertheless, 2×4 2/Btr KDHF has moved higher by more than 3/4% over the past month, while it stands at roughly 11-3/4% below its early-July 2021 level.

2×6 2/Btr KDHF continued to extend gains from its 2022 lows seen two weeks back as it inched higher. For the week, 2×6 2/Btr KDHF closed higher by less than 1% by Friday, as it slowed against last week’s 1-3/4% effort. As a result, 2×6 2/Btr KDHF finds itself more than 2-2/3% lower over the past 4 weeks while remaining positioned nearly 24-1/3% below its price point posted one year ago.

Strength was seen across the board, as 2×10 joined in on the market’s current recovery effort. By Friday, 2×10 2/Btr KDHF added nearly 1-2/3%, mirroring the previous week’s 1-2/3% effort. Over the past month, 2×10 2/Btr KDHF is left lower than 6-3/4% from where it began 4 weeks ago while standing nearly 30-1/4% below its early July 2021 levels.

2×12 2/Btr KDHF, had a bit more pep in its step, as it rose more than 2-1/2% by week’s end, accelerating off of the previous week’s 3/4% effort. Looking in the rear-view mirror, we find 2×12 2/Btr KDHF closes out the last 4 weeks up more than 2-1/2% compared to its early-June 2022, while positioned almost 32-1/2% below its trading level posted precisely one year ago.

From hero to zero in a few short weeks. After standing firm for most of the year, Green DF Timbers have been knocked on their heels as they remain on the retreat. After peeking at their all-time historical high back in mid-June, timbers have been on the retreat. As Friday arrived, Green DF Timbers dipped by more than 4%, adding last week’s 4% weakening effort. Over the past 4 weeks, Green DF Timbers are off more than 11-3/4% while positioned roughly 10-1/4% below their early July 2021 levels from one year ago.

2×4 Western S-P-F 1650fb MSR opted to take a pass this week as they stalled out. As Friday came into play, 2×4 Western S-P-F 1650fb MSR closed out the week unchanged, lower than last week’s 1-1/4% rising effort. As a result, 2×4 Western S-P-F 1650fb MSR now remains unchanged over the past month, standing almost 16-1/2% below the early-July 2021 level.

The short-holiday week did little to curb the directional reversal that began last week, as my ‘canaries in the cole mine’ continued on the move. Traders kept their PO books close to the vest as they placed orders for immediate needs, remaining cautious of the current market conditions. For the week, 2x4x8′ PET KDHF Solid Studs continued climbing off their lows of 2022, adding nearly 2-1/2% by Friday, on top of last week’s 2-1/2% leap. As the first full week of July is in the books, we find that 2x4x8 PET KDHF Solid Sawn Studs now sit roughly 1-2/3% higher over the past 4 weeks while positioned just 4-2/3% below their early-July 2021 trading levels.

As the case is often, the canary that chirped the loudest this week was 2x4x9′ PET KDHF Solid Sawn Studs, as it took the prize for the biggest mover in the lumber category. 2x4x9′ PET KDHF Solid Sawn Studs rose nearly 3% by Friday, slowing from the previous week’s 5-1/3% jump, as the long July 4th weekend was partially to blame for a limited trading week. Over the past month, 2x4x9′ PET KDHF Solid Sawn Studs are left nearly 8-1/2% higher than their early-June levels while positioned upwards of 4-3/4% below their price posted one year ago.

Traders remained pessimistic coming into the post-holiday trading week, as pricing remained lackluster at best. As a result, inquiries were light but sufficient for producers to dig in their heels to hold current price levels. The slightly improved tone helped 4x8x1/2” CDX Plywood finish the week unchanged, an improvement compared to last week’s 1-1/2% failing effort. Over the past month, 4x8x1/2” CDX Plywood finds itself more than 14% lower while positioned nearly 63% below its price one year ago.

Another losing effort left the plywood floor sheathing victimized by the ugly stick. As a result, 4x8x3/4″ T&G UDLX Plywood dipped more than 3/4% by Friday, thankfully slowing compared to the previous week’s 3-1/2% decline. Nevertheless, 4x8x3/4” T&G UDLX Plywood stands more than 40-1/4% below its trading price posted in early-July 2021, while it is left 9-1/3% lower over the past month.

TWO WEEKS AND COUNTING. After being pushed onto its heels and dropping a whopping 72-3/4% since late March, the “Commodity King” finally regained its balance and found a settling point. With the severe declines now behind us, the risks of further significant drops have evaporated. Buyers’ comfort levels have shifted, and their willingness to step in and add to inventories has returned. For the week, 4x8x7/16” OSB posted gains totaling 5-1/3%, adding to last week’s 2-3/4% reversal. Nevertheless, the king ends the past 4-weeks off more than 24-3/4% as it now sits an astounding 76-3/4% below its price point from precisely one year ago.

Stagnation in the plywood sector, combined with the continued upward moves in OSB, helped to shrink the 7/16″ OSB vs. 1/2″ CDX DISCOUNT, which ended the week at 38.3%, compared to the previous 41.4% mark.

A similar effort was seen in the OSB floor sheathing category as 4x8x23/32” T&G OSB moved off of its recent downside resistance level, ending the week higher. As Friday arrived, 4x8x23/32” T&G OSB closed out the short holiday week up more than 2-3/4%, a direction change compared to last week’s unchanged effort. However, over the past month, we have seen 4x8x23/32″ T&G OSB fall more than 20-1/2% while leaving it 67-1/4% below its trading level from one year ago.

The softness in plywood, combined with the rise in OSB, pulled the previous week’s plywood premium over OSB lower, as Oriented Strand Board floor sheathing finished with a 47.4% DISCOUNT, down from the last week’s 49.3% mark.

Another week of lackluster volume was just enough to keep the recovery effort intact, as 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill marked its 4th week of rising action. As a result, 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill gained 1-1/2% by Friday, slowing compared to last week’s 5% upswing. Over the past month, we have seen 2×4 2&Btr Kiln Dried Spruce-Pine-Fir Western Mill rise 15-1/3%, while it stands upwards of 8% below its price point posted precisely one year ago.

JUST LIKE – THE JEFFERSON’S, the sit-com that for 10 years (1975-1985), the futures market is movin’ on up. The strength in the cash market helped the futures market find its bottom. The July 2022 futures continued climbing to end the week at a 1.58% premium to cash, a dip from the previous week’s 7.92% mark.

September 2022 futures to the cash mark increased slightly during the post-July 4th holiday, settling Friday with an 8.98% premium, compared to last week’s 8.46% premium mark. The November 2022 contract followed a similar path but strengthened, ending the week with a 9.41% premium compared to the previous week’s 5.03% mark. Peering out to next year, the January 2023 contract perked up BIG TIME, surging higher to end the week with a futures-to-cash premium of 14.22%, more than doubling last week’s 6.35% premium. The March 2023 followed suit, closing the week into strength, ending with a 17.28% premium to cash, jumping higher from last week’s 11.9% mark. Last but not least, the May 2023 contract flexed it muscle as well, finishing the week with a 17.3% premium, adding more than 45% to last week’s 11.92% closing premium.

Jim Schumacher
Shoe’s Lumber Report
(425) 219-6118
jim@shoeslumberreport.com