April 2016 Lumber & Commodity Report

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The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index for April increased 10.9% to $315.50 as most items felt upward pressure. Over the last month, the first three weeks were the strongest for price increases, with some pricing cracks developing in the last week. The weakness of late could be an indication this market is running out of steam.

Another indication the wood commodity market is running out of steam is March’s Housing Report from the United States Census Bureau. In just released numbers, housing starts were down 8.8% when compared to February. Plus housing permit numbers (an indication of future activity) were down 7.7%. Single-family housing starts took the biggest hit by dropping to 764,000 units annually (or a decline of 9.2%). These numbers are stunning considering the 3.6% interest rate being offered on 30-year fixed mortgages and low unemployment at 5.0%. Housing appears to be stalled during the spring selling season.

Over the last month, the dimensional lumber portion of the Index was up 13.2% as wide-width 2x12 pine shot up a whopping 25.0% plus, with dimensional spruce adding on average 4.0%. 2x4 pine was up 9.3% and studs for the most part were flat to down.  Mills blame the huge increases in wide-widths on too much rain for logging. That should abate as warmer, dryer summer weather takes hold. Stud pricing holding back on increases may indicate a false strength in the market.

The sheathing portion of the Index was mixed as CDX pine was down 7.0%-10.0% while OSB sheathing added $26 per thousand (or on average 11% increase). Better demand in multi-family housing or a move to value could be fueling this market divergence. Whether these opposite directions will continue is debatable considering the OSB production available to the market.

The cracks that started to develop in the markets over the last 10 days could open up into gullies if these bad housing numbers persist. Price run-ups for the last few years have run out of steam in May and this is shaping up to be Déjà vu again. Builders should be mindful of the price increases—protect themselves, but stay close to the market.

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (www.romaclumber.com), and he is a former President of the Southeast Mississippi Home Builders Association, and past Associate Vice President of the Home Builders Association of Lake County. To contact Magruder, email him at This email address is being protected from spambots. You need JavaScript enabled to view it. .

March 2016 Lumber & Commodity Report

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In last month’s report, I said the next 30-45 days would probably give a better indication of the housing market’s direction for the spring.  It appears the housing market is starting to show some life, based on increases in the Wood Commodity Index (Index). Over the last 30 days, the Index is up 5.2% to $299.33 per thousand, with all items but one adding to its wholesale price from just a month ago.  Whether this momentum in the markets can be carried over has yet to be determined.

The dimensional lumber portion of the Index increased 7.8% as double digit increases in spruce and wide-width pine pushed prices forward.  The overall mood of the market was up as the first signs of a warm spring were felt throughout the country.  2x4-16 #2 spruce was up13.9% while 2x12-16 #2 pine added 8.3%, with spruce studs only adding in the single digits.

The sheathing portion of the Index increased 3.1% as OSB sheathing only added about 1.0% while CDX pine was up on average 4.0%.  This lack of price enthusiasm could indicate that the recent price increases in lumber could just be a seasonal fluctuation instead of a real market adjustment.  One huge point is the upward direction of both CDX and OSB shows the market pricing is probably congruent in its values.  Last year, those prices generally moved in opposite directions. 

The housing market needs continued improvement to prop up prices and build momentum.  I am not sure the market has another 5.0% increase in itself for the next 30 days, but it needs it to build on momentum. 

Drywall manufacturers are announcing a 10.0%-15.0% increase as of April 1, 2016.  A real sign of housing strength will be if this increase remains in place until mid-summer.  Rising prices is a great sign for most builders if they prepare by properly bidding or utilizing a price escalation clause in their contracts. 

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (www.romaclumber.com), and he is a former President of the Southeast Mississippi Home Builders Association, and past Associate Vice President of the Home Builders Association of Lake County. To contact Magruder, email him at This email address is being protected from spambots. You need JavaScript enabled to view it. .

 

January 2016 Lumber & Commodity Report

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As 2016 begins, not much has changed in the commodity markets over the last 30 days—uncertainty abounds. The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) for Central Florida in January declined 0.8 percent to $287.83 per thousand. To be fair, this time of year is historically not the most active. However, generally the precursor of a good year is positive movement in the commodity markets.

The dimensional lumber portion of the Index was off 0.7 percent, with mixed pricing, as half of the Index increased and the other half declined. Only wide-width 2x12 pine showed any real increase. The hit-and-miss nature of increases indicates that suppliers are buying inventory only as it is needed. 

The sheathing portion of the Index dropped 0.9 percent to $279.03 per thousand, with only one item adding cost—5/8 CDX pine was up $7 per thousand. The rest of the items in the Index were flat to down $3 per thousand, plus. For most of 2015, OSB and CDX headed in opposite directions, and none are in tune with one another. Both OSB sheathing and CDX pine plywood appear to have settled down significantly in their price fluctuations. This could indicate both are at price levels, which buyers consider to be fair market.

Housing market uncertainty, stock market uncertainty, interest rate uncertainty, political uncertainty, and oil price uncertainty are creating havoc on all of the world commodity markets.  The only thing that is for certain, until the uncertainty is removed from these markets, expect pricing to remain erratic while staying in a general flat-to-down range.  Price fluctuations will be driven more by on-hand availability and mills willing to cut deals instead of some general market momentum or trend. 

One thing I do know for certain—if this uncertainty is not alleviated soon by our political leaders, expect this year’s housing sales to be worse than last year. 

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (www.romaclumber.com), and he is a former President of the Southeast Mississippi Home Builders Association, and past Associate Vice President of the Home Builders Association of Lake County. To contact Magruder, email him at This email address is being protected from spambots. You need JavaScript enabled to view it. .

December 2015 Lumber & Commodity Report

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Just as I predicted last month, the price increases from October and November did not seem sustainable, and they were not.  The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index (Index) for Central Florida in December declined 3.7 percent to $290.27 per thousand.  It was a mixed result, as those items which did not go down in price struggled to hold onto gains, while those retreating did so with few obstacles.

The dimensional lumber portion of the Index dropped 1.9 percent, as spruce gave back some of its gains from the prior months.  Stud pricing took the hardest hit with most down nearly $20, and with 2x4 spruce dimensional flat to down in the single digits.  $10 to $20 per thousand increases were the range for most 2x12 pine, as wide widths gained an advantage in the supply equation.

The sheathing markets are still split with OSB sheathing pricing in full retreat while CDX pine plywood pricing is moving upward in the 1.5 to 2.5 percent range.  Oddly, just a few months ago, the direction of each was opposite.  7/16” OSB gave back almost 60 cents per sheet while 1/2” 4-Ply CDX pine plywood added 32 cents.  Manufacturers are really struggling to find the supply balance in the market.

The weather through mid-December has been much warmer than usual.  This typically extends the building season in the northern areas, keeping prices up.  The better weather appears to be a small catalyst this year, and it may foretell even worsening housing demand as winter begins to grip.  There is little evidence that pricing will have much momentum upward as the New Year begins.

Thank you for reading the Ro-Mac Lumber & Supply, Inc. Lumber and Commodity Report.  I hope everyone has a Merry Christmas and most prosperous New Year.

Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (www.romaclumber.com), and he is a former President of the Southeast Mississippi Home Builders Association, and past Associate Vice President of the Home Builders Association of Lake County. To contact Magruder, email him at This email address is being protected from spambots. You need JavaScript enabled to view it. .

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