What Lumber Price Patterns Are Saying Today

Lumber prices keep … lumbering along. Up some, down some, but look at the graphs that there seems to be a pattern. For a while now, about every month to two months, spot prices reverse directions.

“Within the lumber market, buy cycles typically last between 5-7 weeks,” says Ashley Boeckholt, chief revenue officer of MaterialsXchange, which became part of Mickey in September. “The market bottomed about 5 weeks ago and, in more recent weeks. We noticed prices inching upwards again. When it comes to lumber spot prices, they usually lag futures a little.”

But the frequent reversals at those buy cycles are a fairly new dynamic, says Scott Reaves, director of forest operations at Domain Timber Advisors.

“We see the relatively fast shifting of lumber prices over the last two years as having been driven by a couple key points: pandemic driven lumber production supply chain lag coupled with increasing demand for housing through the pandemic,” Reaves tells GlobeSt.com. “Additionally, as with any commodity product there is the warehousing of stock that can be traded based on spot pricing and can move in and out of the market at attractive price points.

There is also a seasonal factor. “What tends to be the general pattern that our industry looks at is low in Q4 and high in Q1,” Boeckholt adds. “In my experience, we find that Q4 is usually the largest producing quarter and it’s also a time when people don’t seem to build much inventory. Q1 is generally among the lowest producing quarters—and one where people build inventory for their spring needs.”

But while that has been a pattern, “as multi-family construction increased—as well as offsite construction, for example, truss and component—I feel that it changes some of these original patterns slightly,” Boeckholt notes. “This seems to be the general rule people look at. As with any market, these ‘seasonals’ can sometimes work the other direction, but that is just market dynamics. I think the market is currently trying to decide if the worst of the housing downturn is in front of us which, if that’s the case, there will certainly be less desire to build inventory and more desire to run lean. It is also important to separate watching [futures at the Chicago Mercantile Exchange] from cash [on sport markets] at times because there can be a disconnect, especially when looking at other species outside the contract grade.”

“Going forward, in our opinion, we see prices leveling out in the $400-$500 per thousand board feet range over the next several months as interest rates rise and housing demand is somewhat dampened,” says Reaves.  “This pricing range is in line with what we have previously stated as what we felt was a reasonable equilibrium lumber price. Also, the lumber mill infrastructure has effectively ramped up production to meet current demand which helps remove some pricing volatility.  Even with current macroeconomic trends we feel the underlying demand drivers for the use of wood products continues to bode well for timberland investors.”