Lumber Gets Pricey in Wake of Sandy and Housing Recovery

News analysis Bill Esler | Posted: 11/12/2012 6:40PM

 

A housing recovery and a hurricane are driving up the price of lumber, at a time when we would expect a normal seasonal drop. 

click image to zoomLumber futures, CME, random length lumber futuresThe rising price of lumber futures contracts is evident in this November 2012 chart for contracts that become final on Friday, November 16. Lumber futures, contracts to buy large volumes of boards for delivery in January, March, May, July, September and November, have been rising on the tradiing exchange owing to the improvement in home buying and home construction. Since Hurricane Sandy they have reached their highest point in more than 18 months. Futures through May 2013 are showing similar patterns.

Lumber futures contracts for November 2012 (they are traded like orange juice futures or soy bean futures) cease to be "futures" on Friday, November 16, and trading ends the day before. If you are holding a contract at that point, you get the wood delivered. Random Length Lumber futures are for physical delivery 110,000 board feet contract of random lengths 8-foot to 20-foot nominal 2-inch x 4-inch pieces.

So futures are now the present. Lumber futures contracts are traded daily at the CME (once known as the Chicago Mercantile Exchange).

Lumber Futures Chicago Mercantil Exchange CME GlobexRandom Length Lumber Futures trading is explained in a 51-page publication from the CME Group. Download the Random Lumber Futures contracts PDF here.


CME Random Length Lumber futures data is dynamically delivered from the CME commodities trading floor to WoodworkingNetwork.com.

Lumber data is provided here through an agreement with Barchart so all wood purchasers can preview market pricing trends, and large scale wood buyers can do price discovery for lumber used for construction and rehabbing, manage the price risk that mills, wholesalers, builders, retailers and others have related to the purchase or sale of lumber, and trade to speculate based on expectations of lumber.

Lumber futures are contangoed until May of 2013, reflecting investors’ expectations of increased demand over the next few months.

 

A housing recovery and a hurricane are driving up the price of lumber, at a time when we would expect a normal seasonal drop.

Instead, lumber futures have been rising, and since the hurricane rising even more.

 

About the Author

Bill Esler woodworkingnetwork.com

Bill Esler

Bill Esler, Associate Publisher/ Editor in Chief, Woodworking Network Bill is responsible for editing Custom Woodworking Business and coordinating content for Wood Products , CLOSETS , WoodworkingNetwork.com, and related newsletters. Bill’s expertise includes using innovative print manufacturing techniques to grow audience engagement, digital printing, purls, QR codes; and lead-generating webcasts, custom websites, and custom digital and print content. Read Bill Esler's woodworking blogs. He can be reached at besler@woodworkingnetwork.com or follow him on Google+.

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