April 2014 Lumber and Commodity Report
LUMBER AND COMMODITY REPORT – April 2014
by Don Magruder, CEO of RoMac Building Supply
Keep in mind, the lumber and commodity markets are usually the best indicator of the strength of housing, and this month’s report indicates a housing market that is struggling for buyers. The Home Builders Association Wood Commodity Index (Index) for April 2014 declined 6.4%, as declines were widespread in all sizes and species with the exception of wide width pines, which were flat. Concern seems to be growing as to whether the housing season will gather any momentum after a long winter.
The lumber portion of the Index dropped 6.2% to $374.59 per thousand as western spruce retreated 6.3% to 8.4%. What makes this even more difficult to figure out is the shortage in trucking and railcars. If demand were strong, coupled with these transportation issues, pricing should have skyrocketed by now.
The sheathing portion of the Index fell 6.5% to $264.24 per thousand as mills searched for buyers and no one wanted to be stuck with overpriced panels. CDX pine panels have been very resistant to lower pricing; however, mills finally had to capitulate to lower prices. Despite the decline, as of mid-April, buyers still remain with their hands in their pockets only buying what they need.
Many concerns are raised by a commodity market during a time that is usually the heart of the housing season. In the last few years, buyers retreated to the sidelines in mid-May, and this year the selling season has not kicked-off two weeks before May. Will there be a late building season or no building season at all? The lower prices may be good for those who have work, but prices are getting to a level in which mill curtailments will begin. Frankly, if this occurs I am not sure if everyone will survive.
This is the one time when everyone should look to a firming market as an indicator housing is picking up. At this point, uncertainty is fully in charge, which does not bode well for builders. Although there could be some downside risk to the market in pricing the upside is huge.
If for some reason, the home selling and building season cranks up during the next few weeks, the prices of today will not be around long. Protect yourself on projects bid for later in the spring and summer.
Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (romacfl.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 email@example.com.