April 2022 Lumber & Commodity

By Don Magruder

April 22 Lumber Report

The RoMac Building Supply Wood Commodity Index (Index) is a weighted index that we have been charting since 2000, and it includes a mix of the most popular wood items sold in Central Florida.  The Index for April dropped to $889.63 per thousand, or a 34.5 percent drop, which is stunning since much of the decline occurred in the last 2 weeks. In mid-December the Index was at $696.35 per thousand, and in one month to mid-January, it increased 39.3 percent.  The April composite stands 27.8 above the final Index for 2021 just 4 months ago.  This is what you call a volatile market.

There are three key points builders need to be mindful of in these periods of volatility: 

  • Due to longer lead times with trucking issues and inventory management requiring more just-in-case purchasing versus just-in-time purchasing, lower commodity numbers will take several weeks before they hit most suppliers.
  • Most of the decreases are fueled by a softness in the retail sector and not new construction which remains robust across the country, and many expect the mid-West area to begin seeing increased demand as winter gives way to spring.  Despite higher interest rates, the demand equation is strong and should remain strong.
  • Finally, due to trucking issues and the price of materials, many dealers in the south are not overstocked with many items, like specialty studs that are in short supply.

The bottom line, volatility is far from over and builders would be mindful not to buy in these prices for future projects. 

The dimensional lumber portion of the composite dropped to $1050.26 per thousand or 25.9 percent with most items pointing downward in the plus 20 percent range.  The only exception was 2x12 pine that stayed high with mid-teen level drops as LVL availability kept significant pressure on supply.  2x6 precut studs dropped less than a 11 percent which confirms the ongoing struggles in getting specialty stud items.  Trucking remains a huge issue and with vegetable and fruit season in the south, this will probably get worse. 

The sheathing portion of the Index dropped 41.4 percent as OSB sheathings in the last couple of weeks made a capitulation of $600 per thousand after months of resistance in pricing.  Secondary suppliers baling on inventories may have pushed the markets too low, too fast, and given the demand nationally the floor is probably close.  CDX plywood followed OSB but there are questions by some who think CDX is oversold at these numbers.  

There are so many contingencies in the markets currently that make predictions almost impossible.  Last fall when the markets retreated hard and fast, many thought the days of high pricing were gone, and in January, that was proven wrong.

The core issues that drove the markets higher like demand, capacity, labor, and trucking remain, and builders should be very wary at this time.  Expect continued volatility and hopefully current market adjustments will knock the irrationality out of the markets we have seen in the first quarter of 2022.  My sense after 40 years in this business, is that we are a long way from rational trading and pricing.

Don Magruder is the Chief Executive Officer of RoMac Building Supply in Central Florida, he is a former President of the Southeast Mississippi Home Builders Association, and a past Associate Vice President of the Home Builders Association of Lake County.  To contact Magruder, email him at don.magruder@romacfl.com.

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