February 2014 Lumber and Commodity Report
LUMBER AND COMMODITY REPORT – February 2014
by Don Magruder, CEO of RoMac Building Supply
The Home Builders Association Wood Commodity Index (Index) dropped 1.8% to $322.19 per thousand from mid-January to February. Most of the blame for the decrease is pinned to bad weather. For the first time in nearly a decade, the Northern and Southern areas of America are having a very harsh winter, which appears to have broken a long running pattern of early spring building spurts.
The lumber portion of the Index dropped 1.0% to $391.25, as heavily weighted items gave up pricing. Most spruce items (with the exception of 2×4-16) traded in a very narrow, flat range. Pine pricing fluctuated with length demand.
The direction of the sheathing portion of the Index was unmistakably down, as average sheathing prices dropped 2.5%. CDX pine, on average, gave back nearly $10 per thousand while OSB sheathing fluctuated downward $5 to $10 per thousand based on thickness. Most decreases were blamed on slower demand linked to the weather.
From January to February, the weather was indeed a factor; however, there are two different ways to view this market. First, the drop in pricing should have been more given the nasty nature of the weather. Second, should it all be blamed on the weather or have the headwinds of new mortgage rules and this economy slowed down the market? How much longer can the weather be blamed?
Some analysts suggest the lumber market is poised for a huge run-up in prices; however, thus far many dealers are keeping their hands in their pockets. This year could be a typical selling cycle when winters were bad. Back then, prices cratered in January and February and then made huge runs late March through early June. That remains to be seen.
One thing is for sure, builders should be cautious bidding April and May projects with today’s numbers. My suggestion is you put a price protection clause in your bids and bid these items with a good pad. Remember, you can always go down but never go up. The market is in uncertain times and the smart people will be very cautious.
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 firstname.lastname@example.org.