January 2017 Lumber and Commodity Report

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by Don Magruder, CEO of RoMac Building Supply

The Ro-Mac Lumber & Supply, Inc. Wood Commodity Index for January 2017 drifted down slightly to $334.10 per thousand or six tenths of one percent. Spruce settled lower on average at $12 per thousand, while most pines were flat to single digit decreases.  Winter weather and a clear direction appears to be what this market really needs.

The dimensional lumber portion of the composite dropped 2.2 percent to $380.65 per thousand, with spruce looking for short-term buyers.  Most believe as spring draws closer that better weather and the effects of the expiration of the U.S.A.—Canada Softwood Lumber Agreement will drive pricing upward.  The only caveat is demand—it must continue to grow.

In the sheathing portion of the Index, CDX gave back $5 to $10 per thousand, while OSB sheathing added $5.  The net impact is a seven tenths increase for sheathing in the Index, but it also signals that some traders are resistant to lowering the base.  This might be very close to the yearly bottom.

The year is set up for volatility and builders should pay close attention.  Prices today will probably be far different in April.  Builders should protect themselves with a price escalation clause in their contracts.  Keep an eye on spruce quality as better grades may be harder to find.  Good planning in January can ensure profits in May.

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 don.magruder@romaclumber.com.