July 2021 Lumber and Commodity Report
The RoMac Building Supply Wood Commodity Index (Index) for July 2021 dropped 24.2 percent to $956.97 per thousand as lumber, plywood, and sheathing made significant retreats since mid-June. The Wood Index is a weighted index of wood commodity products used in Central Florida and it more accurately defines price variations for a project each month. The last four weeks have been rough, but levels are a long way from pre-pandemic commodity pricing levels. Sheathing and OSB prices have slid back to the first of April while lumber is trading in the November pricing range.
The dimensional portions of the Wood Commodity Index dropped 40.7 percent or $453.76 per thousand with wide-width pine taking the heaviest hit, followed by studs. Over the last few weeks, the market has cut out the speculation which drove prices to unsustainable levels.
Spruce studs, depending on width and length, retreated 30.1 to 47.4 percent or $310 to $590 per thousand. Dimensional spruce 2×4 and 2×6 dropped on average from 31.2 to 45.2 percent which generally equates to the mid $300 per thousand area. Price declines at the dealer level will be slower to filter down to builders as trucking issues and heavy backlogs are making inventory replenishment slower.
Wide width 2×12 pine was routed as buyers went to the sidelines with prices dropping 57.1 to 61.9 percent, while $900 per thousand drops were commonplace. 2×4 pine did not fall as much, with decreases at $470 per thousand or about 38.4 percent. The last 30 days have been brutal, and builders should see much lower pricing as inventories replenish over the next 30 days.
The downturn on CDX pine and sheathings have been a little slower and mills continue to remain in some control, especially as hurricane season grows closer. CDX took the biggest hit in price dropping at $490 per thousand or about 27 percent. OSB sheathing had more moderate declines of 5.3 to 9.1 percent which translates to $65 and $105 per thousand. Overall, the sheathing portion of the Wood Commodity Index dropped $195.78 per thousand or 14.3%. On average that would be $6.26 per sheet.
The pace of declines in lumber has slowed this week while CDX pine has picked up some. OSB sheathing is holding firm as production has not overrun demand. Another factor that may start to play in the wood commodity markets is the huge outbreak of wildfires in the western portion of Canada and the United States. Fires are up significantly versus last year at the same time, and with record heat, lumber supply could be in trouble out west. Throw in a bad hurricane season along with a firming futures market and you may see a moderate rebound and tighter supply in August.
Builders should keep their guard up and protect themselves on long-term projects because this market volatility is far from over given the heavy housing demand projected in the second half of 2021.
Don Magruder is the Chief Executive Officer of RoMac Building Supply in Central Florida 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, fill out a contact form on our contact page.