October 2014 Lumber & Commodity Report

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by Don Magruder, CEO of RoMac Building Supply

The Home Builders Association Wood Commodity Index (Index) for October increased 0.4% to $338.80 with sheathings going up and lumber going down.  One gives and the other takes away. This minimal price movement is probably an accurate reflection of the mood in both housing and the economy — not much excitement. The mood of the country seems to be infected with an economic virus of uncertainty, which cannot be shaken.

The dimensional portion of the Index dropped at the wholesale price level to $401.89 (2.7%) as decliners led advancers by a 5 to 1 ratio. Wide width pine took the heavy hit with declines in pricing of 11% plus. 2×6 spruce advanced in certain sizes, with $10 plus increases in 2×4 spruce popular sizes. Overall the mood is down, and with winter only weeks away, prospects for a price run look dim as the country exits hurricane and storm season unscathed.

Activity and pricing picked up slightly in the sheathing portion of the Index, with CDX pine plywood pricing remaining very strong, while OSB sheathing floundered at much lower levels. The mills for plywood have done a good job managing supply to demand, but in the case of OSB mills, there is simply too much supply. The spread between 15/32” OSB and CDX sheathing is $308 per thousand or $9.86 per sheet. At that difference, you would expect builders to move away from plywood for residential roofing.

Mills and manufacturers appear to be growing anxious over sales in the last quarter, and builders are beginning to see some cracks in pricing. Whether this continues depends entirely upon how well the supply and demand quotient is managed. There appears to be little in the way of housing demand to push pricing in a sustained, upward trend over the next 30 days.

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.