October 2016 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 (Index) increased 2.9 percent to $336.29 per thousand as the scare from Hurricane Matthew continues to subside.  Traders and manufacturers throughout the southeast coast of the United States understand that a worst case scenario for this hurricane was averted which could have thrown the supply chain in turmoil.  A 30-mile wobble to the east at the last moment saved Florida from catastrophic damage.  The hangover effect from the storm will linger for a few weeks, but expect the market to settle down as the holidays and winter season approach.

The dimensional lumber portion of the Index increased 1.7 percent as increased pricing on 2×4 spruce and pine added from 0.4 to 5.9 percent, depending on length.  As most suppliers know, these items are the most popular if major damage would have resulted from the storm.  Wide width pine was in full retreat, giving back $33 per thousand on 16 foot lengths.

As expected, the sheathing portion of the Index increased.  A week after the storm it remains up 4.0 percent by adding on average 40 cents per sheet.  OSB sheathing added $13 per thousand while CDX fluctuated between $10-$28 per thousand.  CDX T&G plywood took a $75 decline as most mills found it difficult to move that type of sheathing when roofs are primarily in jeopardy.  The general consensus is that the increases fueled by the storm will retreat.

The next big hurdle for the markets is the U.S. presidential election.  If the country can survive this ugly, bitter election without plunging into a recession, the economy should stay on par.  There is little doubt that political uncertainty in the market will keep demand subdued.  There really aren’t many factors to keep these last increases in force.  So builders should expect some moderation.