October 2020 Lumber and Commodity Report
The RoMac Building Supply Wood Commodity Index (Index) for October dropped 11.2 percent, or $93.59 per thousand, as the markets finally began to cool off after a scorching summer of price increases. Although the decrease almost wiped out the 13.0 percent gain from September, the market has a long way to drop to catch up to the 47.0 percent increase in August. At least the trend is heading in the right direction for builders. Concern about the COVID-19 pandemic worsening; catching up on pent-up demand from spring; and a general softening of demand as the country heads toward winter are encouraging dealers to put their purchasing books away.
Some manufacturers, especially on the OSB sheathing side, believe the supply and demand equation will remain out of whack for the next several months, which is encouraging higher pricing. However, lumber futures are telling a different story. Based on market adjustments this week, the chances of a pricing free fall are growing.
The dimensional lumber portion of the Index dropped 13.2 percent as everything, but 2×4-16 treated pine, which was up 4.6 percent, gave back pricing. Spruce stud pricing was down from between $85 to $190 per thousand, depending on the cut, while dimensional spruce was off 17.1 to 21.5 percent. Shorter lengths were hit harder. 2×12 pine dropped from $75 per thousand to $165 as 16’ lengths cratered. While the cuts were steep, there is probably a lot more downward movement ahead.
The sheathing portion of the Index was mixed. CDX pine plywood pricing was down almost 32.0 percent, or about $275 per thousand, which is $8.80 per sheet. Oddly, OSB sheathing increased $5 and is selling at a higher price. The plunge in CDX is going to mount a lot of pressure on OSB and the market is going to determine if once again CDX pine is the principal market driver.
The outlook for the next few months hinges on the severity of the pandemic, the chaos surrounding the presidential election, and the overall demand equation for the country. While housing may be strong in areas like Florida, if other portions of the country go on lockdown or struggle with overall demand, prices will decline quickly.
Builders need to monitor the market and not bid projects on the low side of pricing. Let the numbers come to you and get higher prices established before slashing numbers. Do not forget that spring is only five months away.
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, email him at through our Contact Page.