By Don Magruder
The RoMac Building Supply Wood Commodity Index (Index) for August 2021 dropped by 55.0
percent to $430.94 per thousand as the big correction in sheathings and spruce finally hit
the wood markets. The sales declined in the Big Box retailers as the spike in the
coronavirus Delta variant is slowing sales. Since last August, this Index is down 41.5
percent and since January, the Index has dropped 49.9 percent. The markets are at or
close to the bottom, and these numbers are the lowest prices of the year. The correction in
the last 30 days will be filtering down to your local suppliers over the next few weeks as
inventories are replenished, and shipments arrive from the longer lead times attributed to
trucking.
There are two variables that builders should be wary of 1.) Hurricane season is upon us,
and it is getting active, and 2.) The Delta variant is creating manufacturing issues once
again. While no one expects the record pricing that has been seen over the last year,
there is a good chance these factors coupled with a devastating fire season out West
could strengthen the markets quickly. Additionally, trucking remains a concern.
The dimensional lumber portion of the Index dropped 34.5 percent to $433.06 per
thousand. Also, $200 drops were common in spruce as well as with wide with pine. 2x4
pine increased a few dollars with 2x4 treated wood only retreating 12.6 percent as treaters
are delayed a little from the markets. Overall, it was a significant correction that will soon
be seen on the ground for builders.
The sheathings part of the Index was brutal as declines were significant. The overall
sheathing portion dropped 63.5 percent or $748.38 per thousand. On average the drop
was $23.95 per sheet. Compared to August 2020, one year ago, the sheathing portion of
this Index is down 37.0 percent. Once again, it is a good bet that we are close to the
bottom and a bad hurricane could quickly pop these markets off the bottom.
There are a lot of unknowns and volatility in the markets. The declines are so sudden and
dramatic that it will take local dealers and lumberyards a few weeks with lead time and
trucking issues to incorporate in new pricing. Builders should see some good declines, but
on the other hand, builders should be cautious in bidding on future projects at these numbers. Circumstances could change in a month- be cautious.
The RoMac Wood Commodity Index is a weighted lumber and sheathing composite based on usage in Central Florida. By using wholesale pricing, the Index is a good indicator of the pricing direction for the next 30 days.
Don Magruder is the Chief Executive Officer of RoMac Building Supply in Central Florida, he is a former president of the Southeast Mississippi Home Builders Association and a past Associate Vice President of the Home Builders Association of Lake County.