July 2022 Lumber & Commodity Report
By Don Magruder
The RoMac Building Supply Wood Commodity Index (Index) for July dropped 5.1 percent to $582.54 per thousand, but the signs of the markets are pointing up despite the overall decline of the month. In the last couple of weeks, the markets have moved up, especially in the sheathings, despite the overall decline. This is a report and time period that could trap builders in a false sense of pricing security- beware.
The dimensional lumber portion of the composite rose 10.9 percent to $682.57 per thousand as the spruce markets gained pricing steam on curtailments, trucking issues, and continued good demand. Studs dropped 3.7 to 11.6 percent while dimensional 2×4 spruce added 11.2 to 27.2 percent and 2×6 jumped 19.6 to 32.1 percent. Only 2×12 pine retreated in price by 12.0 to 14.9 percent as LVLs became more available. 2×4 treated pine added 1.1 percent on higher pine pricing. Builders should keep in mind that pricing at the local lumberyard will probably be higher as most mills and manufacturers have added $10 to $20 per thousand freight adders to cover increased costs in trucking and labor.
The sheathing side of the Wood Commodity Index dropped 17.1 percent to $507.82 per thousand, and this is where the pricing security trap exists. In the last two weeks, both CDX pine plywood and OSB sheathing have gone up in price, there is momentum toward the upside, hurricane season is upon us, and these manufacturers are also adding new freight charges to cover costs. CDX pine plywood was down 15.5 to 20.0 percent or about $180 per thousand. OSB sheathing was only down $75 per thousand or 14.4 to 16.1 percent. Honestly, it would be not out of the realm of possibility for these markets to increase to prior month levels in the next thirty days.
Overall, inflation is hitting every sector in the supply chain, and it is being overrun with hidden freight and other costs. Plus, a bad hurricane season could quickly change the supply chain calculations. Also, despite rising interest rates the need for housing remains, and as potential buyers get accustomed to the new interest rates, normal and beyond the shock increases, expectations of demand are probably going to increase. Florida remains a red-hot housing market and mid-summer is the worst time for these markets. Builders should be very wary about dropping prices and beware of this month’s pricing trap. Hold on, it could still be a bumpy ride going into August and September.
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.