October 2021 Lumber & Commodity Report
By Don Magruder
The RoMac Building Supply Wood Commodity Index (Index) for October 2021 increased for the second straight month as the August market bottoms have long since been touched. Over the last 30 days, the Index soared a whopping 18.7 percent to $557.96 per thousand as no item on the Index declined in price. Most experts believed the August commodity bottoms were too much of an overaction as the housing demand equation remained extremely strong with a huge backlog and capacity problems restrained by labor and raw material issues, as well as the surge in the COVID-19 Delta variant.
While I did see the rebound in the markets and I cautioned builders last month to be wary, it is surprising that the markets have rebounded this much in such a short time. While the record levels of late spring and early summer are probably not attainable again, these market increases do raise concerns that the systemic issues of demand and capacity are far from resolved.
The dimension lumber portion of the Index composite increased a mind-boggling 27.5 percent to $582.11 per thousand with every item adding $100 per thousand more except for 2×6- 92 5/8 studs which increased by $40. Spruce studs were up 22.3 to 35.7 percent as specialty-sized studs took the largest jumps. Dimensional 2×4 spruce added 22.2 to 31.3 percent depending on the length and 2×6 spruce jumped 32.9 to 41.7 percent. The spruce market is driven by continued Softwood Trade Tariff issues, transportation, and capacity issue. 2×12 wide with pine was a solid $100 per thousand up which translated into increases from 25.3 to 30.6 percent increases. Pine added almost 20 percent and in the last week or so has been going up unabated, and this will once again impact truss pricing as higher-grade truss lumber has become tight again.
The sheathing segment of the Index increased 12.4 percent to $539.93 per thousand as OSB jumped $40 to $45 per thousand or about $1.20 per sheet. 15/32” 4-ply CDX pine plywood added $75 per thousand or about $2.40 sheet. The biggest increase in pricing on the Index was 19/32 “(5/8) CDX pine plywood which added $200 per thousand or $6.40 per sheet. Unreliable foreign supply, code changes in Florida, and a general problem with capacity is pressuring 19/32” CDX, and this item is definitely on a price run. Lead times are starting to stretch out as two-steppers and dealers finally blow out heavier inventories from the summer.
As the COVID-19 pandemic resolves further- hopefully- Florida could have its first real home-selling winter season in a couple of years. There is significant pent-up demand in all areas, so at this point, there are no signs that demand is easing. In fact, the Florida market probably will get hotter in the winter.
Builders should include price escalation clauses in their contracts and be very wary about long-term pricing. No one has a crystal ball and the only way these markets get stable is through controlled demand and increased capacity which seem unlikely in the short term. Expect the markets to remain solid to strong until the holidays and there may be a few weeks of flattening. Curiously, if spring is clear of COVID-19 nationwide, we could see much higher pricing. Planning and preparation are your best tools for combatting markets like this.
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.