Freres Lumber February Market Update: Commodity Markets Press Higher

February 22, 2021

The commodity lumber and panel markets continue to press higher over the last few weeks, continuing on their record-breaking run of prices. Plywood in the west has been steady to good to strong, depending on the day of the week. Buyers continue to support ever higher numbers on sheathing products, with order files on some items reaching into the first of May.

While nothing is ever certain, the marketplace seems to have plenty of momentum to finish out March easily and likely to do the same for April, as crazy as that may seem. Certainly, many buyers are betting on the market’s staying power, as they purchase wood six to 10 weeks out. At this point, it would be hard to bet against the market.

Long order files, tight production, and strong spring demand are factors in this unprecedented strength. What is remarkable is that the markets continue to edge higher right in the middle of our harshest bout of winter weather this year. That would not usually happen. So, buyers are looking past winter weather at this point, right or wrong.

Again, we round up the normal suspects:

1. Pinched production in many or most commodity lumber producing areas.
2. Continuing strong demand.
3. Lean inventories.
4. Strong order files.

This “perfect storm” of events has conspired to heft prices to their current levels. Nothing should really surprise us at this point. Many traders have grown cautious over the past month. And who wouldn’t blame them? Very, very high prices — and with this expanded price range, likely increased volatility in the future.

These markets are never easy for anyone to navigate. Most buyers continue to buy their needs each week, and not much more than that. However, most customers are well entrenched and committed to these higher price levels. So, buyers will continue to keep this strategy, with one eye looking over their shoulder for any signs of a change in sentiment in the marketplace. For now, it sure seems to be more of the same ahead — at least the next 30-45 days, it is hard to see any change in market dynamics.

For now, the trend continues to be your friend. Make hay while the sun shines.