LUMBER FUTURES SPIKE AS DEMAND FOR COMMODITIES HITS FEVER PITCH
Investors are piling into any commodity they can get their hands on as the dollar crumbles and real assets spike. A cautious reading on homebuilder sentiment did not deter traders from bidding lumber limit up for the second day in a row. A vicious combination of short covering, market optimism and demand for commodities is driving lumber prices higher. Curt Cunningham, president of Pacific Futures Trading attributes the buying to inventory restocking and funds that are scrambling to get their hands on one of the few commodities that just a few weeks ago was not at a 52 week high. That was remedied in a matter of three trading days:
“Funds have been buying gold, crude oil and whatever and there just seems to be a consensus that the weaker U.S. dollar means that you need to be long commodities. General consensus is there’s not much wood in the wholesale distribution pipeline and that has left guys scrambling for product.”
Housing data has not been particularly strong of late, but restocking heading into a weak seasonal period could be a sign of better times to come for the housing market. On the other hand, as we’ve seen with many markets it’s difficult to decipher what is real recovery based demand and Fed induced liquidity buying. For now, it’s safe to assume it’s a bit of both.
With the housing report today, lumber futures are down considerably.
Production for the year is down . . . considerably.
http://www.randomlengths.com/base.asp?s1=Daily_WoodWire&s2=Other_Industry_News&s3=Production&pub=list
Speculation has driven up futures, but it has little to nothing to do with supply/demand.
There is a family owned sawmill just a few miles from where I live and they’re complaining about the lack of demand for their niche product and the overall effect the economy is having on their business.
They’re also complaining, as usual, that they don’t have access to enough trees off public lands, blaming the enviros. Unfortunately for them, framing the issue as one of jobs vs. environment just doesn’t do it anymore.
Good to know Don. Looks like the lumber market is quite similar to the rest of this market – not exactly rising due to fundamentals….
On the other hand, this hardly qualifies as a bubble spike, so as TPC said it’s just part of the overall “buy anything”. Remember some of the historic spikes in nat gas, sugar, copper, … this just looks like random trading, volatility, gaming …
Interesting reading because I have a bid in on LL, a parallel idea.
It’s not too far above a decent buy point, but has gone up a lot.