Commodity – A commodity is a basic good used in commerce that is interchangeable with other goods of the same type. I’m sure anyone that has been building or adding on to their home has found that the price of lumber has increased. But why is that?
The Price of Wood
Let’s start where it all began this year. April 2020 pretty much everything was mandatorily shut down.
When some businesses were allowed to re-open and lumber could start being processed again, stock supply diminished quickly with no back supply to fill it with. This is due to the fact that lumber manufacturing takes several steps besides just cutting down a tree. Briefly the steps are:
- They have to inspect trees then cut down the appropriate ones
- The trees have to be debarked
- The logs have to be milled and then cut into sizes
- Then the wood has to be dried/treated
- The wood has to be inspected and each finished piece has to be graded and stamped
- Then comes the shipping to the yards for sale
Key Data on Lumber (LBS):
- Recently Closed – $616
- 52 Week High – $830
- 52 Week Low – $259
The top 5 Industrial Industrial Roundwood Producing Countries are:
#1 America #2 Russia #3 China #4 Canada #5 Brazil
The US is unable to meet its demand within its borders and does rely on imports. Canada supplies nearly one-third of US annual lumber consumption. There has been a history of trade tensions with them.
The four factors that make this wood a highly economically sensitive commodity are construction and housing data, trade policies, availability and price of substitutes, and supply – mostly the old supply & demand.
On average a new home uses approximately 15,000 board feet of softwood to build. A surge in new homes would create a tight supply and higher prices in the intermediate term.
Along with that, we have had and are still having raging fires creating forest loss. “In the view of one National Association of Home Builders (NAHB) economist, a pattern of devastating natural disasters in the United States, including wildfires and hurricanes, should fuel demand for lumber as homeowners rebuild.”*
No one can actually predict where the prices may go for lumber. Will it rise higher from where it is now; possibly. Will it hit the 52 week high again; hopefully not. Expert opinions are conflicted to say the least. But if you are waiting for lumber pricing to drop down further before building that deck or enclosure (it spiked in late August and topped out in mid September), you might just want to get that project moving sooner than later.
Give Holly Springs Builders a call or a text (919-346-0678) and get a free estimate on that deck you would like to build or enclose today.
*Quote found on https://commodity.com/