Notes from the Forest 4-1-21 Early Edition

Ladies and Gentlemen:

In observance of Good Friday, Notes from the Forest is coming out early this week. Notes will return to its normal Thursday scheduled next week.

Softness in the lumber markets and a shortening of dimensional lumber order files, coupled with higher mortgage interest rates, and how those higher rates might impact new and existing home sales and construction, helped to foster lumber and even some panel buyers’ concern about downside risk. As a result, many lumber buyers remain laser focused on their immediate needs, while waiting and wanting to see how the markets perform over the next 7 – 10-days before committing additional resources to inventory for the remainder of April. Panel buyers’ concerns about downside risk are being overshadowed by a lack of available open market panels, delayed shipments and production schedules that stretch from late April to early June. Lumber and panel producers continue to deal with ongoing production and transportation issues, which further added to buyers’ frustration levels. Many traders are looking forward to having Good Friday and Easter Monday off. A chance to reflect, recharge and prepare for the spring building season.

The National Association of Realtors? (NAR) has reported their Pending Homes Sales Index (PHSI), which is based on signed real estate contracts, not actual closings, for existing single-family homes, condos, and co-ops, declined for the second straight month in a row, failing -10.6% in February to a reading of 110.3. An index of 100 is equal to the level of contract activity in 2001. The NAR notes that contract transactions fell in all four major U.S. regions. Year-over-year contract signings declined -0.5%. The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, which covers all nine U.S. Census divisions, reported home prices on an annual basis gained 11.2% in January, up from 10.4% increase in December. The 10-City Composite annual increase came in at 10.9%, up from 9.9% in the previous month. The 20-City Composite posted a 11.1% year-over-year gain, up from 10.2% in the previous month.

Spruce & Stud Markets -: The inquiry and sales pace of Western and Eastern Canadian SPF Std., & Btr., and No. 2 & Btr., overall was on the quiet side. On occasions, ripples of energy moved through the marketplace as buyers stepped back in to cover near-term needs, or reacted to calls from a mill or office wholesaler with an excess of something, that they were willing to wheel and deal on. Wanting to extend their production schedules, rather than raise prices, many mills started the week quoting at or on a narrow line on either side of last Friday’s levels; for production scheduled for the week of 4/12+. Low-grade stock sales continue to hold steady, as industrial sector buyers’ need for inventory remains unabated. Mills started quoting low-grade at or above last Friday’s levels and prices held steady or edged higher from there; for production scheduled for the weeks of 4/12+. Demand for stud trims varied by width and trim. 2x3-8’ trims remain in tight supply and mills started the week quoting above last Friday’s levels for production scheduled for the week of 4/12+. 2x4-9’ studs were subject to modest discounting from the start of the week moving forward. Demand for 2x6 stud trims is active and mills started the week quoting at or above last Friday’s levels; for production scheduled for the week of 4/12+.

CME Lumber Futures –: The CME Lumber Future Contract for May will expire on Friday May 14th, 2021 at Noon CDT. For the past 4 days, (3/26– 3/31), CME Futures were up 3-days and down 1-day. CME Lumber futures have gained $ 35.60 for the week but are trading below the Friday Cash Market $ 1025 by $15.90, CME $ 1009.10.

Hem\ White Fir -: The inquiry and sales pace of Coastal and Inland Std. & Btr. No.2 & Btr., White and Hem-Fir, was less hectic than in the previous weeks. Buyers remain cautious and their concerns about downside risk intensified as the week progressed. The selective and modest discounting that started last week in specific narrow width of inland species continued this week. A lack of I-joist helped to support the current wider width pricing structure throughout the complex. Mills started the week quoting at or on either side of last Friday’s levels and prices traded close to those levels through the balance of the week; for production scheduled for the week of 4/12. Demand for low-grade stock remains steady but perhaps a notch or two slower than in the previous weeks. Demand from industrial buyers and their need to replenish dwindling inventories, allowed mills to start the week quoting low-grade at or modestly above last Friday’s levels and prices held steady or edged higher from there; for production scheduled for the week of 4/12+.  Demand for stud trims has quieted and mills immediately reacted to the slowdown by starting the week quoting at or below last Friday’s levels; for; depending on the specific species, width, and trim for the week of 4/12, or sooner.   

Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir Std. & Btr., & No. 2 & Btr., showed further signs of slowing as the week progressed. A slower pace in the dry market and a few K.D. species experiencing modest price corrections sent Green Doug Fir buyers scurrying to the safety of the sidelines. This week Green buyers only returned to the market to purchase must have fill in items. Mills started the week quoting at or on either side of last Friday’s levels and prices traded quietly in that range through the remainder of the week; for production scheduled for the week of 4/12. Demand for low-grade stock – Utility, No.3 and Economy, was also slower than in previous weeks. Mills started the week quoting low-grade at or  modestly above last Friday’s level and prices remained close to those levels through the balance of the week; for production scheduled for the week of 4/12 – 4/19. Buyers’ interest in stud trims also cooled and mills started the week quoting at or on either side of last Friday’s levels; for production scheduled for the week of 4/12.

Cedar Lumber -:  The inquiry and sales pace of Western Red Cedar (WRC) boards, fencing, dimension, radius edge decking, siding, pattern stock and timbers remains animated. Buyers continue to comb through the market trying to find coverage for new orders in hand, while at the same time checking with mills on previously placed orders. With a dearth of WRC logs available and their prices climbing ever higher, producers struggled to find enough raw materials to keep up with production orders already in house, let alone considering taking on additional sales. Mills started the week, as price guide only, quoting above last Friday’s levels, while continuing to take any order Price Time of Shipment. Buyers have become more vocal, with many wondering aloud if current pricing and a lack of production might just be the catalyst to push \ force WRC buyers to actively consider alternative species and other manmade products to replace WRC product needed to complete projects or to start new ones.  

Shake & Shingles -: The inquiry and sales pace of Western Red Cedar (WRC) Shake, and Shingles and Eastern White Shingles (EWS) continues to mirror a marketplace where offerings, particularly of Shingles, remain in tight supply and previously placed orders are long overdue for shipment. With additional jobsite quantities orders to source, as well as inquiries not covered from last week, buyers were back in the marketplace first thing Monday morning looking for coverage. Sadly, as in previous weeks, most came up empty handed and as a result, buyers’ frustration levels continue to climb. U.S and Canadian producers are reporting procuring logs has become even more challenging, while log prices continue to soar higher. As the Freshet begins to take form, many producers are openly voicing their concern about their ability to continue \ resume steady production without the availability of raw materials. Producers started the week quoting at or above last Friday’s levels and prices edged higher from there. Transportation issues added another layer to the market’s maladies.

Southern Pine Lumber -:  The inquiry and sales pace of Southern Pine No.1 & No.2-dimensional lumber remains tentative. As narrow width buyers wait for definitive results, not just mere trader speculations, that the markets are nearing a bottom. Mills started the week quoting the narrow widths at or below last Friday’s levels and prices traded on either side of that line through the balance of the week. Heavy rains last week and over the weekend continue to limit log harvesting to the outer fringes of the forest. Resulting in 2x10 and 2x12 remaining in tight supply. Mills started the week quoting wides at or on a thin line on either side of last Friday’s levels for production scheduled for the week of 4/12. High grade buyers continue to limit their purchases to must have fill ins, as they too wait for some sign that market correction is coming to an end. Low-grade sales continue to run contrary to the construction grade market. Mills started the week quoting low-grade at or on a thin line on either side of last Friday’s levels and pricing hovered there through the balance of the week; for production scheduled for the week 4/12+. Stud trim sales have stalled. Mills started the week quoting at or modestly below last Friday’s levels, but quickly opened to moderate counter offers to keep production sold. Small squares and timber showed signs of weakness in 4x4 and 4x6, while availability of 6x6 remains tight. Except for the abundance of 4x6-10’ which were being discounted, mills started the week quoting 4x4 and 4x6 at or on a thin line on either side of last Friday’s levels. 6x6’s started the week commanding a premium, as production schedules stretch into mid-April. Demand for 5/4 x6 Radius Edge Decking is once again favoring the Premium grade. Mills started the week quoting Premium grade above last Friday’s levels, while holding Standard grade at previously established levels. Trucking remains tight and as a result shipments are being further delayed.

Pressure Treated -:  The inquiry and sales pace of pressure treated lumber, panels and specialty items were able to build modestly on last week’s uptick in activity. With the price correction in Southern Pine lumber continuing, several pro dealers, some with active jobsites and acknowledging that tight truck availability is making this difficult, continue to limit their purchases to must have fill-ins. Anticipating that delaying purchases today will result in their being rewarded with lower prices tomorrow. On the other hand, large box store retailers continued to add to their inventories of fencing and landscaping materials in anticipation of a surge in DIY activity as the weather warms. Box stores merchandisers did note that this week’s sales and foot traffic were not quite as strong, but believed that many DIY’ers have their attention on this Sunday’s Easter festivities and will be back next week. 

OSB & Veneer Panels Overview –:  The inquiry and sales of OSB and plywood panels remains unrelenting. However, signs of buyer fatigue are beginning to creep into the marketplace. Limited supply cannot keep up with unabated demand. As a result, mills started the week quoting above last Friday’s levels for production scheduled, depending on the specific item, anywhere from mid-April through late May \ early June and all points in between. Anything that was suddenly available for promptish shipment sold quickly and at a premium to reported mill sales levels. Higher veneer prices, ongoing resin issues, along with other production and transportation issues just add another layer of aggravation to the panel markets.

OSB -: The inquiry and sales pace of OSB has become more regionalized. Some areas are reporting that their sales have begun to show signs of modestly tapering off. Perhaps, the result of many frustrated buyers simply deciding to take a step back and stop looking for what is not there. Other regions continue to report that demand is as strong, if not stronger, than ever. Active jobsites kept buyers combing through the mill and secondary markets looking for replenishment. Producers started the week quoting above last Friday’s levels and prices traded at or above those levels for the remainder of the week; for production scheduled for the weeks of 4/19 – 5/3+. Anything that surfaced for close to prompt shipment sold quickly and at high double to triple-digits above mill reported levels. Several producers were, once again, off market for a good portion of the week as they continue to deal with resin shortage, other production and transportation issues; while at the same time trying to catch up on delayed shipments.   

Southern Pine Panels -: The inquiry pace in the Southern Pine Rated Sheathing remains animated. Sales on the other hand continues to reflect the lack of available open market panels for sale. Buyers were caught off guard when late last week a mill(s) suddenly appeared on market with a very limited number of trucks available for shipment this week and next. They were priced at a significant premium to current quoted levels and of course due to the ongoing acute shortage of trucks, shipment times could not be guaranteed. Those in need and fortunate enough to have received the call bought and hoped for the best on shipment. However, that did start some buyers wondering if the mills had more production than they were reporting. This week mills were back to quoting production from the week of 4/19 - 5/10 and with prices being quoted above last Friday’s reported levels. Buyers checked frequently with mills and secondaries about delayed and upcoming shipments and at the same time asked about the chance of getting additional replenishment on the books. Sales of Mill Cert. also continued to strengthen, and mills started the week quoting prices above last Friday’s levels; for production scheduled for the week of 4/12+. The sales of underlayment, sanded, siding, concrete form and other specialty panels remain steady to strong. Producers started the week quoting at or above last Friday’s levels; for production scheduled for the weeks of 4/12 – 4/19+.

Western Fir Panels -: The inquiry and sales pace of Western Fir Rated Sheathing moderated as the week progressed. Nevertheless, demand remains unrelenting, while a dearth of open market panels persist. Ongoing transportation issues, a resin shortage and higher veneer prices did nothing to help improve the market’s tone. Buyers had little choice but to remain active in the marketplace. However, buyer fatigue is clearly starting to settle in. Mills started the week quoting above last Friday’s levels, but the price surge was definitely not as stout as in the previous weeks. Mills are quoting production scheduled anywhere from early to mid-May, to early June. Buyers spent a good portion of the week trying to track down delayed shipments, as well as asking about the potential of May shipments shipping close to on schedule. Mills did their best to not promise much beyond ‘we’re working diligently trying to catch up on your and others orders’. Anything that did become available for close to prompt shipment continues to sell well beyond mill reported levels. Mill Cert. sales continued to intensify over the course of the week. Mills started quoting Mill Cert. above last Friday’s levels and prices climbed higher from there; for production scheduled for the week of 4/19+. Canadian CC grade buyers continue to scour the U.S. domestic market looking for coverage. As a result, mills started the week quoting CC above last Friday’s levels for production scheduled for early June. The sales of value-added panels, underlayment, sanded, siding, concrete form and other specialty panels remain energized. Mills started the week quoting at or above last Friday’s levels and prices moved higher from there; for production scheduled for the weeks of 4/19+ and on some key items well beyond.  

Food for Thought-:   The best time to make a plan . . . is before you need a plan . . .

 This past week and weekend we had several rapidly moving lines of thunderstorms, with high winds, some gusting up to 60 MPH and hail the size of quarters, and golf balls pummel Northeast Tennessee over a 4-day period. Roofs, siding and cars were damaged. Fortunately, our particular neighborhood was spared much of the damage but less than a mile from our home folks were not as fortunate.

As the forecast for inclement weather became clearer, we took the time to review our inclement weather plan. In fact, we have one for both the winter and summer. Hopefully, your family and business do too. Our home does not have a basement, so we know that in case of a severe weather outbreak we are going to the bathroom on the main floor of the house, it doesn’t have any windows and only interior walls surround it. We have several mature trees on our property and we know to stay away from windows and off of the upper floor of our house. All our flashlights have new batteries and our cell phones will be close at hand. We invested in an AC\DC powered NOAA Weather Radio. One of the best under $30.00 investment we’ve made.

Although we hear terms during dangerous weather, do you know the difference between a weather Advisory, Watch and Warning? Let’s review:

   Advisory = Conditions are right for some dangerous weather. However, nothing is currently occurring.  In the winter this also means grocery store shelves will be empty in a matter of hours once the advisory is posted.     

Watch = Severe weather is possible in and around the warning area. Time to keep an eye on the sky!  

Warning = Severe weather is already being observed and it’s time to move to your safe shelter place. 

 For more information I encourage you to visit the National Weather Service at www.nws.noaa.gov/om/severeweather/w.w.shtm1