Notes from the Forest 7-16-21 Edition

Ladies and Gentlemen:?

The lumber and panel markets continue to unwind. With prices continue to deteriorate, in varying degrees, buyers’ interest was once again limited, to purchasing must have fill ins from local 2-step sources. Many lumber buyers, for whatever reason, had been anticipating that this week would be the turning point in the lumber markets and in turn that would firm up panels. Needless to say, they are extremely disappointed. Five straight days of losses in CME Lumber Futures Market did nothing to improve buyers’ overall outlook on the markets. Wildfires burning out of control throughout the Western U.S. and Canada were a topic of discussion between traders, However, thus far their impact has been to limit logging efforts and rail traffic.?

The U.S. Bureau of Labor Statistics (BLS) is reporting that the Consumer Price Index for All Urban Consumers (CPI-U), increased 0.9% in June on a seasonally adjusted basis after rising 0.6% in May. This is the largest 1-month change since June 2008 when the index rose 1.0%.?Over the past 12-months, the all-item index has increased 5.4% before seasonal adjustment. This is the largest 12-month increase since a 5.4% increase for the period ending August 2008. The food index increased 0.8% in June, a larger increase than the 0.4% increase reported for May. The energy index increased 1.5% in June, with the gasoline index rising 2.5% over the month. The largest increase, 10.5% in the index for used cars and trucks and it accounted for more than one-third of all items increase. The index for all items less food and energy rose 4.5% over the last 12-months, the largest 12-month increase since the period ending November 1991. The energy index rose 24.5% over the last 12-months, and the food index increased 2.4%.?

Spruce & Stud Markets -: The inquiry and sales pace of Western and Eastern Canadian SPF Std., & Btr., and No. 2 & Btr., remains restrained. ?Buyers started the week just about equally split between those who thought a bottom might be forming and those who thought that downside risk remained a significant threat. However, hefty losses in CME Lumber Futures market (see below) quickly altered buyers’ outlooks and the markets are once again in search of a trading level. Mills started the week quoting double-digits below last Friday’s levels, with wider widths under more downward pressure than the narrows, and prices retreated further from there; for production available the week of 7/26 or sooner. Low-grade sales remain challenging, as declining prices on the construction grades, have industrial buyers considering No.2 & Btr., and their better yields as an alternative. Mills started the week quoting low-grade below last Friday’s levels and prices edged lower from there; for production available the week of 7/26 or sooner. Stud trim sales remain soft. Mills started the week quoting below last Friday’s levels and prices moved lower from there for production available the week of 7/26 or sooner. Traders discussed the wildfires in Canada and oppressive heat in the B.C. and the West and their impact on logging and rail service. ?

CME Lumber Futures –: The CME Lumber Future Contract for July expired at Noon, on Thursday July 15th, 2021. For the past 5 days (7/9 – 7/15), CME Futures were down 5 consecutive days in a row. CME Lumber futures have lost -$227.30 for the week and are trading below the Midweek Cash Market $ 650 by -$159.30, CME at $490.70. The Septembre contract is now the lead month and will expire at Noon, on Wednesday Septembre 15th 2021. The Septembre contracted ended Thursday 7-15-21 at $ 574.90 and is ‘trading below Midweek Cash Market of $ 650 by -$ 75.10. One Year Ago, today (7-15-20), CME Futures closed out the July 2020 Contract at $600.00. The Septembre contract closed the same day at $505.20.?

Hem\ White Fir -: The inquiry and sales pace of Coastal and Inland Std. & Btr. No.2 & Btr., White and Hem-Fir, remain on the quiet side. Mills started the week quoting below last Friday’s levels and prices traded, in varying degrees, lower from there; for production available the week of 7/26 or sooner. Mills with railcars to load or hefty demerge charges to pay were more aggressive with their quotes, until those cars were loaded.?However, as the week progressed the counteroffers mills were willing to accept became smaller. Demand for low-grade remains stagnant. With an abundance of low-grade available for shipment the week of 7/26 or sooner, mills started the week quoiting below last Friday’s levels and listened attentively to the counteroffers from the few buyers in the marketplace. Trading in stud trims remains reserved. Mills started the week quoting below last Friday’s levels, and just as in the construction grades, inquiries were decent but getting buyers to commit to purchasing remained a challenge. Mills started the week quoting stud trims below last Friday’s levels and prices edged lower from there; for production available the week of 7/26 or sooner. ?

Green Doug Fir -: The inquiry and sales pace of Green Douglas Fir Std. & Btr., & No. 2 & Btr., remains lackluster. Late last week’s modest increase in sales activity had limited follow through. With KD pricing remaining competitive, if not better than Green Fir pricing, buyers continue to favor KD production. Producers started the week quoting double-digits below last Friday’s levels, and encouraged buyers to provide them with their feedback and firm counteroffers. As a result, prices moved lower from there; for production available for the week of 7/26 or sooner. Sales of low-grade remain soft. Mills started the week quoting low-grade below last Friday’s levels, but the price cuts were not quite as deep as in the previous weeks and prices moved modestly lower from there; for production available for the week of 7/26 or sooner. Sales of stud trims remain on the quiet side. Mills started the week trying different approaches to coax buyers from the sidelines. Some mills lowered prices, while others held prices or quoted above last Friday’s levels and then listened to buyer counter offers. For production available the week of 7/26 or sooner. ?

Cedar Lumber -: ?The inquiry and sales pace of Western Red Cedar (WRC) boards, fencing, dimension, radius edge decking, siding, pattern stock and timbers remains on the quiet side. With prices on lumber and panels still correcting, mills fielded questions from buyers who were testing their interest in negotiating on prices. Producers with log availability issues and extended production schedules on siding, 1” boards, narrow dimensional lumber, and fencing, simply thanked the buyer for their call and quoted, as a price guide only, at or above last Friday’s levels. They did, however, offer reduced prices on decking products and were willing to listen to ‘reasonable’ counter offers on small squares and timbers. The items typically purchased in bulk by the large box store sector but whose sales are currently subpar. Wildfire and extreme heat are causing logging, production and transportation issues and delaying the shipment of finished product. ?

Shake & Shingles -: The inquiry and sales pace of Western Red Cedar (WRC) Shake, and Shingles remains on the quiet side. Again, this week, buyers were disappointed by the lack of new offering from producers. With a large portion of British Columbia under high to extreme wildfire danger levels, logging and rail traffic has been greatly curtailed, if not stopped completely in some areas. Extremely high temperatures are causing the snowpack to melt at an extraordinary high rate resulting in the continuation of the freshet on the Frasier River, which in turn continues to hamper towing operations. While all products in the complex remain difficult to source, buyers noted that No.1 Perfections and 5X Shingles, along with Tapersawn Shakes were in extremely tight supply. Mills started the week, as price guide only, quoiting Shake and Shingles at or above last Friday’s levels, but most sales were typically PTS.??

Southern Pine Lumber -: ?The inquiry and sales pace of Southern Pine No.1 & No.2-dimensional lumber overall remains disappointing. Mills started the week quoting below last Friday’s levels and prices moved lower from there. However, as the week progressed the narrow widths appeared to be moving closer to a trading level. While wider widths were still being discounted high double and triple-digits below last Friday’s levels. Buyers continue to keep a low profile and most plan on limiting their purchases to must have fill ins until a firm market floor is established. High-grade buyers, especially those working for truss manufacturers, were active in the marketplace. With their field inventories lite and demand accelerating, waiting on high grade replenishment was no longer a viable option. Low-grade sales remain soft. With excess inventory on the ground, and construction grade pricing close to that of low-grade, mills started the week quoting below last Friday’s levels and prices traded lower from there; for production available for shipment the week of 7/26 or sooner. Demand for stud trims remains lackluster. Mills started the week quoting stud trims below last Friday’s levels and prices trended lower from there; for production available for the week of 7/26 or sooner. The lack of large box store sector participation in the marketplace continues to significantly reduce their need for small squares and timbers, as well as 5/4 x 6 Standard and Premium Radius Edge Decking. Producers started the week quoting both squares and timber and R.E.D. below last Friday’s levels, but here again, the downward price push, especially on 4x4 and 4x6, was not as strong as in the previous weeks. It is important to note that most mills have product available for prompt shipment. The problem remains trucking and rail service and mills have decided to add at least a week or more onto availability to create a shipment cushion. ?

Pressure Treated -: ?The inquiry and sales pace of pressure treated lumber, panels and specialty items showed some limited signs of life over the week. Pro dealers continue to report that jobsite activity remains steady to strong and additional material quotes are being circulated for jobs set to start in August and Septembre. As a result, even though prices are still in correction mode; trucking issues and consistent field demand has them purchasing highly mixed truckloads to assure they have the necessary inventory to meet expected and unexpected demand. On the other hand, large box stores continue to report that their sales are at best fair, with many describing their treated sales over the past 10-days as poor. As a result, their need to replenish remains limited. Treaters continue to work through their high-priced inventory and with demand from their largest customers – the box store sector – they have limited need to purchase additional brite feedstock at this time. This in turn is limiting their ability to average costs down. Some treaters are trying to sell some of their brite on-ground inventory in the open market, hoping to expedite the averaging lower process. ?

OSB & Veneer Panels Overview –: ?The panel markets continue to deteriorate. Last week’s price corrections widened further as the week progressed. With prices still at historically high levels, on most items, buyers remain on the sidelines and are adamant that they will remain there until the markets find a sustained trading level. Mill production schedules continue to shrink. Most mills are quoting production available for shipment the weeks of 7/26 – 8/2 or sooner, but many have product on the ground and readily available. The extended lead times are an accommodation for the ongoing tightness in both available trucks and empty railcars. Secondaries are aggressively looking to find homes for their contract and open market ownership. They are quoting below mill replacement values and encouraging buyers to make offers. ?

OSB -: The inquiry and sales pace of OSB remains lethargic. Last week’s price cracks in the OSB markets opened wider as the week progressed. As a result, buyers have moved to the sidelines and appear to be prepared to stay there and do whatever they can to limit their exposure to the correcting OSB markets. Without sales to the large box store sector, mills suddenly find themselves with excess inventory available for sale on the open market. And buyers, who up 2-weeks ago were looking nonstop for additional open market OSB panels, are suddenly nowhere to be found. Produces started the week quoting below last Friday’s levels and prices traded lower from there with limited buyer interest; for production available the week of 8/2 or sooner. Some mills were even offering PTS in the hopes of allying buyer fears, but that did little to inspire buyers to purchase. Secondaries with contract and open market ownership aggressively priced that ownership and urged buyers to make firm counteroffers. Saying that every counteroffer would be given full consideration.?

Southern Pine Panels -: The inquiry and sales pace of Southern Pine Rated Sheathing remains in the doldrums. Producers started the week quoting triple-digits below last Friday’s significant losses and prices retreated further from there; for production available for the week of 7/26 or sooner. Office wholesalers with contract and open market ownership aggressively priced that ownership below mill replacement values and encouraged buyers to make counteroffers. Last week’s losses have sent buyers running for the sidelines. And that is where many buyers intend to stay until the market stabilizes and can maintain a pricing floor for more than just a short period of time. Mill Cert. sales have also faltered. Producers started the week quoting Mill Cert. below last Friday’s levels and prices slid lower from there; for production available for the week of 7/26 or sooner. The sales of value-added panels, underlayment, sanded, siding, concrete form and other specialty panels have also topped out. Mills started the week quoting at or below last Friday’s levels and prices moved lower from there; for production scheduled the week of 7/26 or sooner. ?

Western Fir Panels -: The inquiry and sales pace of Western Fir Rated Sheathings has just about come to a standstill. Last week’s price corrections gained additional momentum as this week progressed. Buyers seeing prices coming off in chunks remain on the sidelines and purchased must have fill ins in units from local sources, while pressing mills to ship what they still had on order promptly. Mills started the week quoting triple-digits below last Friday’s reduced levels and prices dropped lower from there; for production available for the week of 8/2 or sooner. Secondaries with contract and open market panel ownership available for close to prompt shipment quoted below mill replacement levels and encouraged buyers to make firm offers. Sales of Mill Cert and C.C. panels remain lackluster. Mills responded to the slower pace in Mill Cert. and C.C. by lowering prices triple-digits below last Friday’s levels and prices retreated further from there; for production available the week of 7/26 or sooner. The sales of specialty panels were not exempt from the market’s maladies. Mills started the week quoting underlayment, sanded, siding and concrete at or below last Friday’s levels and prices moved lower, in varying degrees from there; for production depending on the specific product mix available for the weeks of 7/26 – 8/2 or sooner. ?

Food for Thought-: ??I want to take a moment to salute and praise the men and women across the U.S. and Canada, that are on the front lines fighting forest and wildfires. They have the title of ‘smokejumpers’, ‘hot shots’, as well as firefighters and believe you me they have more courage than I could possibly muster, even in my youth. They are risking life and limb, jumping from airplanes and parachuting into a burning forest in an attempt to get a handle on these destructive fires. There are rarely any fire hydrants, if they are lucky, they might have a tank truck with limited water and a shovel to throw dirt on the fire and smother it. Much of the suppression efforts comes from airplanes and helicopter, which are being guided from the ground. Flying into blinding smoke and serious down drafts in order to drop water and fire retardant onto the fire below is not for the faint of heart.?

In conversations with traders in both the Western U.S. and Canada, many have told me that they could smell the smoke in the air, while others said they can see the smoke and flames after sundown. Many of these fires are related to the extremely hot temperatures, low humidity levels and heat lightning strikes which have torched these fires off. Some, unfortunately, are the result of careless humans, who are failing to heed the warning to stay out of the woods and under no circumstances, should they have started a campfire. In Canada, currently there are ~580,000 hectares that are on fire across 13 Provinces. In the U.S. there are currently ~ 68 large wildfires, 65 of which are listed as uncontained, that are burning or have burned ~ 1,038,003 acres of land in 12-states. Year to date, in the U.S. there have been ~34,216, that have consumed ~2.221 million acres. Currently, in the U.S. more than 16,500 wildland firefighters are assigned to these incidents. In Canada there are currently 2,400 firefighters supporting the wildfire suppression efforts. (Source: National Interagency Fire Center & Canadian Interagency Fire Centre, Vancouver (BC) Sun newspaper).?

I ask that you keep these courageous men and women in your thoughts and prayers.?It is difficult work and thankfully they choose to do it.?