RCM Ag Services

Category: Housing

16 Jun 2025
Agriculture, CME, Futures, Hedging, Housing, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: Futures were up $20 for the week

The Lumber Market:

Futures were up $20 for the week. It is a market doing a good job in developing price discovery in a chaos environment. Saturday, I  was asked to be on a call with an equities team who wanted to know what was causing the uptick. These guys a very inflation sensitive. I explained that between the CVD, AD and, tariffs prices from Canada will be going up. To what level remains to be seen. They were quick to point out that the US and European capacity could be increased. I pointed out that the quarters it would take to be a factor is too far off to put into a 2025 equation. What about demand? We are here because demand has been flat for 3 years. A macro look shows that we are fighting for every dollar higher as usual. July hit 710.00 back in early March. The futures market is actually near its low end of the range. We are flat. The trade today is trying to find a new equilibrium trading range. This is not a supply driven rally, at least not yet. It isn’t a demand push either. The rally is spec shorts covering and short funds covering via the roll. Nothing more, nothing less. I do see and uptick in the industry hedging up here. Good move.

Technical:

The RSI is 75.60. A grind to the next points of 642 and then 655 are in reach. Once we hit the gap we may have to take a closer look. The 200 day is at 618.50. History has shown us that this ends in a quick thud, so a risk management plans need to be in place. Just stair step in higher. There is no need to rush into it. The marketplace should drag the cash marginally higher.

Daily Bulletin:

Southern Yellow Pine:

The Commitment of Traders:

About the Leonard Report:

The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.

Brian Leonard

bleonard@rcmam.com

312-761-2636

09 Jun 2025
Agriculture, CME, Futures, Housing, Lumber, Market Commentary, Market Updates, Other News, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: 2025 has been a year of the announcement

The Lumber Market:

2025 has been a year of the announcement. Each causing rallies. There are no supply issues or a demand push that rallies the market. The rallies are triggered by fear of less wood or higher priced wood. Neither have come into play yet, but the fear is real. That said, we are seeing each rally carrying considerably less weight than the last. My thought is that every time we get some type of verbiage thrown at us the trade steps up. It has been the same way for 3 years now. The buyers are adding to the pile each time with a “what if” attitude. They have less risk at the low cash numbers. The best risk management for the last few years has been to buy a few extra deals.

Last week we saw the attitude of a market by Wednesday entering the abyss only to get an announcement that a mill is laying off 2000 workers. That caused a short covering rally or maybe it is better to categorize it as lack of selling event. Most would agree that the margins are the tightest in almost 8 years. Everyone’s ROI is in the tank. That equates to less hedging and a more proactive exited policy of those hedges. The low trading volume allows the futures to spike up then fall. My guess for next week any support will force more hedgers out. Also, a low volume environment when the funds are rolling shorts could cause a spike. It is too hard to be short in this market. That said, I’ll bet in the long run those who did the basis and kept their discipline will go to the bank again. Fundamentals are fundamentals.

Technical:

There are two moving averages that stand out. The first is the 13-day at 596.35. The other is the 200-day at 617.60. Thursday’s trade left a gap from 598.00 to 600.50. The market has a slight sell program from an algo/fund showing up daily. Low volume does not help their strategy but does keep them in the game. That could create the selling that closes the gap from last week. On the flip side, any strength early in the week will set the 200-day as the bullseye.

There isn’t any data out there to support trend analysis. We are stuck with the technical read. The 200-day moving average is used by billion-dollar stock market companies to measure the Dow. 617.60 is the objective and we will then see if trading above it weakens some knees out there.

 

Daily Bulletin:

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

Southern Yellow Pine:

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/southern-yellow-pine.volume.html

The Commitment of Traders:

https://www.cftc.gov/dea/futures/other_lf.htm

About the Leonard Report:

The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.

Brian Leonard

bleonard@rcmam.com

312-761-2636

19 May 2025
Agriculture, CME, Futures, Housing, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: It was a good week for July futures as the cash attempt to bottom helped support it

The Lumber Market:

It was a good week for July futures as the cash attempt to bottom helped support it.  July’s struggle today  is its premium to cash. While there is a good amount of time left, the month can only get so far away from it. Futures tend to carry about a $30 premium to cash early in the cycle. It has been much greater in the recent past, but today’s appetite for risk is limited. The producer side of the industry will again try to rein in supply. Over the years they have not been able to limit supply to slow a bear market. Only when demand picked up where they able to gain back control. It is the same today. It wasn’t a week ago that the wholesalers were playing hot potato with cars of lumber. Like it or not, that is our real time view of the market. As I said before, one distressed widget looks like a thousand when you can’t get rid of it.

Monday, we come in no longer worried about the May expiration and more confidence that the lone widget is gone. We also come in with both the industry and the funds building their positions. The industry jumped their long position to 4575 up 504. The funds increased their short position to 3863 up1103. Now that was as of Tuesday, but the total open interest didn’t move much during our drama filled May expiration. With the industry longs, are those forward buys or speculative? Forward buys mean a better future. Speculation means a lot of selling at some point. The funds, well it is more defined. They will roll their longs at the end of the month and then roll their shorts two weeks later. It is like clockwork. The other thing that now comes into play is the trigger to force the short funds out. Yes, that is a thing. The 200-day moving average is 617.10. That sometimes is the point to start exiting, but it is so early to see them exit on this one.

Futures are not a perfect scientific data set, but it is the best source of price discovery. The May $93 spike is a good example of issues. The guy who sold it has to be a great trader.

Technical:

Looking at the upside, the large gap in July is in play. May’s spike went into its gap. The 655.00 to 675.00 will be looked at. It will need a lot of help but will get near it. The major issues are 1. the funds are selling and 2. the industry is very long. The market needs another sideways build up here over $600. This week will define the futures trade going further out.

 

Daily Bulletin:

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

Southern Yellow Pine:

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/southern-yellow-pine.volume.html

The Commitment of Traders:

https://www.cftc.gov/dea/futures/other_lf.htm

About the Leonard Report:

The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.

Brian Leonard

bleonard@rcmam.com

312-761-2636

05 May 2025
Agriculture, CME, Futures, Hedging, Housing, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: The futures market quietly drifted lower last week

The Lumber Market:

The futures market quietly drifted lower last week ending down $15.50. July futures have been lower 13 out of the last 14 sessions. The cash market was also weak. 2×4 was off $10 while other items went into a freefall. Cash can’t create momentum, and the futures market is honed in on that. The make up in futures is also turning bearish. We saw the industry exit 486 shorts while the funds added 402 shorts. We talked about that red flag a while back. The funds and algo’s disregard trendlines and RSI’s. I have noever seen the buy side slow the funds down when they are entering. We enter the week with fund pressure in futures and a cash theory that mills will blow and go for a while before the duties show up. I’m not a fan of the wall of wood theory, but we did fill in the holes on the last run.

A few weeks ago, we started to see an imbalance developing that could lead to higher prices. That was quickly adjusted, and we are back to normal. That quick adjustment surprised me and showed that the market has not left its typical trading pattern. When the market closes in on the duty increase, prices will adjust higher. In the short run we will continue to run inventories lower until a buy round is created. Hedging is critical. A basis trade is a good strategy.

Technical:

There is nothing friendly about the chart pattern below. May futures are sitting on the 50% retracement point. A close under 549.00 sets it up for a fall to 518.50. Now this is a weekly chart, and May is expiring so it makes it tough to trade off of. What I do see is the support again sitting near 520. Today it is in May. On the 16th. it will be in the July. The market needs some help this week to find balance again. Hedge a little and hope you lose money. I borrowed that comment, but damn is it true.

 

Daily Bulletin:

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

Southern Yellow Pine:

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/southern-yellow-pine.volume.html

The Commitment of Traders:

https://www.cftc.gov/dea/futures/other_lf.htm

About the Leonard Report:

The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.

Brian Leonard

bleonard@rcmam.com

312-761-2636

28 Apr 2025
Agriculture, CME, Hedging, Housing, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: The futures market scratched and clawed to rally a few dollars last week

The Lumber Market:

The futures market scratched and clawed to rally a few dollars last week while the cash market searched for a bottom. The futures market did rally about $18 off its Monday’s lows, but it was a grind. The isn’t any confidence on the upside so any follow through will be limited. Cash does look better, but not enough to bring in the futures buyers. The next part of the cycle is the mills selling wood and building files. That could take time and keep things flat.

The general market is flat and confused for the upcoming construction period. We can do all the mental gymnastics we want to figure out a timeline and construction pace scenario. Today the decisions are predicated on too many aspects to consider. One thing to watch is that all are guarded to the thin side. It would not take much to build some upside anxiety. Looking at all the gaps above in the July contract gives me anxiety. The work to be done is for the mills to find balance again. They are not out of the woods yet.

To keep things in perspective. On April 2nd. it looked like the equities were going to zero. By May 2nd the S&P could be back up to 6000. The flow of capital remains king. It’s estimated that only 30% of the infrastructure bill has been used so far. The economy still has excess dollars coming at it. Our sector is held back by rates. Today a 10 to 25% decrease is all that is needed to move the needle. Add to that the fact that we are underbuilt puts a floor in this market. Percentage hedging…… never fails.

Note: Southern Yellow Pine open interest has been added.

 

Daily Bulletin:

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

Southern Yellow Pine:

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/southern-yellow-pine.volume.html

The Commitment of Traders:

https://www.cftc.gov/dea/futures/other_lf.htm

About the Leonard Report:

The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.

Brian Leonard

bleonard@rcmam.com

312-761-2636

14 Apr 2025
Agriculture, CME, Futures, Hedging, Housing, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: Futures ran up about 33% after the election. It has given back almost 25% of it since the tariff announcement

The Lumber Market:

Futures ran up about 33% after the election. It has given back almost 25% of it since the tariff announcement. The futures market is staying within the parameters of the news. We would like the inclines and declines to be more subdued, but everything we hear is vague. That has the trade pushing buttons left and right. What’s interesting is the commitment of trader’s report that is compiled Tuesday to Tuesday. As of Tuesday, Wednesday was the crazy up day, the industry added 784 longs and liquidated a whopping 1684 shorts. The funds exited 1323 longs and added 390 shorts. That is a lot of movement for a week in this contract. A couple of takeaways:

  1. Futures made a lower low after the massive, short covering by the industry.

  2. The funds started adding long in the hole last time down.

  3. The industry is seeing better activity, but the mills have wood.

  4. The elephant in the room is again a 25% tariff hanging over the market and a rise in the duty coming.

  5. The elephant is more a possibility while the real time fact is an oversupplied environment.

  6. Technically we broke the channel down. It could return to the start of 527.50. That is unlikely if you add in number 4 above to the equation.

The futures market is a trading textbook. The industry is in sync and the funds are not. Under these circumstances, look for this oversupplied market to find some footing. There could be a seasonal switch flipping on this one. The spreads are getting out of line in cash. OSB?? 2×4 9ft. eastern?? There will be opportunities as prices fall in cash. If futures stabilizes the basis will pop up again. Looks like we are back to working for a living.

 

Daily Bulletin:

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

The Commitment of Traders:

https://www.cftc.gov/dea/futures/other_lf.htm

About the Leonard Report:

The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.

Brian Leonard

bleonard@rcmam.com

312-761-2636

08 Apr 2025
Agriculture, CME, Futures, Hedging, Housing, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: It’s hard to believe that we could start to discuss a housing problem in the near future

The Lumber Market:

It’s hard to believe that we could start to discuss a housing problem in the near future. A week ago, there wasn’t an economic reason to talk about a recession. Today it is real. The key is the stock market. No one disagrees that a sell-off was needed. The mag 7, especially Nvidia, ran the market up. Today the market is taking the froth back. What we see in equities in these situations is a massive increase in sellers. You first have to stop the selling and then build confidence back. In 2009 and 2021 the government wrote checks to get it back. That’s not going to happen this time making the confidence factor murkier. For housing it is not as simple as finding help from an equities rally. The genie is out of the bottle. Any help from the demand side has been pushed out. It’s time to sharpen the pencils again. We came into the year looking for a supply issue to help prices not demand. That still lingers…. as does the tariff. As I am writing this the Spoo’s are down 220. Stop the equities meltdown and the lumber futures will correct. The algo selling lumber futures is feeding off of the equities.

The chart below shows a channel pattern that started from the bottom of the move back in July 24. Breakeven was going to come into play eventually. Last July showed the market could not survive at such a low price. Last week’s $91 break indicates the futures market was up on froth. A close under 569.58 indicates the futures market doesn’t care about breakeven.

Lumber futures corrected the tariff rally. This week needs to see overall calm, or we could be in trouble.

*As of Tuesday, there were 5000 industry shorts that are now up $91. Good risk management!

Daily Bulletin:

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

The Commitment of Traders:

https://www.cftc.gov/dea/futures/other_lf.htm

About the Leonard Report:

The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.

Brian Leonard

bleonard@rcmam.com

312-761-2636

24 Mar 2025
Agriculture, CME, Futures, Hedging, Housing, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: It was a tough week for the cash market

The Lumber Market:

It was a tough week for the cash market as mills were forced to lower prices to get rid of excesses. Futures on the other hand, held value. It was a very slow volume week as the trade stayed on the sidelines. While this is normally a hard time to read the market, it is obviously much harder this year. A few keys to be watching:

  • I have been preaching about the high amount of inventory out in the field. Every week that number is reduced. A couple day run in cash could even things up and force the buyers back in. That remains to be seen, but there will be an uptick in usage.

  • I’m not a fan of the “underbuilt” hypothesis. There are too many dynamics that have to come into play to make it a factor. We saw them come into play during covid. When momentum to move increases we are far short of homes. What we have today is a two-pronged move being created. The first is once rates drop there will bring a ton of existing home inventory onto the market. That will create good sales but little anxiety. Once the trading of homes is completed, the market with feel the underbuilt condition.

The market has been in an uptrend since last July. I will have a chart below to show the trend. It tells me that the mills can no longer produce at breakeven or at a loss. The housing demand is too great for that. I said that a few years ago so take it with a grain of salt. Economics are economics and housing leads. As of today, it is looking up. Tariffs and duties are all transitory. Stick to the fundamentals.

Technical:

I love the gap on the chart below at 812.20. I know it was the old contract, but the algo and funds don’t give a shit. The next few weeks are going to be very volatile. The market could shoot $50 in either direction for a while. What if the market ran up to $720 and then down to $620. Is your risk managed?

We are going into one the most confusing week of all of our careers. Remember things never change. We will all come out of this at some point when reality is defined. Don’t get caught up in it.

Daily Bulletin:

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

The Commitment of Traders:

https://www.cftc.gov/dea/futures/other_lf.htm

About the Leonard Report:

The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.

 

Brian Leonard

bleonard@rcmam.com

312-761-2636

17 Mar 2025
Agriculture, CME, Futures, Housing, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: SHIFT TO A “COST OF SUPPLY VS DEMAND” MARKET

The Lumber Market:
There has been a shift from a supply and demand market to a “cost of supply vs. demand” market. By that I mean the actual supply does not have a relationship with its cost. The cost will be driven by a tariff charge. Let’s separate the two. If there were not any tariff threats facing the market today, the slack demand would be pressuring the market lower. I have seen so many times in the past of a spring that never developed. The wood bought covered the wood needed. It’s starting to have that type of feel. Let’s take a step back. Futures are up $120 from the lows this year. We are putting it all on the tariffs, but part of it could have been the spring run. I’ll say that because demand lacks any momentum. If the tariffs came out tomorrow, prices would go up, but demand would not. I am not calling for demand to slow. I just want to be clear that today we are an “cost of supply market.” Any other year it would be a sell in May and go away. This isn’t any other year.
There are two types of hedging. The first is basis trading locking in a profit. The other is risk management or the protection of the company. This medical insurance comes at a cost and always gets questioned by the higher ups, until it works. You have to have inventory. You also have a plan to protect it in place.
Technical:
The Bollinger bands are slowly moving back together. There is a long way to go, but viewing the market getting range bound is the play until something comes out. There is a strong support line in May sitting at 632.40. I think the focus this week should be on the chart pattern in futures and not on any rumored tariff garbage. I’m not positive, but I heard of spreads on DraftKings between a college bball teams and lumber are getting sent out.
Daily Bulletin:
The Commitment of Traders:
About the Leonard Report:
The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors. 

Brian Leonard

bleonard@rcmam.com

312-761-2636

04 Mar 2025
Agriculture, CME, Futures, Hedging, Housing, Lumber, Market Commentary, Market Updates, Research, Risk Management, Weekly Prices rcmagserv 0 comment

LEONARD LUMBER REPORT: “Lumber, lumber, we don’t need no stinkin lumber.”

The Lumber Market:

“Lumber, lumber, we don’t need no stinkin lumber.” Or is it, Badges? Trump is coming after the Canadian lumber industry with both barrels. The problem is the current Canadian government does not like or support the industry so who’s on their side? The biggest and very unintended consequence of all may not be sharply higher prices but a real slowdown in the US housing sector. It is already fighting just to stay flat. This may just send investors to other markets, thus reducing the dollars available in the housing sector.  You cool the housing sector, and you will cool inflation. Again unintended.

This is one of those times where you plan for the worst and hope for the best. It is also a time when you could have $750 lumber and no customers.

Technical:

I was dead nuts on last weekend stating that for the market to go higher it would need a sharp sell off. We saw that on Wednesday and keeping to new lumber style, it all happened in a few minutes. That’s how we roll these days. What I missed was the timing. I think we have to take a step back and consider that while the technical read tends to pan out, it now occurs in minutes not days or weeks. We have to project the move and have orders in to take advantage. Don’t freeze on winners. Manage the position based on what the cash market would offer you. More importantly, don’t freeze on losers. Get out.

Sticking with the boxing analogy…. “hit the one in the middle.”

Daily Bulletin:
The Commitment of Traders:
About the Leonard Report:
The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors. 

Brian Leonard

bleonard@rcmam.com

312-761-2636

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