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19 Dec 2022
Agriculture, Lumber, Market Commentary, Market Updates, Research, Risk Management rcmagserv 0 comment

THE LEONARD LUMBER REPORT: The liquidity issue in the marketplace seems to be getting worse not better

Weekly Lumber Recap 

12/18/22

Happy Holidays!!

The liquidity issue in the marketplace seems to be getting worse not better. At this point in the cycle, we should start to see a few green shoots. None were to be found last week as futures hit a new low on Friday. The outside markets are having a bigger than normal effect on our trade. Mostly due to the lack of news here. I’m confident that overall production on January 1st. will be less than the amount produced December 1st. The market seems to agree but throws in the fact that there will also be less homes starting on January 1 than started on December 1. The question becomes of how long the drifting lower will remain in place.

Look at the chart below. It has a Fibonacci measurement from the contract low during covid to the highs in 2021. Look to the left and 2019. The sideways price channel for the year was developed with an average of 1.29 starts. If that is the number, we are looking for 2023 then a sideways trade for a year could be expected. I’m not sure if that will develop but it does look like the current futures market wants to test that theory.  I’m in the camp that next year will be somewhat subdued, but at a higher level. Next week will be more of the same unless the short funds start to cover. It hasn’t shown up yet so that is even a limited wish.

NEW CONTRACT:

Lumber Futures Volume & Open Interest

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.volume.html?itm_source=cmegroup&itm_medium=friendly&itm_campaign=lbr&redirect=/lbr

CFTC Commitments of Traders Long Report

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

Lumber & Wood Pulp Options

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

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

[email protected]

312-761-2636

16 Dec 2022
Agriculture, Corn, Dow Jones, Grain, Market Commentary, Market Updates, Research, Risk Management, Soybeans, Weather, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: DECEMBER 7 – 16

Corn had a good week making gains on mixed news across the world. The war in Ukraine has picked back up with more bombing and aggression from Russia after a “quiet” few weeks. Exports were better this week as we head into the end of the year well behind the expected pace. Weather in Brazil remains good in most areas while Argentina forecast is becoming wetter. Markets will likely remain cooled through the holidays unless there is any unexpected news (flooding rains, further escalation in Ukraine, etc.) that is not already priced in.

Via Barchart

Soybeans were relatively flat this week with a mix of up and down days. We are back up trading at the top of the range we have seen since July. Whether it fails at this level again or can move higher may require some surprise news to the market as exports were good, but the market seemed to shrug off. With South America expected to produce a record crop and those beans hitting the world market in a little over a month, finding buyers for US beans could become challenging. Like corn, news may be quiet heading into the end of the year and holidays.

Via Barchart

Equity Markets

The markets were down this week following a good amount of volatility following the Fed’s announcement of a 50-point hike in rates with comments indicating there will be more raises in the future and could be held higher for longer. CPI came in better than expected but still hot at 7.1%. While we are 2% lower than the highs, we still have a long way to go to hit the target of 2-3% which the Fed will continue to work towards.

Via Barchart

Drought Monitor

Podcast

The Hedged Edge is back online with a guest who could be this podcast’s most important guest of all time. At a time when inflation is running rampant through the world economy, drought conditions are drying up our rivers, and the global supply of grain is scarce. We are tasked with the question, “what the hell is going on in logistics, and is there any relief in sight?”

To help address these questions and more, I am joined today by a man that needs no introduction to most in the physical commodity sector – Woodson Dunavant with the Dunavant Logistics company based in Memphis, TN.

Via Barchart.com

 

Contact an Ag Specialist Today

Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or [email protected].

 

12 Dec 2022
Agriculture, Lumber, Market Commentary, Market Updates, Research, Risk Management rcmagserv 0 comment

THE LEONARD LUMBER REPORT: What a difference a year makes

Weekly Lumber Recap 

12/11/22

 

What a difference a year makes. This week 12 months ago saw a $170 trading range with a high of $1069. Last week we saw a $50 trading range and a high of $436. Last year the market was in a full panic. Today it is not. The reason I bring this up is that it has been one hell of a run and now we are suffering from the hangover. No one can argue that we are in full stop mode that has pushed prices to the lowest level since the covid shutdown. Is it sustainable? Probably not. Will it go lower probably. All that said, this market is going to start working itself out of this spiral lower trading. What are those indicators?

This market has sold off sharply because of two issues. The first is the drastic slowdown in construction on the horizon. The other is an industry with no appetite for inventory. The first is a known value. The estimates of a 30% reduction in building are getting announced almost daily from builders large and small. The distribution side of the industry is in for some real pain and is drastically trying to curb supply. That brings us to the other issue and that is the fact that everyone is curbing inventories. Everyone is off at least 30% of volume by now. That is a formula for the downward spiral to end. That does not indicate a turn but shows a limited downside from here. If you add in the technical read, we get the same conclusion.

The weekly outlook shows a pattern of limited downside. The futures market has traded between the moving averages and the lower band since June of 2021. Today the spread between the lower band and the averages is $100. That spread was over $300 for almost 2 years. The lower band sits at 374. The averages sit around 473. The market could take the 373 band out, but history tells us that it will recover. That band will lower but it isn’t indicating that today. This pattern also shows us how much resistance there is at the 473 level.

To sum it up the call is for a bottoming action followed by a sideway trade. Most of our headwinds are not supply and demand related anymore. They are driven by outside economic issues. This week’s Fed announcement could upset our market, but regardless we have started the process to find equilibrium. The lack of the roll has been surprising.

NEW CONTRACT:

Lumber Futures Volume & Open Interest

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.volume.html?itm_source=cmegroup&itm_medium=friendly&itm_campaign=lbr&redirect=/lbr

CFTC Commitments of Traders Long Report

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

Lumber & Wood Pulp Options

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

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

[email protected]

312-761-2636

08 Dec 2022
Agriculture, Corn, Crude Oil, Grain, Market Commentary, Market Updates, Podcast, Research, Risk Management, Soybeans, Weather, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: NOVEMBER 18 – DECEMBER 7

December has not been good to corn as we started the month with a slide lower into the $6.40s. There has not been any major news change with a good start for corn in Brazil, China lockdowns, and the war in Ukraine continuing to hold the headlines. While weekly exports have been good but uninspiring, the weakness in the USD should help US ag exports be competitive in the coming months before the South American harvest. The humanitarian corridor has continued to work as ships leave Ukraine, but as always this is something to keep an eye on for any bad developments. Russia is expected to resume ammonia exports soon, which would help keep input costs for 2023 from getting much higher.

Via Barchart

Soybeans have seen a nice improvement with their slow march higher from the beginning of October. The EPA came out with lower-than-expected biofuel mandates sending soybean and other world veg oil prices lower while meal has taken off higher. Soybeans hit their highest price since mid-September this week with buyers coming back in the market with a weakening USD. South Americas start has been good enough to where the market expects them to produce another record crop but there is still a long way to go. Right now, there does not appear to be much higher of an upside than the low $15 range in the near term, but if South America has weather problems, that could be the catalyst to move higher or if weather remains good the next move lower.

Via Barchart

Crude Oil

Crude has had an interesting second half of the year following its peak in June. While it has traded between $80-90/barrel most of that time, this recent dip below $75 shows there is a lot of uncertainty as we head into winter. The sanctions on Russian oil by capping it at $60 goes into effect this week while many investors do not expect to see it having a major impact immediately. With Russian oil already trading below the $60 and their breakeven closer to $40 it does not appear this will dampen exports for them with India and China continuing to buy. Europe is still struggling with energy as the war in Ukraine continues. Further guidance from the UN or another shock to the market (China loosening Covid restrictions) could send Crude back higher to its recent trading range.

Via Barchart

Equity Markets

The equity markets had a great November rallying over 10% but have gotten off to a sluggish start in December. While data comes in still pointing to a strong economy and job numbers the ball is in the Fed’s court on what to do with rates. It is expected that there will continue to be rate hikes into 2023 with the Fed potentially keeping rates higher for longer than originally anticipated but slowing the rate at which they raise them. Some of the largest companies in the world have either laid off workers or frozen hiring as many questions remain for next year.

Via Barchart

Drought Monitor

Podcast

The Hedged Edge is back online with a guest who could be this podcast’s most important guest of all time. At a time when inflation is running rampant through the world economy, drought conditions are drying up our rivers, and the global supply of grain is scarce. We are tasked with the question, “what the hell is going on in logistics, and is there any relief in sight?”

To help address these questions and more, I am joined today by a man that needs no introduction to most in the physical commodity sector – Woodson Dunavant with the Dunavant Logistics company based in Memphis, TN.

Via Barchart.com

 

Contact an Ag Specialist Today

Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or [email protected].

05 Dec 2022
Agriculture, Lumber, Market Commentary, Market Updates, Research, Risk Management rcmagserv 0 comment

THE LEONARD LUMBER REPORT: IF YOU HAVE BEEN AROUND LONG ENOUGH YOU HAVE SEEN TIMES WHEN THERE IS NO MARKET

Weekly Lumber Recap 

12/4/22

If you have been around long enough you have seen times when there is no market. It was always caused by some event. This time the focal point is on the free money causing an overbuilt/overpriced housing sector. The market now has to digest the run up. Commodities in general will have extended swings as traders are either 100% in or totally out. The issue today is that the buyside continues to add cheap product to the pile for the first quarter. This could be a Peter and Paul moment. We are going into a critical week for the market. There needs to be a shift in interest level going into the end of the year. We shall see.

I talked about the futures market starting with a 3 handle back in late July. It took over 4 months to get there. Except for a few corrections the futures market has traded sideways. Only when the cash market accelerated down did futures finally sell off. Futures were building the bottom end of the range. Today they are just following an unhinged cash market. My point being that futures is looking at the low $400 as a tradable level. That is not a buy recommendation, just a value area. I have been around too long to think the mills will find a bottom anytime soon. Firms today really believe that all this will end soon, and things will be back to normal. There is little planning going on to limit exposure. It will take time.

The technical picture could be friend or foe. On the friendly side the whole momentum complex has come together. Rarely has a market continued its trend without some type of correction. With the RSI at 29% there may be more downside but with the pattern and going into the holidays I expect a little pop. Now on the foe side the Bollinger bands are moving sideways but January futures closed under the lower band. Futures tend to bounce right back into the band area. If futures continue down, it will take time and distance for the bands to catch up. Doing the math today that level would be $307.80. There is the shock.

NEW CONTRACT:

Lumber Futures Volume & Open Interest

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.volume.html?itm_source=cmegroup&itm_medium=friendly&itm_campaign=lbr&redirect=/lbr

CFTC Commitments of Traders Long Report

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

Lumber & Wood Pulp Options

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

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

[email protected]

312-761-2636

28 Nov 2022
Agriculture, Lumber, Market Commentary, Market Updates, Research, Risk Management rcmagserv 0 comment

THE LEONARD LUMBER REPORT: AT THIS POINT IT’S TIME TO KEEP IT SIMPLE

Weekly Lumber Recap 

11/27/22

At this point it’s time to keep it simple. I remember the quote from Ronald Reagan about the cold war. He said, “let’s keep it simple. We win they lose.” Today we don’t have a road map. We don’t have historical data. All we have is the market in front of us. The data indicates a market headed for $300 while the real fear is it goes up $300. Both are a reality. Without a supply disruption the market is geared for a slow erosion with light rallies in between. Any signs of fear from the buyside and the mills will be off the market again.

Most would agree that housing is in a created recession. That is a recession caused by a steep increase in prices. Whether those price increases were cost related or not, it has the same effect at the end of the day. The only question is how deep of a recession the US go into. A layoff panic will drag housing into a deeper recession. A recession with minimal layoffs will allow the market to find a level and build off of it. The bad news it may take until the 2nd quarter to see how bad it could be.

Today the futures market is at a standstill. It is drifting lower with the cash market. The January futures contract has had a $38 trading range in November so far. There are three days left but nevertheless that is the smallest range in years. All the pressure in futures comes from the electronic trade made up of either the algo or the funds. The industry has pared its inventory to a level that hedging is not necessary. That is friendly. Any disruption in supply sets off the panic beginning with the funds covering shorts. That is where the big run-up would come from.

From a technical standpoint the market is close to a move. The Bollinger bands are as tight as we have seen in months. The sideways trade has pushed the market into an area calling for a breakout. A strike will set things off to the upside. A .75 raise in December will probably cause the bottom to drop out. In either case the futures market wants to trend. I’m still a fan of mitigating upside risk. The downside is easy.

NEW CONTRACT:

Lumber Futures Volume & Open Interest

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.volume.html?itm_source=cmegroup&itm_medium=friendly&itm_campaign=lbr&redirect=/lbr

CFTC Commitments of Traders Long Report

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

Lumber & Wood Pulp Options

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

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

[email protected]

312-761-2636

21 Nov 2022
Agriculture, Lumber, Market Commentary, Market Updates, Risk Management, Weekly Prices rcmagserv 0 comment

THE LEONARD LUMBER REPORT: With this abrupt pause in our industry it may be a good time to do a review of 2022 and projections for 2023

Weekly Lumber Recap 

11/20/22

With this abrupt pause in our industry it may be a good time to do a review of 2022 and projections for 2023. The reason for an early start is that any movement from here will be the result of first quarter planning. There are three focus areas that will drive prices. The first is the decline in demand and new forward guidance. Next is the cost of production and lastly is the equilibrium equation. Let’s go last to first.

I now call the equilibrium equation a numerical defense. The focus in the last decade was just how underbuilt the housing industry had become. I call it a numerical defense because we continue to use an old formula to get this rather high number. It is based on a husband, wife, two kids and a dog. That isn’t the typical household today, so the underbuilt number is high. In the mid 2000’s we took starts up to 1.6 because of spec buying. If fell to 500 once the spec homes were empty and for sale. This recent hysterical run was fueled by 401K borrowing or buying among other factors. The point I am making is that at 7% mortgages and a 385K starter we are overbuilt.

Next is the cost of production. Does anyone think it could be in the $400’s? Nope. We are all looking at a $600 number. I know I am and can defend that number. That is for 2×4 2&B spruce. I think the entire basket of products may just be cheaper in some respects than we think. A good example is SYP. 10 years ago, that would not play into the mix as much as it does today. The cost of production is a non-defined factor in pricing today. It will be dragged into it eventually, but for today a mill trading spruce under $400 speaks volumes.

Finally, another difficult statistic to follow is demand and construction. We are seeing the expected push in building for yearend. The builders are getting it done while also looking for at least a 30% drop in construction for the first half of the year. This strategy to build and then abruptly stop seems counter intuitive. They are increasing available homes in a falling demand market. What this will do is extend the period of easing until the excesses are cleaned up. It isn’t an economic strategy but more of an accounting move. My first thought is to be careful of the home builder stocks in the short run.

The expectation from here is to look for the shock to the system that turns the market. Until the market experiences it the trade will be one of floating into a buy round that lasts for three days or two weeks. In either case new lows can follow. This market remarkably looks like the lumber market of old. Can that be possible?

NEW CONTRACT:

Lumber Futures Volume & Open Interest

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.volume.html?itm_source=cmegroup&itm_medium=friendly&itm_campaign=lbr&redirect=/lbr

CFTC Commitments of Traders Long Report

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

Lumber & Wood Pulp Options

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

 

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

[email protected]

312-761-2636

18 Nov 2022
Agriculture, Corn, Cotton, Crude Oil, Dow Jones, Grain, Market Commentary, Market Updates, Research, Risk Management, Soybeans, U.S. Dollar, USDA Report, Weather, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: NOVEMBER 4 – 18

Corn strung together several days lower in a row last week with a neutral USDA report in the middle of it. The USDA raised the US yield to 172.3, which was within the range of estimates. While corn had been trading sideways for some time, the move lower remained in its trading range, followed by a bounce back higher this week. The black sea export corridor deal being renewed is welcome news for the world supply chain. Brazil and Argentina got some needed rain while some dry areas missed out. They are still suffering drought conditions, but it is also still early in the year. Exports improved this week from last, as the current price levels attract buyers.

Via Barchart

Soybeans fell over the last two weeks, due to two days of large losses this week. Soybean Oil got hit as world veg oil prices fell, pulling beans down with it. The rain in Argentina helped speed up soybean planting but rain will still be needed moving forward as still about 25% of the country experiences drought. Bean exports, like corn, improved and better than expected this week. The lack of news makes this a difficult market to trade in as there are no overwhelming bullish or bearish factors dictating direction.

Via Barchart

The US cotton supply was raised in last week’s USDA report with better yields and lower demand. The problem in the cotton market right now is demand. While more money is being spent , fewer units are being bought which translates to less consumption. With the continued high energy prices and inflation issues across the world people are prioritizing eating and heating their homes and fueling their cars (good call) over buying new clothes. The potential for a looming world recession in 2023 does not ease demand concerns as we would not see demand for cotton pick up as producers would sit on inventory they currently have. Until we get more clarity on the world outlook and 2023 it is a time to be cautious. The weakening USD will be worth keeping an eye on.

Via Barchart

Equity Markets

The equity markets started off November with gains after a cooler than expected October CPI of 7.7%. While a drop is nice to see it is important to remember the target is 2-3% so we are still much closer to the top than the bottom with a Fed rate rise coming in early December. The markets seem to expect a 50-point hike, but there is still plenty of time for that to change and get priced in before. One big question that remains for the markets looking ahead is “what will December bring?”. Will there be a Santa Clause rally? Will markets fall as investors do some tax loss harvesting? Many investors still think a recession is coming in 2023 and the next month and half could give us a better idea what to expect.

Via Barchart

Drought Monitor

Podcast

The Hedged Edge is back online with a guest who could be this podcast’s most important guest of all time. At a time when inflation is running rampant through the world economy, drought conditions are drying up our rivers, and the global supply of grain is scarce. We are tasked with the question, “what the hell is going on in logistics, and is there any relief in sight?”

To help address these questions and more, I am joined today by a man that needs no introduction to most in the physical commodity sector – Woodson Dunavant with the Dunavant Logistics company based in Memphis, TN.

Via Barchart.com

 

Contact an Ag Specialist Today

Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or [email protected].

 

14 Nov 2022
Agriculture, Lumber, Market Commentary, Market Updates, Risk Management rcmagserv 0 comment

THE LEONARD LUMBER REPORT: TODAY YOU CAN’T LOOK AT THE HOUSING MARKET OR THE LUMBER INDUSTRY WITHOUT LOOKING AT THE MACROECONOMY

Weekly Lumber Recap 

11/13/22

Today you can’t look at the housing market or the lumber industry without looking at the macroeconomy. There are no longer sectors, but one big unit of trade and we are married to that fact for a while. Thursday the markets reacted favorable to a better that expected CPI. Equities went higher and rates fell. The best quote I heard was that the market can finally see a bottom. It isn’t close but can be seen. What that means is that we know there will be a bump in layoffs. There probably will be a few companies that go under, but that is all part of the fix. Since the housing industry has such a long timeline new construction planning could be on the horizon. The industry can handle higher rates if in place and expected. A break in home prices will bring about a market again. Low home inventories, less supply of wood, no inventories in the field these are all positives. Things will slowly get better unless there is a blowup, and the fact is that rising rates breaks something. It always happens. Could that be bitcoin?

A $38 billion company with ties to hundreds of firm’s files for bankruptcy. The CEO says, “sorry my bad.” WTF…. I’m not sure that is enough to shake the entire global economy but will do some damage to many sectors from advertising to net worth of a generation. The generation we need to buy homes. It is too early to tell how much damage was done.

This downturn will take time to play out. Prices have to come down. These high prices for homes are unsustainable. With all this wait and see we could expect a sideways lumber market for some time. Rallies will come from a buy round followed by the slow pull back. The buys are only a temporary fix for the mills. They can’t build momentum off of them. Out in the trade price isn’t the driving factor. It is more based on need and as we have seen there isn’t much difference between $430 and $530 if it is needed.

Buy January calls and take the rest of the year off….

NEW CONTRACT:

Lumber Futures Volume & Open Interest

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.volume.html?itm_source=cmegroup&itm_medium=friendly&itm_campaign=lbr&redirect=/lbr

CFTC Commitments of Traders Long Report

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

Lumber & Wood Pulp Options

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

 

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

[email protected]

312-761-2636

07 Nov 2022
Agriculture, Lumber, Market Commentary, Market Updates, Research, Risk Management, Uncategorized, Weekly Prices rcmagserv 0 comment

THE LEONARD LUMBER REPORT: 11 straight weeks of a trading range between $430 and $550

Weekly Lumber Recap 

11/6/22

It has been 11 straight weeks of a trading range between $430 and $550. I have been able to cover virtually every negative or positive effecting this industry during that time. What we do know today is that single family homes are no longer affordable which will show in the data at some point. On the multifamily side there continues to be very profitable sales and/or rentals. Given those two points the question becomes how much wood needs to be taken out of the market before it reaches equilibrium. Let’s rehash some of the key points to see if any are indicators yet.

The builders are going to lock it down going into 2023. That is a given. I am seeing indications that the buy side is already gearing up for it. There is no building of inventories. It is a buy as needed cycle. With prices going down, it is a simple and efficient process. Just remember a zero inventory policy when construction isn’t dead sometimes backfires but in any case it will keep things lean. To sum it up, we are looking for a falloff in starts and a general zero inventory policy.

Supply will be curtailed. There will be continued moderate reductions. I expect to see less Euro as they work through the winter. I still expect to see a pickup in China. They have not been in the market for a very long time. Finally, we always have rail disruptions from the possible strike in a few weeks to winter issues. There will be less wood in the system.

The problems today are all the unknown’s. This is driving the zero inventory policy in the US. Someone said it well Friday when she mentioned that the Fed is “burning growth.” To be clear they are slowing down an overheated economy. An economy that they overheated. This back and forth will cause something to break. If the only thing to break is housing then we are close to being done. If there is more we will feel that effect.

The trade has many unknowns and stuck in a range. This upcoming week has the election and probably news of preparations for a possible strike. It’s hard to be short futures but I don’t expect to see much cash activity because of it.

Buy January calls and take the rest of the year off….

NEW CONTRACT:

Lumber Futures Volume & Open Interest

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.volume.html?itm_source=cmegroup&itm_medium=friendly&itm_campaign=lbr&redirect=/lbr

CFTC Commitments of Traders Long Report

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

Lumber & Wood Pulp Options

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

 

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

[email protected]

312-761-2636

Disclaimer

RCM Ag Services is a registered DBA of Reliance Capital Markets II LLC. Trading futures, options on futures, and retail off-exchange foreign currency transactions are complex and involve substantial risk of loss and are not suitable for all investors. Loss-limiting strategies such as stop loss orders may not be effective because market conditions or technological issues may make it impossible to execute such orders. Likewise, strategies using combinations of options and/or futures positions such as “spread” or “straddle” trades may be just as risky as simple long and short positions. There are no guarantees of profit. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. You may lose all or more than your initial investment. You should not rely on any of the information herein as a substitute for the exercise of your own skill and judgment in making such a decision on the appropriateness of such investments. Opinions, market data and recommendations are subject to change without notice. Reliance Capital Markets II LLC shall not be held responsible for any actions taken based on this website or attached links. Parties acting on this electronic communication are responsible for their own actions. Past performance is not necessarily indicative of future results.