LEONARD LUMBER REPORT: “Doing the same thing over and over and expecting different results”

“Doing the same thing over and over and expecting different results,” Albert Einstein. He must have been talking about the lumber trade. What we just saw was an outside influence causing a sharp increase in prices over a period of time, only to reverse most of it overnight. March futures rallied $64.50 off the mill fire over a 10-day period. It gave back 61% in 2. The trade didn’t hedge because they were already Texas hedged (long futures and long cash). The spec community added to their positions on the way down. The trade was looking for this one to be it. It still very well might be, but the market still has a demand issue.

The momentum is positive. There is a much greater push to the upside. That will remain in place under the current dynamics. The fact that you can’t wait and buy cheap will keep the buy side off balance. Add to it the lack of basis, which took some of the risk out, is no longer available. Last year, you bought low, and it went lower. This year, you will have to pay up, making timing and hedging key. To sum it up, you will pay more for lumber in 2026, and a $30 basis may be all you can get.

Technical:

The 61% retracement up this upswing in 578.80. That was also an old support area. No one would disagree that a pullback to that area wasn’t healthy. The issue is that it occurred in a single session. Is that a correction or a warning of rough seas ahead?  A long-term bear cycle will not end that easily. This last bear wave went sideways for 6 weeks before the fire bottomed it. That’s not a traditional bottom. This is a seasonal bull cycle, so the yin and yang are in overdrive.

A trade back to 578.50 could trigger selling for all sides. That hasn’t changed yet. On the flip side, the market only needs to close over 608.50 to bring back supportive indicators.