LEONARD LUMBER REPORT: Steady outtake, steady demand, steady prices

Summary:

Steady outtake, steady demand, steady prices—that’s a recipe for a dull trade with thin margins.

Seasonally, May into early June is dead money. “Sell in May and go away” exists for a reason. But this year, the takeaway is just firm enough to keep everyone from stepping away entirely. Add in historically lower field inventories (possibly by design), and the market doesn’t have the cushion to relax.

Right now, the industry is playing prevent defense—always on the field, focused on not losing. That’s a tough way to operate in a commodity business, especially when costs are sticky and conviction is low.

Flip Side:

I think what most are missing is that there are inventory pockets—and they’re full. It’s not enough to supply the whole market, but it’s a real risk for the guys sitting on it. And right now, there’s no appetite to hedge any of it.

In a market with no clear direction, that’s a problem. Everyone needs to stay disciplined—we’ve seen how quickly this can turn into a bottomless pit over the past year. It doesn’t take much. Hedge 20–30%, give yourself some cover, and live with it.

Step back and nothing has really changed in three years. The guys who bought wood and consistently hedged made money on the futures side—that’s just fact.

I think the weakness is running out of gas… but I’ve said that before.

Starting back in June of 2023.

Technical:

Last week’s trade was a step back technically. It’s not a sell signal, but it did give back some hard-earned momentum. Most oscillators have rolled back to neutral-to-negative, and it’s going to take some work to turn those higher again. The fact one stayed positive since mid-April just reinforces how sideways this market really is.

Levels to watch:
July futures need a close over 603.50—the recent spike high—to confirm things are tightening underneath the surface.

On the downside, there’s real air between 580 and 560. That zone keeps catching volume month after month, with a few thousand contracts likely changing hands there since January. It’s become a magnet.

Markets tend to build a base in areas like that… and eventually move higher from them.