LEONARD LUMBER REPORT: The low price of lumber is straining everyone’s bottom line

LEONARD LUMBER REPORT: The low price of lumber is straining everyone’s bottom line

Lumber Weekly

  • There is a battle in the Housing market pitting a tighter credit environment against a capital-rich ecosystem.
  • Excess inventories grow over time. The effect also grows over time. It didn’t this time. 
  • The low price of lumber is straining everyone’s bottom line. 

Last Week

The futures market was under pressure all week. The two drivers were the lack of a cash trade and the funds reentering a short position. If we look at the open interest, the funds built a short position (+408) while the hedgers took profits (-438). That’s based on data ending on Tuesday. Both numbers will grow again in next week’s report. That sums it up. The key takeaway is that a pile of wood is now unhedged and cheaper.

So, what does it look like today? The negatives are the hot weather, slowing construction, the euro arriving at the port, and an industry that just completed a buy round. The positives are the continued steady of wood out the door and the fact that we dropped $79 (futures) already.

The market is sitting in the middle of the cycle. What’s different this time is the middle now sits $20 higher than last time. However slow it may be, this market is building value at higher levels. The fund pressure may change that but only in the short run.


There are contrasting views this week. The longer-term view is just now breaking down momentum-wise. With an RSI of 49.30%, it calls for a return to the lows. Shorter-term, the market is grinding down to a bottom. This low volatility quiet trade would generally slow the selling and cause profit-taking. The momentum indicators are trying to look positive. The only issue is that most negative cycles don’t turn when hovering at a 23% RSI. With the funds around, we could easily see a spike lower. If you liked it at $520, you’ll love it at $500 and even better at $480.

Daily Bulletin:


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

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