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

LEONARD LUMBER REPORT: We are closer. The end is near. No that is not a biblical prophecy, at least I hope not.

The Lumber Market:

We are closer. The end is near. No that is not a biblical prophecy, at least I hope not. Most of the announcements should be done in the next two weeks. That will hopefully put an end to all the chaos. Last week the market continued to walk itself higher. The main takeaway is the fact that the short funds are exiting their position. We saw that in Friday’s commitment of traders. We are also seeing it in the way the futures are trading. Normally the short funds will throw selling at the market to see if it could reverse the trend. We haven’t seen any of that. That is mildly bullish. Without their selling the only player left are the spec longs. They continue to push the market higher, but the discount mutes the intensity. Those are the mechanics we have been watching in the futures market. But what about the cash market?

If you step back and look at the cash dynamics, you will expect more of the same. Rallies occur when the market thins out and then falls right back after it. This steady takeaway business is three years old now. It does not create margin expansion and that limits any speculative buying. Today the speculative buying is going from 30 to 90 days inventory for jobs already booked. It is efficient and will not move the needle. The rally cry now is for more expensive wood making the inventory bottom line look better. I’m not sure that is a business plan to base the business on.

September is 667.00. In the next two weeks we will shift from analyzing what value should be to what value is. The guessing will finally get answered. That’s why I believe if we are going substantially higher it will have to be in the next few weeks.

Technical:

The futures market has now checked off all the objectives up to the gap. Momentum definition showed that if the market hit $650 it would go into the gap. It was the same in July noting a close over $600 sets it up for a run to the gap. There is nothing from here up that will call for a new higher objective.

The technical read that has not been recognized is the fact that September hit a high of 714.50 back in late March. The futures market was higher not too long ago. It also traded volume at those higher levels. The low $700’s are a real objective in Sept. Nothing fundamentally has changed since then excepted for a few more closures. Buy the rumor, sell the fact created a run up followed by a selloff of $120. Hedging is a must but continue feeding them in. Given the current demand equation, getting through the gap will be the challenge.

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

312-761-263

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

THE LEONARD LUMBER REPORT: The futures market continued its trek higher on a journey to find real price discovery

The Lumber Market:

The futures market continued its trek higher on a journey to find real price discovery. A report midweek about two SYP mills taking downtime confirmed the reality of less product in the future. But at the same time we saw more weak housing news compounding the problem. Add to it that Trump in now loading both barrels and pointing it at Canada. The possible 25% tariff just keeps showing up. What we do see is many items holding lower levels because of the lack of demand. There is no reason to wait on these items in today’s environment. As long as the industry procrastinates the more chance there is for a spike higher when the SHTF. If it turns out to be a non-event, sell the board.

Technical:

The midweek gap in September from 648.50 to 649.50 is a momentum gap. We can come back and close it early in the week making it more of the same or we can see additional momentum following it up. That would bring the 4-month gap of 673.00 to 708 into play. I do have an issue with a 76.80%. That is toppy without the momentum. I will say it could be less of a fact when we analyze the trade. The market shot up with the tariff announcements. These has been no resolution to it. Whatever the catalyst for the initial rally, a precedent was set. Any movement towards a tariff again pushes prices back up there.

This could take some time to play out. Owning cash at low levels with a good basis available has been the play for 3 years now. Today there is too much wood out there. It doesn’t mean you shouldn’t own some.

 

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

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

LEONARD LUMBER REPORT: Just when we thought we had seen it all this year, the US bombs Iran

The Lumber Market:

Just when we thought we had seen it all this year, the US bombs Iran. With that news we see the TASE at all-time highs today. If nothing else, it is weighing on the psyche of the investor. That in turn makes the big decision of home buying more difficult. And that will keep demand and building muted. So where is the risk in the next 3 months? The biggest is risk is to the producers. The Canadians will see higher costs that can’t be passed along. The US producers, especially down south, will see prices fall below breakeven. Looking at the other risk, it is on those holding jobs short. The producer side could just shut it down causing a major temporary spike in prices. The buyer could get stuck in the middle of it. It is a mess. Now as far as the middle trader goes, volatility carries a premium in markets. They should benefit.

Last week July futures were off $10.50 on a trade dominated by the roll. The market makeup has the industry getting short eating up the funds exiting. The only other feature is that the yahoo’s are getting longer. The debate is which month is better to be speculatively long. The closer July gets to no limits the less it should be traded. Time holds the answer. Once the funds are done with the July buy side there won’t be much support.

Technical:

Technically the July is still in the neutral zone while the September is rolling over. That is the opposite of what most expect. The tech read is very fragile so not much of a run up would reverse it. They whole picture holds little opportunity. Most are relying on the pending price increases forced on the Canadians.

$100 crude is not helpful.

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

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

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