After Skyrocketing To Record Highs, Lumber Prices Fall Back To Earth

By Ailan Evans

Lumber prices have begun to drop following record highs, with futures closing Monday at their lowest price in over two months.

Lumber futures reached their highest-ever price in early May according to Nasdaq, trading at $1,711.20 per thousand board feet. Futures closed Monday at $966.20 per thousand board feet, still well above pre-pandemic levels which hovered around $400.

Prices skyrocketed due to a variety of factors, including supply chain disruption due to COVID-19 restrictions, labor shortages, and higher demand due to the surge in the housing market, according to a report by Wells Fargo economists. The report noted that while prices were unlikely to return to pre-pandemic levels, restarting domestic lumber production and restoring domestic supply chains would stabilize the market.

Moreover, as lumber supply contracted, demand increased and builders began hoarding wood. “There was this fear of lack of availability,” former lumber trader Mike Wisnefski told The Wall Street Journal.

The drop in lumber prices could be attributed to the bursting of a speculative bubble, though lumber producers and traders expect prices to remain relatively high well into 2022, according to The Wall Street Journal.

Lower prices may also be due to the labor market stabilizing and sawmills regaining their workforce. “To take advantage of these rare and extraordinarily favorable markets, mills have had to pony up enough money to make it worthwhile for their people to return to the workplace,” Harry Spelter, partner at Forest Economic Advisors, told The Washington Post.

As prices have fallen, builders and prefabricators have begun selling from their own stockpiles, The Wall Street Journal reported. This has caused an increase in supply which has in turn lowered prices further.

Lumber is not the only commodity that has seen massive price increases, with crops such as corn and wheat reaching 8-year highs in May. High commodity prices across the board have raised fears of inflation.

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Author: Ailan Evans

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