Lumber tanking 50% in a week. Why?
- Thread starter Amun Ra
- Start date
Supply. High historical prices brought out supply and may have started to curb demand.
With all the hurricane damage, I can't imagine lumber prices going down. Is there such a thing as a split in commodity futures?
Short lumber ETF's?
In the real world,
you will not see millions of trees suddenly disappear from the world within few days.
You will not see millions of trees suddenly appear out of no where within few days.
In the trading world,
when liquidity is soo bad, price can increase many times over, and
price can tank many times over.
Real world is real world.
Trading world is trading world.
In trading, don't attempt to use logic / reasoning.
So trade based on the chart, and avoid illiquid product
In the real world,
you will not see millions of trees suddenly disappear from the world within few days.
You will not see millions of trees suddenly appear out of no where within few days.
In the trading world,
when liquidity is soo bad, price can increase many times over, and
price can tank many times over.
Real world is real world.
Trading world is trading world.
In trading, don't attempt to use logic / reasoning.
So trade based on the chart, and avoid illiquid product
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The lumber market is not feedstock cost limited. Logs are plentiful & cheap here and in Canada.
Mill capacity is limited by high capital requirements and some other issues. Mill margins are very good normally ... and when mill capacity is overrun by demand (like C19 and people migrating to more sane locations pushing demand forward in a lump), mills raise their price to max the last of their capacity. Builders face the choice to not build or pass the cost along.
As soon as mill capacity goes a little slack, pricing drops back quickly because those huge fixed costs gotta be covered.
It kinda got carried away a bit as well:
https://tradingeconomics.com/commodity/lumber
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Builders are building like crazy. I don't think a drop in demand caused the drop (a drop to prices that are still historically high, btw). They probably just worked out some "kink" in the supply chain.
The Fed has basically said that mortgage rates will remain super low through probably 2023, so I don't know what's there to stop the demand for new homes.
The Fed has basically said that mortgage rates will remain super low through probably 2023, so I don't know what's there to stop the demand for new homes.
Lumber has always been a crazy one, fortunes made and lost.
I've just read a good book, West of Wall Street, written by a big local in the S&P pit during the mid 1980s. He wrote that many on the floor loved to build up long term positions in Lumber because when it went, it went. He also wrote about the lumber pit locals - they wouldn't even give their mothers an edge
I've just read a good book, West of Wall Street, written by a big local in the S&P pit during the mid 1980s. He wrote that many on the floor loved to build up long term positions in Lumber because when it went, it went. He also wrote about the lumber pit locals - they wouldn't even give their mothers an edge
That is the American way.