Odd Lots Why the Price of Lumber Has Soared Day After Day After Day
Apr 26, 2021
Stinson Dean, CEO and founder of Deacon Trading and a lumber market expert, dives into the skyrocketing prices of lumber that have captivated the nation. He explains the interplay of diminished sawmill capacity, a surge in home renovations, and homebuilding demand as key drivers of this phenomenon. Dean discusses the complexities of the lumber supply chain, the impact of environmental policies, and market psychology shaped by past financial crises. He also touches on the nuances of lumber futures and the evolving dynamics between producers and builders.
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Lumber Dealer Inventory Management
- Lumber dealers commit to lumber sales 60-90 days out but hold a maximum of 45 days of inventory due to cash constraints.
- This creates a reliance on open market purchases, contributing to price volatility and short squeezes.
Impact of Conservative Inventory Management
- The lumber industry's conservative approach post-Great Recession, characterized by low inventory levels, has amplified price volatility.
- Hesitation to reinvest and replenish stocks has contributed to the current lumber shortage and price surge.
Canadian Log Supply and Beetle Kill
- Canadian government reduced logging to sustainable levels impacting lumber supply.
- Beetle kill infestation and subsequent logging practices further complicated the supply chain dynamics.