Odd Lots Stinson Dean on the Lumber Crash That Followed the Boom
Nov 8, 2021
Stinson Dean, Founder and CEO of Deacon Lumber, shares his insights on the wild swings in the lumber market, where prices skyrocketed before collapsing due to unique factors, not just housing slowdown. He sheds light on how storage issues and oversupply triggered this volatility. Dean also discusses the labor market dynamics in the lumber industry, emphasizing competitive wages and workplace culture. His expertise offers valuable lessons for traders and the construction sector amidst fluctuating economic signals.
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Lumber's Wild Ride
- Lumber prices doubled between mid-April and late May due to short covering.
- Retail lumber prices stayed high even as futures prices dropped, due to lumberyards selling existing high-cost inventory.
Lumber's Negative Oil Moment
- A "negative oil moment" occurred in lumber when contango reached a $100 discount, similar to when oil prices went negative.
- Lumber storage facilities were full, creating a situation where traders would pay to offload lumber, despite the low cost of storage.
The Lumber Glut
- Lumberyards and producers, scarred by the 2008 housing crisis, underinvested in storage capacity.
- A glut occurred due to a halt in "outtake"—lumber leaving yards for installation—caused by supply chain bottlenecks like truss plate shortages.