CME May lumber closed up $9 at $296 per thousand board feet, a 32-month high. This is due to a number of factors but primarily lumber mills have cut back production and a number of lumber mills have closed in the past year in reaction to slow sales. However, as demand improves or futures rise, it causes cash to rise and expectations are that housing will improve this spring after being depressed for some time. There is the question of if housing improves more than expected, will mills be able to ramp up production to meet a surge in demand. Furthermore, will they be able to get the timber to supply the mills. Two plus years of a down market have caused much of the industry infrastructure to disappear and the harvesting labor force to move to other industries. A quick surge in demand will definitely put a strain on an industry that has been depleted of labor, machinery, and transportation. This is good for prices as demand rises with limited supply. Estimated asking price for spruce rose to apx. $294 per tbf, up from the $286 level posted by Random Lengths Wednesday. The housing market is showing small signs of improving. Contracts for pending sales of previously owned homes unexpectedly rose in February, a survey from the National Association of Realtors showed. Traders noted much of the gain in used home sales can be attributed the soon-to-expire tax credit for first-time home buyers. New home construction has remained slow despite the tax credit, but this is seen improving as warmer spring weather draws buyers to new home sites across the country.
In order to illustrate the squeeze on the supply side, the USDA Forest Service has a report out about mill closures. A report is now available from the USDA Forest Service regarding Arkansas Hardwood timber and lumber industry for the 3rd quarter of 2009. In January of 2009 the Forest Service estimated that a total of 15 mills would be closing throughout the U.S. South in 2009. The report reads, “in September, Columbus Lumber in Brookhaven, Miss. was forced to close due to a financing issue with its lender, Bank of America. That announcement followed on the heels of AbitibiBowater’s statement that it would shutter its Albertville, Ala. mill permanently on November 15. Following these two announcements, the total number of closures now stands at 13 mills.” Accoring to the USDA Forest Service in 2009, nearly one billion board feet has been removed from production. For more information
http://www.arnatural.org/News/Timber_Report/2009/ar_price_report_09_3.pdf
