bottomcatcher

Lumber Bulls Wood Love to See a Break Above (1)

CME:LBS1!   LUMBER FUTURES (CONTINUOUS: CURRENT CONTRACT IN FRONT)
From the fall of 2015, the demand for Lumber skyrocketed driving prices from $213 to almost $650 by mid-2018 where it peaked. The second half of 2018 was a very different story as demand eased creating a glut in the market which resulted in weak commodity prices which ultimately led to a steep decline back to $300 by October, previously seen in November 2016. Throughout the summer of 2019, lumber managed to hold above its 200 period daily moving average initiating an uptrend only to be devastated by the COVID pandemic in March of this year where prices bottomed out at $257.

Since April of this year, lumber has put in a strong performance, creating higher highs and higher lows each month, surpassing the February and March highs before the decline. Next hurdle is twin resistance at (1). What happens here could determine the future direction for lumber prices for the short to medium term. Short term sentiment amongst small participants is approx 74% bearish at the time of writing.

Comments

There's been a spike in retail demand for lumber during COVID lockdown, particularly treated wood for decks, fences, etc. - and most sawmills were shut down for a time. I think those are the main factors behind this recent increase.

Lumber is prone to rapid jumps in the cash/front month contract price that don't hold for very long - Supply catches up and buyers stop putting anything into their inventories if they expect prices not to hold. Most mills are running again.

For anyone looking at trading lumber just be careful, high volatility/low liquidity - very easy for your stops to be run over. The volume/open interest on the CME contract is among the smallest of all exchange traded commodities.

It's a really interesting market to follow!
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@aeverett, Nice read, thank you.
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Growing up on a tiny 200 acre family Timber farm, where our land borders Weyerhaeuser on the east and South, with BLM land on the west and a long time neighbor to the North has given me a very inside view of the operational side of the business. I would like to learn the business and market side of things. I do know Timber brokers make serious bank. I don't know exactly what they do, but since I was a kid I am always hearing about the price of "export" being good or bad.
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You learn something new every day, this was informative.
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bottomcatcher Modz_Club
@Modz_Club, Thank you..)
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You don't see many people charting lumber prices. Only on TradingView 😍
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Great fundamental analysis. Another contributing factor is the spike in the creation of USD from Jerome and his buddies. All commodities up! Inflation/Stagflation inbound.
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@AJ-0293, Thanks for your input, and thanks for following ;)
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Really cool dude.

Like, if you've seen Michael Moore's Planet of the Human's , we can see this skyrocketing demand for trees for the biomass electric plants.

Seems like if that's the "renewable" energy of the future then they gon' be burnin' a lot of trees!

Long Lumber! :P
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vanight63163 Gregisontradingview
@Gregisontradingview, Well, it is a renewable resource. I am 3rd generation, in place to take over half the farm at some point. My cousins the other half. My Dad even built a portable saw mill. Quite clever really. We used it to cut all our own lumber to build a 3500 Sq. Ft. house for Mom. All rough cut lumber too! LOL. Unfortunately, my Dad (adopted Dad) is not a business guy, or sales or marketing. So now 30 years later, its a HUGE hunk of rusting metal in the woods. The problem with re-prod Timber is the cycle length. 30+ years! So its all about each generation setting the next one up. Hoping the Tree huggers who are complete ignorant morons on the subject of Timber management and preventative fire risk management.
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