The Home Builders Association and Ro-Mac Lumber & Supply Inc. Wood Commodity Index (Index) for November dropped 2.1 percent to $331.78 per thousand as early wintry weather, coupled with lackluster demand, cooled pricing. 2014 has been a struggle for many areas in the housing market as the first quarter started slowly due to heavy winter weather, with the middle of the year never realizing forecasted expectations. If early winter weather in the fourth quarter hampers demand, that would be the final nail to a year that many expected more from.
The dimensional part of the Index declined 5.7 percent to $379.12 per thousand as mills searched for buyers. Most dealers and distributors, seeing colder temperatures early, have figured that housing demand will wane during the holiday months—most have no motivation to load warehouses. Some could make a mistake of running inventories too low as trucking remains an issue and this could bode well for regional two-step distributors.
The sheathing portion of the Index continues to display a split personality. For months, OSB sheathing productions and pine plywood seem to be moving in opposite directions. CDX pine dropped 1.4-2.5 percent as limited production finally met limited demand. OSB sheathing enjoyed a 3.8-6.8 percent increase as CDX buyers converted some purchasing away to the much lower priced product. Overall, the sheathing portion of the Index increased 1.6 percent to $296.42 per thousand. There is much more available OSB production than CDX pine plywood, and this month may be the first indication that builders are ready to move buying decisions. For example, the spread between 1/2” OSB sheathing and 15/32” CDX Pine is $287 per thousand or $9.18 per sheet. Look for more builders to switch to OSB sheathing at these price differences.
If fuel prices remain lower, and the winter weather persists, expect a flat to downward drift for most wood commodities for the rest of 2014. After the first of the year it will depend solely on demand and weather. There is also a chorus of first-of-the-year price increases being announced by manufacturers for January, including a huge proposed 20 percent increase by the drywall industry. It is unclear if the housing market will allow these increases to stick.
I hope everyone has a wonderful and blessed Thanksgiving, full of food, family, and faith.
Don Magruder is the Chief Executive Officer of Ro-Mac Lumber & Supply, Inc. in Central Florida (www.romaclumber.com), and he is a former President of the Southeast Mississippi Home Builders Association, and past Associate Vice President of the Home Builders Association of Lake County. To contact Magruder, email him at