Lumber futures fall for eighth consecutive day, as speculation that has taken prices to record highs unfolds
A customer wearing a face shield loads wood onto a cart at a Home Depot store in Pleasanton, Calif. On Monday, February 22, 2021.
David Paul Morris | Bloomberg | Getty Images
Lumber futures fell for an eighth straight day on Wednesday and threatened to derail a month-long frenzy that pushed the price of lumber to record highs amid the pandemic era.
Futures of wood for July, delivery fell about 5% to $ 1,201 per thousand board feet on Wednesday, according to FactSet. The prices have reached what is known as the lower limit, the maximum percentage drop allowed by the exchange.
Prices have fallen every day since lumber hit a record high of $ 1,711 per thousand board feet on May 10.
Tens of thousands of stranded homeowners and new home builders have, for much of the past year, purchased processed pine by the ton. But more recently, with sawmills unable to keep up with demand as the timing approached spring, a speculative frenzy entered the market, with traders aggressively raising prices since March. Despite the fading, the price of wood is still up by around 37% in 2021.
Single-family housing starts fell 13% in April, the biggest drop since the start of the pandemic, this week’s data showed. Rising lumber costs were partly responsible for the slowdown in production by homebuilders even as demand for housing increases.
Although the rules for reaching lower limit prices vary by asset class, reaching this level in the commodities markets can be particularly stressful for traders who are unable to sell their positions because of trading on the exchanges. is interrupted as soon as the lower price limit is reached.
The downward price limit change in lumber futures on May 19 is $ 63, according to the CME Group. At the last reading, lumber futures had reached this limit and had stopped at $ 1,201.
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