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Don’t Forget! You Saw it in the
June 2017 #10215 Page #67
Lumber Briefs By Matt Layman Publisher, Layman’s Lumber Guide
LAYMAN'S LUMBER MARKET BRIEF
Ideal Lumber Inventory Management Strategy... Softwood Framing Lumber Market Forecast & Trading Strategy Matt Layman, Publisher Elasticity Week #21
Wednesday
May 24 , 2017
Ideal Inventory Management...Elasticity During rising tide (green zone) we expect demand accelerators.
A fellow lumberman asked me to describe my ideal style
A fellow lumberman asked me to describe my ideal style inventory management, or buying strategies. So ithere of of inventory management, or buying strategies. So, here is. The it is. As a lumber broker, a truss plant buyer and a retail best way to describe it is “elasticity.” lumber yard owner. The best way to describe it is "elasticity"." Imagine the lumber market like the waves and tides of the Imagine lumber market likeand theflows waveswith andthe tides of sea. The tide isthe predictable...it ebbs moon’s the sea. The tide is predictable...it ebbs and flows with cycles and position in relation to the sea. The variable is the size the moon's cycles and position in relation to the sea. The of variable the waves can and can estimated by weather. is which the size of be theinfluenced waves which be influenced and estimated by weather. Likewise, the lumber market has predictable tides. The Likewise, the lumber market has predictable tides. The greatest influence on our lumber market is weather and the cycles greatest influence on our lumber market is weather and of the longer andofshorter days.shorter Shorter days have days less favorable cycles longer and days. Shorter have weather for lumber demand. Longer demand. days haveLonger more favorable less favorable weather for lumber days have more favorable Weexpansion know when of weather. We know whenweather. periods of andperiods contraction expansion and contraction will occur...i.e. the TIDE. will occur...i.e. the TIDE. The tides of the lumber market can be seen on the graph below green and red Green is below The tides of by thethe lumber market can shadings. be seen on the graph rising tide, (lengthening daylight), red is falling tide by the green and red shadings. Green is rising tide, (lengthening (shortening daylight). Clearly we can conclude that the daylight), red is falling tide (shortening daylight). Clearly we can tide does not determine lumber price cycles or movement. conclude that thecreates tide does notmovement? determine lumber price cycles or What then price Simple. The movement. motor is buyers' anticipation of how large or small and frequent the waves will be during each high or low tide. What then creates movement? Simple. The motor is During falling tide price (red zone) we expect demand buyers’ anticipation of how large or small and frequent disruptions. Lower waves of demand disruptions the waves strengthen Higher waves will be duringprices. each high or low tide.of disruption weaken prices. More of the expected unfavorable conditions is During falling tide (red zone) we expect demandisdisruptions. bearish. More unexpected favorable conditions bullish.
Lower waves of demand disruptions strengthen prices. Higher waves of disruption weaken prices.
Higher waves of additional demand accelerators strengthen prices. During rising tide (green zone) we expect demand Conversely, lower waves of demand accelerators weaken prices.
accelerators. Higher waves of additional demand accelerators prices. Conversely, lower waves Obviously,strengthen in both situations, more than expected favorable of demand accelerators weaken prices. More of theconditions conditions are bullish. More than expected unfavorable expected favorable conditions is bullish. More of the are bearish. unfavorable conditions is bearish. unexpected is the the preparation preparation for ItIt is for the the expected expected and and unexpected unexpected that that creates volatility. The ultimate goal is to establish a creates volatility. The goal is to establish a base inventory around base inventory around the expected. Higher inventory the expected. inventory duringduring rising tide, lower during risingHigher tide, lower inventory falling tide.inventory during falling tide. Then, adjust the near-term position elastically, Then, adjust the near-term position elastically, expand or contract, depending on the unexpected influences. Nasty expand or contract, depending on the unexpected influences. freezing winter, scorching hot summer, prolonged wet Nasty freezing winter, scorching hot summer, prolonged wet spring...thin it out. Warm winter, dry spring, mild spring...thin it out. Warm winter, dry spring, mild summer...beef summer...beef it up. it up.The most effective way to manage inventory is to expand at FTP reversal lows and reduce as we approach The most effective way to manage inventory is to expand at FTP reversal highs, riding the big waves on the tide. In FTP reversalweek lowsto and reduce as the we approach FTP reversal highs, between, week, ride small waves. Buy early riding the big waves on the tide. In between, week to week, in the week in rising markets. Delay purchases until late ride in small the week during the waves. Buyprice earlyweakness. in the week in rising markets. Delay The absolute worse is just-in-time buying, purchases until late in thestrategy week during price weakness. being totally oblivious to the wave motions. The worse and strategy is just-in-time buying, being The absolute key is elasticity the buyer's unpredictability.
totally oblivious to the wave motions. Looking Forward...ML
The key is elasticity, and your most powerful secret weapon… unpredictability. Looking Forward...ML
(FTP) Forecasted Time & Price vs. Composite (2x4's #2 SYP-E, SPF-W, Dry Hem Fir, Green Doug Fir.) 2016-Current Vertical arrows project time-major turning weeks. Red squares forecast price direction ,adjusted periodically.
Green Zone=Increasing Demand #02-30
Red Zone = Decreasing Demand Weeks #31-01
Yellow Zone=Daylight Savings Weeks #11 Through Week #44.
The tide is still rising. This week is an inventory expansion reversal low FTP.
450 430 410 390 370 350 330
46 47 48 49 50 51 52 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46
Layman's Lumber Guide...Matt Publisher PO Box 905, Belmont, NCand 28012 A veteran lumberman, Matt Layman publishes Layman’s LumberLayman, Guide, the weekly forecasts buying advisories that help component Phone or Text: 336-516-6684 Fax: 888-811-6917 Email: matt@laymansguide.org Reprint or distribution is unlawful without permission. www.laymansguide.org Join Matt Layman on LinkedIn manufacturers save money on lumber purchases every day.TWITTER.com/Laymansguide You can reach Matt at 336-516-6684 or matt@laymansguide.org
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