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Component Manufacturing dverti$er
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Don’t Forget! You Saw it in the
January 2017 #10210 Page #59
Lumber Briefs
By Matt Layman Publisher, Layman’s Lumber Guide
The Save Money Series
Part Three: Anticipate 2x4 Prices H1-2017
I certainly do not have crystal ball, but I do have something almost as good. I have history and the ability to analyze the market from a fundamental and technical perspective. Together they provide an 86% accurate forecast of when prices will rise and fall. This should help protect you from under bidding and being out of position with inventory.
Reviewing the Data So let’s evaluate the projected price range for 2x4 #2 in 2017 using the futures market. On the long-term monthly continuation chart of the nearby futures contract, the first thing to see is that, since 2004, we have created a narrowing pennant or wedge formation ...lower highs and higher lows. Currently, we are rallying up to the top of the wedge towards $375-ish. The bottom of the wedge is $240-ish. That is a $135 trading range. The current value of lumber futures is $310…$65 from the top…$70 from the bottom. We are right smack dab in the middle.
Preparing Your Action Plan So, what can you do with that? First, realize that all 2x4’s #2 prices are well above 10-year averages and about $50 higher than last year this time. SYP 2x4’s, the primary specie for component manufacture in over half the country, are $132 over the 10-year average and $15 above the highest January price over the last 10-years. Big picture, lumber prices are high and moving upward. I expect framing lumber prices to move to the top of the wedge before the bottom. The Softwood Lumber Agreement and Trumponomics could keep our lumber market spooked at these higher prices well into the spring. If the top of the wedge holds, we could be in for a nasty ($135) bear market to follow. My strategy would be to anticipate $50-75 higher prices the first half of the year then begin a move lower into the fall.
A veteran lumberman, Matt Layman publishes Layman's Lumber Guide, the weekly forecasts and buying advisories that help component manufacturers save money on lumber purchases every day. You can reach Matt at 336-516-6684 or matt@laymansguide.org.
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