Ag Analysis Report 8/12/18 - Lumber Prices Come To Their Senses

Three days ago, I wrote a post about Bill Ackman taking a stake in Lowe’s and one of the statements I made was

I Think Bill Ackman Is About To Take Another “L”

What we are experiencing is pressure on both sides of the housing market. Buyers are getting squeezed by rising mortgage rates and housing prices are climbing almost double income wages.

The price of the average new single-family home has increased by almost $9,000 since January 2017, according to the National Association of Home Builders. One of the culprits has been the price of lumber. Lumber hit at an all-time high of $639 per 1,000 board feet on May 17 before pulling back to $414. Although this represents a 35% drop in price, this is still higher than the prices have been in 40 years.

Lumber prices have increased due to a confluence of factors. A severe Canadian wildfire, an ongoing trade dispute between the United States and Canada and limited rail capacity are the main culprits. Typically, up to 97 percent of American lumber imports come from Canada, and President Donald Trump recently imposed tariffs of more than 20 percent on Canadian lumber – making the import more expensive.

So where can we expect lumber prices to head next, lets go to the charts?

Monthly Chart (Curve Time Frame) - monthly supply is $625 and the nearest monthly demand is $425.

Weekly Chart (Trend Time Frame) – the trend is screaming down.

Daily Chart (Entry Time Frame) – the chart suggest that price will pull back before continue the downward trajectory. There is an opportunity to short lumber if price gets back to the daily supply at $525.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.

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Published on

by rollandthomas

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