Lumber futures continue their wild ride, trading limit down after going limit up in the previous session. Futures fell the max $48 per 1,000 board feet, off 3.6% to $1,278.70.
But lumber prices are still up around 50% year to date and have tripled since the start of 2020.
Strong demand for U.S. homes in the midst of pandemic-related supply constraints have been the big factors in the surge in prices.
In addition, Canadian pine beetles are spreading across forests in Alberta.
But prices could be due for a sharp fall when supply ramps up, according to Capital Economics commodities analyst Samuel Berman.
“All told, we forecast that the price of U.S. lumber will plummet to $600 and $550 per 1,000 broad feet by end-2021 and end-2022, respectively, as domestic supply surges and imports remain strong,” Burman wrote in a note, according to Bloomberg.
But RBC analyst Paul Quinn is looking for futures prices to remain above $1,000 until at least late July.
Overall, “market participants continue to have a favorable outlook for pricing levels given strong demand, low inventories, and the inability for supply to catch-up in the near-term,” he wrote, Bloomberg reported.
Negative catalysts that could disrupt the rally include improved trucking logistics, inventory rebuild, lower demand and sticker shock from high prices.
The rise in lumber has added $24,000 to the price of a new U.S. home, according to the National Association of Homebuilders.
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