Lumber prices pause near record high in wild trading day

• U.S. lumber futures (LB1:COM) swing from gains to losses in wild trading, in at least a brief pause from prices that have soared in the past year.
• The most-active July contract on the Chicago Mercantile Exchange rose by the maximum daily limit this morning after hitting $1,537 per thousand board feet before reversing to limit-down levels, recently trading -2.7% at $1,453 after reaching an all-time high $1,733.50 on Monday.
• ETFs: WOOD, CUT, NAIL, XHB
• Potentially relevant tickers include WY, RFP, PCH, WFG, OTCPK:CFPZF, OTCPK:IFSPF
• "We expect a peak will occur in July-August at which point more lumber will start flowing to market as supply chain disruptions, a lack of rail cars and trucks to transport lumber to market, ease," Paul Jannke, a principal at wood product analysis company Forest, tells Bloomberg.
• Jannke thinks the most-active contract could rise to $1,800 per 1,000 board feet in the absence of extensive wildfires this year, but a bad fire season could see prices top $2,000.
• "Despite the recent pullback, we think higher lumber prices are here to stay" because of a supply/demand imbalance, Janney analyst Tyler Batory writes, adding that "we do not believe this is bad for homebuilders."
• "We think higher lumber costs have actually been an impetus to unite builders towards driving prices higher," Batory believes.
• Redfin analysts reported this week that demand for second homes has more than doubled from pre-pandemic levels.