U.S. lumber futures prices have soared about 30% in the past five months, with bets rising 18% since January with help from an odd ally: a credit crunch in the industry.
Lumber distributors, who channel supplies from mills to end users, finding it difficult to raise loans to buy lumber in the cash markets are resorting to buying futures as a hedge and to possibly take delivery when a contract expires.
Lumber supplies available to distributors in the cash market have also been shrinking due to a pick up in the housing market in the wake of a mild winter in the country.
“Distributors are having trouble buying lumber in the tight stocks environment and also they can’t get capital from banks so they’re buying futures,” said Brian Leonard, a futures broker and analyst for Leonard Commodities Inc. in Chicago.
Open interest in lumber futures is up 18% and spot lumber prices are up 12% since January, indicating new buyers in the futures market.