Lumber futures fell for an eighth-straight day on Wednesday and threatened to derail a monthslong frenzy that pushed the price of wood to record levels amid the pandemic era.
Lumber futures for July delivery fell about 5% to $1,201 per thousand board feet on Wednesday, according to FactSet. Prices hit what’s known as limit down, the maximum percentage decline allowed by the exchange.
Prices have fallen every day since lumber hit a record of $1,711per thousand board feet on May 10.
Tens of thousands of stuck-at-home homeowners, and new home builders, have for much of the last year snapped up processed pine by the ton. But more recently, with sawmills unable to keep up with demand as the calendar turned to spring, a speculative frenzy entered the market with traders bidding up prices aggressively since March. Despite the swoon, the price of lumber is still up about 37% in 2021.
Single-family housing starts dropped 13% in April, the biggest decline since the pandemic hit, data this week showed. The rise in lumber costs was partly to blame for homebuilders slowing production even as housing demand increases.
While the rules for reaching limit down prices vary by asset class, reaching that level in commodity markets can be especially stressful for traders who are unable to sell their positions because trading on exchanges is halted as soon as the limit down price is met.
Lumber futures’ limit down price change on May 19 is $63, according to the CME Group. As of the latest reading, lumber futures had hit that limit and had been halted at $1,201.
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