Back in 2004, when people still did things like build new houses, lumber futures were trading at $460 per 1,000 square feet; but with the housing market now in shambles, the lumber industry has been crushed by oversupply and lumber has traded down to $235. But it gets worse. To avoid devastation from a beetle infestation in Vancouver, British Columbia, they can’t stop cutting. Mill closings and mergers are rampant.
“It’s sad really,” says Ted C. Bloch. He declined to pick a bottom, but said the one bright spot is that the market has recently entered contango, with the January contract currently trading at a $21 premium to the November, and the March trading at a $40 premium to the November. “You get bumps up in cash every once in a while, but then it comes right back down,” he says.
"Lumber is in deep slumber," says independent trader Suzanne Bodlovic, adding that as bad as things are, she sees more downside potential in the near term. While those big buyers in the back months indicate an expectation the housing market will right itself, she says the turn around is not imminent. During November, she says lumber will trade as low as $217.