Commodity Update: December 2021

Over the last year, lumber and commodity prices have best been described to me as a roller coaster. The long steep climb to the top with a brief stop to build suspense before everything comes crashing down with all kinds of twists and turns along the way to keep it interesting. Only this time, the coaster did not stop at the gate to let the wide-eyed riders off. Lumber busted through the gate and started the climb back up to the top…. The challenge right now is no one knows where the top is or what the fall looks like on the other side.

Here is what we do know.

• Demand for wood products through our region is as high as we have ever known. (The same can be said nationally)
• Flooding and subsequent damage to transportation infrastructure has created a mess in getting timely product to the market.
• Vaccine requirements for truck drivers to cross the Canadian Border will influence the pipeline of wood.
• Ports are backed up and local drivers can command good rates to move containers over wood products.
• Discussions are continuing between Canada and the US regarding an 18% tariff on softwood lumber.
• Inflation in just about every product we buy is driving cost and sell up.
• Real wage inflation for many jobs is required to keep the best people employed.
• Interest rates are still very low with demand for new and existing homes at or near peak volumes.

While we could go on and on with more reasons, the roller coaster boils down to limited supply and huge demand. Until something cools demand, like interest rates or the economy, supply will struggle to keep pace. In the words of one of our brokers, now is not the time to be afraid! It is time to buckle up, charge forward, and enjoy the ride.

Through the history of commodity trading, every up turn has ended in a down fall. Every downturn has also ended in an upswing. The only real difference now is that we are playing with very high-priced wood. Just like in the 2021 run up, Frontier is committed to protecting supply first at the best possible price. Our preference is to keep you building, even if we must sacrifice some to keep you going.

Thank you for allowing us to be a partner in your business and your projects. We know you have choices on where to buy your materials. We want to earn our place every day. If you have any questions or concerns about the wooden roller coaster we are riding, please reach out and I will be happy to help.

Best,

Kelly Fox, President
Frontier Building Supply