In May 2021, lumber prices soared to an all-time high at $1700 per 1,000 board feet. As we come up on that anniversary, lumber has shifted from bull to bear in the past weeks.
According to Barchart, over the past year, lumber has gone from a shooting star to a falling knife and back and forth again. The illiquid nature of the lumber futures arena makes it virtually impossible to trade. When the price is rallying, limit-up sessions do not allow buyers to participate in the market, and limit-down periods do the same for sellers.
As of the end of March 2022, the lumber price was in implosive mode as the wood market searches for a bottom. While the nearby price has declined by over $480 per 1,000 board feet over the past month, it remains near $1,000, double the pre-2017 all-time high.
The backwardation in the lumber market makes nearby futures more expensive than deferred futures contracts.