Credit crunch boosts lumber prices

A new report has suggested that US lumber prices have received a boost from an unexpected source – the credit crunch.

According to a report by Reuters, US lumber futures prices have risen by 30 per cent since October, whilst bets have risen 18 per cent since January. The article argues that the recession has been partially behind this rise.

One explanation is that lumber distributors are struggling to find loans to purchase lumber in the cash markets and are opting to buy futures as a hedge with a view to taking delivery when a contract expires. The mild winter has also encouraged a pick up in the housing market, leading to a further reduction in lumber supplies.

Brian Leonard, a futures broker and analyst for Leonard Commodities Inc in Chicago, told Reuters, "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.”

Statistics on the lumber futures market suggest it is attracting new buyers. Open interest in lumber futures is up 18 per cent since January, Reuters reports, whilst spot lumber prices are up 12 per cent.