January 2014 – Market Update

The lumber market has relaxed somewhat since the end of 2013, with the holidays, mill closings and winter weather conditions all having a dampening effect on sales and, subsequently, pricing. Unlike last January in which there was a constant battle cry to “Buy! Buy! Buy!” (based on the assumption that supplies would quickly dry up to a quickly-rebounding economy), this year has had a much more conservative attitude toward sales. The general forecast shared by most for 2014 is that sales will be up a few points, but nothing too dramatic. As a result, budgets have been set and purchasing has been reserved, leading to a drop in pricing at a time when it historically is propped up due to mill shut downs and limited log supplies. As order files were thinning, attractive offers by the mills were offered to dealers and wholesalers in order to push out inventories but, again, a conservative response was returned. Looking ahead at the next 30-60 days, pricing is expected to remain stable with a chance to rebound, but it will be based upon how kind Mother Nature will be towards providing favorable building conditions.

The sting of the market collapse from last Spring is still reverberating throughout the industry, as last year just about everyone had positioned themselves far ahead of normal inventory levels. This was based on the frenzy brought about by the forecast that the economy was going to rebound in excess and that mill production would not be able to meet demand, in effect shutting out those who did not buy in. As we learned the hard way, a glut soon followed that deflated pricing right through May, and contracts trucks that pumped more inventories into yards that didn’t need stock continued to roll in. In hindsight, the frenzy created by the overly optimistic expectation that 2013 was going to grow in incredible amounts was shortsighted and even naïve. For 2014, it is admittedly refreshing that the industry is being less emotional and reactive to what could happen, and more attuned to steady but restrained growth based on actual market factors. This situation can be used as a learning lesson for our industry in other areas as well, as emotional decisions are rarely the best decisions. For example, there are frequent changes that occur to supply channels, mostly through acquisitions, mergers and reassignments of distributorship. Initially, there is typically a great shock and uncertainty as to how the changes will impact relationships with the product line and the supplier and great concerns over the future prospects of both. Frequent and common reactions are to throw out the old and bring in the new but, oftentimes, it is best to withhold the snap judgments that only make change for the sake of change. As hindsight is indeed 20/20, you can be assured that by allowing time to “let the dust settle” you will gain a better clarity as to where your future path should lead.

It is this philosophy that we use when approaching changes to product lines and suppliers, as we do not jump at the first opportunity that’s presented: we’ve learned that better judgments and/or opportunities often present themselves once the turmoil breaks. Based upon this, we can offer you a consistent supply of high quality, aggressively priced and an even unique and different product offering. Always ready to do business, we can say with confidence that we are well-stocked with all of your building needs and look forward to growing our relationship with you in 2014. Please have a Happy New Year, and thank you for your past, present and future business!

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