https://tradingeconomics.com/commodity/lumber

Chicago lumber futures traded above $820 per thousand board feet, close to levels not seen since late June, amid constrained supply due to labor shortage, and ongoing problems with transportation, and as off-season strong construction activity fueled the demand. In the United States, sawmills are facing a labor shortage as workers are unwilling to work in such dangerous conditions at low wages. Meanwhile, in British Columbia the government has settled the cost of logs – the raw material for lumber - four times higher this month as it was one year ago, weighing in the production levels.

Lumber 1 year chart below

Lumber 30 years below

Mike

 In your response to Wayne, the statement :

 Meanwhile, in British Columbia the government has settled the cost of logs – the raw material for lumber - four times higher this month as it was one year ago, weighing in the production levels.

scares me- the government settled - ??? What does that mean?

Thanks if you can clear that up.

  John

Great question John.

It’s obviously something to do with the Canadian government since British Columbia is in Canada but I haven’t found the explanation after a first look but won’t give up.

The harvestable timberlans in Canada are largely government owned.   So, I guess they get to set the price.   Why they would be pricing raw lumber out of the market is a question that can only be answered by a bureaucrat, I guess.

Heres some stuff I found and Tim has the idea-Im sure its more complicated.

Canadians private lumber growers complained and prolly lobbied for a more fair deal for themselves because the government prices were grossly unfair to the private growers they claimed.

In Canada, forest areas are mainly located on land, owned by the federal or provincial governments (Crown land). The provinces lease these areas to forest companies for the purpose of timber harvesting. The stumpage rates are defined by law, using a variety of administrative instruments.

Harvesting is managed by means of long-term contracts called tenures. These tenures usually involve 20-year concessions, with the possibility of renewal.

In contrast to Canada, in the United States a large portion of the land under forests is privately owned (70%). Wood from the private sector is sold on the open market through different buyer/seller agreements. Stumpage fees are determined on competitive auctions.

In other words, the fees charged to harvest the timber in the US are dictated by the market, rather than the law.

The above difference in timber acquisition costs was the spark that ignited the softwood lumber dispute. Namely, Canadian stumpage fees (based on labor, transportation costs, etc) are significantly lower than the prices in the US.

US’ point of view

The US views Canada’s way of setting stumpage fees as subsidization. The US lumber coalition claims that unlike the domestic action-based timber sale, Canada’s administrative pricing concept doesn’t reflect the market value of the goods.

By harvesting timber on Crown land at artificially low rates, Canadian companies are actually taking advantage of subsidies, which is an unfair practice and should therefore be subject to trade remedy laws. These laws envision the imposition of a countervailing (anti-subsidy) duty on this type of foreign goods as a way to compensate for the subsidy and restore the price to match market rates.

As a more recent development, USA also made “dumping” allegations, claiming that the price of Canadian lumber on the US market is lower than the cost of production or the selling price in Canada. As a result of this dumping, the lumber companies have acquired a larger share of the US lumber market.

Canada’s point of view

The Canadian government defends its forest management system, challenging the subsidy claim itself, as well as the allegation that the lumber should be subject to a countervailing duty on those grounds.

Since the wood is used in a wide range of industries, it doesn’t qualify as a subsidy under US law, which stipulates that countervailable subsidies must be specific to a certain industry.  According to Canada, the actions of the US are driven by protectionism, rather than unfair practices.

Great find John!

nice long term chart their metmike.

from the 90's until a couple years ago, the trading range was 200 to 400.  200 was a buy, and 400 was a sell.  i expect there is now a new trading range,  from 600 to 1200.  if it gets down to 600 or lower, then it will be a buy.  and when it gets up to 1200 or higher, it will be a sell.