By now, Central European timber companies, too, are said to be entering into future hedging deals. Those who concluded deals at the end of July are currently doing well. They could now continue selling at US-$680 to US-$690/1,000 bft until the end of September.
Weaker demand for residential construction is one reason for the falling prices in the US. The number of building permits in the US fell by 2.2% in July to 1.362 million units (adjusted for seasonal effects). This is the lowest level since June 2020.
Added to this is a substantial increase in lumber supply which was the result of large advance shipments from Canada. Many exporters delivered their goods to the US early to avoid potential tariffs. This created an oversupply that, according to US market analyst Matt Layman, is the highest it has been in 40 years.
What are futures and how do they work?
A future is a standardized forward contract that is traded at an exchange. Buyer and seller agree to trade a specific quantity of a commodity (e.g., lumber) at a predetermined price (e.g., US-$606/1,000 bft) at a specified time in the future (e.g., January 2026).
- The seller secures a fixed selling price for themselves today.
- The buyer secures a fixed purchase price for themselves today.
This hedges the risk of price fluctuations.
For example, if the January future is currently quoted at US-$606/1,000 bft and you sell it, this means that
- you are obligated to deliver the commodity in January at this price.
- the agreed future price applies, regardless of whether the market price is higher or lower than that.
