The Hidden Costs Behind Falling Lumber Prices

[] How Shipping and Transportation Expenses are Rippling Through the Economy [] [] [] [] Earlier this week, [I delved into the rising shipping costs]( and their potential to kick off another round of inflation. We looked at the issues in the Panama and Suez Canals and how these are affecting the prices of goods and services. Today, I want to expand on this by discussing another critical area impacted by these rising costs: the lumber market. Impact on the Lumber Market and Housing Sector While shipping costs are a big concern, other areas of the economy are feeling the strain, too. One area is the lumber market. Lumber prices have been falling since March of last year and are now below pre-pandemic levels. But, the cost of labor and trucking has significantly increased. Many lumber mills are losing money at today's prices — and if this trend continues, we could see mill shutdowns or large layoffs of skilled workers. Usually, this time of year sees an increase in lumber prices due to high demand from home builders. A strong labor market and a shortage of homes have kept builders active, but higher interest rates are now taking a toll on the housing market. Last year, there was an 18.7% decline in home sales from 2022, and recent months have seen a further decline, with median home prices falling by 4% so far. So there’s no end in sight for the troubles lumber mills are seeing right now. Connecting the Dots: Rising Costs Across the Board The increasing cost of transportation is not just limited to ocean freight. The price of labor and trucking within the US have also gone up. This trend impacts various sectors, with lumber being a prime example. When mills face higher transportation costs, they pass these costs onto consumers, further driving inflation. Understanding these dynamics is crucial. The interconnected nature of our economy means that rising costs in one area, like shipping, can ripple out and affect other markets. As traders and investors, staying informed about these developments can help us make better decisions and anticipate market movements. As an example, take a look at these charts. Boise Cascade (BCC), a lumber mill on the left, and lumber futures on the right. Both are down over 30% from their peaks just a few months ago. [] The key thing right now is to keep a close watch on how these rising costs impact various sectors, because one of the big things markets are watching for is when the Fed plans to cut rates. And the only way that’s going to happen is if the Fed believes it’s tamed inflation. Despite some recent positive data, Powell has said he’s still waiting for more reports like those to keep adding up before deciding to issue a rate cut. — Geof Smith P.S. Rising costs and economic uncertainty can make it tough to navigate the markets. That’s why I’m excited to share Liberty Income Alerts with you. This exclusive service targets monthly income from the overlooked ticker TLT, providing a reliable strategy even in volatile times. [Secure your access now and take control no matter what markets throw at us.]( [] [] Earlier this week, [I delved into the rising shipping costs]( and their potential to kick off another round of inflation. We looked at the issues in the Panama and Suez Canals and how these are affecting the prices of goods and services. Today, I want to expand on this by discussing another critical area impacted by these rising costs: the lumber market. Impact on the Lumber Market and Housing Sector While shipping costs are a big concern, other areas of the economy are feeling the strain, too. One area is the lumber market. Lumber prices have been falling since March of last year and are now below pre-pandemic levels. But, the cost of labor and trucking has significantly increased. Many lumber mills are losing money at today's prices — and if this trend continues, we could see mill shutdowns or large layoffs of skilled workers. Usually, this time of year sees an increase in lumber prices due to high demand from home builders. A strong labor market and a shortage of homes have kept builders active, but higher interest rates are now taking a toll on the housing market. Last year, there was an 18.7% decline in home sales from 2022, and recent months have seen a further decline, with median home prices falling by 4% so far. So there’s no end in sight for the troubles lumber mills are seeing right now. Connecting the Dots: Rising Costs Across the Board The increasing cost of transportation is not just limited to ocean freight. The price of labor and trucking within the US have also gone up. This trend impacts various sectors, with lumber being a prime example. When mills face higher transportation costs, they pass these costs onto consumers, further driving inflation. Understanding these dynamics is crucial. The interconnected nature of our economy means that rising costs in one area, like shipping, can ripple out and affect other markets. As traders and investors, staying informed about these developments can help us make better decisions and anticipate market movements. As an example, take a look at these charts. Boise Cascade (BCC), a lumber mill on the left, and lumber futures on the right. Both are down over 30% from their peaks just a few months ago. [] The key thing right now is to keep a close watch on how these rising costs impact various sectors, because one of the big things markets are watching for is when the Fed plans to cut rates. And the only way that’s going to happen is if the Fed believes it’s tamed inflation. Despite some recent positive data, Powell has said he’s still waiting for more reports like those to keep adding up before deciding to issue a rate cut. — Geof Smith P.S. Rising costs and economic uncertainty can make it tough to navigate the markets. That’s why I’m excited to share Liberty Income Alerts with you. This exclusive service targets monthly income from the overlooked ticker TLT, providing a reliable strategy even in volatile times. [Secure your access now and take control no matter what markets throw at us.]( [] ABOUT US: We believe that the opportunity for financial literacy and freedom belongs to all people, not just those who already have years of investing experience. Prosperity Pub provides an array of educational services and products that will help you navigate the markets and become a better investor. Trading is made simple through our online forum full of trading techniques to give you the best tools to kick-start your investing journey. We offer collaborative webinars and training; we love to teach. No matter the opportunity, we bring together a strong community of like-minded traders to focus on analyzing market news as it’s presented each day. DISCLAIMER: FOR INFORMATION PURPOSES ONLY. The materials presented from Prosperity Pub are for your informational purposes only. Neither Prosperity Pub nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational purposes intended is at the user’s own risk. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. Prosperity Pub is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions. Please visit [( for our full Terms and Conditions. [Unsubscribe]( This email was sent to {EMAIL} by Prosperity Pub 101 Marketside Ave, Suite 404 PMB 318, Ponte Vedra, Florida 32081, United States [Prosperity Pub]( [] ABOUT US: We believe that the opportunity for financial literacy and freedom belongs to all people, not just those who already have years of investing experience. Prosperity Pub provides an array of educational services and products that will help you navigate the markets and become a better investor. Trading is made simple through our online forum full of trading techniques to give you the best tools to kick-start your investing journey. We offer collaborative webinars and training; we love to teach. No matter the opportunity, we bring together a strong community of like-minded traders to focus on analyzing market news as it’s presented each day. DISCLAIMER: FOR INFORMATION PURPOSES ONLY. The materials presented from Prosperity Pub are for your informational purposes only. Neither Prosperity Pub nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational purposes intended is at the user’s own risk. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. Prosperity Pub is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions. Please visit [( for our full Terms and Conditions. [Unsubscribe]( This email was sent to {EMAIL} by Prosperity Pub 101 Marketside Ave, Suite 404 PMB 318, Ponte Vedra, Florida 32081, United States [Prosperity Pub](