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SYP on track to be one of most produced species in North America, has overtaken spruce, largely due to wildfires, pest infestations, import duties, reduced harvests; British Columbia's spruce output fell 17.7% in first five months of 2023 compared to 2022

May 16, 2024 (press release) –

As the manager of LMC’s Futures Program, John Brady’s role is to bring trading and product expertise to the program on behalf of dealers. In his endless quest to do just that, John travelled to Charlotte in April to attend the 2024 MSR Workshop.

Each year, the MSR Workshop brings together participants from across the entirety of the lumber supply chain to broaden every attendees’ perspective on the MSR market and discuss opportunities for growth.

The purpose of John’s travels was to dive into the depths of Southern Yellow Pine (SYP) and bring back his learnings in his support of LMC’s Futures Program participants. The price risk continues, even after the record lumber prices during the pandemic.

“Participating in futures is an opportunity to manage price risk,” says John Brady, Futures Program Manager. Additionally, more companies in the forest products industry are participating in futures trading programs. Recently, the lumber futures contract set new records for the number of open contracts and trading volume."

“The Lumber futures contract is an opportunity for our dealers to be unique and stand apart from the competition,” Johnrecently told CME Group. “In an era where consolidation is only continuing to grow, pennies and single points of margin matter and will be exponentially more important in the years to come.”

SYP is quickly becoming the most produced species in North America. Its surge in market share means it has overtaken Spruce, largely due to an unfortunate run of bad luck for the species, including the worst wildfires in history, pest infestations, painful import duties, and a reduced harvest in old-growth forest stands. The output of spruce in British Columbia even fell 17.7% in the first five months of 2023 compared to 2022.

SYP is recognized as being a more sustainable group of species overall, and its growth couldn’t come at a better time as mass timber becomes the heart of huge institutional projects. The new Walmart Home Office Campus in Bentonville, Arkansas will become the largest mass timber corporate campus in the United States. Meanwhile, Under Armour has already built a timber corporate campus in Boston, MA.

John Brady and the futures team offer a world-class risk management opportunity for dealers

“While Western spruce-pine-fir (WSPR) once shaped the North American lumber market, Southern Yellow Pine mills and consumers haven’t been involved in trading futures for the species,” John says. Western SPF (Spruce Pine Fir) once shaped the North American Lumber market. Many Southern Yellow Pine producers and consumers avoided using lumber futures as a tool. One of the main reasons is the inconsistency of prices differences in WSPF futures and the spot/cash market of SYP.

Fastmarkets expects the South’s share of lumber production to rise to 39% in 2023-2027 -- a substantial jump from 34% in 2018-2022.

For those who aren’t yet involved, John offers some intel from the MSR Workshop.

“Southern Yellow Pine operates similarly to the spruce world,” John says. “Spruce mills, consumers, and traders tend to find each other and organize themselves, and Pine operates in the same clandestine way.”

Armed with the minutiae of the SYP supply chain operations from the MSR Workshop, the next event on John’s calendar is the Lumber Risk Academy, a StoneX event in Nashville happening in June. While the MSR Workshop provided an intense education in all sides of the supply chain from production dynamics to harvesting, the StoneX conference is a select gathering of lumber trading experts.

“The Lumber Risk Academy is a very technical trading workshop,” John says. “It goes well beyond what we teach our dealers as part of our Futures program. The conference covers very technical details that we might not need in lumber but are also good for dealers who really want to know how the futures market ticks.”

“When you understand why things happen, you can react to them more appropriately.”

John brings a select group of dealers to the event each year to support them in their education. The seminar discusses the global trade of futures and topics like trend lines, graphic techniques, and other tools used by hedge funds.

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