Reader JohnH pointed us to an article titled “Timber prices have fallen, but they may rise by 65% by the end of the year, an expert said.”. What does the market think about this?
figure 1: Lumber and softwood PPI (blue, left scale) and near-month futures, lagging one month (brown, right scale), the futures will end on August 9, 2021 (dark brown +). The NBER decline date is shaded in gray. Source: BLS through FRED, Macro Trend Network, Ino.com, NBER and author’s calculations.
Futures prices gradually increase (but they are usually, that is, commodity futures are usually in a positive spread due to storage costs).
Now, it is wrong to interpret futures as one-to-one predictors.The one-percentage basis-the change in the futures price relative to the current spot price-is related to the change in the actual timber price of the two-month maturity futures by approximately 0.55 percentage points, as stated in the report Mehrotla and Carter (2017) With the period from 4 months to 8 months, the coefficient rises to 0.67, 0.71 and 0.77.
Therefore, the market does not seem to be betting on a 65% rebound. But, of course, anything can happen, and there is no guarantee that the market is correct (for example, the market for gold and silver is often very wrong).Still makes me doubt
