- [Narrator] Lumber has never been more expensive.
Two-by-fours are more than three times their typical price.
Other wood products that we use to build houses,
like plywood, have also soared.
The increases are thanks to an unexpected boom in demand.
Even in the broad rally that has pushed up
commodity prices across the board,
from crude oil to corn,
the dramatic climb in wood prices stands out.
Lumber futures have more than tripled
since the rally began in April 2020.
No one expected wood prices to soar,
not even saw mills, lumber dealers,
and others who profit from rising prices.
Here's how lumber prices climbed
to records during the pandemic, who has profited,
and why those who grow the trees
haven't benefited at all.
When the pandemic set in,
saw mills shut down like many other businesses.
Before the lockdown, it was shaping up
to be a strong home building season.
But when the global economy ground to a halt in 2020,
new housing construction in the U.S. plummeted.
- At the onset of the pandemic,
lumber mills shut down,
dealers liquidated their inventories,
and speculators started shorting lumber futures,
expecting prices to plunge.
No one thought that there was a housing boom coming
or a remodeling boom.
- [Narrator] Hunkered-down homeowners remodeled in mass,
and low mortgage rates drove demand for suburban housing,
while restaurants raced to construct
outdoor dining accommodations.
Lumber and plywood started flying off shelves.
The building boom lifted the share price
of home improvement giants Lowe's and Home Depot
ahead of the broader market.
Wood was in short supply.
Sawmills ramped up capacity but couldn't catch up,
leading to a surge in prices.
- Besides prices rising, demand is such
that some people can't even get the right amounts
or the right products of lumber.
You're seeing this throughout,
across products, from a two-by-four, to plywood,
to engineered products for home builders.
- [Narrator] Sawmills have been big beneficiaries.
Owners of Southern mills have seen profits skyrocket,
and their share prices have surged.
Farther up the wood supply chain,
those who grow the trees that become
the two-by-fours have been left out.
Timber growers supply mills with logs,
which are sawed into lumber and mashed into pulp.
Prices for logs and lumber usually move in unison,
but lately their prices have diverged.
Much of the nation's logs are harvested in the U.S. South,
and Southern growers have gained nothing
from the run-up in prices for finished lumber.
Earl and Wanda Barrs have been growing timber
for 35 years in Central Georgia.
They say prices for their timber
have not kept pace with the run-up in lumber.
- The landowner, us, we haven't benefited
from the increase in the price of lumber.
- When I was a procurement forester,
we were paying
$25 a ton for sawed timber
on the stump, 40 years ago.
If you bring that forward today,
the market is $25 or less on the stump today,
and that's in constant dollars.
That's not taking into account inflation
and other things that have gone up
to grow those trees.
- [Narrator] The problem is that there's so many trees.
Between 1980 and 2020,
the volume of wood per acre of timberland
in many Southern counties has more than quadrupled.
- In the 1980s, the federal government paid
a lot of landowners in the South to plant trees.
The government wanted to take crop land out of rotation
and to stop having a lot of corn and soybeans,
so the prices would rise in those markets.
They paid people to grow trees
because those trees would sit on the land for decades
and just grow, and accumulate value,
and eventually be ready to be made
into things like lumber and plywood.
- [Narrator] Decades later,
many of those trees are being harvested
which has flooded the market with an abundance of timber.
- There's so many trees in fact,
that mills can basically name their price
for the logs that they take in and saw into boards.
The supply and demand is so out of whack
that analysts and a lot of investors in sawmill companies
think it could be a decade or two
before enough trees are cut down
that supply and demand is back in balance,
even with the increased demand
we're seeing today for wood products.
- [Narrator] Earl Barr says the consolidation of the market
has also made it difficult to sell timber.
- 20 years ago, if we'd have had a track of timber
that we would've put up for bids,
we'd have gotten at least 10 independent bids,
competitive bids, for that track of wood.
Now, we're seeing fewer than 5, if you're lucky.
We're not looking at what is happening to our markets.
Are we playing on a level playing field?
Are we able to put our trees
into a truly competitive marketplace?
- [Narrator] Analysts do expect lumber prices
will eventually go down,
but with the housing market continuing to run red hot,
the price continues to rise.