ECON 101: Lumber and Inflation

This past summer, I had the unique opportunity to work in a lumber mill as a tailor. This position required me to assist operators as they worked machines such as rip saws, sanders, planers, and molders that process thousands of feet of lumber each week. While working there, I learned just how expensive lumber was for this company and most lumber and sawmills across the US. Although some types of lumber were cheaper such as white oak and poplar, each of my coworkers taught me the best ways to reuse excess that we cut off the boards no matter what type of wood it was because of the high prices. At one point, I remember that a 1" x 1" piece of a rarer kind of wood was valued at $7 per foot! Although I thought the source of these high prices was a shortage of lumber, I found that the higher prices had everything to do with Covid-19.

According to NPR (2021), lumber prices first surged in 2020 when more people were quarantining. People at home decided to either remodel their houses or start DIY projects at an unprecedented rate. So, because of the increased demand, lumber prices and production rose to meet it (para. 2). Furthermore, many professional homebuilders began building more as people who wanted more space took advantage of meager house interest rates (para. 11). So, the strain was put on sawmills to meet this demand and process more lumber when most sawmills were shut down (para. 7). NPR goes on to say that the price of lumber continued to rise from April 2020 to May 2021 by going from $349 per thousand board feet to $1,514 per thousand board feet (para. 13).

This massive price inflation also affected the capacity of wood orders that the lumber mill I worked for was trying to fill. When I joined the company at the beginning of June, my co-workers often mentioned how hectic the company's business had been in the recent months. In fact, I learned that the company was projected to make the most enormous profit ever this year because of this uptick in business. International Banker (2021) states that there has been a massive decline of 65% in prices of lumber over this past summer (para. 4). This is because more people are traveling now than last summer. However, International Banker also states that prices are still way up despite the sharp decline. And with a decreased demand for homebuilding now that more people are traveling, I hope that this price inflation on lumber can drop more so that more consumers will be willing to pay for the services of mills like the one I worked at. However, it could be that prices of lumber and other goods will take some time to recover because of the economic shock of the pandemic.

References

Hernandez, V. (2021, September 13). Is it the End of the Rollercoaster Ride for Lumber Prices? International Banker. https://internationalbanker.com/brokerage/is-it-the-end-of-the-rollercoaster-ride-for-lumber-prices/.

Horsley, S. (2021, July 8). What The Rise And Fall Of Lumber Prices Tell Us About The Pandemic Economy. NPR. https://www.npr.org/2021/07/08/1013819703/what-the-rise-and-fall-of-lumber-prices-tell-us-about-the-pandemic-economy.