BLOG: On a Personal Note
Lumber and Woodchips
By Sujeet Rajan
June 8: There are a couple of new houses coming up in my neighborhood. Almost all houses in the town I live in Connecticut has pockets of woods; dense foliage. A portion of a nature preserve that extends for hundreds of miles is a short walk away from my house.
On a walk yesterday, I noticed a bunch of cut trees piled up next to a mountain of woodchips. The area where the new house is coming up is on a rising tract of land, and perhaps two acres worth of trees had been cleared to make way for it. Lumber that was spared from being minced was probably headed for some utilitarian purpose, like furniture. Or to turn into ashes as firewood.
A few months ago, that lumber would have fetched a high price in the open market, with a dire shortage of wood. Today, it’s a different scenario: prices of lumber have plummeted. Dealers who stockpiled it as demand for new houses skyrocketed, are now stranded with only a few takers, as the Fed hike in interest rates dampened zeal for new houses. The completions, starts, and building permits for single-family homes all declined in April, in the US. Lumber futures are down 52% since March.
“This combination of rising rates, falling inventory, and big asking prices led new home sales to drop 16.6% between March and April — the largest decline in nine years.”: The Hustle
On hindsight, the crash in lumber prices in the US was a precursor to warnings of global recession, and worse, stagflation reminiscent of the 1970s, issued by the World Bank yesterday.
“For many countries, recession will be hard to avoid,” wrote World Bank president David Malpass: Fortune
Malpass mentioned the threat of stagflation multiple times in the World Bank report, noting similarities in monetary policy environments between now and the last time stagflation hit.
“Several years of above-average inflation and below-average growth are now likely, with potentially destabilizing consequences for low- and middle-income economies. It’s a phenomenon—stagflation—that the world has not seen since the 1970s,” he wrote.
It’s not just lumber though. A lot of big retailers are overwhelmed with inventory, probably need the help of Marie Kondo to stop warehouses from being inundated with small and big-ticket items.
“Inventories rose $44.8 billion for companies on S&P consumer indexes with a market value of at least $1 billion that reported earnings over the last two weeks, according to data Bloomberg compiled. That’s up 26% from this time last year. The glut dented profits at some retailers, with Walmart Inc. paying more for storage and Target Corp. and Gap Inc. cutting prices on key goods,” noted this report.
As for those wood chips, there would be no dearth of takers. It’s summer, the perfect time for mulch to be strewn generously in yards, and even in vegetable beds. Well, not all mulch is good for vegetable beds, though. And ‘volcano’ mulching – that mini mountain of mulch piled at the base of a tree trunk, is a different discussion to be had some other day!
“Dyed or colored mulches are often made out of recycled wood, from materials like pallets. This wood could be pressure treated and/or treated with various chemicals at some point, so it’s probably best to not use this type of mulch around vegetable plants,” informed WSBradio.
Who knows…perhaps the lumber and woodchips have been kept aside for the new family who would move in once their house is completed; use it for some projects in and around their new abode. Good luck to them!