U.S. Southern Pine Lumber Futures Trading Starts This Month

Exchange operator CME Group said it is launching trading in Southern yellow pine futures on March 31.

Trading in lumber futures has been a staple of the marketplace for years but it will now include Southern pine as the situation with Canadian lumber continues to get more complicated. Up until now trading has been in spruce, Northern pine and fir.

According to a Wall Street Journal report on the new addition – it will go under the ticker “SYP” – the futures contracts “will give the South’s loblolly planters, loggers, sawmills, pressure treaters and builders a mechanism to manage their exposure to price swings that is more in line with the local market than existing futures.”

The Journal reported that discussions have been going on for years as the South’s production grew to be more than 36 percent of North American softwood lumber output. “Now that Northern lumber is a lot more expensive, they are saying the time is right.” Current lumber futures trades are tied to deliveries of boards made from Northern conifers. The WSJ wrote “Builders like those species for the wood’s lightweight and easy nailing.” It said that Southern yellow pine had been excluded previously because the wood “is a lot heavier and preferred for fences and decks because it works well with waterproofing and stain.”

Unlike existing lumber futures, which will continue to trade, the Journal reported that “Southern yellow pine contracts will be settled with cash so hedge funds and other speculators can wager on wood prices without worrying about ending up with truckloads of two-by-fours.”

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