COVID-19 and the Mystery of Lumber Price Movements

The COVID-19 pandemic led to unprecedented changes in the U.S. price of softwood lumber by more than 300% between 2020 and 2022. The increased volatility of lumber prices after the COVID-19 outbreak remains unexplained. In this paper, we examine how a calibrated random walk can induce similar price volatility through the development of a stochastic process. As a preferred approach, we employ an event model to estimate the impact of COVID-19 and other key events on the price of softwood lumber. The econometric model serves to provide evidence that the price volatility of softwood lumber is not completely random, and we can instead attribute part of the variation to recent regional and global events. We found that, while COVID-19 did result in a price jump, it was smaller than a rainfall event that restricted imports from Canada, while import duties and other trade actions had no discernible impact on U.S. lumber prices.

Automated summary

The COVID-19 pandemic caused a significant increase in the price of softwood lumber in the United States, with over 300% change between 2020 and 2022. The higher volatility of lumber prices after the COVID-19 outbreak remains unexplained. In this paper, the authors use a calibrated random walk and an event model to study the impact of COVID-19 and other events on the price of softwood lumber, finding that the price volatility is not completely random and can be attributed to recent regional and global events. While COVID-19 did lead to a price jump, it was smaller than a rainfall event that restricted imports from Canada, and import duties and trade actions had no observable impact on U.S. lumber prices.