Here's a chart of lumber futures prices over the last month. Of particular interest is the big upward movement starting on January 28th. Between then and this last Friday, lumber TWICE went up the session limit of $10 / thousand board feet (mBF).

At the beginning of the month, I was bearish on lumber because I suspected housing starts have not actually increased whatsoever (and at the time I took a short position, only to be stopped out in accordance with my personal trading philosophy); however, now I am even more bearish because I think this pricing run-up neither makes sense nor is in any way sustainable.

Lumber futures have surged nearly 60% since the beginning of October despite mixed signals in recent housing data (read Mike Farrell’s must read housing comments here). Random Lengths recently reported the continuing substantial weakness in housing as lumber production declined 23% vs 2008:

U.S. lumber production through November totaled 21.205 billion board feet, down 23.0% from the January-November 2008 figure, according to the Western Wood Products Association. Through the first 11 months last year, production in the West declined 22.3% compared to the same period of 2008; production in the South fell 23.7% during the same period. Nationwide, November 2009 production totaled 1.620 billion feet, down 16.6% from the November 2008 total and off 18.9% from October 2009.