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Lumber Futures Drop From Highest Price in More Than Four Years

Jan. 4 (Bloomberg) -- Lumber futures fell on speculation that the highest price in more than four years didn’t reflect the outlook for demand.

The commodity jumped 36 percent in 2010, the most since 2003, after mills in Canada reduced output and investors bet that a housing recovery would boost demand. Today, lumber reached the highest since May 2006 before dropping.

Traders have “seen the prices run up, and they’re taking profits,” said Paul Quinn, a Vancouver-based analyst at the Royal Bank of Canada Capital Markets. “I don’t expect the current pricing level to be sustainable,” he said. “You’ll see additional capacity start up and therefore flood the anemic demand.”

Lumber futures for March delivery fell $9.90, or 3 percent, to settle at $320.10 per 1,000 board feet at 1:04 p.m. on the Chicago Mercantile Exchange, the biggest drop since Oct. 1. Earlier, the price rose by the exchange limit of $10 to $340, the highest since May 5, 2006.

To contact the reporter on this story: Elizabeth Campbell in New York at ecampbell14@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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