Kurt Yinger: Okay, thanks for the color, Devin and good luck here in Q3 guys.
Devin Stockfish: Thank you.
Operator: Thank you. Our next question comes from Susan Maklari with Goldman Sachs. Please proceed with your question.
Susan Maklari: Thank you. Good morning everyone.
Devin Stockfish: Good morning.
David Wold: Good morning, Susan.
Susan Maklari: My first question is, Devin, can you talk just a bit about the production levels and the inventory that you’re seeing at the mills just across lumber as the builders are gearing up and adding that starts on the ground, how are you thinking about overall lumber inventory out there? And maybe what could that mean for your ability to hit that 5% annual growth target that you’ve set out there?
Devin Stockfish: Yes. So the first part of the question in terms of inventories, I’d say on balance in the lumber space, inventories are on the lean side, not nearly as lean as OSB, but I’d say leaner than normal. I think what’s going on right now is there is adequate supply coming on. And so people are feeling more comfortable with those lean inventories. And as you know, typically, the August time frame is a period where you see a little bit of pullback in demand, particularly on the R&R side just because of the heat of the summer, people are less inclined to build a deck if it’s 110 degrees outside. So I think you have some normal, seasonal demand pullback just on the R&R side. But in terms of what that leaner inventory looks like is as you get into the Fall, if buyers continue to carry lean inventories and certainly, our inventories at the mills are on the lean side as well.
If you get into the Fall when that R&R activity picks up and you have strong single-family homebuilding, we’ve seen what happens there, particularly if you have some sort of supply shock maybe from fire season or some other thing happening, that can really push pricing up fairly quickly. And we saw that even just in June with the fire activity in BC, what that can do to pricing. So I think it all depends on if we see repair and remodel activity pick backup in the Fall as we normally do and the builders continue to build, which is what we’re expecting, that could be a nice setup for Fall pricing in lumber. In terms of our ability to meet the 5%, there are going to be puts and takes every year. What we’re doing is we’re doing the work with building the capacity.
So the CapEx projects, the improvements in reliability, et cetera, that we need to do to hit that target. Last year, obviously, we were down a little bit because of the strikes in the Northwest. This year, we did dial back production a little bit just because lumber demand has slackened a little, particularly in the Northwest and BC. So we’ll see what the ultimate production number is for the year. But ultimately, we’re doing the work from a capacity and an operations standpoint to support that 5% per year.
Susan Maklari: Yes. Okay. That’s very helpful color. And then I guess, as you do think about some of the dynamics that are going on in the lumber market from both a supply and demand perspective, how do you think about where pricing can go as we think about the back half of this year and probably even in the first half of next year, given what the builders are talking to and looking to add on the ground. And maybe how is that different from what happened in the last few years that could either put a floor or a ceiling in terms of the upside potential around the pricing?
