This involves thousands of independent buying and selling decisions by manufacturers and their customers. The end results are prices at which thousands of individual items trade. The process isn't perfect, but it usually produces relatively well-defined selling ranges. This discovery process provides the basis for the prices reported in Random Lengths. Our surveys provide a weekly record of what were, in our judgment, representative trading levels for more than 1,500 lumber and panel items at the time of publication.
Contracts commit the two parties to ship and to take stated volumes over a period of time.
Usually they are based on third-party prices such as those published by Random Lengths or its competitors. Third-party contracts allow producers to move large volumes with small sales staffs, while guaranteeing that a certain percentage of the company's output is sold each week. For wholesalers and retailers, they're a way to lock in supplies of potentially scarce products or to guarantee shipments from favored suppliers. They also allow secondary manufacturers to maintain a predictable flow of inbound wood to their plants. What sounds like a win-win arrangement has a number of drawbacks.