Lumber futures are certainly one of the most illiquid commodity markets and erratic price behavior is the norm in the lumber pits. The price action in lumber futures has been quite amazing in the last month. January lumber futures have risen from 182 to nearly 240 in about four weeks. Most of that move came in just the last week.
The reasoning for the jump in prices is a little unclear. Some say demand is increasing and inventories are being replenished. This is the slow time of year for lumber demand, so it doesn't make much sense. Another explanation is that lumber prices have been in the doldrums much of the year and hedge fund managers might have sensed some value here.
It doesn't take much to move lumber futures, so this market could have been ripe for picking. New home starts have been weak, so it is difficult to see where demand is coming from. This could revolve around expectations for improving demand in the future or it might just be more of a liquidity enticed rally like the stock market and some other commodities. Regardless, this is a dangerous market to jump onboard - always trade this market with caution.