CME lumber ends higher on short covering

CHICAGO Oct 26 (Reuters) - Chicago Mercantile Exchange lumber futures closed mostly higher on Monday buoyed by shortcovering prompted by the November contract's near $20 discount to the average cash price, traders said.

* Cash lumber sales remain slow and cash prices should move lower from the latest $193 cash quote, but the futures' current discount may be too large, traders said.

* On Monday, November lumber 2LBX9 closed up $1.10 at $175.60 per thousand board feet, while January 2LBF0 closed up $1.00 at $195.00.

* Home building is a major user of lumber but that business has been slow due to tight credit and high unemployment.

* On Friday, the closely watched Random Lengths cash lumber report quoted cash spruce, on average, at $193 per tbf, down $2 from Wednesday and a week earlier.

* After the futures closed, Seattle-based lumber producer Plum Creek Timber Co (PCL.N) reported a fiscal third quarter profit of $19 million, or 12 cents per share, compared with $69 million, or 40 cents per share, a year ago.

* In the earnings report, Plum Creek said timber markets appear to have stabilized and it has had some modest log price improvement in some regions. (Reporting by Bob Burgdorfer; Editing by Marguerita Choy)