CME lumber ends higher on short covering

CHICAGO Feb 26 (Reuters) - Chicago Mercantile Exchange lumber futures ended higher on Friday amid short covering and end-of-the-month position squaring, traders said.

* Short covering developed after losses earlier this week while lower cash prices and continued weak housing limited upside potential.

* Futures have been recovering since setting a one-month low on Wednesday following record low new-home sales and falling cash prices.

* But Random Lengths on Friday put cash spruce price at $275 per thousand board feet, down $7 from Wednesday's quote and $15 under the week-ago level.

* National Association of Realtors on Friday also said used home sales fell 7.2 percent to an annual rate of 5.05 million units, sharply below market expectations for a 5.50 million unit pace. [ID:nN26167386]

* CME March lumber 2LBH0 closed up $3.40 at $257.00 per tbf and May 2LBK0 was up $3.90 at $273.70 per tbf.

* Expectations of further weakness in cash lumber seen keeping a lid on any recovery going into next week.

* "Buyers pulled back from the market for a third straight week, and many framing lumber prices softened," Random Lengths said. "Weather played a major role in the slowdown, as intermittent rain in California and another snowstorm in the East slowed shipments."

* "Distributors owned lumber purchased in January and earlier this month at considerably lower prices, and winter weather hampered their efforts to move it into the marketplace," they said.

* "Wholesalers scrambled to move what they retained from the recent run. Given the market's rise, many sales at hefty discounts to mills' current quotes still had profit in them," the reporting agency added. (Reporting by Jerry Bieszk)