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It is easy to start trading lumber futures.
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Speculative traders, who don’t want to take or make delivery of the commodity, can avoid that by rolling over to contracts in the next expiration months.
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At expiration, the contract is settled by physical delivery. The contract normally expires in January, March, May, July, September, and November. The lumber itself comes in 2 inches by 4 inches, with a length of 8-20 feet. The CME (Chicago Mercantile Exchange) offers a contract on Random Length Lumber Futures, and it can be traded from any part of the world through the Globex electronic trading platform.Ī random length lumber futures contract is equivalent to 110,000 board feet (approximately 260 cubic meters) of lumber, and the pricing unit is in dollars per 1000 board feet. How to Trade Lumber FuturesĮven though there are other ways you can play the lumber market, such as trading options on lumber futures or trading lumber CFDs, it is better to simply trade lumber futures contacts. Some people tend to see commodities as a means of hedging their wealth against inflation. Inflation hedge: Fiat money is constantly losing value due to the frequent reduction in interest rates and other central bank policies. Lumber is popular among agricultural commodity investors. Their sole aim is to see how they can benefit from the daily fluctuations in lumber prices.ĭiversifying portfolio: Some investors and fund managers invest in the commodity market as a way of diversifying their investment portfolio across several asset classes so as to reduce systemic risk. Speculation: Apart from the stakeholders in the lumber industry, most of the traders in the lumber futures market trade purely for speculative purposes. Hedging against price fluctuation: While wood mills and producers of lumber come to the lumber futures market to secure a good price for their product, lumber users, such as homebuilders, wholesalers, retail dealers, and others, come to the market to ensure a stable supply of the commodity. For the stakeholders in the lumber market, lumber futures offer a way to manage price fluctuations. Some trade the contract for speculative purposes, while others use it to hedge against inflation or to diversify their investment portfolio. The reasons for trading lumber futures vary from person to person. Global trades in lumber futures is done through the commodity exchanges. On the aspect of wood consumption, the countries that use the most woods in the world are the United States, China, Russia, Canada, Brazil, Sweden, Indonesia, Finland, India, Germany, and the United Kingdom. Canada tops the list of countries that export the commodity, and it is followed on that list by the United States, Sweden, Finland, Germany, Russia, Brazil, Australia, and Chile. Other top producers include China, Canada, India, and Brazil. The Largest Producers and Consumers of LumberĪccording to the UN Global Forest Products facts sheet, the largest producer of lumber is the United States, followed by Russia. Wood flooring: Both outside decks and indoor flooring can be constructed with lumber. Kitchen cabinetry: Most of the structures in the kitchen for washing, cooking, and storing foods are made from wood because it makes it easy to integrate the necessary appliances like refrigerators and dishwashers into the kitchen cabinet. Similarly, most of the items used in offices and schools are also made from lumber. In some places, an entire building can be constructed with woods alone.įurniture making: Many home furnishing items, such as chairs, tables, desks, beds, nightstands, and shelves, are made from lumber. Home construction: Lumber is needed in various aspects of building constructions, such as roofing, paneling, trim work, setting up beams, making rafters, and making doors and windows. There are many uses of lumber, and these are some of them:
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With lumber futures trading on the commodity exchanges CME, homebuilders and other lumber users can easily get the woods they need for their various works.