A Commodity Strategy And Futures Strategy That Never Makes The New, Lumber, Has Hit A Six Year High

The U.S Department of Agriculture says Beef production will fall 5 percent to about 24.68 billion pounds. The U.S herd was the smallest in more than 40 years, factor in population growth and it appears we have a serious supply issue.

Chicago, IL (prHWY.com) December 26, 2012 - 2007 was the beginning of the end for the housing boom. That was more than five years ago and lumber, the main material, is now rebounding. With a tightening supply of lumber and the housing market seeing signs of growth, lumber is having one of the biggest rallies in the commodity markets. Lumber has more than doubled since 2009 which was the lowest point for the U.S economy and it has shot up 37 percent this year alone in the futures market. One of the reasons for the shortage of lumber in the U.S is due to exports to China while we had a surplus because of low housing demand. There were almost 900,000 new housing starts in October which is the most since July 2008, just before markets froze and the world economy played chicken with death. Bank of America is forecasting 1 million new home starts sometime in the beginning of 2013. There is some analysis that the rise in lumber demand is due to Hurricane Sandy and is not truly reflecting our economic condition.

It is not just demand but we have a production problem affecting supply. Logging is down 40% from its production peak in 2007. One factor is death of trees in British Columbia, Canada caused by the pine beetle epidemic. This is all great news for housing and even if the U.S housing market does not take off like some analyst suspect it seems China is there as a safety net to hold lumber prices steady. One negative for housing in the U.S is a look at recent manufacturing numbers which appear to be in a downward trend and even negative in growth. Housing may be on the rise but if manufacturing is down it will take housing with it.

So if you're an investor and looking to make a buck or two betting for or against housing you can look to lumber, a commodity strategy that speculates on the #1 material used in housing construction. Another commodity strategy would be examining copper, another material used in the construction of homes. Investors can choose from more than one futures strategy when trading these commodities. One futures strategy would be buying or selling futures contracts. Another would be buying or selling options, either puts or calls. There are more complex strategies involving buying and selling of more than one at the same time to create what is known as a "spread trade" and taking advantage of more than just one type of price movement. This trading can be done by yourself or through commodity trading companies which can manage your funds in the futures market. Commodity trading companies can be referred to as managed futures. Managed futures allow non -sophisticated investors to enter the market and provides them with a professional money manager called a commodity trading advisor. A commodity trading advisor also known as a CTA trades the futures account on behalf of their clients.

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Tag Words: futures strategy, commodity strategy

Categories: Finance

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