Lumber futures contracts are traded electronically through Schwab and are offered by CME on the Globex trading platform. To trade lumber futures, you’ll need a futures account that has been approved.
What is the best way to trade lumber futures?
What is the best way to trade lumber futures? Lumber futures contracts are traded electronically through Schwab and are offered by CME on the Globex trading platform. To trade lumber futures, you’ll need a futures account that has been approved.
Is it possible to short futures?
You can trade as much long or short as you like in futures as long as you meet the margin requirements for the contract you’re trading. This means that new traders with small account balances can start shorting with products like the Micro E-mini Index futures. When you “short sell” a futures contract, you are purchasing it with the intention of selling it at a lower price in the future. Unlike the stock market, there is no need to borrow. You can see how this leads to a more level playing field between long and short traders, as all traders have the same financial requirements for going long or short.
What is the best way to short a futures market?
As the price of the commodity falls, a short position will profit. To finish a short position, tell your broker to buy the identical contract again, closing the trade; then you’re done. To initiate a short position when trading futures online, press the sell button. When you’re ready to leave the trade, press the purchase button.
Is it likely that lumber prices will fall in 2021?
Lumber prices have risen again in the United States over the previous month. Since the start of the COVID-19 pandemic, the price of lumber has been volatile, sharply plunging and unexpectedly soaring during the last two years.
Despite a brief drop in pricing in the new year, lumber prices have risen steadily throughout February, reaching $1,272 per thousand board feet, the highest level since summer 2021.
According to the Labor Department’s most recent producer price index report, softwood lumber prices increased by a stunning 25.4 percent in the month of January alone.
Will the price of lumber fall in 2022?
The United States is the primary driver of softwood lumber demand in North America. Softwood lumber consumption in the United States increased to 50.93 BBF in 2020, and we expect it to rise to 52.76 BBF in 2021, the highest level since 2006, and 53.87 BBF in 2022. Residential-improvement sectors, which will benefit from years of robust home sales, drove growth in Canadian lumber consumption. However, as the Canadian currency strengthens, the manufacturing sector will be harmed, thus we predict consumption to decline year over year from the fourth quarter of 2021 to the second quarter of 2022, before rebounding throughout the balance of the forecast period.
North American offshore exports fell by about 24% year over year between the second quarter of 2019 and the second quarter of 2021. As the global economy strengthened last year, we expect offshore lumber exports from North America to fall slightly less in 2021, perhaps 9.8% less than in 2020. (compared with a 25.7 per cent decline the previous year). Because of robust domestic demand, high prices, and competition from Europe, we estimate export growth to continue poor, decreasing another 1.6 percent in 2022.
The supply of lumber is made up of domestic capacity as well as imports. Early in 2020Q2, lumber demand and prices plummeted. Mills cut capex as a result of this, as well as the uncertainty surrounding the COVID-19-induced slump. As a result, capacity fell marginally in 2020. Pricing rose unexpectedly, and mills began investing to take advantage of the higher prices. This will result in a 1% increase in capacity in 2021-22. Over the next two years, significant additional capacity and expansions at existing facilities have been announced. Due to constraints on machinery manufacturers and mill labor, this capacity will ramp up slowly.
Offshore imports into the United States climbed nearly 40% in 2020, and with demand and prices soaring in early 2021, offshore imports are predicted to rise another 13% in 2021. In 2022, we anticipate a 9% increase in growth.
The predicted surge in imports is due to multiple factors, including strong North American consumption and high pricing; capacity constraints in Canada; ample, low-cost fiber supplies in central Europe; and the strong US currency. For a thorough description of the fiber supply problem in central Europe, see the FEA research Central European Beetle and Windstorm Timber Disaster.
Due to a combination of declining residential-improvement markets and the regular seasonal reduction in end-use market activity, demand for U.S. mills (consumption plus exports minus imports) has fallen off its seasonal peak, and we estimate demand for U.S. mills to continue weak through February. Putting it all together, we predict total demand at North American mills to rebound by 3.3 percent last year after being unchanged the previous year, and to grow by another 1.1 percent this year.
In the first half of 2020, capital expenditures came to a halt. Capacity growth has stalled until 2021 as a result of this. Meanwhile, demand was strong in the first half of 2021, and it expanded rapidly. Operating rates rose to 87 percent for the year as a result of this. In 2022, demand will continue to rise, but capacity expansions following the price spike of 2020-21 will start to come online. As a result, the demand/capacity ratio will stay unchanged in 2022, at 87 percent.
We may now turn our attention to lumber prices after putting all of this together. Prices rose at the conclusion of the year. Part of this was due to severe supply delays caused by British Columbia’s unusually wet weather. However, part of the rise in costs was due to strong demand as warm weather across the country extended the building season, and dealers rushed to replace inventory, fearful of another price spike similar to the spring of 2021. The weather’s impacts will be transient. However, we expect prices to remain high through February for a variety of reasons.
Inventories are still low across the supply chain, and dealers will want to start replenishing them before the construction season begins in March-April across much of North America. Mills took a break over the holidays as well. Finally, the all-too-fresh memories of $1,000-plus pricing will keep purchasers in the market while output is hampered by log- and labor-supply shortages.
Supply restrictions in the United States’ South will boost lumber prices in early 2022. Mill closures in British Columbia were primarily compensated for by capacity expansions in the United States South. Wet weather and labor shortages, on the other hand, have hampered log availability and mill output. We anticipate a reduction in soil moisture content over the winter, with a La Nia year in 2021-22. This will make getting into the woods a little easier. Labor shortages are expected to last longer this year, since many people who left the industry at the start of the COVID-19 pandemic have yet to return, and we expect labor concerns to continue to stymie production.
While we expect prices to stay high into early 2022, we do not expect them to return to the levels seen in 2021. Capacity additions in the United States’ South, somewhat higher inventory levels heading into the year, and weaker residential-improvement activity will likely preclude a run like the one we experienced in 2021. Furthermore, we estimate prices to fall in the second quarter as dealers work through their stockpiles built in late 2021 and early 2022. We foresee another round of buying in the third quarter as residential-construction markets remain strong seasonally and cyclically; however, as more low-cost southern pine production comes online, prices in the second half of 2022 will average lower than in the first half of the year. In 2022, we predict the RLFLCI will average 645 for the year.
In the end, we predict lumber prices to remain erratic in 2022. There are several causes for this, the most important of which is COVID-19’s residual effects. Following the first outbreak of COVID-19 in the United States, a lack of buying and production drove dealer stocks to new lows. As demand climbed, there was insufficient inventory in the system to meet the growing demand. As a result, prices skyrocketed to new highs. Dealers stopped buying lumber at such high prices, causing their stocks to fall again. Low stockpiles will almost certainly force dealers to buy wood at higher prices than they wish, and those higher costs will encourage dealers to cease buying as soon as their immediate needs are met, causing prices to fall significantly. Over the next year, this cycle will repeat itself, resulting in extremely volatile prices.
Forest Economic Advisors (FEA) LLC, the main source for North American wood products analysis and information, has Paul Jannke as a principal. North American lumber markets are Paul’s main area of expertise. Paul is the industry’s top economic analyst, having spent nearly 30 years evaluating lumber markets and giving dependable, intelligent forecasts. He wrote the FEA publications Lumber Advisor and Lumber Quarterly Forecasting Service.
Is it possible to short micro futures?
There are no short-selling limits with futures, so you may go short as readily as you can go long. E-mini futures’ full fungibility gives you more options when it comes to trading positions.
Is it possible to short commodities?
If you wish to short commodities, you can use CFD trading or spread betting to accomplish it. You can sell the market without owning any underlying assets using either technique. To short commodities, follow these steps:
Is Alpha expressed as a percentage?
Alpha is a metric that is often used to rank active mutual funds and other sorts of investments. It’s usually expressed as a single figure (like +3.0 or -5.0), and it’s a percentage that indicates how well a portfolio or fund fared in comparison to a benchmark index (i.e., 3 percent better or 5 percent worse).
Why would you want to sell a futures contract short?
- Shorting the basis is a trading method that involves buying a futures contract and selling the underlying asset in the spot market at the same time.
- Shorting the basis is a directional hedge that locks in a price until the futures contract expires, essentially eliminating the influence of any price swings in the asset.