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A beginner’s guide to lumber: Price, uses & market overview
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On this page, we explore everything you need to know about lumber. Gain insights into lumber market trends, pricing mechanisms, and the environmental impact of lumber.
Read on to learn more about this popular commodity and find links to beginner-friendly guides explaining how you can get involved in lumber.
What is lumber?
Copy link to sectionLumber is a natural wood product made from trees. Also known as timber, lumber is a fundamental component of the modern world and is a crucial material in construction and infrastructure.
It is used in various applications from building homes, schools, hospitals, and other structures, to furniture, packaging, and other products. Lumber is one of the most important commodities in the world and the market is worth billions of dollars.
Lumbar is important in the global economy and supports employment in lumber mills, related industries, and construction. Its sustainable nature contributes to environmental protection, making it a renewable and environmentally friendly resource.
Lumber market overview
Copy link to sectionThanks to technological advances, a growing population, and a greater need for new infrastructure, the lumber industry has experienced massive growth in the past few decades.
In more recent times, the lumber industry has experienced volatility, with large price fluctuations partly due to supply and demand issues, weather conditions, and global trade policies. The coronavirus pandemic also impacted the lumber market leading to shotages and price spikes.
The lumber market is worth around $450 billion and over the next five years is expected to reach $822 billion. A growing population, the requirement for new housing, and rising disposable income are all contributing to the market expansion.
Is lumber valuable?
Copy link to sectionYes, lumber is a valuable commodity and there are numerous reasons why investors are attracted to the market. We have highlighted some of these key fundamentals below, explaining what they are and why they matter.
- Lumber is a versatile material. Lumber is a necessary component in various industries including construction, infrastructure, furniture manufacturing, and packaging. This versatility means it is not reliant on a single industry and it is a sought-after material, ensuring future demand.
- It drives economic growth. Lumber is directly and indirectly related to driving economic growth. The lumber industry employs millions of people around the world. From forestry, logging, lumber mills, and related sectors it supports a large network of businesses that depend on its production.
- Lumber is renewable and sustainable. Lumber comes from trees which makes it a renewable resource that is capable of regeneration. If forestry practices are sustainable, lumber can be replenished for future generations.
- Portfolio diversification. Lumber is an excellent commodity for adding diversification to your portfolio. Its price sometimes moves in a different direction than traditional assets like stocks and bonds. This diversification can help reduce your overall risk.
How to invest in lumber
Copy link to sectionYou can invest in lumber by using a commodity trading platform. These platforms offer a range of commodities and are very easy to use. There are different platforms suitable for specific requirements.
Some let you buy lumber, others let you trade lumber, and many are designed for investing in the grain. Visit our dedicated guide to discover how to invest in lumber.
lumber in your investment portfolio
Copy link to sectionA diverse investment portfolio can help protect you during market uncertainty, and the inclusion of lumber can add value while allowing you to spread your money across various markets.
Lumber often moves independently to traditional investments like stocks and bonds. You can include lumber in your portfolio as a hedge against potential losses. During times of economic uncertainty, investors view commodity grains such as lumber as attractive options.
Lumber’s long history and the fact it is a necessary commodity for various industries, makes it a good long term play.
Lumber vs other commodities
Copy link to sectionLumber is an agricultural commodity like wheat, corn, and cocoa. Each commodity is unique in its own way and offers different features for investors and traders. You can learn more about specific agricultural commodities using our dedicated guides below.
- Wheat. Wheat is a grain that is grown around the world and is used for various foods.
- Corn. Corn is one of the most versatile commodities with many uses, including livestock feed, biofuel, oil, and food.
- Rice. Rice is the most popular grain commodity and a staple for half the world’s population
- Soybean. Soybean is a major global commodity used for livestock feed and cooking oil.
- Cocoa. Cocoa is the key ingredient in chocolate and a globally important commodity.