The research and analysis consultancy said that prices have risen 30 per cent in the past five months and that this was being prompted by distributors increasingly buying futures as a hedge in light of a lack of credit. They are finding it difficult to obtain the credit they need to buy lumber with cash, so they are resorting to futures.
Leonard Commodities analyst, Brian Leonard, told Reuters, "Distributors are having trouble buying lumber in the tight stocks environment and also they can't get capital from banks so they're buying futures.”
“This is great news for timber investors,” claimed FRA’s analysis partner, Peter Collins, who added, “more and more people are looking to the timber industry as a possible asset class, due to its flexible nature and the fact is does not correlate closely with equities.”
Recent figures show interest in lumber futures is up 18 per cent since January, while spot lumber prices have also risen by 12 per cent so far this year.
Leonard explained the attraction of buying up futures: "One contract of lumber is now worth about $28,000 and you can own a futures contract for $2,100. They're buying on margin, which is what the futures market is for."
"I have customers who have a good 50 to 80 percent more volume in futures than they used to own,” he added.
FRA is a keen promoter of forestry investment and supports projects such as those run by firms like Greenwood Management, which runs plantations of non-native, fast-growing tress species and offer investors the chance to buy up section of plantation land. Greenwood runs its projects in Brazil and Canada and investors can start with as little as $10,000.
About Forestry Research Associates
Forestry Research Associates is a research and advisory consultancy that focuses on forestry management, sustainability issues and forestry investment around the globe.
Forestry Research Associates
620 Vineyard Lane
Bainbridge Island, WA 98110
(206) 316 8394