The lumber futures contracts on the Chicago Mercantile Exchange are fairly straightforward. Essentially, you are betting on the direction lumber prices are going to go and hoping to profit if you are right. When you are considering a trade in the sugar market, some of the basic fundamentals that you should consider are:

1. Housing Demand for lumber picks up as new home construction increases. Housing demand tends to shift rapidly based on interest rates and other economic conditions that affect housing starts. As a result lumber futures show good trending characteristics and track the overall health of the economy.

2. Whether Demand can increase for lumber during hurricane season. Plywood demand increases before a hurricane hits, as coastal residents board-up their windows to protect their houses. Demand for lumber should increase if a hurricane causes significant property damage and homes need to be rebuilt.

3. International Trade Policies In May 2002, the United States imposed duties of 27% on Canadian softwood lumber, arguing that Canada unfairly subsidized producers of spruce, pine and fir lumber. An agreement was finally reached in April 2006 with an agreement that would require the U.S. to return about 80 per cent of the duties it had collected on lumber imports. The agreement remains in effect for seven years, with the possibility of renewal.

These are just some of the basic fundamentals to keep in mind when you are considering a trade in the lumber market. Lumber futures are very illiquid and prone to wild swings in price for no apparent reason so before you open a commodity account to trade lumber futures you should consult with a licensed commodity broker that follows the lumber market to discuss investment strategies.