Timber ETFs To Capture Sprouting Lumber Prices

 |  Includes: CUT, WOOD
by: Tom Lydon

Lumber prices are touching a six-month high due to a growing shortage of timber. While there are no exchange traded funds tied to lumber futures, investors can still gain access to the commodity through equity-based funds.

Two lumber producers shutdown operations in British Colombia after a beetle infestation decimated forests in the area, reports Joe Richter for Bloomberg.

Paul Jannke, an analyst at Forest Economic Advisors LLC, believes the shutdown will exacerbate supply concerns that were already heightened on low inventories.

"This is definitely going to bolster prices going into next year," Jannke said in the article. "It's also coming at a time when you typically start to see mills going down for maintenance."

Improving weather conditions have increased hardwood lumber production, but the lack of loggers has kept production below demand this year, reports Andy Johnson for Woodworking Network.

The rebounding U.S. housing market has also bolstered the lumber market, with wood imports over the first seven months this year at their highest since 2008, according to Woodworking Network.

CME Lumber futures were up 2.8% Friday, trading around $373.8 per thousand board feet.

Investors interested in the wood market can gain exposure through ETFs that track global timber-related companies, such as the Guggenheim Timber ETF (NYSEARCA:CUT) and iShares Global Timber & Forestry ETF (NASDAQ:WOOD).

CUT's top holdings include Smurfit Kappa Group 8.5%, West Fraser Timber 5.7% and Svenska Cellulosa 5.5%. Top country allocations include U.S. 33.2%, Japan 16.2% and Brazil. The ETF is up 25.1% year-to-date.

WOOD's top holdings include Weyerhaeuser 8.1%, Plum Creek Timber 7.9% and Rayonier 7.5%. Top country allocations include U.S. 47.8%, Canada 11.5% and Brazil 9.5%. The ETF is up 17.0% year-to-date.

Max Chen contributed to this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates.