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How to Trade Cotton, Sugar and Lumber: Analyst

Cotton, sugar and lumber prices have been on the decline in the last month, so how should investors trade each of the commodities? Sterling Smith, commodity analyst at Country Hedging, shared his best plays.

Trading Cotton

“We had a huge run-up in prices back to post-Civil War highs, and the cotton market’s trying to find balance in the near-term contracts,” Smith told CNBC. “You can look out to December cotton for some trading plays, [but] we do have weather potential that can drive prices higher.”

Trading Sugar

“Right now, look at sugar being a play to the short-side,” he said.

“Then it’s going to depend on what India does—whether they end up being an exporter or an importer. If they end up not exporting any sugar, we have some good upside there.”

Trading Lumber

Meanwhile, Smith said the housing marketlargely determines lumber prices.

“The housing market is terrible and I don’t see that improving until 2014, at the earliest, for new home construction," he said. "But lumber supply can be controlled more readily than any other commodity so when we see prices drop there, I think a person can look to buy it if they’re careful.”

Scorecard—What He Said:

  • Smith's Previous Appearance on CNBC (Mar. 15, 2011)

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No immediate information was available for Smith or his firm.