You use your axe to chop it up. Just equipt your axe and stand facing it, then press the y button. It will then pop on top of your head and you then press the x botton to put it in your rucksack.
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You can find lumber by talking to the man next to the wood in Whittleton Village. :D
First you have to get your axe out and use it on a piece of wood
you can get into the lumber yard on both P2P and F2P world regardless of wether you used to be a member or not all you have to do is go to the gates of the lumber yard and along the left fence there is a gap in the wood and select the crawl under option and there you are! the lumber yard is yours to explore!
you could either buy lumber from the carpenter or you could use your axe to chop sticks and tree stumps you find to get lumber. The tree stumps offer more lumber than the sticks of wood though. you can also cut down trees if u have an axe with an upgrade or get the elves to cut some for u.
In order to make lumber in Harvest Moon: Tale of Two Towns, you need to have the axe. When you find branches around the mountain area or in all the hidden areas, just equip your axe and chop the wood into lumber.