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Low ■- Grades on a Bull Market 



If one were asked to state the leading feature of tlie hardwood 

 situation of the past two or three years, it is likely that an answer 

 that would come closest to the truth would be the increasingly strong 

 position of the low-grade lumber. Just now, of course, practically 

 every yard is denuded of most of its common and cull lumber, and 

 where there are slow movers it is nearly always in connection with 

 lumber above the No. 1 common grade. 



Those familiar with the constant references to the decreasing 

 quality — and increasing cost — of timber in the hardwood producing 

 sections have been prepared, as a theoretical proposition, to demon- 

 strate that prices on low-gi-ade stock are destined to fall, relatively, 

 reasoning in this wise: The proportion of low-grade lumber to the 

 total produced is becoming larger. The demand for good hard- 

 wood lumber is certain to be fairly constant. Therefore, with the 

 supply of the latter decreasing and the demand remaining the same, 

 or possibly growing, the value of upper-grade hardwood is certain 

 to rise. On the other hand, with a greater amount of low-grade 

 lumber being manufactured, without any apparently greater outlet 

 than heretofore, the strength of the demand is certain to diminish 

 and prices certain to fall, compared with those of high-grade stock. 

 Quod erat demonstrandum. 



The theory of the proposition, like a good many other theories, has 

 bumped into at least one solid fact that has knocked a hole in it and 

 left out a good deal of supporting gas. The fact of most consequence 

 is the increasing local consumption of low-grade hardwoods at the 

 point of production. The southern states are the largest producers of 

 hardwood lumber, and at the same time form a section which is 

 experiencing the most rapid industrial development of any in the 

 entire country. This has been accompanied, as every community 

 development is accompanied, with consumption of lumber on a large 



scale. 



One interesting evidence of this fact is shown in eastern Ken- 

 tucky, where a lot of railroad development work has recently been 

 completed, the result of which has been to increase the production 

 of hardwoods in that territory. But while a large quantity of lumber 

 is being cut, a great deal of it is being used right at the mill, or 

 very close by, in the construction of buildings for coal mining com- 

 panies. These concerns use millions of feet in building tipples, 

 company offices, houses for miners and other buildings, and are cer- 

 tain to continue to take a large part of the total production of the 

 sawmills in that territory, as the development of the mines and the 

 timber is going forward practically as one operation, both being 

 dependent upon and the result of the creation of transportation 

 facilities. 



In territories which are not to be regarded as new, in the same 

 sense as the eastern Kentucky sections where trees have been allowed 

 to stand, because there was no way to get them out either^ as logs 

 or lumber, industrial development on a large scale is going for- 

 ward. In Tennessee, for example, a water-power company capitalized 

 at $20,000,000 has been organized. This is now building two large 

 power plants on rivers in eastern Tennessee and is constructing trans- 

 mission lines to the principal cities of the state. Smaller companies 

 have begun similar development work on other rivers, and the manu- 

 facture of power FO cheaply that industrial activity is certain to be 

 encouraged is already an assured fact. 



This means a great deal for Tennessee, and it means incidentally 

 a good deal to the lumber interests of the state. With cities growing 

 rapidly all over the state, new factories being built, new homes being 

 constructed for the additional population and consumption of the 

 products of the sawmill going ahead apace,, it is certain that a greater 

 proportion of the output of the lumber manufacturers will be used 

 at home. 



The Southwest, including Arkansas and western Louisiana, is a 

 large producer of hardwoods and has a greater future supply of hard- 

 wood timber, perhaps, than any other part of the southern territory; 

 but like other parts of that section the Southwest is growing rapidly 

 and is maintaining a steadily increasing consumption of lumber. 



The completion of the Panama canal is confidently counted on to 

 help every department of business in the South, and while definite 

 proof of this result is as yet not forthcoming, it seems certain that 

 the stimulation which may be expected from such a gigantic improve- 

 ment as the linking of the oceans will be evidenced in broader and 

 more aggressive business development. 



The whole story, then, is that the South, which has been, and at 

 present still is, an agricultural section for the most part, with lumber 

 production the next leading interest, has reached a point where the 

 development of general manufacturing is certain to be an important 

 feature of the situation. The question still remains, however, as 

 to why this expansion along industrial lines should affect low grades 

 more than any other kind of lumber. 



In the first place, new development, such as that in the eastern 

 Kentucky coal district, is of the kind which obviously is completed 

 without much attention to finish or ornamentation ; utility is the big 

 thing, and the heavy structural end rather than the finish is given 

 chief attention. In other sections, the cutting away of the timber 

 has converted the woodlands into farms, requiring barns, fences and 

 other equipment, all of which is of the sort which takes low-grade 

 material. Another consideration is that the more valuable a com- 

 modity is the greater the distance it may profitably be shipped. Hence 

 it is logical that where there is a local market for the millman he is 

 glad to utilize it in the direction of moving low-grade lumber, 

 knowing tliat he can dispose of his good stuff to buyers at points 

 far removed. 



The experience of large lumber concerns tliroughout the Ohio 

 valley, many of which purchase a large part of the output of small 

 mills in the central South, is that less low-grade stock is being 

 offered than ever before, and that the sawmill men are getting rid of 

 this material in their own localities at as good prices as outside 

 buyers are willing to pay for it. Thus they are undergoing a meta- 

 morphosis which is converting them into retailers on their cheaper 

 stock, while they are continuing to dispose of the better grade lumber 

 in larger quantities. 



Lest it be thought that an obvious feature of the situation is being 

 overlooked, it is worth while to remember that many buyers who 

 formerly thought that they had to have firsts and seconds lumber for 

 their particular purposes have discovered that they can get along 

 very well with No. 1 common and even lower grade lumber. In 

 other words, the higher price of lumber all along the line has caused 

 many to arrange for the use of low grades, thus emphasizing the 

 demand for this character of stock. This is a development along 

 desirable lines, since it strengthens the demand at a point where 

 the greater part of the supply is located. 



That there has been a big change in the situation here is indicated 

 by the fact that an executive of one of the large hardwood lumber 

 organizations made a trip to conventions of various consuming maiui- 

 facturers several years ago, demonstrating to them, by chalk talks 

 and otherwise, that it would pay them to buy more No. 1 and No. 2 

 common lumber and a smaller amount of firsts and seconds. At 

 that time the preponderance of the demand among manufacturers of 

 case goods was for the higher-grade stuff, almost to the exclusion of 

 the cheaper kinds, and the big problem of the sawmill man was to 

 get rid of his low-grade lumber. Now that consumers are educated 

 to using low-grade hardwoods, however, such a problem is no longer 

 in evidence, especially in view of the other factors affecting the 

 situation, as pointed out above. 



The development of dimension stock business was originally put 

 forward as a solution of the low-grade problem of the manu- 

 facturer; but, significantly, the improvement in the demand for this 

 kind of stock has resulted in the consumer becoming the leader in 

 the call for dimension lumber, which many sawmill men are no 

 longer desirous of making, under the conditions as to price which now 

 obtain. 



' ' I never saw low-grade hardwood lumber so scarce as it is today, 

 said one of the leading wholesale lumbermen of the Middle West. 



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