20 



HARDWOOD RECORD 



December 25. 1921 



that tbe maximum productive capacity of the sawmills of the country is 

 much in excess of any ciemand the country has ever known." 



He then quotes from an editorial in The Southern Lumberman, In which, 

 among other things, it is said : 



"The danj/ei- which ice see lurkiniJ in the future for the lum-ber iudtistry 

 is overproduction. When the demand for lumber is good and the prices are 

 good, it is a strong temptation to the sawmill men to put night shifts at 

 the mill and an extra logging crew in the woods and keep turning out 

 lumber twenty-four hours in the day. The desire to cash in while the 

 cashing is good is natural and easy to understand, but every sawmill man 

 who contemplates putting on a night shift should stop long enough to 

 reflect on the past history of the lumber business. If he does indulge in 

 such reflection the chances are he will give up any ideas he may have 

 along that line. Overproduction has always been the curse of the lumber 

 industry in America. It has caused more trouble and hardship than any 

 other one factor. It would be criminal folly, therefore, for the lumber 

 manufacturers to indulge themselves in any such form of commercial 

 suicide." 



Adding that the lumbermen have within their grasp an era of prosperity 

 for some time to come, the writer continues: 



"They can either reach forward to seize their opportunity or thep can 

 ca.it it aside hir the policy of overproduction. Which shall it be? It is 

 up to the sawmill men themselves to decide." 



The managing statistician of the association significantly adds : 



"Are we guilty? If so. the warning is timely." 



Again, a week later at a meeting at Shreveport. l.a., in the discussion of 

 market conditions, one of the members declared : That in his opinion it 

 was "suicidal to run a mill night and day; that the pine milLs had done 

 it. but he hoped they (we) would profit by their past experience and not 

 do it this year." 



Depression of Cut Regarded as One of Chief Aims 

 Much more of like purport appears in the minutes of the meetings 

 throughout the year, hut this is suflicicnt to convincingly show that one 

 of the prime purposes of the meetings, held in every part of the lumber 

 district, and of the various reports, was to Induce members to co-operate 

 in restricting production, thereby keeping the supply of low and prices 

 high, and that whenever there was any suggestion of running the mills 

 to an extent which would bring up the supply to a point which might 

 affect prices, the advice against operations which might lead to such result 

 was put in the strongest possible terms. The co-operation is palpable and 

 avowed, its purpose is clear, and we shall see that it was completely 

 realized. 



Declares Inflation Was Urged 



Next, the record shows clearly that the members of the combination 

 were not satisfied to secure, each for himself, the price which might be 

 obtainable even as the result of co-operative restriction of pro<luction, but 

 that throughout the year they assiduously cultivated, through the letters 

 of Gadd. speaking for them all. and through the discussions at the meet- 

 ings, the general conviction that higher and higher prices were obtain- 

 able and a disposition on the part of all to demand them. The intention 

 to create such a common purpose is too clear to he doubted, evidenced as it 

 is by the following excerpts from much of like character In the testimony. 

 Thus. In the stock report of March 8, 1919, after pointing out that the 

 stock at the mills was only about three-fourths normal, and that the pro- 

 duction in the Memphis group of manufacturers was only 5G per cent of 

 normal, the letter of the Manager of Statistics continues : 



"There has been a long drawn out and desperate effort to break the hard- 

 wood market by withdrawal of demand ; hut, be it said to the eternal credit 

 of the hardwood producers, they have maiyitained a stout heart and stiff 

 baekhone, with the result that there has been exhibited a strength in the 

 market which has been little short' of remarkable In the face of the light 

 demand and the vigorous efforts which have been steadily made to hammer 

 doien prices. 



"With this known information before him it is diflScult to see how any 

 Intelligent hardwood manufacturer can entertain any hesitation as to the 

 proper course for him to pursue in selling bis lumber." 



.\nd it may be added that it is not difficult to see what this "proper 

 course to pursue" was intended to be. 



Again, three weeks later, in the market letter of March 29, after stat- 

 ing that stocks had further decreased from the previous month, with a 

 production not to exceed 50 per cent of normal, the Manager of Statistics 

 of the Plan adds : 



"Naturally the situation ought to have an important bearing on the 

 plans of every hardwood lumberman. If the facts were better understood, 

 offers of business now at shaded prices icould get scant consideration, 

 and there would not only be no good reason to cut prices, but there would 

 be every reason why they should be held at reasonable profit-making levels. 

 All conditions indicate a firm market for the balance of the year, with 

 prices moving upward." 



Another month later. In the market letter of April 26, this Influential 

 agent of the association, after pointing out that stocks were less than 75 

 per cent of normal, that production was about 00 per cent of normal, and 

 that tbe demand was far in excess of supply, adds : 



"If ever there was a time when rich rewards awaited the producer of 

 hardwood lumber now Is that time. There are glorious opportunities 

 ahead — supply and demand must necessarily govern prices. The demand 



Is with us. the supply inadequate, therefore vaJues must increase^ as our 

 competition in hardwood is only among ourselves." 



Again, in another month. May 24. in his sales report, the Manager of 

 Statistics, after stating that production during the month of April was 65 

 per cent of normal and that a careful estimate indicated that there would 

 be no material increase in May and June, says : 



"If any one tells you that lumber prices are coming down call their 

 attention to the following: Curtailed production of mills; stocks belo^v 

 normal ; nrerssitu on the part of lumber operators of obtaining a price 

 level that ivill enable than to make a reasonable profit." 



Gauging the Upward Tendency 



And he concludes with : 



"The tendency of the market is upward and w-ill undoubtedly continue 

 to advance so long as sales and production bear their present relation 

 to each other." 



Again, on September 20. in his market letter, he says : 



"It has been rumored that a certain class of buyers, believing that the 

 price of lumber was too high and that the temporary inactivity in the 

 export market offered the opportune moment, have agreed to confine 

 purchases to actual immediate requirements during the next sixty days. 

 This is not going'to worry the manufacturers very much ; in fact, it will 

 give them a much-needed breathing spell, and an opportunity to accumulate 

 a supply of dry stocks which, in our opinion, is the same as gold dollars 

 In the bank. 



"Those who have been looking for lower prices overlook the very impor- 

 tant factors : That production continues below normal : that unsold stocks 

 at mills arc 70 per cent below normal ; that the export demand has just 

 started." 



And he concludes ; 



"With these conditions prevailing there is nothing in the situation that 

 should encourage anyone to hope for a drop in quotations." 



Diagnoses Effect of G-add Ijetters 



To this we must add that constantly throughout the minutes of the 

 various meetings there is shown discussion of the stock and production 

 reports in which the shortage of supply was continually emphasized, with 

 the implication, not disguised, that higher prices must result. Men in 

 general are so easily persuaded to do that which will obviously prove 

 profitable that this reiterated opinion from the analyst of their associa- 

 tion, with all obtainable data before him, that higher prices were Justified 

 and could easily be obtained, must Inevitably have resulted, as it did 

 result, in concert of action In demanding them. 



But not only does the record thus show a persistent purpose to encour- 

 age members to unite in pressing for higher and higher prices, without 

 regard to cost, but there are many admissions by members, not only that 

 this was the purpose of the Plan, but that it was fully realized. Within 

 four months of the consolidation, on April 2.3. 1919. the Manager of Sta- 

 tistics wrote to members asking each to write him "his experience with 

 the Plan," and any Incidents showing benefits deriveil from it. 



Quotes the "Experience" Letters 



The replies to this letter arc significant confessions. One writes : 



".\11 who have access to your reports bring their price to the top." 



.\nother : 



"There seems to be a friendly rivalry among members to see who can 

 get the best prices ; whereas, under the old plan, it was cut-throat competi- 

 tion." 



.\nother : 



"It has kept us In touch closely with the market, and in many instances 

 has made us one or more dollars per thousand feet on the lumber sold, 

 and we believe the Plan Is going to be very successful in carrying out the 

 ptirposes for which it was Intended." 



Another : 



"From the first report we received under this plan we were enabled to 

 Increase our price $6 per thousand on a special Item of oak. We had Just 

 taken a small order at which we thought a satisfactory price, but dis- 

 covered Immediately that others were getting more money. Since then we 

 have booked orders for a number of these special Items at the increase of 

 $6 per thousand." 



Another : 



"Since we became members we have been selling our lumber at several 

 dollars per M more than formerly and we are perfectly satisfied with 

 the Plan." 



And another : 



"We have always left these meetings feeling that we did not get money 

 enough for our lumber and that we ought to try to do better." 



There was one discordant reply, saying : 



"The open competition plan has been absolutely accurate, but Instead 

 of stabilizing the market it has caused a runaway market." This on 

 May 29, within six months of the forming of the combination. These 

 quotations are sufficient to show beyond discussion that the purpose of 

 the organization, and especially of the frequent meetings, was to bring 

 about a concerted effort to raise prices regardless of cost or merit, and so 

 was unlawful, and that the members were soon entirely satisfied that the 

 Plan was "carrying out the purpose for which it was intended." 



Statement of Price Increases 

 As to the price londitions during the year, with"\it going into details, 

 the record shows that the prices of the grades of hardwood in most gen- 



