June 10, 1915. 



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Individual Regulation of Production 



Editor's Note 



The tollowljg address by Robert B. (Joodmau. presid'nt of the Northern Hemlock and Hardwood Manufacturers' 

 Association, was given at the National Hardwood Lumbn- Association's meeting in Chicago, June 11. It discusses 

 the very important matter of regulating the production of hardwood lumber, and takes the ground that the indivl- 

 (liial mill owner is resi>onslhle lor all that has been done along that line ; and on him must depend what is to be 

 done in the future. 



We have all beard of the plans that are being developed for extend- 

 ing the use of lumber. We are all familiar ■with the promotion work 

 carried on by the regional manufacturing associations for the pro- 

 motion of individual kinds of lumber. 



These advertising campaigns are bringing results and the splendid 

 work that is now being planned of national scope to increase the con- 

 sumption of lumber is a credit to the industry. 



Nevertheless we must remember that the development of consump- 

 tion is one-half the problem, and of equal importance is the regula- 

 tion of production. 



Tendency to Over-supply 



The peculiar nature of the lumber industry and its peculiar defect 

 is that there are so many influences in it tending to over-stimulate 

 production. Chief among these influences are the growing costs of 

 carrying stumpage, the decreased cost of manufacture when running 

 at full capacity, the popular belief in lumber profits, which is con- 

 stantly building new mills, and the progressive and optimistic spirit 

 of lumbermen themselves. So strong are these influences that a few 

 lumbermen believe that the very efforts now being made to develop 

 the uses of lumber are liable to stimulate its production to as great, 

 if not even to a greater degree, as it will develop increased consump- 

 tion. At any rate there is equal urgency in promoting a national 

 agitation for the adjustment of production to the actual demand 

 instead of to the high level of past years, or to the anticipated level 

 of more prosperous future conditions. 



Such an adjustment is sound economics, benefiting the producer, 

 the wholesaler, the manufacturing consumer, and the public generally ; 

 for the reasonable regulation of production insures reasonable prices 

 with the elimination of those extreme fluctuations that are the disturb- 

 ing factor to all elements of the lumber trade alike, so that the work 

 now being done to bring about a reasonable regulation of production 

 is constructive and progressive in the highest degree. 



Fortunately for us this problem is comparatively easy in the hard- 

 wood industry. Most of the forces tending to over-stimulation of 

 production are inoperative in this field. In fact a careful economic 

 study of the American hardwoods discovers peculiar incentives for 

 conservative production. 



American Hardwoods Limited 



The hardwood forest of America begins in Texas and extends 

 northeast to Wisconsin, Michigan and Maine, through the oldest 

 and most completely settled portions of the United States. The 

 stand of hardwood in this forest has been estimated from 400 to 

 500 billion feet, and the annual cut in lumber 8 to 10 billion feet; 

 and possibly half as much more per annum is consumed in other 

 products than lumber. Moreover, this stand of hardwood is vir- 

 tually all mature timber. 



The study I have made of our own Wisconsin hardwood forests, 

 cut into as they have been by logging operation, leads me to believe 

 that the growth of the young timber is more than offset by decay, 

 fire and wind damage, so that the limitation of the supply of hard- 

 wood must have a material effect upon the price of hardwood lum- 

 ber during the years to come. 



Furthermore, it must be borne in mind that the estimated stand 

 of hardwood is not all available for lumber production. A very 

 appreciable per cent is now retained by private owners for beautifying 

 their estates, by farmers for wood lot purposes, and by states for 

 public parks. I know of no figures available on this subject. 



There are about fifty varieties of American hardwoods. The 

 twelve most commercially important, measured in the order of the 

 amount produced are, oak, maple, red gum, yellow poplar, chestnut, 

 birch, beech, basswood, elm, cottonwood and ash, and these twelve 



leading commercial woods themselves vary materially both in quality 

 and in price and in the nature of their usefulness. For example, 

 rock and soft elm, red oak and white oak, and hard maple and 

 soft maple. 



The variety of these woods breaks up the problem of available 

 supply into a great number of smaller groups. The oak and maple 

 constitute about one-half the total, leaving less than 200 billion 

 feet of other mixed hardwoods. Surely the production of the various 

 American hardwoods, each with its distinctive quality of utility and 

 beauty, is a matter of intensive development, with the profit deter- 

 mined by quality rather than quantity — not simply an industry, but 

 a fine art. , 



And finally, a most important element in the future value of all 

 these hardwoods is that their only competitors are imported woods 

 of little, if any, greater intrinsic value, but with better established 

 reputation and higher market price. 



I have written a number of those present bothersome letters in 

 regard to realization prices for hardwood over a period of past years 

 and I wish to thank you for your promptness in replying and the 

 care with which you prepared this information for me. Nothing 

 like a complete result can be deduced from this information. 

 Hardwood Price Line 



By a series of combinations and averages I have platted a com- 

 posite price line for hardwood f. o. b. mill, which shows the trend 

 of prices from year to year. This price line shows a gradual advance 

 commensurate with the increased cost of stumpage from year to year. 



This increase amounts to approximately 50 cents a year per thou- 

 sand, so that nothing is lost or gained by decreasing or increasing 

 the annual rate at which the operator consumes this stumpage. The 

 fluctuations in mill prices are due to market conditions, which mean 

 not simply the demand and the fluctuations in the demand, but the 

 supply and the demand and their relations to each other. 



Moreover, the demand is inelastic. One dollar, two dollars, or 

 even five dollars reduction in the price does not increase the amount 

 of lumber consumed. In fact, some dealers tell me the opposite is 

 true, whereas the supply of lumber is extremely elastic, one dollar 

 or two dollars more in price increasing the supply enormously. 

 Hardwood Production 



While we were enjoying the high average prices of 1913 we did 

 not realize that their direct effect would be to over-stimulate pro- 

 duction and that in 1914 some 500 mills, about 250 of which were 

 hardwood mills, belonging to regional associations, out of some 15,000 

 hardwood mills throughout the United States, reported a surplus pro- 

 duction of 175 million feet, or nearly one-third of their total pro- 

 duction. A peculiarity of this over-production during last year was 

 that it all occurred in the first six months of the year and that after 

 the meeting at Buffalo last June the curtailment of almost fifty 

 per cent in the manufacture of hardwood took place during the 

 last six months of the year. 



Of course this was not brought about by any kind of an agree- 

 ment made at the convention. Of course it was largely due to the 

 fact that the season 's cut is mostly in the first six months in the year, 

 but I do believe that a large part of this curtailment was the indi- 

 vidual regulation, by the individual manufacturer, of his production 

 to meet market conditions. 



Problem of Eegulation 



A voluntary agreement amongst aU hardwood producers looking 

 toward a limitation of production, whether a question of legality 

 or not, is almost a physical impossibility. Less than one-fourteenth 

 of the total hardwood lumber produced is produced by mills reporting 

 their cut to manufacturers' associations; less than three per cent 



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