34 



HARDWOOD RECORD 



yellow pine occurs, the earlier the values of lumber and timber will in- 

 crease, and the longer that period is deterred, the longer the prices will 

 maintain a lower basis of value. 



According to James D. Lacey & Co., of Chicago, there is only 1,200.000 

 acres of yellow pine land not now in the hands of the manufacturer. 

 This land, at the highest estimate, would yield 18,000 million feet, or less 

 than one year's present output of yellow pine lumber, and it should not 

 take less than ten years to remove it. 



ESTIMATED SITUATION ON TIiMBER IN 1916 



It is seriously estimated that the production of yellow pine lumber will 

 be reduced by 40 per cent in five years from Jan. 1, 1911, which would 

 amount to 7,227 million feet, and that during that same period, the 

 increased demand due to inci'ease iu population should amount to 3,780 

 million feet, and that this decreased supply of yellow pine and increased 

 consumption of lumber (amounting to 11,007 million feet) will have to 

 come from the Pacific coast fir timber, which would take from that 

 country appro.xiraately 1.5,683 million feet per annum in 1916, as ag.iinst 

 their production of 4.856 million feet in 1909, which increased demand 

 will greatly enhance their cost of stumpage and the price of lumber, and 

 the drain on their supply will be 300 per cent per annum greater than 

 it was in 1909. 



As to competitive conditions and their relation to the so-called "lumber 

 trust" the impression is broadcast that the "lumber trust" is the Yellow 

 Pine Manufacturers' As.sociation, and that its members are the members 

 thereof. 



The government's reports for the year 1909 show that of the total 

 number of sawmills in the South, there were 17,3.';9 active mills reported 

 as cutting yellow pine lumber in that year, out of which 234 mills were 

 members of the association and 17,12.") were non-members of the association, 

 and were and are always in competition with members of the association. 

 These 17.123 mills produced in 1910 75.7 per cent of the lumber produced, 

 or 13,567 million feet. 



In addition, the product of the mills of the fir manufacturers of the 

 Northwest, and the hemlock manufacturers of the North and Northeast, 

 as well as the manufacturers of other woods, are at all times directly 

 in sharp competition with yellow pine, so It will be seen how Impractical 

 it would be for one-fourth of the yellow pine producers to enter into 

 agreement and affect the market values on their product without not only 

 the co-operation of the non-association mills in their own territory, but 

 also without the co-operation of the manufacturers of other woods. 



It has been established that the price of yellow pine and other lumber 

 has been governed by competitive conditions, and tlic law of supply and 

 demand, rather than by any external manipulations. 



The report then statistically illustrates that the price of lumber has 

 been dependent upon general prosperity largely because in prosperous 

 periods car building is very active, thus taking from the general market 

 a large percentage of the available lumber supply and consequently 

 rendering the remainder more valuable. The years 1904, 1905 and 1906 

 are cited as being a striking illustration of this fact. 



The increase in price of lumber has not been proportionate with the 

 increase in price of most other staple products. • 



The increase in the price of yellow pine lumber since 1896 has not kept 

 pace with the increase in the price of agricultural products, as Is evidenced 

 by the following table : 



NUMBER OF UNITS OF COMSrODITIES REQUIRED TO PURCHASE 1,000 FEET OP 

 YELLOW PINE LUMBER 



1890 1908 1910 



Barlev (bushels) 46.6 33.9 31.6 



Corn "(bushels) 53.8 .36.3 39.1 



Cattle, steers, choice to extra (pounds) 302. 300. 293. 



Hav, timothy (Ions) 1.34 2.01 2.21 



Hogs, light (pounds) 390. 441. 2o2. 



Oats (bushels) 72.2 48.3 58.3 



Flax (bushels) 17.1 20.7 10.0 



Rve No. 2 (bushels) 39.4 33.2 28.2 



Vfheat (bushels) 21.7 27.3 20.7 



Butter, Elgin (pounds) 77.2 91.8 lo.O 



Potatoes, white ( bushels) 69.5 35.00 52.9 



Evidence in the Missouri ouster suit against thirty-seven concerns In 

 that state showed a comiiilation of invoices covering shipments m.ide 

 and of orders received on thr 15th day of January. April. July and October, 

 of the years 1904 to 1908, inclusive, of ten different companies, which 

 compilation showed that out of 2,298 cases of duplicate shipments on the 

 same items on same days, 2,134 showed a variation in price from 25 cents 

 to $7.50 per thousand, and 95 showed no variation ; in other words, 95.87 

 per cent showed variation and 4.13 per cent showed no variation. 



Of the orders, out of 1,095 cases of duplicate sales of the same items 

 on the same days, 009 showed a variation and 66 showed no variation ; 

 in other words. 94 per cent showed variation and 6 per cent showed no 

 variation. 



As evidence, in the same suit, against the charge that seventeen 

 manufacturing companies involved conspired to limit production, figures 

 were submitted showing that in 1903 they manufactured 5,45 per cent of 

 the total, in 1904, 5.60 per cent and In 1905, 6.16 per cent. 



PRICE AGREICMENT IMPRACTICAL 



A price agreement is something that would not be practical in the 

 distribution of lumber, for the reason that the marketing of lumber 

 products Is distinctly a merchandising proposition, and prices have to be 

 elastic In order to dispose of surplus stocks so that the various items can 

 be disposed of rather than held on hand and allowed to rot In the pile. 



Therefore, if there were a price agreement, some mills would find it 

 impossible to dispose of these accumulations without a loss that would 

 more than offset any possible gain from such an agreement. 



EFFECT OF STOCKS ON HAND ON MARKET PRICES 



There were in 1910, according to government reports, 48,112 sawmills 

 in the United States, and they produced in that year 48,959.000,000 feet 

 of lumber, 35 per cent of which. It Is estimated, was carried in stock on 

 the yards of the manufacturer, which amounted to 17,135,650,000 feet. 

 There were In this same year at least 40,000 retail lumber yards in the 

 country that carried stocks on hand amounting to not less than 12,000,- 

 000.000 feet, making a total of stocks on hand of 29,135,650,000 feet, 

 being equal to 59 per cent of the total annual production of all mills. 

 These stocks have the effect of holding down the values of lumber. 



The cost of production of one southern pine mill, with exceptionally 

 good manufacturing conditions, showed an increase in total manufacturing 

 cost of 88 per cent between 1897 and 1911, while the average price at the 

 mill of the lumber that plant manufactured increased only 78 per cent 

 for the same period. 



The percentage of Increase in the various items entering into the cost 

 of manufacturing lumber was as follows : 



Percentage 



Timber 2,500 



Carrying charges 5% on timber 2,500 



Taxes 666 



Hay 166% 



Corn chops 1 ] 2 



Mules 90 6-10 



Steel rail 71 



Labor 46 



Increase, low-grade lumber manufactured by cutting small timber, 475%, 

 or increased from 4% of the whole production in 1.S97 to 23% In 1911. 



Relative to percentages of grades of lumber manufactured, especial 

 attention is called to the large Increases In low-grade lumber made, for 

 the reason that the close cutting of timber and the manufacture of small 

 trees and top logs into lumber reduces the merchantable lumber made : 



1901 1909 1911 



Nos. 2 and 3 16% 36% 33% 



Merchantable grades 84 64 67 



In order that the effect of increasing production of low grade may be 

 understood, we give the following example. In comparison of 1901 and 

 1911. the following percentages of grades were produced: 



1901 1911 



Clear 5% 1% 



Star 10 12 



No. 1 69 54 



No. 2 12 28 



No. 3 4 5 



Now. if, for exnmple. these realized the same average mill price each 

 year, as follows : 



Clear $25.00 



Slar 20.00 



No. 1 13.00 



No. 2 10.00 



No. 3 7.00 



and we take 100,000 feet in each instance and extend into total realization, 

 we find that the percentage of grades produced in 1901 would have 

 produced an average price In 1901 of $15.08. while in 1911 the price 

 would be $13.90, or a lower basis of $1.18 per thousand, which might be 

 considered as an Indirect increase in cost. 



COMI>AH.\TIVE COSTS AND REALIZATIO.V 



Figures show the average prices secured for lumber and their relation 

 to manufacturing cost, and the gross profits, not including interest, sales 

 or general expense, indicallug that the per cent of operating expense to 

 gross realization has increased and the percentage of gross earnings to 

 realization has decreased during this period. 



CONCLUSION 



Before concluding these remarks. I desire to dwell upon a few of the 

 conditions affecting the various industries. 



The rapid growth of the population of this country, through immigration 

 and. otherwise. Is continually plunging us into alternate periods of 

 aggressive activity and reaction. In the past, after a period of sfagnation, 

 where the industr.v of the countr.v has been awaiting the march of progress 

 to catch up witli the development, we have, all too late, awakened to find 

 that we have not been alive to the rapid growth, and the demand for our 

 commodities at such a time has generally exceeded our ability to supply 

 same : consequently, we have proceeded on a rush program to increase our 

 capacities to augment the supply in the same ratio as the demand has been 

 increasing, but the consuming public has generally awakened before the 

 manufacturer to the difficulty of securing their requirements and have 

 bought during such times in excess of their needs, thereby greatly 

 stimulating the demand and making It during such periods siieculatlvc. 

 We have been slow to recognize this phase of the situation, and have 

 been prompted to further large Increases in our developments to take care 

 of the demand indicated by such purchases, resulting in an over-production. 

 When the demand has again become normal, this over-production has 

 resulted in wasteful competition, leaving nothing for the manufacturer to 

 do but to sit still and again await further Increase in the growth of the 

 country to absorb the increased capaeit.v of the additional development. 

 These periods have come up In regular cycles, resulting In depression and 

 prosperity, each following the other as a natural sequence. 



Following each period of reaction with Its consequent over-production 

 and under-consumptlon, we are confronted with two horns to the dilemma : 



