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econeraic characteristics of the lumber industries. 



Lumber prices have lagged behind ether -prices because there 'is a 

 strong pressure to .increase lumber production even in the face of a 

 declining and fluctuating demand 



The causes of the pressure to increase lumber production are: (1) 

 Over-capitalization of timber stands en the basis of the high prices 

 prevailing before 1907, and tho accumulation of a vast tinker surplus 

 in the northwest by private owners p has resulted in a heavy burden of 

 interest charges and taxes which accrue regardless of the rate of lumber 

 production, and which make It desirable to keep on cawing lumber even 

 when tho demand is slacJ-:* Moreover 9 tha present slow movement of 

 investoents ia tinker lands has forced timber owners to cut their lumber 

 as the only means of liquidating their investment. Thus to reduce the 

 load of fixed charges, and to withdraw excessive capital investments 

 in timber l^nds, timber owners have been content to sell lumber on a 

 falling market at a price that did not yield them a profit.. (2) Be- 

 eaust, 1 of the over-capitalization of lumber lands and bad accounting 

 methods, lumber industries h.a T re had difficulty in securing credit at 

 the 'banks and , this has incroa'acd the pressure upon them to dump lumber 

 on a falling narkot. Higher .Interest rates demanded by the banks 

 from th3 lurabei: industry ha/e also limited the amount of stock they 

 .could carry in dull times. (3) 'i'.b.s perishable nature of lumber and 

 its deterioration when stacked in yards prevent lumber from being 

 held over long periods of depression. (4) The highly competitive 

 nature of the lumber industry,, due to the wide distribution of timber 

 regions, the snail capital necessary to start a saw mill resulting in 

 .the growth of over 40,000 mills, and the extreme individualism pre- 

 vailing among lumbermen, have prevented the development of influences 

 that .idght stabilize prices of lumbar. In addition to the keen com- 

 petition that prevails between different mills in the same region 

 cutting the same species of wood, there is a continual struggle between 

 the same species cf v;ooS cut in different regions and between different 

 species of wood used for the same purpose. Thus Douglas Fir from the 

 Pacific coast competes in the markets of the middle webt with Southern 

 Yellow Pine from the gulf states, north. Carolina Pine 9 Eastern Hemlock, 

 Western White Pine, and Western Yellow Pine* The possibility of sub- 

 stituting one species for another :.3 constantly enlarging as new timber 

 resources are tapped, methods for handling new timber resources are 

 developed, and tastes for na\7 woods are built up by advertising. This 

 free competition between persons of all c. egrees of financial responsibil- 

 ity and accounting accuracy,, between old regions striving to hold their 

 supremacy against new regions seeking t,o overcome the disadvantage of 

 distaroo by low m.11.1 prices, "bsw/eer. new species striving to make inroads 

 upcn old species f certified "by custom and tradition, has swept aside all 

 tendencs.ies to restrict lumber production or to maintain a price. The 

 market has repeatedly broken under the attempts of small mills 'with 

 slender financial backing to realize on their output et alr^ost any price, 

 or the attempts of large mills to liquidate excessive timber investments, 



(WIB359-48) 



