Wholesale Prices and ^ holesale Price Indexes, Adjusted 



In order to show a wholesale price and relative change in price for 

 lumljer as it conies from the sawmill, the wholesale prices and their 

 indexes must he adjusted. This adjusted price of lumher will reflect the 

 revenue received hy a mill. A considerahle portion of all lumher sold hy 

 New Hampshire mills is sold wholesale.* 



The average quality of New Hampshire stumpage has shown little 

 marked improvement since the last days of the virgin cut. There is 

 only limited factual data to support this general forestry opinion, hut 

 assuming little real improvement hetween 1946 and 1961, a pertinent 

 study hy Wallace and Amidon (1958) f gives accurate data on tiie quali- 

 ty of white pine stumpage. Their study found the average log quality 

 in New Hampshire to saw out 4 percent D select and better, 13 percent 

 number 1 and 2 common, 38 percent number 3 common, and 45 percent 

 number 4 and 5 common.J These figures show that sawmills in New 

 Hampshire do not produce large quantities of the highest priced lum- 

 ber. It would, of course, be natural for them to produce as much high 

 quality and high priced lumber as they could, but on the average their 

 grade recovery should be in line with the above percents. This means 

 that the wholesale price they received per M b.f. of lumber will be 4 

 percent of the price received for D select and better, 13 percent of the 

 price received for number 1 and 2 common, 38 percent of the price 

 received for number 3 common and 45 percent of the price received 

 for number 4 and 5 common. The figures in this paper can then be 

 adjusted on this basis to reflect sawmill price, in effect, an actual yard- 

 run wholesale price based on what the mills produce. To keep the price 

 figures on the conservative side it should l)e understood that the 45 

 percent number 4 and 5 common is entirely number 4 common. This 

 eliminates the poorest grade and will leave the adjusted price received 

 by the mills at as high a level as is conceivably possible in the actual 

 situation. 



Table 12 gives these adjusted prices and the adjusted indexes to re- 

 ject the relative changes in price. It can be seen by comparison with 

 Table 11 that both the adjusted price and the adjusted index fall be- 

 tween number 3 and number 4 common lumber. The effect of this trend 

 should be of special interest when considering the effect of lumber 

 prices on producing mills. Marketing studies indicate, also, that num- 

 ber 3 common is considered as medium quality lumber and that num- 

 ber 4 common lumber is poor quality material with only limited de- 

 mand. Another important factor should not be overlooked; that the 

 average price of ungraded or mill run lumber is approximately equiva- 

 lent to the price for number 4 common lumber. Unpublished mill studies 



* Wallace and Amidon (1958) indicate that this figure might be as high as 70 

 percent. 



t They derived the grade recovery for the 1956 annual cut. Their sample was 

 based on 75 million feet to separate grades D select and better, number 1 and 2 com- 

 mon, and number 3 common and poorer. A 15 million bd. ft. sample separated 

 number 3 common from number 4 and number 5 common. 



+ The Executive Secretary of the Northeastern Lumber Manufacturers' Association, 

 following a check with industry in 1955, has estimated average quality of stumpage as 

 D select and better, 3 percent; number 1 and 2 common, 12 percent; number 3 

 common, 25 percent; number 4 common and poorer, 50 percent (Holland, 1960). 



16 



