64 



TIMBER DEPLETION, PRICES, EXPORTS, AND OWNERSHIP. 



very large interests. By and large, the degree of concentration 

 indicated in the findings of the Bureau of Corporations in 1910 

 has not been appreciably changed ; but no general tendency is 

 evident to extend control by increasing the larger holdings or 

 by withholding timber from the saw. Indeed, the opposite is 

 true in many regions. 



Two factors make the effect of timber concentration greater 

 than it appears. The first is the ownership of key areas, 

 strategically located at the outlets of valleys or other points, 

 where they control to a considerable degree the operation of 

 the back-lying or adjoining timberland. There are many cases 

 where topography thus gives the owner of a key tract practical 

 control over an adjoining quantity of timber which he may 

 confidently expect to purchase more or less at his own terms 

 when he is ready to log, but which meantime must be carried 

 by others. Under the operation of the timber and stone act 

 and other land laws, many such tracts have been acquired 

 within or adjoining National Forests which in effect control 

 considerable quantities of publicly owned timber, and the same 

 situation frequently exists as regards private lands. 



A second aid to timber control is the fact that the holdings 

 of many, though not all, of the large owners comprise the most 

 accessible timber in their regions, the timber most cheaply 

 logged, and the timber of the best quality. A considerable 

 part of the western stumpage is so inaccessible and costly to 

 log that it will not be a competitive factor in the lumber market 

 for many years. This is true, particularly, of much timber in 

 the National Forests. Control of the more accessible and high- 

 grade timber will strengthen the position of many large inter- 

 ests aside from the actual volume of stumpage which they own. 



CONCENTRATION TENDENCIES IN LUMBER MANU- 

 FACTURE AND MARKETING. 



The most significant tendencies during the past five or six 

 years bearing upon the general question of timber concentra- 

 tion, however, are not in the ownership of stumpage, but con- 

 cern a more highly organized control of sawmills and lumber 

 marketing by groups of operations. During the same period the 

 industry has become more closely knit through the development 

 of regional associations and other cooperative measures. The 

 census of 1910 reported some 45,000 operating sawmills. The 

 study made by the Forest Service in 1914 indicated that the 

 lumber industry at that time was very individualistic in char- 

 acter. An enormous number of mills, large and small, operated 

 independently, and the vast majority of lumber-making estab- 

 lishments manufactured and marketed their products as compet- 

 ing units. The sawmill capacity of the couritry was much 

 greater than the volume of lumber which could be marketed. 

 The bonded indebtedness of the industry was large and, in gen- 

 eral, its financial structure was weak. The pressure of carry- 

 ing charges on timberlands and indebtedness and on investments 

 in manufacturing capacity too large for the market led to fre- 

 quent periods of overproduction and of financial distress to 

 many operators. 



The change from these conditions which now appears to be in 

 progress may be compared to the changes in the iron and steel 

 industry during the period when the small foundries and steel 

 plants were disappearing or being consolidated in a compara- 

 tively few large groups ; or to the changes in the transportation 

 industry during the period following 1870, when many small 

 railroads were absorbed into large trunk systems. These ten- 

 dencies in the lumber industry may be summarized as follows : 



THE CREATION OF LARGE OPERATING GROUPS OF AFFILIATED 

 SAWMILLS. 



The necessity of manufacturing lumber in the vicinity of 

 standing timber prevents the geographical concentration of 

 plants to any degree comparable with most other manufactures. 

 Nevertheless, there is a distinct tendency, particularly in the 



Western States, toward concentration of production through 

 the central control of a considerable group of mills. Such con- 

 trol may be exercised through varying degrees of stock owner- 

 ship, bonding or other financial relations, or affiliations of one 

 form or another. These operating groups range from 2 or 3 

 sawmills to 12 or more, with a combined cut of from two to 

 three hundred million board feet yearly up to a billion feet. 

 In several instances the group includes mills in two or more 

 of the principal softwood regions the South, the Lake States, 

 and the Northwest, and in some cases also embraces mills or 

 timber properties in British Columbia or Mexico. 



The movement of southern lumber interests into the Western 

 States is one of the significant phases of this tendency in lum- 

 ber manufacture. Several of the large southern operators have 

 recently acquired mills or timber properties in the West. In 

 some cases this represents an expansion of existing lumber- 

 producing organizations; in others, the migration into new 

 territory of operating units which have exhausted their former 

 timber holdings. 



With the development of such operating organizations there is 

 a certain elimination of sawmills and timber holdings which 

 hitherto have been unaffiliated. The tendency of the large 

 operating groups is to consolidate the holdings, large and small, 

 in their vicinity and thus acquire sufficient stumpage to supply 

 their manufacturing plants for at least 20 or 25 years. The 

 relation of the small mill to this general movement is a complex 

 one and, as will be indicated later, works in different ways in 

 different regions. But as regards the principal remaining 

 timber resources of the United States in the West the present 

 tendency is unquestionably 'toward a closer concentration of 

 lumber manufacture in large units than has existed hitherto. 



This development toward more large and powerful operating 

 groups is but partial. The number of sawmills operating as 

 independent units is still very large and still manufactures 

 the greater part of the total lumber cut. Furthermore, as 

 far as present indications go, the entrance of new organizations 

 of large size into the lumber industry of the West has not 

 tended to restrict competition. The newcomers, usually well 

 organized, efficient, and well financed, have indeed in several 

 instances introduced a new competitive element in the regions 

 where they located. This tendency in the lumber industry 

 undoubtedly would make a process of " getting together " 

 between the larger interests easier than it has been before, 

 but it at least is not yet evident. 



GREATER FINANCIAL STRENGTH OF THE LUMBER INDUSTRY. 



The study of the lumber industry in 1914 indicated that its 

 financial structure was weak. Incomplete records of bonds 

 and other forms of indebtedness on timber lands and opera- 

 tions in the southern pine region and the West aggregated 

 $151,000,000. Stockholders' loans, current bank loans, and 

 other forms of borrowing apparently had been carried often 

 beyond the point of safety. Interest and maturities on the 

 various forms of indebtedness formed a heavy charge upon the 

 average thousand feet of lumber manufactured, and notably 

 forced many sawmills to continue cutting during periods when 

 operation represented an actual loss and increased the over- 

 production which occasioned periodic demoralization of the 

 industry. In the three years following 1912 there was a weed- 

 ing out of weaker operators as a result of these conditions, and 

 certain of the large timber holdings in the Northwest were 

 broken up and passed into other control owing to the attempt 

 to carry bonds and other forms of indebtedness beyond the 

 capacity of the business. 



Within the last four years the financial strength of the 

 lumber industry had radically improved. A large volume of 

 timber bonds has been retired. The flow of eastern capital, 

 particularly from the Southern States, into western timber re- 

 gions has eliminated a certain number of weakly financed timber 



