TIMBER DEPLETION, PRICES, EXPORTS, AND OWNERSHIP. 



65 



owners and sawmill operators and has strengthened the finan- 

 cial backing of other concerns where no change in ownership 

 was made. Higher profits in the manufacture of lumber dur- 

 ing the past few years have enabled the industry, by and large, 

 to wipe out much old indebtedness and greatly improve its 

 financial situation. 



This change is cited because it is part of the general recon- 

 struction of the lumber business which is taking place, thus 

 making it a better organized industry, and which tends to elimi- 

 nate certain conditions which formerly made this industry one 

 of the most highly competitive in the country. The indebted- 

 ness of timber owners and lumber producers was formerly a 

 large factor in keeping up production with little reference to 

 demand, and in causing the scramble to market the lumber cut 

 at almost any price. To a considerable extent the lumber in- 

 dustry now appears to be passing out of a condition where ex- 

 cessive competiti(m was forced upon a large portion of its mem- 

 bers by purely financial exigencies. 



The fact remains that the nature of timber properties tends 

 to compel the operator to manufacture lumber steadily at the 

 full capacity of his plant and to dispose of his product cur- 

 rently as it is sawn. This results from the cost of carrying large 

 supplies of raw material. The " stumpage load " has forced 

 many timber owners in the West to become operators, and the 

 very necessity of liquidating timberland investments compels 

 continuous operations. 



The carrying charges on timberland thus tend to keep the 

 lumber industry competitive. In 1914 they compelled many 

 miUs to operate at a loss — for operation was still less costly 

 than idleness. The greater financial strength of the lumber in- 

 dustry will minimize the effect of this basic factor to some ex- 

 tent, but can not eliminate it. Once let lumber stocks equal or 

 exceed the demand and it would again become a powerful com- 

 petitive influence. Another safeguard against possible monopo- 

 listic tendencies in lumber manufacture is the public owner- 

 ship of a third of the timber in the Western States, in the Na- 

 tional Forests. The sale of public stumpage under the restric- 

 tions enforced will foster independent mills not affiliated with 

 the large interests. 



CONCENTRATION OF LUMBER MARKETING. 



Probably the most significant phase in the reorganization of 

 the lumber industry is the development of large marketing 

 units which handle the output of a considerable number of 

 plants, under central control. This has gone considerably be- 

 yond the concentration of production through the control of 

 groups of mills. A lumber sales company in the Northwest 

 markets approximately a billion board feet yearly, cut by 1] 

 affiliated sawmills. An agency in New York sells the product 

 of 11 southern mills, amounting to some 200 million board feet 

 annually. The second of these examples is much more typical 

 than the first. There are many other groups of mills whose cut 

 is marketed .iointly under management which may be identical 

 with the ownership or affiliation of the mills themselves or 

 which may, in the form of a selling agency, be largely or 

 wholly unconnected with the producing plants. One of the 

 most common is the type of selling agency which markets the 

 cut of 12 or 15 small mills on a commission basis, giving the 

 mills a more efficient selling department than they individually 

 could afEord. 



The "line-yard" system of retailing lumber, although fol- 

 lowed for a good many years, is an indication of the same 

 movement toward a closer organization of lumber marketing. 

 In many cases large sawmills or groups of sawmills under the 

 same financial contror maintain their own lines of retail lumber 

 yards or are financially affiliated with companies operating 

 line-yard systems. The large wholesaler who contracts for the 

 entire cut of a number of mills, or the entire cut of certain 



grades of lumber, is another factor. Many small mills, par- 

 ticularly in the Southern States, while seemingly independent 

 operating units, are in fact grouped into relatively large market- 

 ing units through a single wholesaler who handles their prod- 

 uct ; and in many cases these small mills are partly or largely 

 financed by the wholesaler who markets their cut. 



The movement in this direction, while only partially con- 

 nected with the ownership of timberlands, is undoubtedly the 

 most pronounced feature of concentration in the lumber in- 

 dustry from the standpoint of tendencies in its development and 

 their bearing upon the interests of consumers. Concentrating 

 the marketing of lumber into large units is still far from com- 

 plete. The 40,000-odd sawmills scattered all over the United 

 States do not lend themselves readily to such a process. 

 Furthermore, the number of distinct marketing units, even those 

 of large size, is still very considerable, and the proportion of 

 the lumber cut of the country handled by the largest of them 

 is relatively small in comparison with other industries. The 

 largest unit of this character, for example, markets about 3 

 per cent of the lumber cut of the country. In particular reg- 

 ions the proportionate control of lumber distribution by a 

 particular organization may be much greater, and the policy 

 of the organization as to local sales of the products handled 

 by it of corresponding importance to the interests of the con- 

 sumers. 



In the general lumber trade the large selling organization 

 has often been a strong competitive factor. Reaching out for 

 more business, it has not infrequently brought effective com- 

 petition into regions where formerly it was lacking and given 

 better service to consumers In such ways as stabilization of 

 lumber grades, offering new grades or dimensions especially 

 adapted to local requirements, or furnishing plans for the con- 

 struction of dwellings and farm improvements. In itself this 

 form of organization may be beneficial rather than harmful to 

 the public interests, particularly in an industry like lumber 

 manufacture, which has been backward in the development and 

 adaptation of its products to the requirements of consumers. 

 The danger lies in the possibility of using large marketing 

 units as a medium for price control. 



DEVELOPMENT OF TRADE ASSOCIATIONS. 



Regional associations of lumber manufacturers have been 

 in existence for many years. They have discharged certain 

 functions of value both to producers and consumers of lumber, 

 particularly in the standardization of lumber grades enforced 

 by association inspectors and in correcting evils common in 

 the industry to which its product is particularly susceptible 

 through various practices of misgrading. The associations have 

 also largely handled the traffic interests of their members and 

 have been the media through which various forms of statistical 

 and other information are assembled and distributed to the 

 lumber producers comprising them. 



The general reorganization of the lumber industry has in- 

 volved inevitably an expansion in the activities of such asso- 

 ciations and has given them greater influence upon both the 

 production and marketing of lumber. They have given em- 

 phasis, for example, to the formulation and adoption of uni- 

 form accounting systems, tending to unify the accounting prac- 

 tices of lumber manufacturers, which in former days were ex- 

 tremely diverse and often haphazard and inaccurate. They 

 have been the foremost promoters of the movement for guar- 

 anteeing the quality of lumber products. Another activity, 

 developed particularly during the last six or eight years, is 

 the assembling and distribution among members of the asso- 

 ciation or of a subsidiary organization of current reports on 

 the prices received in lumber sales. The purpose of this work 

 is to give the members of the association a common and up-to- 

 date understanding of the market which they are supplying. 



