Economic problems of the lumber and timber products industry..

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Economic problems of the lumber and timber products industry..
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Full Text

OF NATIONAL RECOVERY ADMINISTRATION


DIVISION OF REVIEW


. : ..::


:0 04 NOMIc PROBLEMS OF THE LUMBER AND TIMBER PRODUCTS INDUSTRY

I By
... .::: : '"
h:'": *:*.. W Peter A. Stone
: < 'William E. Yost
"":"..... : .. .. "
i^.. ~D. N. Burnham
:.,;, ...C. Stowell Smith
Il ... ? .....Spencer H. Reed
Sterling R. March


WORK MATERIALS NO. 79


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INDUSTRY STUDIES SECTION
MARCH. 1936


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UNIVERSITY

OF FLORIDA

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OFFICE OF NATIONAL RECOVEY ADMINISTRATION


DIVISION OF 1EVIEJ












ECONOMIC PROBLEMS OF THE LIMBEi AIM -INBER PRODUCTS INDUSTRY

By

P-ter A. Stone
William E. Yost
D. N. Burnham
C. Stowell Smith
Soencer H. Reed
Sterling R. March














j


INDUSTiY STUDIES SECTION
MARCH, 1976







33g
L(535w
no. '13





Xa4ZHORD


This study of the Lumber and Tiiber Products Industries was com-
pleted by Mr. Vlilliam E. Yost, of the Industry Studies Section, Mr. H. D.
Vincent, in charge.

The report concerns one of the oldest and largest industries in the
United States, but because of lack of time and personnel the original
plan for a report covering a study of the entire subject of Lumber and
Timber Products has been curtailed to the basic portions only. Forests
have been dealt with exhaustively. Logging and san-mills have been co-
vered extensively, but not as adequately as was desired. Other parts
of this industry have only been touched. The stresses of administration
have been pointed out, and their effects and results analyzed.

The National Lumber Manufacturers Association has cooperated with the
Division of Review by generous contributions of data and by cordial avail-
ability for conference and discussion. On the page immediately following
this foreword will be found a statement by the Association.

It should be pointed out that there are masses of material in 1,iRA
files and in the files of the Association that are not reflected, or are
at best inadequately reflected, in this study. The report is precise-
ly what the cover page implies, work materials for further study. It
is to be hoped that in some way the subject may be reopened to the end
that, through further cooperation with the industry, a more complete and
informative report may be written.

At the back of this report will be found a brief statement of the
studies undertaken by the Division of Review.




L. O. Marshall
Director, Division of Review



March 17, 1936.






S' ,, r 7


-i-





Division of Revie!i,
National Recovery Administration.

In response to a reqiiest from the National Recovery Adminis-
tration, Division of Review, the national Lumber Mianufacturers Associa-
tion appointed a representative committee to review and comment on the
work of the Division of Review in the preparation of a study of Eco-aomic
Conditions in the Lumber Industry. Early in December the Committee
received for comment a copy of the preliminary draft of the study. The
Committee made a brief review of the preliminary draft and sent numerous
suggestions and criticisms thereon to the Division of Review. Subsequent-
ly it was informed that the proposed report had been substantially changed
in scope and content.

The final draft of the study, except for Appendices II and III
was received from the Division of Review for transmission to the Comnit-
tee early in March. Due to the necessity of having the report memeogra-
phed before April 1st, the time was insufficient to permit the members
of the Committee to make adequate study of, or comment upon, the report;
and they have not done so.

The proposed revised report, however, has been generally re-
viewed by the Association staff aided by conferences with members of the
Division of Review. These have resulted in a partial but substantial
correction of inaccuracies, and of important omissions of fact. Upon
many points the Association is in entire accord with the statement of
facts and conclusions by the Division of Review. On some points differe-
nces of opinion concerning the facts and their significance, and lack
of sufficient time to collect and prepare pertinent data have prevented
more complete agreement. On still other points the Association believes
that the material has been presented in such fashion as to point to or
at least readily to invite erroneous conclusions and unwarranted infer-
ences.

The participation by the National Lumber Manufacturers Associa-
tion in a review of this work does not imply either agreement or disagree-
ment with the substance of the report or with its conclusions. Nor is it
to be interpreted as signifying agreement with the approach to and plan-
ning of the study, the selection of material, the manner of presentation,
or the conclusions stated in and to be inferred from the report. It is
in entire accord with the judgment of the Division of Review that the
time and facilities available for the preparation of the study and the
difficult conditions under which it has been conducted, have not permit-
ted the full achievement of a balanced, thorough, and objective study.

It is understood that a copy of this communication will be
included as a part of the report of the Division of Review on Economic
Conditions in the Lumber Industry.

Respectfully submitted,

1YATI01HAL LUMBER MA!UFACTURMS ASSOCIATION
March 25, 1936


9813


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TABLE OP COKTENTId

Page
HISTORICAL SU.- ARY ..................................... *............ 1

CHAPTER I. INTRODUCTION ................ ............ 7

A. General Description of the Industry ....................... 7

1. Forest Lands and Species ............... .............* 8
2. Early History .............................. . .......... ... ... 8
3. Western Areas ................................... .. 9
4. Volume of Production ...... ....... ..... ............. 10
5. Effect of Logging on Production .................... .. 11
6. The Production Cycle ................................. 12
7. Labor ................................................ 13
8. Lumber Uses ........................................ ... 14
9. Production Costs ..................................... 15
10. Transportation ..................................... 16
11. Distribution ......................................... 17
12. Improvements in Products ............................. 19
13. Other Lumber Products ............. ......................... 20

B. Scope of Discussion ....................................... 23

CHAPTER II. THE PROBLEMS OF FOREST IANAGEITENT ..................... 24

A. Timber Supply and Location ................................. 24

1. Present Forest Area. ................................... 24

a. Commercial Forest Area ........................... 24

2. Forest Stand .............................. .. ... .......... 27

a. Stand on Total Area ............................. 27
b. Stand on Saw Timber Area ......................... 28
c. Stand on Cordwood Area .......................... 28
d. Stand on Restocking Area .................... ... 28
e. Saw Timber Stand ........... ............... ....... ..... 28

B. The Problems of Timber Ownership and Value ................ 30

1. Ownership of T;ntire Forest Area ................ ..... 30

a. Industrial Ownership ......................... 30
b. Farm Woodlands ........................... ..... 31
c. Public Ovmership ..... 0............ ...... ............... 31

2. OTmership of Sar Timber Stand ........ ............. ... 32
a. Industrial Ownership ............................ 32
b. Farm woodlands ................... .. .......... 32
c. National Forests .......... ............ .......... 32
d. Other Pederally Owned and managed d Forests........ 33
e. State, County and Municipal Ownership .......... 33


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9813





3. Average Stand of Saw Timber per Acre ..................
4. Forest Growth and Drain ............................

a. Forest Grow7th ................. . . . ... . .
b. Forest Drain ....... ........... ...... ......

5. Value of Forests and Forests Lands .................

a. Privately Owned Lands .......... ..............
b. Publicly Owned Lands ....................

6. Stumpage Values ................................... ...
7. Concentration of Timber Ownership .................

C. The Problen of Holding Timber Land ......................

1. Interest .......................... ............... .
2. Fire Protection Cost ............................ ...
3. Taxation ....................... .

D. Pre Code Efforts at Conservation ........................

1. Public .............................................
2. Private .. ... ................ .. .............. .

E. Conservation Under the Code ............................

1. The Private Forestry Program .......................
2. The Public Forestry Program................

CHAPTER III. THE PROBLEMS OF PRODUCTION ......................

A. Capacity ............................. ...................
B. Production Volume Usage ................ .............
C. Financial Structure .....................................
D. Production Costs ....................... . ..............

1. Raw Material Costs ................. .......... . ....
2. Sawmill or Rough Lumber Conversion Costs ...........
3. Dressing or Planing Costs .........................
4. General Expenses and Overhead .....................
5. History of Costs Under RA .......................

E. Prices and Mill Realization ........... ...............

1. Prices ...................................... ...
2. Mill Realization ... .............. ... ...... . w .

F. Labor .................................. .... ............. ..

1. Statistical Coverage ...............R .. .. ...
2. NTumber and Type of Enployees ....................
a. Number of Employees .........................
b. Seasonality of Employment ...................
c. Type of Employees ...................... .,...
9813 -iv-


Page
33
33

33
35

39

39
40

40
41

43

44
45
48

50

51
52

54

57
60

64

64
74
79
90

92
93
94
94
94

103

103
110

115

115
115
115
117
118




Page
3. General Labor Conditions .................. 121
a. Hazards of Employment .............. ........... 121
b. General labor Conditions on the West Coast .... 123

(1) High Labor Turnover ................ .... .. 123
(2) Causes of Labor Unrest .................. 124
(3) Improvement in Labor Conditions ......... 126

c. General Labor Conditions in the South ......... 127

4. Organization and Disputes ......... .............. 128

a. West Coast ................ ........ ........ ...... 128
b. South ............................... . .. .......... 135
c. West Virginia ....... .... ... .... ........ ....... 136

5. Wages .................... .................. ..... 138

a. Savmill and Millnork Combined ................. 138
b. Sawmill and Millwork Compared ...........,.... 139
c. Area Comparisons ................................. ...a 140
d. Payroll ..................................... .. 144

6. Hours ................................ ................... 146
7. Productivity ............... ............ ................... ..... 150
8. Code Labor Provisions end their Interpretation ..... 153

a. General Labor Provisions ...................... 153
b. Hour Prov5sions .............. ....... ...... ... 154
c. Wage Provisions ............................... 156

9. Operation of Code Lsbor Provisions ................ 159

a. Child Labor Provisions ........................ 159
b. Hourly Provisions ............. ......... ...... 159
c. Wage Provisions ............................... 160

G. Production Control ......... ................................... 164

CHAPTER IV. PR3OBLEMS OF DISTRIBUTI01 ............................ 189

CHAPTER V. ............................................ ........ 223

A. Future Studies ................... .. ... ........... .. 223
B. Timber Ownershio Statistics ............................. 231
C. Transportation and Cross Hauling.............. ........... 232
D. Methodology ................................ ...... ....... 235


APPENDIX I. HISTORY OF PRECODE EFFORTS AT PRODUCTION CONTROL ... 237

APPENDIX II. TABLES AND EXHIBITS ................................ 261


9813





APPEIIDIX It

ECONOMIC PROBLEMS OF THE LUMBER AD TIMB3R PRODUCTS INDUSTRY

INDEX.OF TABLES


PAGE NO.

Commercial Forest Area of the United States.... 262

Total Stand in the United States of Saw
Timber Cordwood ............................... 263

Stand of Saw Timber in the United States by
Regions, States, and Classes of Ownership...... 264

Stand per Acre on Saw Timber Areas............. 265

Production of Lumber in the United States -
1925 to 1929. . . ................. ....... 266

Softwood and Hardwood Production by States -
1929 to 1934.................................. 267

Softwood and Hardwood Production by States -
1929 to 1934. ........................ .... ... 268

Annual Drain of Forest Prod-lects (other than
lumber) Averages 1925 to 1929.................. 269

Total Forest Products Drain (individual
products)..................................... 270

Annual Forest Drain otherr than Forest Prodducts)271

Total Annual Forest Drain, based on 1925 to
1929 average.............................. ... 272

Timber Cut on National and Indian Forests
compared to Total Cut.......................... 273

Present Current Annual Growth of Usable
Material on Commercial Forest Areas of the
United States................... .. ........... 274

Comparison of Forest Products Drain and
Forest Growth....... .... ........... ............. 275


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VI (a)


IX (a)







TABLE NO.

X

X (a)

X (b)

XI

XII


XIII (a)


XIII (b)


XVI

XVII

XVII

XVIII


XIX


PAGE 110.

Average Stumrage Prices by States and Regions..... 276

Stumpage Prices by States 1928 to 1933......... 277

Stumpage Prices Selected States and Periods..... 278

Fire Protection Ex-oenditures ................. .... 279

Estimated Annual Tax Burden on Commercial
Privately Owned Forests by States and Regions..... 280

Estimated Annual Tax Burden on Commercial
Privately Owned Saw Timber Areas by States
and Regions ....................... .............. . 281

Timber Taxation as related to rate of
Lumber Production................................ 282

Timber Taxation as related to Lumber
Production and Timber Owned...................... 283

Relative Statistical Position of Principal
Producing States for Softwood Lumber.............. 284

Relative Statistical Position of Principal
Producing States for Hardwood Lumber.............. 285

Percentage of Ca--acity and HTurmnbor of Iills........ 286

Lumber Production Softwoods by States.......... 287

Lumber Production Hardwoods by States........... 288

Recapitulation by Intervals of Lumber
Producers............................................. 289

Recapitulation by, States of Known Lumber
Producers. ................. ... .......... ..... 290
'1
Comparison of Equipment Utilization............... 291

Table of Capacity by States and Ratio of
Stand to Capacity..................... 292

Quarterly Softwood Stocks by Division............. 293

Quarterly Hardwood Stocks, by Regions............. 294


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ABLE NO.

XXIV

XXV

XXVI

XXVII

XXVIII

XXIX
XXX

XXXI



XXXII



XXXIII




XXXIV


XXXV





XXXVI



XXXVII
LXXVIII


PAGE N1O.

Quarterly Softwood Production by Regions........... 295

Quarterly Hardwood Production b: Regions........... 296

Quarterly Softwood Shipments by Regions............ 297

Quarterly Hardwood Shipments by Regions............ 298

Southern Pine Costs. ........ ...... .............. ... 299

Western Pine Costs ..... ................... ...... 300

Cost and Realization....... ..... ... . ............. .. 301

Cons,=ntion of Domestic Lumber by the
Construction, Wooden Container, and all
other Industrial Users for the year 1928........... 302

Consu rnotion of Domestic Lumber by the
Construction, Wooden Container, and all
other Industrial Users for the year 1933,........... 303

Comparison between Total Construction and
Units Shipped per $1,000 of Construction for
Selected Products during the years 1920-1934....... 304

Lumber and Tim-iber Corporations (Forest
Products Industries) Condensed Balance
Sheet and Profit and Loss Data .5................... 305

Lumber and Timb-er Corporations (Forest
Products Industries), Number of Corporations
reporting Profit and 'io Profit in each of
the Classified Groups.., ........................... 306

Corporations Returns Classified by I.Major
Industry Groups Percentage of Corporations
reporting Profit.................................. 307

Corporate Returns Classified by Major
Industry Groups Percentage of Asset Values
of Corporations reporting Profits.................. 308

Forest Prod.ucts Corporations, Tet Income, or
Loss, Cash Dividends, and Federal Income
Taxes Paid ................ ....................... .... 309


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TABLE NO. PAGE NO.

XXXIX Distribution of Hardwood Lumber from Producing
Regions to Consuming Regions and States 1929....... 310

XL Distribution of Hardwood Lumber from Producing
Regions to Consuming Regions and StAtes 1932....... 311

XLI Distribution of Hardwood Lumber from Producing
Regions to Consuming Regions and States 1934..... 312

XLII Shipments of Principal Softwood Species of
Lumber to States from Principal Producing Regions.. 313

XLIII Imports of Softwood Lumber..................... ......... 314

XLIV United States Exports of Specified Lumber and
Timber Products to Principal Importing Countries,
1933 1934 ....................... 315

XLV Softwood Eroorts United States' Share of World
Market. ................................... ....... ........ 316

XLVI Retail Lumber Dealers lumber of Dealers and
1934 Questionnaires Received....................... 317

XLVII Retail Lumber and Building Materials Code -
Recapitulation by Divisions of Reclassified Data
contained in 1933 Questionnaires. Total of Sales
is Base of all Percentage Given,................... 318

XLVIII Retail Lumber Dealers Recapitulation Expenses
to Net Sales Dollar, 1934 Known Dealers 23,531 -
Dealers Reporting 3,554 .................... ........ 319

XLIX Retail Lumbor Dealers Recapitulation Modal
Cost Details Year 1934 Known Dealers 23,531 -
Dealers Reporting 3,554........................... 320

L Retail Lumber Dealers Recapitulation for
Industry Operation Results 1934 Known
Dealers 23,531 Dealers Reporting 3,554. ......... 321

LI Lumber Cost at Chicago, Illinois, Code Period
January to karch, 1934............................ 322

LII Lumber Cost at New York, ITew York Code Period
January to March, 1934............................ 323

LIII Stocks, Shipments and Production of Softwood
Lumber, 1923 1935.. .......... .. ............. ... 324

LIV Hours of Labor: number of Establishments and
Number of Wage Earners by Prevailing Hours of
Labor per Week, 1929............................... 325


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EXHIBITS


EXHIBIT PAGE NO.

A. Price Trend Southern Pine Roofers................ 326

C. Quarterly Softwood Shioments, by Regions,
1929 1935 ........................................ 327

D. Quarterly Hardwood Shipments, by Regions,
1929 1935........................................ 328

E. Softwood Stock on Hand, by Regions, 1929 1935.... 329

F. Hardware Stocks on Hand, by Regions
1929 1935 ........................................ 330

G. Quarterly Softwood Production, by Regions,
1929 1935............ .......... .......... ...... ......... .. ... 331

H. Quarterly Hardwood Production, by Regions,
1929 1935........................................ 332

I. Average Lumber Price Breakdown at Chicago,
Illinois, ........................ .. ........ 333

J. Average Lumber Price BrEpk'own at New York,
New York................... ................. . . 334

K. Average Price cf Softwood Lumber................... 335









ECONOMIC PROBLEMS OF THE LUMBER A!fD TIER PRODUCTS INDUSTRY


HISTORICAL SUMMARY

The Lumber Industry is one of-our oldest industries. It differs from
other industries in that the line of deiarc.atihn between -orocessing and pro-
duction of raw materials is not -so pronounced In lumber the -oroduction- of
raw materials is more analogous to agriculture then to industry in the ac-
ce-oted sense of the latter term.

The production of logs and timber tbrhaus preceded agriculture as an
activity of" the early colonists since shelter, as well as food, was an im-
mediate requirement. Moreover, clearing of land. in most cases was a
required process to the -oursuit of agriculture. It is no wonder then that
the New England colonists engaged in lumbering as a torincinal activity, and
for more than'200 years the forests of-Ndw England produced not only the
materials for shelter required in America but could export considerable
quantities to the West Indies and to Euroue as well.

This does not mean that New England was the sole producer of forest
products during this period. The Southern colonists also found rich stands
of timber and -roceded to exv'oit these resources. Ho'-ever, the natural
conditions which obtained were such that Southern lumbar exploitation was
only a minor factor as.com-oared .to agricultural activities,. Nevertheless,
the forests of New 9riland were.-the -arincinal "source of lumber un until
about 1880. -in: this 'discussion .the: region" designated as New. England includes
Northern New York and Pe-.nsylvania as well bs'what is now commonly termed
the New Ehgland States. .

After the" Civil'War and with the development of the uprer Mississipoli
Valley, the Lake States of Wisconsin, Minnesota and Michigan became the
principal supolier of lumber. However, by this time production methods had.
imnrov'd arid the steam sawmill with -he cifctular saw allowed for more rapid
eroloitation of greater areas in a shorter time; hence it was only twenty
years later that the neaR of production -oassed from the Lake States to the&
South. .
"
Theoeriod from 1870 to 1910 represents the years of greatest forest
exploitation. The transontinantal railroads Thad on=ned ua .vast new ter-
ritories, and new farms, towns -and--vil-ages "were being created at a rapid
rate. The chiof material for both farms and towns was lumber. Forests were
lose at hand and lumber was. relatively cheap6 This era reached its -oeak in
1906 and 1907, dutin. rhi.ch years anoroximately 46 billion feet of lumber
oer year were produced..

*During~the period after 1890 and when production in thQ Lake States
began to decline there was,a considerable movement to the Pacific Coast and
the exDploita&'-ior of the rich fir region of the Northwest became an important
factor. The vor6ducts of' this region entered the interior markets with the
fOening of the Northern pacific c Railroad in 1892 and a considerable -Dortion
of the production fouhd its way into the devlooment of the -rairie states
j"st east of the Rockies. The fir region whith lies west of the Cascades in
OSegon and Washington had previously found its urinciual outlet in the
requirements of the fact deyelpDing State of California. With its timber
n I .
vn, ry ,* .' t -..,







growing right d( 'n to the shone liro i was relatively ete^ to load its
products aboard sailing vessels almost at the n-.Aint P-, -or*-Lctimn.

In 1907? a:ter the opening of the Panama Canal, ;thbs -orfxziing an
easie, access Lo cne Atlantic Cott. the production from the qaciic North-
west became an i-rcrtant factor .in sternen markets ani has continued a
struggle with the South for the softwood market.

It may bq ?een that the Luiber Industry has been a constantly
migrating one, e'ololting tne most accessible natural resouzaes and moving
on to richer fields when its orerating area became more difficult of pro-
ducing both sn-Acalating and operating profits. As the iidustr, moved on It
left in its wake a less important segment in every region whiun had bqen.exz-
oloited. ThIs segment exo-an4ed or contracted as economic: conditions war-i
ranted, but it was always a factor in the control of ecca aic -ornblems of .
the industry. TI-e segment, composed o small mills w'7.', *e-e more or leas
marginal factors during the greatest period of eroloi tatlon o- an area,
became the margins1 factor which determined the degree cf -ot m.is-oerity during
the decadent era.

THE PROBLEMS

I. e. d3a3lr-aing country with rich natural resou,'ces it was but natural
that the best arid moat accessible tinjer should be cut 31i-.0 It was this
orinniple that motivated the industry to move from one area to another as.
rapidly as facslitties for tranSoorting the troduet became available. aow-
evz, after the i' evelomn'.nt of the Pacific fir region had reached a high
stage, in whi:n it was nrodueing 8a much au the South, others .ere no new
areas which offered 'osciblities of easily accessible virgi. fereste.,: 1t
followed then that as tho indus ry was forced beetk int the more inaec^q.-
sible areas vith its conseauent highe" cnmt of rea,.thing the consuming wutett
there was, of necessity, an increrao ir the -orlce lev 1. y'

At about this time many -zblic spirited people became a? Y-mned- at .the-
rate of exploitation of the forest are were led to -oreJict en early ea-..
haustion of forest resources. An imLrtant result of this alarmist at-
titude which hal ca,"ht the nonular fancy was an increase in timber
speculation. If, reasoned the sec-.lators, our standing timber Is rapity:.
becoming exhausted, higher values of existing standing timbe .t ,..a:t.-
noopssarily follow. As a consequence large tracts of st izding timber were.t
-ourch&sod at Toun1lrg prices, with ui thought at the .time ( cunvertiw tbis
timber into lumbe,-. Subsequent events forced the osts ishrmnt of ta .
mill facilities for the sole Durpooe of liquidating ti ese investments4 but- .
at the time of acquisition there was nc thought given tc v is necessity.

Another development of tkis period was the raid Inc ease in- the use of.
steel and eeu.ent, The tierfection of the Bessemer vreLess made steel- an
im=nrtant competitor in buildings and other structure. Tl orocesu for
making cement had developed to the -oint where eoncrbte, wfuh its laating
qualities, entirely displaced lumber for sidewalks and ott.r flooring
Dur-oses where heavy traffic was a factor. this, eourleed-..th the rising
cost of 'Lumber, brought about a ra-id displacement of lumber and a deoliair
ner capital conswrntion. T.is declining consumption was-rot trIarent to th|
industry until after the World War, but toward the declining period of tih
post-war building bo'm it became evident that stumroage orices were likely --:
98123


. 2-




-3-


to remain at a standstill, and with mounting taxes stumnage became a
liability. Hence it became necessary to provide facilities for liquidation,
and this, with the adven- of the depression, caused a comnolete demoralization
of the lumber markets.

The increase in the rice levels brought abnut by the migration of the
industry into higher cost areas had another important effect. As stated
previously, the small sawmill with its lack of volume facilities wag always
a marginal factor, Paying low wages and with small investment the small mill
could operate in small timber that would by unnrbfitable for the large and
medium-sized mills with the Preater investment. However, since the timber
available to this tyoe of mill is so small, the mill'cannot -oroduce at a
Profit. except at a rice level, trat is ni-rh enough to. warrant such -oroduction.
Such mills operate in cutover areas located for the most -art close to the
areas of consumption. However, the r-sult of their o eration insuch areas
is such as. to -orevent the full regrowth of a given forest area to a point
where it might agaih become an imnrrtant produicing region lying close to a
consuming area. 'When the price level of lumber rose, due to the higher costs of
the major portiop of the industry, there was'.lways the tendency to encourage
the small mill to again enter production, thus increasing the volume to the
point oQf overA-roducction, causing a -orice decline which would force them to
retire until, the rice ros. again. In this manner the small mills acted as a
pressure. bn the market..

The need for liquidation of speculative timber became anarent with a
declining volume of use, Darticularly during the latter oart of the building
Sboom, and it was &ur.ing this oer.iod that many new mills were -out into
operation for that purpose. During the devressioh this situation became more
acute, and from 193Q to 1.932- mills continued to,.operate.for theiduruose stated
above, although cons.un otion had declined to aboiit.25""er cent pf. the oeak.
This, of couir.se., meant an enormous stock on hand each' year during the
depression years. The average amount of stock ni.hand during the 20Qs was
about 14 billion feet. During.th-se yearsobetween 25 billion and 39 billion
feet per yearwere used, but between 1930 andI 1932 it ran between 10 billion
and 17 billion.fe't. The stocks on hand. at'the beginningof the year
receded very. little, averaging, from 9 to ll'b.illion feet. Naturally prices
were demoralized, wages were cut, and conditions, bQcame chaotic. Although
this. situation might niot have appeared so rapidly had construction remained
. at the same level a6 that of the late'20s, eventually the over-capacity of
the industry and the.necd. to liquidate speculative holdings would become
-. aDnarent; ahd although the deroressioh.brought about the chAoticcondition,
a de-oression in the Lumber Industry must have eventually come about under
..... ny circums'tan nces if the industry had continued under the same influences,

THE CODE-

After the passage of the"National Recovery Act it was auonarent that the
industr-: was, aware of the condition of over-canacityand chaotic prices, and
in presenting its Code it nad three major -orooosals:

.. .()'...The. regulation of Droduction with a view to'cutting
...d .st.ock. pn hand. to meet. demand.
(2). ."4 .",'nrease.4n the wage'1.level, which had fallen,
le- lpw sub'sistence evel .e-





- .~ .-'14'- ; ..

(3) The fixing olfminimum prices of lumber at a -oint
at which it was estimated costs of production would'
be recovered.

The operation of the-"first provision eventually resulted in some decline
of stocks. However, it provided for no permanent improvement; since the
elimination of .he C'ode the-"industry is in apDnroximately-the same position it
was in before, as far as thefundamental evils are concerned, although the
reduction of stocks during the Code provided a temporary benefit which will
last for some time.

The fixing of orices anoarently failed -to brin9 any permanent good-or
contribute to any permanent imnrorvement in the industry. One of the results
of fixing of prices at a point of cost recovery was to increase the price.'
above the point which would encourage a greater use. In fact it is believed
by many students of the situation that the prices so fixed tended to retard
an increase in consumption.- Moreover there were many operating difficulties
inherent- i'n all attempts at determining true costs or in setting rigid -rice
regulations for so vast -and complex an industry as this one. In any ex-d
periment toward an improvement through -oublic regulation or even industry'
regulation, u-orice fixing apparently should be the last resort, but in this
particular industry it is highly improbable that it should ever be resorted
to since there'are so many other ways of ir-oviding more -earmanent cures for
obstacles to -orogress within-the industry. -

As to wage rates, there was a considerable increase in both the Northern
and Southern -sections. Without price fixing the increase in wage rates
alone, it is believel-, Wbuld have had a -tendency to prevent the incursion-of
the numerous small mills dependent upon a higher price. However, *it. this :
increase in rice level provided- for under the G-ode- many of the small oteratori
believed they could either make a profit at the higher prices, even though
they paid the minimum wage, or expected to evade the higher wages while tbye
collected the higher prices. During the very early -oart sf the Codd'e the .forae
was the general rule; that is, a higher wage-level was .generally naid. -But
as it became apparent that the products could not be sold At the -lrice level
set, there was a greater tendency to evade the minimum wage.. This wage
lev-l for the -South, incidentally, was set at a-moint equal to that of any
period in its history. This evasion of-minimUm wages produced bitter re-
criminations,- since many of the small and medium-size mills,- having once
entered into production, were loath to discontinue. Nevertheless, toward. the
latter part of the codal period a great number of them did discontinue* How- :
ever, since the elimination of the Code it is ap-oarent that the general wage
level has remained 15 to 20 per cent higher than during the deuresslon period.
In the West Coast it is probably 50 to 60 ner cent higher on the average than,
during the lowest point of the depression.

As has been stated, the operation of fixed minimum prices frr' cost
recovery proved burdensome and failed of any permanent prod. Th's provision
was canceled, therefore, six. months -ot ior to the Schechter decision which
invalidated the NRA. Thete apDeared .no1 immediate after-effects, since by that.
time the various efforts of other Government departments to improve con-
struction began showing results, which n-aturally increased the demand. It is
believed that this demand had reached a-'oint :.toward -the latter part of 1935
that justified the price level, which had remained at about the point fixed.


9813






under the Code. However, with a lower stock on hand, in comparison to the
general demand level, it is believed that prices may reach a disproportionate
level again if industry, through its own efforts, continues to keen stocks at
such levels.

CONCLUSIONS

(1) Chaotic conditions caused by excess stocks were relieved during the
period of NIRA, but the Lumber Code failed to proVide a permanent remedy for
causes of such excess.

(2) The operation of price fixing has proven itself to be impoossible,
even under Government regulation.

(3) Labor has been benefitted by a rise in the wage level, which will
aunoarently remain and is urooortionate to the general wage level of the
entire country. However, certain inherent characteristics of the timber and
the psychology of those engaged in the Lumber Industry in the South are such
that labor is not free to use its own bargaining -ower in any effort to main-
tain a reasonable level of wages,

(4) There are certain steos which might be taken by both the industry
and the Government which might, in the'long run, tend to improve the general
level cof the industry and the labor employed by it. Such improvement must
start with the forests.. It is recognized that for the -ourpose of a stabilized
industry -- one that is not only kept at a reasonably high level but is
continually improving -- there must be a continually improving forest status.
In other words, Lhe industry must be removed from one of a migratory nature
to a more permanent position. This involves the operation of a forest, which
is the basis of the industry, on a l.on.-time continuous production basis. It
has been demonstrated in "urooean countries that this can be done. Not only
in Euronean countries are there continuing forests that is, forests with a
sustained yield -- but there are a number of far-seeing corporations in the
United States that have also placed their operations on such basis.

It must be remembered that first there are large areas of cut-over lands
which will not come into production for many years -- particularly production
of saw timber. There arc other areps where saw timber would come into pro-
duction in a reasonable period if it were allowed to grow, but that is now
being cut in an immature stage, producing an inferior product at a higher cost,
For such areas it is a'oarentlv impossible for private industry to bear the
burden of taxation and other costs of holding until the timber comes to the
income-producing stage. Such areas might be -urchased by the Forest Service
and held until they are income-orod.cing, then sold to -orivate industry for
private production on the basis of selling the product, and only such product,
that will permit of further growth and further yield. It is realized that
this, in effect, recommends the Government ooing into the business of managing
forests on a sustained yield basis, but as already -ointed jut, the costs,
including taxes, fire prevention, etc., ari such that these areas do not hold
any nossiblity for profit to private i-.6ustry. These areas are located close
to the consuming markets for the most -ort and wom.ld, in the long run, benefit
the consumer by affecting the rjrice level o'f umber, and benefit the industry
by removing a considerable threat of lumber cut from immature trees, thus over-
burdening the market.


9813




-6-


It is realized that there are considerable holdings of timber areas by
very small producers and farmers throughout the Southern states to whom such
holdings are not burdensome. In order to encourage a oro-oer regard for
forestry among such holders, the Government might take advantage of the
financial stringency among these holders by forming cooperative groups for
sustained yield under Government aid in financing and fire and forest
protection. A-1 of these recommendations noted above have been more or less
accepted by the Forest Service, who have partially initiated many of these
provisions.

(5) Transportation rates should be lowered from the Atlantic seaboard
west to Chicago and rrom the Pacific seaboard east to Chicaa-o. This will
encourage the use of timber from the Pacific Northwest, where exist the best
resources and greatest excess holdings. A cut in rates from the Atlantic
sea board would permit an extension of the market for lumber now moving by
water from the Pacific Northwest.

(6) The industry may improve its product by the manufacture of more
complete assemblies for building nurooses and seek to promote shop fabricaStin
as against fabrication on the job. This will enable individual manufacturers
to obtain markets in which quality may be a selling factor. This would also
tend to eliminate the more migratory manufacturers and -oromote forest
management on a sustained yield basis.

(7) There has been considerable contraction in the lumber market along
with that of other industries. For lumber this is particularly due to the
loss of the Australian and other British Empire markets as the outcome of the
Toronto agreement of 1933, in which preference was given Empire markets for
Canadian lumber as against American lumber.. The adjustment' made in the recent,
trade agreement with Canada, in which some of the restrictions have been
removed, should be carried forward in favor of the American lumber industry
into any trade agreement with Great Britain, so as to restore to the American
industry at least a portion of the markets eaual to that restored to Canada
by the United States.


9813







CHFJ2R I

I:TOfDUCICT0:o

A. G:IPLRAL DESCRLPUTI C, FT IDST:.

The Lumber and Ti:.:bcr Prol.ucts In6. st:'.- has no clor.rly Cefined
limits. Generally speon:ing, it ic. coTr)oPdc, o' all those engaged in
(a) mnana':ing the con-ire'ci? foE"est:. 'If t..e nation; (b) in the conversion
of staoxdinz ti.Lber into *L'sefml ,:n'c Ct cts; an () in the distribution of
those nrocucts to the consumer.. The prinioial timber oproLducts are: (*)

L-xibcr, lath arnc. shingles
?ucel rood
e-?-nI ties
:once -)r!tt,
Pill-,i ,o '.
j.ir.e ti bo-'s .' mnline r'o0)s
Vcne.crs
Co omer.;."-e stocl:
Pol.bs onC. alili:v:.;
Distillation -oorl.
Trnnin,- r7,o',. :.n,-'. baL!..

The Zurean of the Census defines lurber and ti,1ber products as

"logging carps, merchant saTaiills, combined samills
an.d planinc .illr, including. those engaged in the
manufacture of bo::es if connected 'ith a eawnill,
veneer nills 7r.n. co-npe-ate stoch: illss" (**)

The Lu-.:ber an6. Tir'ber Proc.':cts Incutries CodC.e extended a bit fur-
ther than the Census definition a:d included: (i) Logs, poles and piling;
(2) sawn lumber and. other s.vm nor.d ,rorducts of sarnills, and products .
of planing mills operated in conj-.riction -ith sa:-nmills; (3) shingles;
(4) woodor-or!: (nill-orl) including, th.e -,rodv..ctv of p).aninj mills opera-
ting in conjunction -ith ret:-,.ii lxuiner :'Qr\s; (5) hardwood flooring;
(6) veneers; (7) )ly-0rool; (8) :iln H'ried hrirdwocd di::onsion; (9) lhth; (1C0)
saWed boxes, shoo': crates; (li plyood, veneer .a-m. -irebound packages
and containers; (12) certain adC.itior.al iinor products specifically
provided for. (***)


() "A :-ational Plan for American Forestry", p. 214. A report of
the Forest Service (1933)

(a) "Forest Products in 1932", Bureau of the Census, Department
of Commerce.

(**) Article II (A), Lttfuber r.-I: Tirbber Pr.)i. xcts Industries Code.


9813







1. Forest Lands and Species

The basis upon -hich the entire industry rests is, of course,
the forest land. of the United States, which amounts to practically one-
third its total land area, or about 600,000,000 acres. (Originally the
forest area of this country was estimated to be 880,000,000 acres.)
However, not all of this forest area is available for commercial use.
About 49,000,000 acres out of the total area have been classed by the
Forest Service as commercial forest land capable of producing timber
of commercial quantity and quality, according to present day standards,
andC available for commercial use. (*)

In considering availability of saw timber, species play an
importrit role. Not all species are suitable for the same purpose.
Generally speaking, the entire species group is divided into two classes
-- softwoods and hardwoods. The term "softr-oods" is generally applied
to all o\ the coniferous trees as distinguished from the broadleaf
varieties, and c.oes not necessarily apply to the actual softness or
hardness of the wood itself. The term "hardwoods" is generally applied
to all of the broadleaf trees vhen used commercial ly.

The geographical distribution of these species has determined
to a great extent the divisions of the industry which have been followed
more or less in its organization. Particular uses have sprung up in
industrial processes r-hich require certain species. Such species may
or -iay not be interchangeable with other species. This division is
funda'-ental in the indCustry's organization, and perhaps accounts for
many ot its problems, due to the fact that certain species are native
to certain sections of the country only, whereas the use of the wood
may be nationwide.

2. Early History

Since this industry had its beginnings -ith the early colonists,
naturally the first forests exploited were those of New England and
of Virginia, both softwood areas. The erew England forest consisted
Chiefly of nine anC. spruce, and although they have passed through a
cycle of e:zoloitation and are about to enter into the second cycle of
production, the area still produces the sane native woods, with the
possible exception of northern white pine which, because of its adapt-
ability for most purposes, -!as used up most rapidly and had not been
replenished to the sane extent as spruce.

Prior to 1850 New England was the principal producing region,
up to that tine accounting for more than one-half of the total lumber
used. However, between 1850 and 1860 Ner York- ant- Pennsylvania took


(*) See Table I. See Ap-)endix II.




9813


-8-




-9-


the lead. (*) These tvo states, while e having a considerable amount
of soft-ood, again principally pi..e rA.'. spruce, had a greaterr amount
of hard-.,ood, more suitable for nanufacturing pur:oses than for con-
struction.
T-hat is sc.id of iLe- York nd FecL;--ilvrnia applies as w-ell to
Nei: Jersey, .Laryland ni.. :cla,r.re, teesU 1ive states comprising the
middle Atlantic Region. In tu-e earl: pcrioC.s ef -oroduction in the
i.iiddle Atlantic Re-ion t.-e ,.-oft--oor s were ouick-ly depleted, the hard-
roods reimaining.;, since '..ses f`r h'ard.-oods -'had not developed to the
extent that they ha.d. for-- soft'oo cs. T'lis area is still considered a
hardwood producing section Ld under t ie Cod.e ,as called the Korth-
eastern Hardwood Subdivision, tiho-.;-: combined vith part of the easterly
Lake Sta.tes anc. also a part of ..the n.lachian Region.

The next maj :r pro iucin; area, chronolo;ically, '-..s the Lake
States -- linnesota, Tlisconsi.- *nc' iichigan. Here the species were
chiefly pine and hemlock- -- both soft- oo.s. Ho.rever, this area has
alwaZs had, in addition, a co7erci.'] ro,-th af hard maple, though with
some slight exceptions as to hemloc' it no'r produces little softwood.
It is still the principal mapt.e nro'u.cing section of the country, some
80 Der cent of the maple flooring coni.i,'i fro:.: that area. The peal: of
production or this area -.-as around 1830, in whichh year the Lak:e States
acco-LinteC. for 34 per cent of the tot.l liumber volume.

From 1820 to 1919, whicA was a -noriod of rapid. progress in the
development of. this nation,the forest irea of the South, embracing
Alabana, Arkansas, Florida, Gcor-ia, "cjntuc1yj, Louisiana, I.ississippi,
iLissouri, iorth Carolina, South Carolina, Oklahona, Tennessee, Texas,
Virginia and 'Jest Virginia, -as the .-rincipal producing area. The
species in this area consist of yellow pine and practically all the
kinourn dcnestic hardwoods. The foner has become the most important
commercially.

Short leaf pine flourishes on the Atlentic Coastal Plain as
one o0 the fastest gro-'in; co e.rcia.l species among soft-oods, and
its renewability has kept thu re_'ion a continuous luImber producing area
since the 1890's.

It should be understood t:iat thi-; shift front one area to
another does not mean that the original areas were completely denuded,
but merely that the new areas of virgin timber presented more attract-
ive possibilities than the older producing regions, all of whichh are
continuing producing regions to a !ainor extent.

3. Western Areas

Perhaps the most important development in the Lumber Industry
is the expolitation of the western forest areas. These begin in the
Roc'y mountainn Region, exten.in,. throughout all the Rocl r iiountain Region


() "An Outline of General Forestr-y", by J. S. Illick, p.52 (1935)


9813





-10-


The Douglas Fir Region, although called that, is not confintAL to
Douglas fir but grows hemlock, spruce and cedar in addition. *This .
region contains the most luxuriant stands of cedar in this country.
and is therefore the center of the cedar shingle production industry
as trell as being highly important in softwood production.

The P.ocky liountain Region, nhich includes the area east of the
Cascades, together rith the Sierra itevada Range through California,
grons westernn pines. Sone spruce and vhite fir are also found in this
region.

On the West Coast is found the nost luxuriant growth of timber..
in the United States, with the greatest couriercial possibilities. The
average stand per acre in the State of Washington is about 45,000
feet per acre. This is compared nitn 6,000 to 7,000 feet per acre
for most of the Southern States. In California, chiefly i;n the few
counties in the north central part o0' the state, lies the Redwood
Region. Rednood trees are Tell !norn for their enormous size and
their commercial possibilities.

Although the Lumber Industry in the West started in the early
18530's, it did not become connercially important until the completion
of the Northern Pacific Railroad in 1E82. (*)

As stated at the beginning of this chapter, although lumber
is only one of the products of the forest it is by far the most impor-
tant since the san timber area consists of approximately five-sixths' of
the total commercial area. The oinerchip of this area therefore in-
volves the Limber Industry in the problems of forest management. How-
ever, most of the industry itself has only lately given adequate con-
sideration to such problems. With the shifting of the industry as each
nea area nas tapped, the acquisition of the virgin forests became one
of the important factors in the development and management of the in-
dustry. Luch of it nas included rith the land grants to the trans-
continental railroads in the latter -art of the nineteenth century.
Sone of it nas acquired by those who were interested only in specula-
ting on the increased values, but for the most part lumber producers
attempted to acquire sufficient acreage and stumpage to. assure them-
selves the longest possible period of continued operation.

4. Volume of Production

Turning non to the volume of lumber used in this country,
it is found that a peak was reached in 1906 and 1907. ninth the large
total of 45,000,000,000 feet for each of those years. Up to that


(*) "An Outline of General Forestry", by J. S. Illick; p. 53 (1935)


9813




-11-


tine it ihadcl been continuously increasing. After that time it started
on a do-nv'arc' trend. However, lu1.iberien, intent on acquiring a volume
of stun;.paje for their oieratio:., c'ic.fly speculated on the increasing
trend. of production r-,C .:ere -any 'ears too late in becoming v.xare of
the declinij voluie o1 consumption. T'i'.s luibernen found themselves,
at the becinnin-, of the ce.'esvion, overstockedl with tir.ber acreage.

It uay be vell to e:.)lain here that, the teri sturnpage is
applied to h.e st jiri.,o tree, 2:, t"he vm-.l'n of stunm)age is thlie value of
the luuibel content o' t>' t-e.-es it.oat rearcc to the land u-on which
they gro,. This is usu.lly calc.ilated in board measure, log scale.
The term "log scale" has various neainin.Ts -nd is applied ,ith different
rules in c'.ifferent areas, bein, -particularly applied to a given species
than to .-iven geographica-l area. io-'ever, in speaking of lumber pro-
duction the term "board measure" is used, whichh .Lieans one board foot
equals a board one foot lon2, one foot vide, and one inch thick.

Tie first sawill was esttbliEsned., accorCinw to one historian,
in Jj.iestorn, Virginie, in 1625. This, as vell as other early colonial
sanwmills, '.-as operated either by v..ter poorer or windmills, It is be-
lieveC. that the maxinum capacity of these early saW.TnillE, -as not more
tha-n 500 board feet per day.

The first record of steam aonlication was in I'c7: Orleans in
1811. However, shortly after that period, in 1814, the circular saw
was invented, but it did. not cone into general use until about 1840.
The first band saw. w:as exhibited at the Philadelphia Centennial Ex-
hibition in 1876. Such a saw.: today, 'ilth all other modern appliances,
has a cap-acity of epproxilatelr 100,000 feet .er day. (*)

5. Effect of Loggin;7 on Pror:.uction

One important factor ir. tihe development of the Luiber Industry
has been that of transporting logs froni the 170oo06.s to thie mills. In the
original development of the inlustri- ,w-ater trans-nortation of logs by
floating, and later by rttin. .,n':. i..,ilar Iethods, was the principal
means of transporting los. In tl.e woods, horses aL-6 mules provided
the chief motive power for drr,"g-in, tho logs to places here they could
be transported by water, or directly' to the mill located in the woods.
Indeed. thie -)roduction of logs was nore a separate part of the industry
in the first half of the nineteenth century than it has been since, due
to the fact that logs were floatedL to central booms and could be
purchased by -.Iills Thich had no timber lands of their own. An open
log market exists today only in the far Tllorthnest.

Beginning about 1880, with the development of lumbering in
the La-e States, railroading started in prominent use in log trans-
portation, and has since become the :rincipal factor for such trans-
portation. This is an important factor in the cy-cle of timber areas.


(*) "An Outline of General Forestry", b-y J. S. Illick,; pp. 51, 56.


9813





-12-


In the earlier timber developments where the more primitive methods were
used, a liribering operation developed to what would now be termed a medium
size operation, but never to the enormous size of present day operation.
This restriction was due to the limited means of supplying logs. With
the development of railroad logging, however, operations grew in size,
an. to,'7ard the latter part of the Lake States lumbering period the ne-rer
enterprises were much larger than the earlier ones.

6. The Production Cycle

With the more primitive neans of logging, clear-cutting, that
is the co:-lete denuding of an area, was not prevalent. It was economic
to tJ:e only the most available lo.2s, and there was a "thinning out"
operation rather than a complete "logging off" operation. It is probable,
for this reason, that the older areas have continued producing for a much
longer period than the newer areas, and their renewability has been more
pronounced. This fact brought about a cycle of developments T'.ich are
illustrated in parts of Pennsylvania and the Apoalachian Region. The
cycle consists of, first, what might be teimed preliminary operations of
fairly snall size, then the exploitation of an area on a large scale,
and then the return again to small, portable operations.

However, with the development of railroad logging this cycle was not
so pronounced. Railroad logging sometimes involved the laying of a rail-
road 80 miles in length. TWhen an area was cut out the most economic thing
to do was to salvage the rail line and completely abandon the workings.
The upkeep and overhead of a railroad logging operation being so great,
it wasn't feasible to continue on a small basis with the remaining thin
stands. This also tended toward a complete cutting out operation rather
than a thinning out operation, and in a measure is responsible for some
completely abandoned areas of the Lake States and of the far West. In
such areas the hope of sustained yeild operations presents much greater
problems than in the older areas of the Appalachian and Southern districts,

The Zoregoing description briefly brings us up to the situation
of the late twenties. In 1929 the Luaber Industry, as defined by the
Census Bureau, was composed of approximately 18,556 units doing more
than $5,000 in business annually, accounting for a total production amount-
ing to $1,962,000,000, and had 539,775 wage earners, with an annual wage
bill of $567,202,000. The mere figure as to the number of sawmills is not
of important significance when it is considered that the first census
giving the number of sawmills in 1840 recorded 31,650 sawmills in the
United States. However, the 18,553 sawmills reported in 1929 had an an-
nual capacity of 70,000,000,000 feet, whereas the 31,650 recorded in 1840
had a probable capacity of 7,000,000,000 feet, although the total produc-
tion recorded for the year 1839 was only 1,603,000,000 feet. (*)



(*) Forest Service estimate.




9813




-13-


There is still a large number of -:erv snail "-ill: "ith a capacity
of around 5,,')00 feet dry.. On the other hrnr, some of the largest
mills have a capacity of as much as 1,000, )00 feet a da',. The im-
portant factor in the difference to-wa' is the fact that the smaller
mill must compete in the sa-.fne T'arket as the giant producer, and herein
lies the beginning of many o: the oro.lens of production.

The penk of production "'Ls in i'06 -n.hi 1907 -'ith 46,0;0,000,000
feet. It must be remembered thv-t this peak of production camnec before
the rich areas of the Douglas 'Yr Rer:inn anC.L the westernr n Pine Reion
were fully developed and th-iLt the camacitT in these areas, T-'hich is
the greatest part of the total mill capacity, has been developed since
that time. Coincident -'ith till- c.-.'- -city development there has been a
declining volume of production. Since 1917, vith the exception of
1923 and 1925 when a total of 41,000,0,0,0.0 feet was reached, at no
time has a total of 4'",0J0,')C0,00 i feet been reached. In 1926 a total
of 39,000,,00,000 feet w2.s re-.ched. However, in 1929 which h is gener-
ally considered the peak yeo.r of indi.istrirl production, only
37,000,000,000 feet of lunb-r .rere nro'.uc d. Following that -.ear,
of course, came the depr.vsion, thle low point being reached in 1932
with only 10-,000,000,000 feet of production.

At the beginning of 1930 there w-ere stocks on hand of 9,500,000,000
feet. The depression did not become fully effective, as far as the
Construction Industry was conct:rned, until the latter part of 1930, al-
though ship-ients dronoed from an average of 7,OL 0,000,000 feet per
quarter in 1929 to 5,000,000,000 feet per quarter in 1930. Stocks
increased during the laLtter half of the year 1930 to 10,250,0.0,000
feet. This grent stock on h-nd, to-ether 'ith the pressure of liqui-
dation of the indebtedness incurred in the development of the Uest
Coast Re.2ion during the boon period and particularly in the tvrretims
gave risr: to the most important problems of production. (*)

7. Labor

While no figures arc available a, to the number of emplo-ees in
the early days of the inv.ustr-r, there has be n a vast fluctuation
during the later years, oarticularlir for the se"iod from 1919 on.
Prior to 1919, although there has been a migration of the industry, .
-'here it dropped enplo-rees in one area it would Aick them up in
another, bringing about a migration of enplo?,ees as well as a ui. ra-
,tion of the industry. itself, However, in the -oeriod of declining
production, the effect of the C ron in production on en-oloyees nay be
mea-urod by the fact that the number of employees declined from
539,775 in 1929, when the total production was 37,000,000,000 feet,
to 178,000 in 1932 r'hen the production was 10,000,000,000 feet.
While it is possible to estimate the number of emp-loyees in the in-
dustry back in 1906 and 1907 hen the total volume was 46,000,000,000
feet, actual statistics on that core are lacking.


(*) Figures from ilational Lumber manufacturers Association







In general, employees mey be divided into two main groups-logg-jg
employees and sawmill employees. There is some difference in the
type of labor and living conditions between the two. In those older
areas where the more primitive methods still prevail, woodsmen still
saw down the trees and teamsters haul the logs to the main point of
transportation, whether That be mill pond or some gathering point
such as railroad siding or fluming center. In the Northwest and in
some of ,he larger operations of the South, -articularly where rail-
road logZin, is involved, more mechanical methods are used. ?.eavy cables
are strung over a wide area and large logs are brought to the railroad
by means of electric or stee-m donkey engines and loaded onto the cars by
steam loaders. More recently cr.terpillpr tractors hrve been used in log-
ging to .n increasing ex-tent, one advantage being that it is less de-
structive to rerp.ining trees than the varLous cable methods.

The actual falling and bucking savingg up the felled tree into logs
of 16 to -0G feet lengths) have changed little from the original methods.
One of the later developments is the use of a portable gasoline saw for bet
falling anr.C bucking.

All o- this involves a higher t-ne of labor,with a consequent higher
stanmd-trcd o." loLvi",; rn"C a higher waje rate. However, the significant divi-
sion betwe': -D r,'-:ill anr-d loginig lrbor is its method of living. Loggers,
for the .:t-o *.rt, are by necessity forced to live in camps which can be
moved pbo-.t fy7ai dne center of log, ing to another. With modern methods
it takes but a chort time to log all ths comiiercial trees on quite a large
area. It is not feasible to have those engaged in theee operations living
too fnr from their work. Therefore there are. very few permanent living
quarters to- log-ers. This r.erns, of course, that they are, forte most
part, uruia'rried rand more or less transient in most of the producing areas,
Where loj ,:'. 2r&.S are more or less contiguous to agricultural areas, as
in the oi:':Lh -r -,pnalachian Region, logging labor is more or less inter-
cha.ngr-' c .'/- that of agricultural labor and there is no clear-cut divi-
sion 'rip ,'. most loggers working "'art of the year in logging opera-
tionr, -.z i2'ir permanent residences on the farms in the neighbor-
hood.

S-tvrr.il!l eo-:-hers rn.y be likened, for t;.e mort part, to ar." other
factory l.br,,in in the western area: the, are less transient, than
logge-rs,

Ir T Se Sr uth negro labor nre1om.irat.cs in both sawmill rnd logging
opera-.. .. .- vc.r he-5 the negr:" inbcLr ir the Lumber Industry, partic-
ularly V.... *-: o;:,is, can hardly br set apart from the agricultural
negro it).jr of the- So-utl-, of which it is also a part. Likewise, sawmill
labor in Cie So'm.h, although: for the most part negro, is somewhat similar
to all factor- lC..or mn thf South. The fact that such a great percentage
of labor i. the -5r-.nth is negro labor, and that there is considerable
difference in 'upe density of the timber stands of the South and those of
the West, lede to the important differences in Code wage provisions and ga
rise to the important lnbor problems of the industry.

8. Lumber Uses

The consumers of lumber may be divided into three general classes,

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First, and foremost, is the Construction Indust:ry, including railroads,
which cons-a:mes apmroxinatelv 65 to 70 1cr cent of the total. IText in
importa-ce are the Wooden Pr-.-zae I 0.,,.st'ies, including boxes, barrels,
etc., which industries coysuixr- fr:o.- 15 to '.0 "-er cent of the tol,!. The
balance goes into other i;.'ustri-.l v.s--. of varied sorts. ThI-us it may be
seem that the most imni-iort.nt .2netc.Ain.'.t of where luxmber is used is the
volume of consti-r.ction in diffk--rent .la.ces an -,.t different times. This
also me.ns ,.-t lumber is us-cd to the gre..test extent in centers of pop-
ulation. On the other tpnd the .re,.test centers of merchantc.blc timber
lie where &hare is t'le least --op-ultion. This involves an ir-mortant
factor in zcrketing.

At the outset it w,-.s st.ted. that the industry r.-may be divided between
the har,,ioods Pnid soft'.:.-oodls. I. t-'e softv-oods, industrial consuLmption
aside froa wooden pLac]c1^es vq-iou-nts to -n iniisignificant factor, perhaps
not more then two ner cent, wood,'-n mac':ages about 1.2 per cent, andi con-
straction rmI r-ilroads bout 75 pe: cant.(*) Construction luinber as
used here includes -)laniin; mill --roC.ucts .and milliwork used in buildings.

The softwood areas of t ie .nst andJ. South are so located that their
shipments to Ghe centers.of population of the middlee Atlantic States must
be by railroad. The Western forests, on the other hand, being located
on the coast with its harbors, require very little transportation to
waterside, thus offsetting the apparent nearness of the EZ.stern softwood
areas of -roductiOn to the centers of population, and bringing: about an
important comtetive condition. The combination rail and. water rates in
the West ,ar:-es this comnretition more acute.

9. Production Costs

This competitive transportation factor repcLes into production,
which ma-es the cost of production also ,n inToortcnt factor in competi-
tion. The cornarison between t'.e cost of production in the Southern
Pine Re:;ion and the Douglas Fir 2t_,ion is as folo7ows:


D ou'l -.s Southern
-ir Pine
Pi feet Pe-r ii feet
(r'.-'r Ce.t) (Per Cent)

Sturrpage .a . . . . . . . 13.1 17.6
Lo.,in: and. mill l.bor . . .. .27.6 30.9
Oth'-er loc. i.Lg and mill cobts . 35.5 25.C
Shippi-, .;i. selli--.,: labor . 5.7 6.3
Ouher sLhi pi.v: an: sellic.... ..... 6.3 4.d
Officers a'nd ovnr-ers1 pay 3.) 4.,l-
Ad--.iLi strative over . . 11.1.
*100.0 100.0



Table XLIII


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In view of the ride difference in the type of labor employed
and the dissimilar conditions of operation, the similarity of the
proportionate relation of costs between the tr7o areas is remarkable
and indicates that methods have been worked out to meet the conroeti-
tion rather than to take the greatest possible advantage of the area.
The importance of transportation as a competitive factor is reflected
in the breakdown of the selling price of Douglas Fir and Souther Pine,
which shows that manufacturing costs are 46 per cent, transportation
costs 30 per cent, and distribution costs 22 per cent of the total
price. Thus in spite of the comparatively small selling margin, 22
per cent, the manufacturer received less than one-half of the consumers
dollar. (*)

10. Transportation

The chief means of transporting lumber has been by water and rail.
The use of trucks in lumber transportation is a comparatively recent
development. Water has always been considered the most favorable means
of transportation because of the bulkiness of the product, accept for the
finer grades of some species easily damaged in handling. In the 1870?s,
when canalization was making rapid strides in this country, this means
of transportation was used to considerable extent. In 1872 nearly
1,500,000 tons of forest products moved into the Hudson River from the
Erie and Champlain canals. The development of the railroads, of course,
brought about the replacement of canals to a great extent, as shown by
the fact that by 1907 the canal movement of lumber had dropped to less
than 250,000 tons (**)

In the 1880's when the center of production had moved to the Lake
States it was quite natural that water transportation should be the
chief means used, and this is shown by the figures reported for 1885
when 659,000,0oo feet of lumber were shipped via the Great Lakes and
149,000,000 feet moved by rail. However, as western railroads developed.
this olso changed, and in 1897, 379,000,000 feet moved by rail into'
Chicago, as against 89,000,000 feet by water. It is stated in the above
cited report that in 1885, 81 per cent of the lumber reaching Chicago
came by water. In 1913 less than nine per cent arrived by this route.

When the center or production moved to the South in the 1890's
water shipment of lumber to the lorth Atlantic ports was most important.
In 1890 out of 96,000,000 feet delivered by water to the port of New
York, 39.3,000,000 feet or more than one-third of the total came from the
South. As late as 1907 out of a total of 447,000,000 feet of Southern
pine shipped to New York, 224,000,000 feet were discharged from vessels. ('"



(*) Tables LI and LII

(**) Report on Transportation by Water in the United States, by the
U. S. Commissioner of Corporations1 part II (1909).
(***) Report on Transportation by Water in the United States, by the
U. S. Commissioner of Corporations, Part II (1909)


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-17-
However, after 1907 as the network of railways in the South
increased, rates competitive with water transportation were established
and the area closest to tidewaterd was logged out, which meant that as the
centers of production receded inland, the water-borne movement of Southern
pine on the Atlantic seaboard detre,-,sed to an insignificant amount.

The early development of the Lumber Industry on the Pacific Coast is
largely linked with water transportation. California was the earliest
market for the products of the Douglas fir region which, as has been shown,
lies west of the Cascades, north of the California line. Many M.ills in
the early days were erected for the sole purpose of shipping lumber to
California by water, and as heretofore sho,-n it wasn't until the comple-
tion of the ITorthern pacific Railway in 1882 that rail shipments figured
at all in the production of this arxe..

In the ye r 1902 something^ over 571,000,000 feet of lumber were
shipped from the State of Washlington by water as against 562,000,000 feet
byrail. Although production increased by 1906, there was a. slight change
in the proportion shipped by rLil and wcter, the former taking the lead.
Total water shipments in thc.t year amounted t( 1,100,0Cr,000 feet as
against 1,500,000,000 feet by rail. However, in the early 19201s the
shipments of Pacific Coa..st woods to the Atlantlc seaboard began moving "
through the Panama Canal in subtcntial volume. The year 1922 saw
1,122,000 tons of forest products going through the canal from the
pacific to the Atlantic seaboard (a ton equals approximately 800 board
feet). By 1926 this volume had increased to 3,312,000 tons. This de-
velopment of wr-t er transportation has been the most serious factor of
competition and has placed Douglas fir ona" parity with Southern pine in
spite of the latter's more favorable location with respect to consuming
markets.

The fact that trucks became a factor in transportation during the
period of the depression has been noted. This was chiefly due to the
increase in highways during the boon period of the late twenties, extend-
ing through the years 1930 end 1931. It is chiefly a development in the
delivery of lumber from the Southern pine area and Southern hardwood
areas to the M.id-Atlantic and Iforth Central States from the more nearby
producing areas to those locations. This form of transportation received
some impetus during the Code period, since in most cases, rith fixed
prices based on costs, the amount of transportation was the only competive
factor. Such transportation may have been further accentuated by the fact
that throughout the entire period of depression purchases were made in
minimum quantities. Minimum quantities could be delivered by truck at a
much lower cost than the less-than-carload rate generally applicable to
lumber shipments.

11. Distribution

In the early history of the industry, with the small output per
day,mills usually sold their output in their immediate locality. Lumber
was used close to its sourra of production since centers of population
and the centers of production were not s: widely segregated. As villages
grew into towns and lumber output increased there developed the retail
lumber dealer. For many years the retail lumber dealer was the sole
distributor of lumber products. In those 6arly days the retailers
field was considerably broader than that of today. Evidently there was


9813





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some competition between mills selling direct, within a given retailer's
area and the retailer, for it is recorded that in 1850 a convention of
lumber retailers protested against manufacturers selling to their cus-
tomers -- undoubtedly the local builders.

Not only was there an increase in the number df individual retailer
but with the advent of the large band saw mills, with their enormous pro-
duction, such mills established their own retail yards in the newer
towns and cities.

No records are available as to when the wholesaler entered the
picture but it is quite probable that with the demand for larger and
larger quantities a distributor might require the output of a large
number of mills. Further, the number of retailers had been growing at
a rapid rate. All of the new towns which sprang up in the last 25 years
of the nineteenth century and t he early part of the twentieth century,
due to the development of the new transcontinental railroads, resulted
in an excess number of dealers when such new developments fell off.
However, during the period of this development, retailers, due to their
number, had no access to all possible sources, and it is quite probable
that the earliest development of wholesaling was that of the establish-
ment of distributing yards to serve other retailers who were established
In the larger cities. All of this is very much in the nature of surmise1
since no historical records of these developments are available.

Records do show that the National American Wholesale Lumber Asso-
ciation reported 573 members in the year 1928, and estimated that in
1933 there were approximately 1,458 persons engaged in that business,
although there ware only 238 members of the Association. Roughly it
may be estimated that during the boom period of the late twenties there
were approximately 2,000 persons engaged in the wholesale business.

The term "wholesaler" may be applied to various types of dealers.
Little is known of the development of each type. However, the original
type, which still functions, was the wholesaler who sold only to re-
tailers requiring the output of several mills. This type of whole-
saler maintains regular salaried employees who call upon the trade, and
is distinguished particularly by the fact that he supplies credit to
the mills, ofttimes financing some of the smaller and mediumsized mills
through a contract arrangement whereby he disposes of their entire, output
It is cQuite probable that with the development of the lumber market,
which occurred at a considerable distance from the sources of produo.-
tion, the smaller mills had fewer facilities for disposing of their
product andvere forced to turn to this type of distributor rather thaA
sell either direct to consumers, which at best could be only local con-
sumption, or to retailers at distant towns an( cities.

Coincident with the development of this type of distributor was
the establishment of distribution yards. Such wholesalers maintained
central yards within a given area from which they could supply smaller
amounts to the local retailer and furnish quicker service than could be
obtained if the retailer had to depend directly upon the mills for hisb
source of supply. Many mills, particularly of the larger type, also
maintained such distributing yards in principal centers of consumption.


9813




-.19M


A third type of wholesaler came with the development of large
buildings. It became a prent to contractors reouirian- 20 and more
carloads of lumber for a single project that they should be in a
position to purchase their requirements either from wholesalers or di
direct from -he mills. The older esztr.blished retai ers, as shown here-
tofore, have always co.isider.L. themselves t- ba the rain contact be-
tween the consumer and the source of- su.:-ly, whether that supply be
fromtho wholesaler, distribution yard or t ha mill. Naturally such
retailers were at all times under vigorous o.:,osition to wholesalers
who acceded to the demands of the large builder in supplying such build-
er's needs. Quitenaturally they used every means at their disposal to mai
maintain such business, and their principal m.ans was the boycott of
wholesalers or mills which en-m;ged in such de lings. TDiis led to the es-
tablishment of wholesalers, '-ho defended in the main upon the business
'of large contractors and other large users.

There has also developed in this industry, a s in most other manu-
facturing industries, the broker and the commission man. There is
very little distinction between the two, the principal distinction being
the fact that a commission man usually aligns himself with one producer
and represents that producer in all his dea,-lings, whereas a broker feels
free to sell lumber on a commission basis, transferring the order to any
producer he thinks can fill the needs and -.-ho can give him the greatest
advantage. Brokers, as a rule, are not expected to supply credit to
either the producer or t he buyer, but merely to act as an intermediary
between the two.

12. Improvements in product

In the early days of the industry,--.ith the inadequate facilities
of the lumber mill of that time, it is but natural that the product was
rather crude, being but a slight improvement over the hand sawn product.
Dimensions were irregular and there was an inadequate knowledge of the
properties of the various species, which led to considerable misuse of
lumber. Prejudices gre': up which had no foundation in scientific fact.

The first step toward improvements in lumber was a realization of
the importance of the drying process. The water content of lumber
determines its shrinkage; hence when green lumber, that is, newly cut
lumber, is used it may shrink considerably upon drying out, causing
the product made from that lumber to become loose and function improperly.
In the early days air drying was the principal method used, a method
which is in considerable use today and is, in many cases, the cheapest
way of curing lumber. However, to improve the product and to make it
usable as soon as possible after sawing, the establishment of dry kilns
became common. Kiln drying is merely a method of drying the lumber by
heat in buildings built expressly for that purpose. The process, con-
trolled to prevent too fast drying which "'ill warp and check the lumber,
enables the producer to accurately contr-l the 'rPter content of the
product he sells. This process is aIso i:>-orttnt in the competition
between the small mills and the large nills. The small mills, with
inadequate facilities or a smLll production which does not warrant the
investment required fori dry kilns, produce, on the whole, a poorer
product than the large mills.


9813





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The investigation of the properties of wood was a further step
in the improvement of lumber. It was found that various pieces from
the same tree had properties different from other pieces Also, the
effects of knots upon the structural properties of lumber and timber
were measured.

With these refinements came the establishment of grades. Origin-
ally the knowledge of hardwood grade was kept from the consumer. It has
been stated by a prominent hardwood lumberman that one of the earliest
conventions of the hardwood lumber producers was marked by a vigorous
fight to oust one of their members who had disclosed some of the se-
crets of grading to One of his customers. This tendency to withhold
grades from the customer, which allows manipulation by unscrupulous
dealers, though deplored by the majority of members of the industry,
has so far failed to become of sufficient moment to the producers to
induce them to mark the grade upon the product except in some instances.
There has been, however, considerable agitation for grade marking in
the past few years and grade marking has received considerable impetus.

There have been a few recent refinements in sawing lumber. However,
many of the old prejudices remain, and for general competitive purposes
the buying public has not yet been educated to the point of demanding
individual quality. Hence there has been no encouragement to individ-
ual producers to improve the quality of their products.
I;
As yet the properties of the producers rather than of the con-
sumers, which makes lumber a product that competes within certain class-
es chiefly on price, the general species of softwoods being considered
competitive with 6C&bh'other.
tL
13. Other Lumber Products

Up to this point the discussion has been confined princi-
pally to the production and distribution of lumber, However, the
Lumber Industry under the Code considered itself as including woodwork,
hard'-ood flooring, veneer and plywood, dimension, and wooden package
producers.

Woodwork is generally considered to include planing mill
products, that is, such items as molded pieces, sash,doors, frames,
and'other products for building requiring more fabrication than just
plain lumber. Woodwork, in turn, may be divided into two branches
namely, stock millwork and special millwork. Stock millwork is con-
sidered as the product of those producers who manufacture, sash, doors,
blinds and other millwork of standard dimension, including, of course,
molding, which, in most cases, is manufactured directly in connection
with atwmills and is usually stock. Many large sawmills ,have woodwork-
ing departments for the production of stock millwork.

Special millwork has no defined limits; there is no
point where the craft of cabinet making is separated from that of
special millwork. Special millwork, besides including sash, doors and.
other building products not of standard dimension, also includes special


9813




-21-

snapec and carved work wherever t-.e r:riLcer of such millwork feels
that he is able to ;rodace it. T e fact that there was no such defined
limit wis t-.e source of the o.:i,1,L .LttatL jurisdictional dis-ute during
the entire ccdal period .as it c onc.?rined tie LvuTiber Industry. yIoay of
these -roducts, which are mn de t c. zrder chiefly froili architects' seci-
fications, are i.aade in s c.--nnectc-.' with retail lumber yards.
However, such shops cmn -r7c.C.u c t-e r-nuire.ients for only small pro-
jects. Thle large building project rec.airing special vwocdwor: rmust
look to the large F, ca. -b'. .e ,f .-,rod'.ici;. such. iucI_ of this is
done in factories _.h o rinci' -L o-it_:.ut is tihet of stock millwork.
i-Hence it beccnes ',trd t- strictly: ,ividle th-e entire woodwork industry
between sawmiills, stock riillwork --r'1,,ucers and s-;e'cicl millwvork pro-
ducers. Some mil.s "re capable of pr-ducin, the most intricate of
woodwork deGigns, while other inil .' s .'o not extend beyond planed-1Iunrber.
Tiere are some stock mi]..work 'rc. ucers and, indeed, some special'
millvwork pr-cc'.ucers -amon; th:e gj-'1o2s VithL s:,aller shops, wIo, if given
such an order, would hrLve it execute(. in larger plant capable of
more economic ;rocluction.

hardwood floori-i., -r,- '..icerF h-.ve for a long time been or-anized
as such, due to the fact th't tLi- ?:-oduct is made on special machines.
It dJes not follow th.e--usa-.l ch'anne1.s of distribution although most
lumber dealers stock hardwood flo ring. having' a larger number of
grades and the methcc-s of ,roducti.:n and distribution being different,
hardwood flooring hl.s generally been considered. a separate -p.rt of the
industry, -.lthougi its b.ase prchtct is hard(.wood lumber. Due to the
fact tha,.t hardwood flooring is produced in special machines, some of
it is -nade by those en,- ed in prod-Licing flooring and not lumber.

There are three general brcnc.es of this industry, namely,
the oak flooring producers, VwhoCse -roduct is oak flooring produced in-
an area w'iich centers around heonhis, Tennessee, and extends through
the Appalachian and IT orth Central --.rLdwood producing states; tie
maple flooring prodacer-, locatee' c iefly in tie vicinity of Cadillac,
Michigan, with 'a production aiicantinLg t: a_,p.-roxi,. lately 80 percent of
the total used, about 15 percentt being produced in the New England
States and a small -u cunt in the S-uthcrn St.tes (however, the maple
flooring industry considers itself chiefly a Lich.igan producerr; and
special flooring -roducerj v..' are en gmged. in poducing made-to-order
types of hardwood flooring.

Both veneer and plywooOls :.re produced by mami'.facturers who
are very closely allied with the Lum-ber Industry in view of the fact
that they are -roduced direct from the log rather then from manufactured
lumber. Tis is a newer part of the industry and represents the most
economical utilization of the tree, t-ie veneers being sliced off the
log in thicknesses of one sixty-fourth to one-quarter of an inch.
Then two or more layers of such wood are glued together they are called
)lywood. Thie finer ancl. mere decorative woods are produced in this
manner and for such thin,;s as furnritror. are r -:.lj corn-etitors of solid
lumber. Among those saw-nill!s tr,-.t -,ls:. -'r'.ce veneers and plywood
the princi-al reliance is en sawd lumber. ?;,o:d, particularly, is the
one part of the industry tl-t it Jr...wiig, since new uses are being found


9813





-22-


for this product in late years. As a competitor of solid lumber,
Ilywood, although producing an increase in dollar volume for the amount
of tree that it uses, may be largely responsible for decreasing the
Amount of solid lumber in industrial and construction uses.

The next most important Division of this industry is the
Wooden Package Industry. This branch of the industry is further sub-
divided 3rincip.ally into the Sawed Box and Shook Division, the others
being such Divisions as Plywood Package, Egg Case, Wirebound Box, and
Wooden Pails and Tubs. It has been stated that wooden -packages
re-resent am-roxim-ately 15 to 20 Dercent of the entire lumber -roduc-
tion. In some Divisions of the Lumber Industry, however, as, for
instance, the Western Pine, 33 percent of the production goes into
wooden boxes and shooks ("Ishooks" is the term applied to the finished
pieces that go to make up the wooden box). This product is preponder-
antly man Lt'rod in factories connected with sawmills and is an out-
let 'or i;n." ~.e lower grades of lumber and the -)oorer species of
timbri-^.

1-" 1.?.' out of a total of 18,3536 producing plants, 792 'ro-
duced woo.r-' L.T rcjducts. The Wooden Box Division is also the more
seasonro..o I .'l-rr J' tho industry because a greater part of its products
are used "r sni'."'ing .agricultural products, and the season therefore
follows t k- harvest season.

The independent establishments in the manufacture of wooden
crates, boxes, etc., are located chiefly in the East and away from the
lumber producing centers. Such plants purchase their lumber, usually
the lower grades, for the manufacture of the various ty-es of boxes
and packages for industrial use. It is this part of the Wooden Box
Industry that has been. the hardests t hit by the substitutes pa-per board
and paper boxes, the "aper box field having not yet been extended to
include agricultural products in any substantial amounts.
a
Another Division included as a Dart of the industry, chiefly
because the productt is manufactured in connection with sawmills, is
that of the Kiln Dried Kardwood Dimension Industry. By hardwood di-
mension is meant both the cutting and shaping of wooden parts used in
industrial processes. This branch of the industry lays an important
-art in the application of wood to industrial products, an illustra-
tion being the Furniture Industry. Wooden parts for furniture, in
fact entire peices of unassembled furniture are now manufactured in
sawmills, the only process required to mcke them into finished furniture
being that of assembling and finishing.

This industry has developed rapidly within the past few years,
chiefly because it represents a methDd delivering wood products nearer
to its point of distribution with less waste. In some instances as
much' as 40 percent of tie lumber used in the manufacture of various
wood products represents waste. The savings from making finished parts
nearer the 3oint of lumber production, and the avoidance of the shipping
of waste products, represent a considerable saving to industry. This
development is a further step in the integration of the industry and


9813








seems to hold the chief hoes .fi t..c.t industry in maintaining a higher
ratio of hardwood luromber consuv.rticn.

Practically .al1 of these -.u::ili.:'ry Divisions, while not
contributing very signi'icantI: to the basic -roblems of the Lumber
Industry, were included uneor the Code, bringing with thiem all of
their ;.iinor problems to co:. 1 ic".te thie opera.tin of the Code, which,
in the first -place, was xc intend toward. thLe solution of the problems
of the Lumber Industry.

B. SCOPE OF DISCUSSICI

To sum un, the broad b'o.cLground of the entire Lumber Indus-
try as it presented itself u- to t.e time of the Code has been out-
lined here. The :,ur 'oLe of Code action was a solution of the Droblems
of the industry. From this )oint forward the discussion of these
-roblems is Cdivided into the following fields:

First, the b::..ic problems of st-nding timber, which is the
base of thie Lu-nber Industry. T'-ese problems concern themselves with
volume, location, ti.iber ovnership and value, and costs of holding,
and efforts at conservation -- in fact, all of the -problems of forest
mana.gemen t.

Second, the >roblemrs of production. These, while closely
related to species ond t.ie -roblems of forest mana.geminent, are also
concerned with special problemss revolving around volume, costs, labor,
caxicity, capital, credit, etc.

Third, the problem3s of distribution. Involved here are the
factors of cor-petitin bct-i rejion.l anC species, the demand factors,
the problem of substitutes, -rices, transportation costs, etc.

Fourth, a resume of the attempts :to meet these problems
through, the mediumum of a code rf fair competition ond an analysis of
the operation of that code, and

Finally, the -present status of the industry and issues re-
lating to its future needs.


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CHAPTER II

THE PROBLEMS OF FOREST MA.IxG7ZI.1'T

Forest mr-ne;ement has a vide range of meanings ciepencing upon the
ournoses underlying it. Thus in commercial forest menigement there is
a tendency to stress. thile principles of profit and maximum production,
whereas in ouolic forest management special emphasis is usually> placed
unoon the -)ri-Liciples of sustained yield and highest use and service of the
forest. The Society of American Foreste-s defines it as follows: "For-
est management is the practice or application of forestry in the conduct
of the forest business."

A. TIMBER SUPPLY AND LOCATION

Like all natural resource industries, the successful development and
management of the lumber and timber products industries are dependent
upon: (1) The location of ra, materials with respect to consumer reauire-
ments; and (2) upon the form, character, volume an. accessibilit-: and,
therefore, cost of material in a specific region which would permit its
use or conversion at a profit.

These de-endencies involve problems of cutting, of transportation,
of competition. with similar -rocucts ncd. -os-,ible substitutes, of costs
of rar materiz'.1 and conversion, and of derianal. The suppirl, location, and
other characteristics of the -orirci-al kid.6s of timber available for con-
version into useful nroC'ucts are describeC in t-is section.

1. Present forest Area

From the original forest areas' of more than 800,000,000 acres, ap-
proxima.tel- 304,000,000 acres, or 3C oer cent, have been withdrawn from
commercial timber -ro-7irg. This -ithcralal is mnde up of 150,000,000
acres chie'l- cut to clear land for farms in early days .Pnd the timber
destroyed becr.-use of no market; 10,000,000 acres of reservations, -arL:s,
preserves, etc.; end the balance cut over for timber and subseauentlv for
use for other purposes.

The conversion of forest land into farm lane is still ;oing on,
particularl-, in the ".est, '-here the removal of virgin timber of relative-
ly low present value for com-iercial purposes releases good. soil for farm-
ing. It is estimated that eventuall-> some 2,000,000 ncres of connercial
forest land in the 7est -ill be removed for this oDurpose. In the East,
however, an o'oposite tendenc-y is being ma&-ifested. on a major scale, for
here farms are being abandoned and becoming increasingly available for
forest use. Already some 52,000,000 acre. are estimated to be so avail-
able, and it is estimated that from 25,000,000 to 30,000,000 additional
acres of abanConed farm and other lands m-" be vg.ded to the commercial
forest area by 1950. Further, 3,000,000 acres of treeless prairies could
be planted if the need for increased for-st area develops. This acreage
of abandoned or potential forest area, on account of its variable ouanti-
ty, is not considered in this study.,
I

a. Commercial Forest Area

The remaining 495,000,000 acres left of the original 800,000,000
9813







acres of forest a-ea, a"ter da-.uctinc the 304,000,000 acres cited above
as withd.rraT. from co;..,ne-.-cil timber irorin, constitute the present com-
mercial forest area -.n-. cnco-i_)Vs: the follo-"in" discussion.

The South contains the :'r;e-t arer- of commercial forest lanes, ,7ith
a-p-oroxiir.-tel'- 40 ')er cert of the total for the Tjnited States. The Pacific
Cost re1'ior. ranoi nc:.:t, vith a little over 13. per cent; closely followed
b-r the Central re iorn '7it- about 1'5 oe" cert; and the Lake re:-ion, with
sli,.-ntlA, over 11 *o- cent. These four re, ions contc.in about 76 oer cent
of the tote.l commercial forestt area. Tho iidcle Atlantic region contains
the smallest corea, o- chboat 5 per cent; .,'iile the other three regions,
Ke-' Ennlanc "-ith E' ?vr rent ancT the 1'orti v'na' Souti 2och:" I.outains 'ith
7 per cert and 5 :er cer.t, re'moectiveL-, possess thie rest of the acreage.(*)

Ap-9ro-:imntel-- ,...O",000. acre, or, 7, per cent, of the cormercial
forest lrnC.s !.ie e o-t o: ';he -reet P.L'i.-s '".ith tihe balance stretching
w,'est"-Err f-on th-' PGi'.- :.S7.ttain .

A'o-t 33 .,-' c,.,:t o- the total corm ercir.l fore t rF" of the United
States is chrot t.. :."Q : o trees lasrce en.oi.'i 'or sop lo.j', in accordance
.'it-i Drev-- iln -1.c.-in- r.i.illn-'n %-)rc'.ctice, am.d ic therefore designated
as srw-timnber a re. et t -is Frea, r57 oer cent is located eait of the
Gre.-.t Peir.s. Here n-. the Sou.tf. leads i.- this tv-oe of land, claiming
'0 per cent of t.i-e ota"., while e the Pacific Coast ran':s next 'ith 23 ner
cent. The L,-e St. t-t-r c :.tai n the least :eva-tinber l1n6, or a'oprox:imr'telv
3 poar cent of tae total, -"obllo'e o t,., '.id.le Atlrntic States Ith about
4 per cent.


(*) Throm t thi^ re-no-t in rics.si;. til&ber or timber lpnds vtrioUs
reg.:ions cre refr'd-e to rs fol.o-s:


Ne En- -nland

Connecticut
Llaine
IMascachusett r
Tew Hme 1noThi re
Rhode Island
Vermont


Mi d Ie Atlrntic

Dela,,are
A arylavnd
Fev Je-'sej"
i-e"' York
Pe 1.!-iv.. i ri


Lah-e


THi chigan
!innesota
ITorth Dcl-ota
.i sconsin


Central


Illinois
Indiana
Iowa
Kentucc cy
Mi ssouri
Ohio
Tennessee
,est Virginia


South


Alabama
Arkan s, s
Florida
Georgia
Loui sian.
i ssi ssi'oii
1orth Carolina
Oklahoma
* South Carolina
Texas
Virginia
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Pacific Coa-t

California
Ci.r .' -I1
rTaF'. lriton


I._ "ocky L1t. S. 7.ock- lit.


I taho
:,Iont&na


Ari z ona
Colorad-o
-evada
i er! 'exico
South Dakota
t ah
yornmin':


4*' 4 "


j4 4 i
4* 4 -^


4 *





-26-


T',entv-four (24) cer cent of the commercial forest lands containn1 -,.
trees too small for san, logs but lprge enough for cordnood, rezp.rdless
of whether the stand is to be cut for cordvooC or held for saw timber. '-"
As rould be expected, the states east of the Great Plains contain most of
the cordrooe. areas, or about 85 oer cent, due to the foct that a greater
jrooortion of the virgin timber in the East has b .n cut over, thus re-
leesing the lands for second growth.

The bull of cord'.7ood lands, or 44 per cent of the total, a'e located
in the South. 'The Central States come ne7:t, v-ith 21 -*er cent; followed
by the IidCle Atlantic and Lake States rith 9 anC. 7 er cent, resoective-
lv. e'-- Englar.d has the least, a-o:)roximatelv- 4 -per cent, end the other
three regiors possess approximately 5 per cent each. The relatively
smr.l1 cordC'ood. area in the Pacific Coa.t States is due to the high per-
centage of virgin s,'vr timber oniheir total con-iercie.al forest area.

'estockinf are,-- com-arise IrnLr tt'.at once sur-Yorted a stand of tim-
ber and '-'hich rre no'- bein.- renewed. The bulk of this newv ;ronth is
smaller than corcv.'oodc. size. ?rir to srtisfactolr restocking areas, ac-
corc.inz to present stanaCrds, ma be defined as lands 40 -.er cent or
more eestocke. -ith commercial species, rhile areas "'ith lo',er "restock"
percentage are considereC roor to non-restocking areas.

Restocking lends constitute about 37 per cent of all commercial
forest lands PrC', as is to be expected, the' ,re found in those regions
hereee the lerrest volume of lumber aes been produced over a considerable
period of time, nemelv, in the South and the Lrkc States. The Souith
contLins over 80,000,000 acres of such area, or 16 per cent of the total
commercial forest area of the entire country. Of0 this amount nearly one-
half is conridereC fair to satisfactor-" rroro6uction. The Laece region
contains restocking lands -umountirng to 8 per cent of the total commercial
forest lands, -,'ith 67 per cent of tlem fair to satisfactory,. '-

The eastern regions contain nearl-r si:. times r.s much reproducing
area as is found in the western regions, -nc6 the proportion of fair to
satisfactory restocking lands to total restockinv. lands is much greater.
Reproducing areas are in the best condition in the 1'e': Enkli:nd aind'Centra
regions, ap-oroximately 70 per cent containing ; fair to satisfactory re-
proAcction. The poorest reprocaction is found in the South Rocliy Moun-
tain region, where orln 9 per cent of the re-nrocucing .reas are fair to
satisfactory.

It is apparent that th:e commercial forest lands of the United States
are, general' spe':ing, so "ict:'ibuted as to produce future supplies of
forest -roCucts :airlv close to lar.7e population centers, cnJ therefore
to e:xoected demand. Possible exceptions a.'e the Nei EnfTland and the
Middle Atlantic regions, where the expansion of forest industries to any-
where near their former cr.-pacitv mi ;ht necessitate the dra-ing of -oartial
future suonlies from tie South and -.7est. The commercial forest lands in
these t'-o regions, however, 'if int -.1 e'bl' .meanpeC, ma-, be expected to
-oroduce forest products 6on'si'deriably inii excess of their consumptive demands.,
Of course there may be a trend of future forest industr-ies toward regions
of abundant supply, a'.-ovemen-t -which- has characterized such industries in
the nast.


9813





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2. Forest Stand

From the standpoiit of future generations, the forest area now
available will furnish ruffficient i!rn for the 7ro-in,- of required forest
crons. For thle ore-ent ant in iec'iate "uture, the srv.i')lr of timber now
strrnein,-, its locL-tion "it.1 r-et--cct to tAc need. for forest o'oducts, and
its marketsbilit-r a-e of -rim,- concern.

In 1928, throu-rh the c cS'- :frel -i :c'arv Act, Con.r'.T s ;.tiorized a
national survey of ti.e FiLmber re-ource-, oa" the United St-te.3,. Its objects,
for the survey is not '-ct corv-.lete, are: (1) To ma'-.e .n invento-rr- of the
resentt supnlr of timber and .,t.ser ?crest -roc'.cts, C(2) to -,s.certain the
r.te of qrort' (..)) to cetermirine thie rcin on tite oet th-ou-li indus-
trial and other -.se', .an.: fro.-' 'ir-s, .isers. --, etc., (4) to .eterminr.e the
roresunt end. probable future reoairwen.t .'.'r timber .an.. o;her forest 'ro-
ducts, anr (5) to correl" t.-. e i i t. e:xisti..' r." ontici)ated
economic conditions.

Althou.,- tti.. fi.e.-l ork on over SCo ,,iOQ,,'C,, acres ha" been comnoleted
and subs;tantiai.]. rore-1? 2.. a: t-ie como.licated office raor: of1 this
national survey, no resul;"- .-e at rn-vrilIble for rWn-T ore state or 7rovrp
of states. The arer,, sta.,., ".ro rit c oac-tir-l c'ru.in fi T.res in tils re-
-port, therefore, have be:n -i I.-... -ue t.'urn : ro, U. S. _.ore-t Servic-
sources. (*)

Prelimin,-r-r end uiof-i'i!iFl e-tim t,-. _riner. framn iW? survey cited
above indicate th:t some oF t-.e Ft. nc : na fi.s.-ures token from tae
Forest Service reports pre too lo-r. It i1- b1 livee,, therefore, that the
conditions described anc' conclusions r-ecched in thii rerjort are conserva-
tive.

a. Stanc on Total Area

Products derived from t.u. :-cirosts a..e of r'icel'- v;.r-ri'i- character,
anc their unit volume is expressed in a niunier of ,.i.i'erent 'a -. Thus,
lunoer a.nd lots are e..-nre'-e: i- fet, ooarr-' ea..rue; ffel wood, uLlp
vrood, distill.'tion oaooC, -'.nd ot. ier conr:: "'oo ini cor': ; i'm:\;n ties, fence
oosts, staves anc. hooM-, -hi.-l.e-, rpole C Pn.:l ,i].in., 11 piecess ; round.
mine timbers, in cubic feet; an' .l&-c he- cdi.-g and. ti'-ht he.d.ing co-
operage, in sets. The on!-c,- -.iole cc--io.n cenominctor of measurement is
cubic feet. Chart II and TpLti. II sio" the total stand, e:-oressed in
millions of cubic feet, of vll forest p-rocouct- e.ti.nated to be v tandinR:
in tree form on the a,,oroi0,te. .9,,C,0000 ..cres of commercial forest
1ir nd.

Fift'-si:x (56) per cent of the fo.'est st-nd of the U'nited States is
in the West. The Pa.cific region, '"ith 39 o-.r cent of the total, hrs the
largest stF.nd. The South is ne--it, ith'. 213 )e cent, and the Lake region
last, -'ith 4 pIer cent.

(*) U. S. Forest Service. The Forest Situ':.ion in the UJ.-ited States;
a soecial report to the Tirnbe- Conservrtion 3ocrc., Jn.:ue- 30, 1932;
and Senate Document 012, A i<"tional Plan for American Forestrr, 1933.





-23-

Softr.ood comprises aboat 74 oer cent of the total stend in the United
States. In the eastern regions 40 per cent of the stannd consists of soft-
rood, and in the western regions prectically 100 per cent is softwood.
Hard-:oods predominate in the Few Englar.d, Middle Atlantic, Lake and Cen-
tral regions. Only one region east of the Great Plains, the South, con-
tains a greater volume of softw7ood than hardwood.

b. Stand on Saw Timber Area

The strnd on the sae-timber area comprises 75 per cent of the total
United States stand, with hardwood predominating in the eastern region
and softwood in the West. Eightyr-one (01) per cent of the total stand
on the sa7-timber area is roftuood. rThne stand on the sm"-timber area is
further discussed in terms of board feet, under the caution "Saw Timber
Stand."

c. Stand on Cord'7ood Area

The stand on the cordwood area amounts to 20 per cent of the total
stand of the United States. About 81 per cent of it is located east of
the Great Plains. Thirty-ei.-ht (38) per cant of the Eastern total and
99 per cent of the :estern total is softwood. The Souta has the largest
cord-nood stand, i. e., 39 per cent of the total, of rhich 61 per cent is
softwood. In all of the Eastern regions, e::cept the South, hardwood
greatly predominates in the cordnood. area.

d. Stand on Restocking Area

The stand on the restoc'.inc; area amounts to 4 per cent of the total
stand in the United Strtes. (*) A breakdown of the restocking area into
soft-ood .,nd hard'7ood. is impossible from existing data. Of the various
regions, the South a.ain leaCs in volume of stand on the restocking area,
vith 42 per cent of the tot 1 volume. The iTorth Roc.:-, Uountain region
is next, with over 14 per cent, followed bv the Pacific, Middle Atlantic
end Ne- England regions. The South 2oc, if Mountain region has practically
no volume on the restockin! area.

e. Sa- Timber Stand

From the standpoint of both the lumber industry and the public, the
amount of sa- timber, its character, and its avail-bilitr are forest
management problems of fundamental iinortance. Not onlr does the swunpl'r
of sa'7 timber take care of current lumber and other important reauire-
ments but it governs present and oosible feature competitive conditions
for tne industry, and forest products users. Chart III and Table III show
the present san timber stand of softwood andc hardwood andC the various
classes of o'mership.

The saw-timber stand in the United States is estimated to be 1,667,-
803,000,000 feet board measure. Of this 59 per cent is privately owned,
and the balance is owned or administered b-r the public in the formi of

(*) Omits data for Lake region, which are not available.


9813




-29-v


national, Inrdian, sttco, count-r, nrId municipal forests. Of the nrivatelr
o'."neQ. timber 38 per cent is o"ne, b" land, lumber, uulp and paper, and
mining com-oanies; naval stores o-)erato-"s; railroads; rnm. miscellaneous
individuals anc. a-encies; mnd the o.dance byr farmers.

All of t-iis supl" is nrot imnrieCiatel-, available because of Door lo-
cation ,ith respect to trans.:ortr.tion facilities, densit- of stand, com-
"oosition of stand, and other actors. 0Cbvio-isl-r its complete conversion
into forest oro6ucts is governed br the ,illinrgnes. of tLhe -)iubl.ic to na'r
t .e cost of getting out the mor? inaccessible )ncF scattered timber.

Availability ih the "est is illurLstrated u, the State of California.
In a Etu.dyr of the timber situations. in that state in 1914 the couestion of
accessibility was carefull- consic.erer.. () .'or ourposes of the study,
the state, outside of the red'.oo,: rT-i '1,- ""'as diu'tided up into three zones
of accessibility, in which the !o;."ir." costs "'ere estimated. at 6.50 per
M feet or lesa for Zone 1, $6.50 to ,9.50 for Zone 2, and over P$9.50 for
Zone 3. It vas founc that '31 per cent of the total stand, both oubliclb,
and privatel- o,-neC, ,7as av.il..ole at $5.50 or lese, 46 -er cent at Zone
2 cost, and the orIn.ice at Zone 3 cost. In 191-1 the averuzie loging cost
for 20 representative nino- miills in California "..s -..'4 ,ner i feet. In
1934, however, accord.inc to ctrI titic. -"urn .' sociation, average lo-' in-n cost in the -ine re.:ion of Californit '"7as
$8.61 per I feet, or still '-ithin the Zone 2 cost limit of 1914.

The average price reczlve6. in 191: b- the 210 representative nine
mills in California fo- thei' .,roCact f.o.b. s-ii.ii.,i joint ''r $16.03.
Althoui ave-2ge rice fi-'ir.; for 1211. mre not .c'.wilable, avera-e -prices
b- species f.o.b. ship.oi:- ,oint are reoortec bLr the Testern Pine Asso-
ciation Es veari-.. from about 315 to aoout $41, "ith an estimated average
for all species in the nine re-.ior of California of '-3ro::imately $25.
Thlius, the log7ingr- cost in 114 -'ns 7:7 -er cent o: thle selling price, or
substantiallv the sane r-a:io ,.-. 1'. This in.icates that as losing
costs increase due to rola'ive i...'.ccessibili -W, either soe!l.ing prices
increase or the ororuct is sol.' beloo, cost. Further discussions as to
the effects of either of tnese courses 'ill oe found in a later chapter.

Another -oroblem incident to for- st m-n-.Tm?-nt lies in the trends.
away from lumber as'a orimary forest -.',roc.uct and toarc" -iaterial that
can be converted into r; -nil Ln. .ien ma,.e into a variety or )roC'uctp.
Timber difficult to ;et out in lo.. form ma' bi, e.-oloite, in cordwood form,
which is more suit-.Lle fo1'. ulo conversion, and at a subst; ptially longer
cost than that required for the removK1. or s?'" lo's.

Of the total sar-timber su-)pl.-' 39 ijer c:nt is softwood a.hd 11 -oer
cent hardwood. About 83 oer cent o: the total cut during the -,)eriod 1929-
1934 was soft-ood. It is thus seen that the relative demand for softwood
and hardwood is i-n about the same proportion as the suonl-,r of softwood
and. hardwood sa'- timber. (**)

(*) Smith, C. Stonell, As'istant District Forester, "The Lumber Industry
in California; a.n .unpubalished re-oort of th-ie U. S. Forest Service.
(**) Table V (a) of tbis report.





-30-


Seventy-nine (79) per cent of saw timber is located west of the
Great Plains. Of this practically all is ooftwood. It is strikingly
evident, therefore, that the bulk of softwood saw timber is not-in close
proximity to the centers of population and demand, as is hardwood saw
timber. However, the location of softwood on the Pacific Coast makes it
possible for producers to take advantage of water transportation through
the Panama Canal, with consequent shipping costs low enough to permit
considerable back haul by rail from the Atlantic Coast before equaling
the all-rail cost overland if the haul were made that way. This faVor-
able freight differential, together with the relatively larger timber
and denser stands on the Pacific Coast, has made it possible for Pai-
cific Coast lumber to compete successfully in the East With lumber pro-
duced close to points of consumption.

It is not necessarily unfavorable to have timber, the raw material
for certain forest products, raised under conditions of maximum growth
and at lowest cost and to have the material transported considerable
distances to the industries requiring it. The important matter is an
adequate supply of suitable material at reasonable cost to the industry
or other consumer making use of it.

The Pacific Coast region contains the largest stand of saw timber
(62 per cent of the total iht the United States). Of this, however, less
tnan three-tenths of one per cent is hardwood. The largest supply of
softwood is in Oregon, followed by Washington and California. lost of
the hardwoods in the West are found in.Oregon.

The next largest stand of saw timber, approximately 12 per cent of
the total, is in the South, with 61 ?er cent softwood and 39 per cent
hardwood. The North and South Rocky iMountains come next with a little
less than 9 and about 7-1/2 per cent, respectively -- practically all
softwood.

The Middle Atlantic region possesses the smallest amount of saw
timber, about 1-1/2 per cent, of which 68 per cent is hardwood. The
saw-timber supply of the Lake and Central regions is also preponderantly
hardwood -- 74 per cent and 91 per cent, respectively.

B. THE PROBLEM OF TIiM3ER OURSHIP AID VALUE

1. Ownership of Entire Forest Area

a. Industrial Ownership

Over one-half of the total co-amercial forest area is owned by land,
lumber, pulp and paper, and mining companies; naval stores operators;
railroads; and miscellaneous individuals or agencies. (C)
*
Industrial forest-land ownership is the predominating type of own-
ership in the eastern regions, comprising over 60 per cent of all



(") Chart I and Table I.

9813





-31-

ownership. Eighty-six (86) per cent of the industrial acreage is in
the East and 14 per cent in the West. The South contains nearly 50 per
cent of the industrial lands of the entire United St-.tes. One-third of
the total area under industrial ownership is classified as saw-timber
area. Because of the large areas of softwood and hardwood forest which
were originally culled of softwood alone on account of easy river driv-
ing, leaving an essentially unbroken old growth hardwood saw timber for-
est, over 50 per cent of the Newv England region is classed as saw timber.
In the Lake region less than 10 per cent is saw timber.

Cordwood areas industrially owned in the United States amount to
23 per cent of the total are& industrially owned, with about an equal
amount of fair to satisfactory restocking areas and somewhat less of
poor to non-restockin- areas.

The Eastern regions contain 74 jer cent of the industrially owned
saw timber, 93 per cent of the corcdLv.ood, and 90 per cent of the repro-
ducing areas. Although the Western regionzis contain a relatively small
percentage of industrial ownership, that ownership, especially in the
Pacific Coast region, is ver,- important because it includes land that
is potentially highly productive and also because considerable areas
possess virgin stands -nich pre pressingfor liquidation. Industrial
ownership in the South includes 30 per cent of all restocking lands in
the United States. Of tnis 4,1 per cent is classified as fair to satis-
factory. *

b. Farm Woodlanids.

Approximately 26 per cent of the commercial forest area consists
of farm woodlands. Of this, 95 per cent is in the East, where it cdri-
stitutes approximately one-third-of the E&stern commercial area. In
the Central region it includes about one-half, and in the South and
Middle Atlantic about one-thiru- of the commercial acreage.. Farm wood-
lands consist of 28 per cent sa17 timber, 34 per cent of cordwood, and
38 per cent of restockin,: lands. In the South, where the largest area
of restocking farm lands is located,' slightly less than 50 per cent is
in fair to satisfactory condition. In all other. Important farm-wvood-
land regions the bulk of the restocking areas are in fair to satisfac-
tory condition, with the exception of zthe Pacific Coast region, where
54 per cent of such areas ranL-e from poor to non-restocking.

c. Public OwnershiD.

Approximately 20 per cent of the commercial forest area is pub-
licly owned. Of this amount about 90 .er cent is owned or managed by
the Federal Government, a little less than 10 per cent by the states,
and the balance by other public agencies. Eighty-five (85) per cent
of public ownership is in the Western regions and includes about
75,000,000 acres of national forest'. 'Acquisition of lands for national
forest in the Eastern regions did not start until 1899. The largest
area of publicly owned commercial forest l3nd is in the Pacific Coast
region, amounting to 34 er'cenrt of the total.


9813






-32-.


Sixty-three (63) per cent of the total publicly owned area consists
of saw timber, 16 per cent cordwood, and 21 per cent restocking area.
. The greatest publicly owned saw-timber acreage is in the Pacific region,
followed by the South Rocky and the North Rocky Mountain regions. The
public owns a little over 10 per cent of the total cordwood areas and
about the same per cent of the restocking area.

2. Ownership of Saw Timber Stand

a. Industrial Ownership. (*)

Generally speaking, the saw-timber industrially owned is the best
and most accessible. It includes 52 per cent of the total saw-timber
stand. Sixty-six (66) per cent of the industrial saw timber is in the
Pacific Coast region, consitituting 55 per cent of all classes of owner-
ship in that region. The percentage of industrial to all classes of
ownership in the various regions is as follows: New England, 82 per
cent; Middle Atlantic, 53 per cent; Lake, 61 per cent; Central, 48 per
cent; South, 59 per cent; Pacific, 55 per cent; North Rocky Mountain,
27 per cent; and South Rocky Mountain, 8 per cent.

Industrial Dwnershio in the United States as a whole is divided.
into 86 per cent softwood and 14 per cent hardwood ownership, although
in the Eastern regions the ownership is 52 per cent softwood and 48 per
cent hardwood.

Next to the Pacific Coast, industrial ownership of saw timber is
greatest in the South, accounting for 17 per cent of the total. New
England follows with 5-1/2 per cent of the total, and the North Rocky
Mountains third with 4-1/2 per cent. The smallest industrial ownership
is found in the South Rocky Mountains.

b. Farm Woodland

Of the 7 per cent of saw timber owned by farmers, 55 per cent is
softwood and 45 per cent hardwood. The bulk of farm ownership of saw
timber is in the East, accounting for 78 per cent of the total. Of
this Eastern group, the South leads in farm ownership, with 39 per cent
of the total; the Pacific region is next, with 20 per cent; and the
Central region third, with 14 per cent.

c. National Forests

The national forests claim 33 per cent of the total saw-timber
stand, of which 99 per cent is softwood and 1 per cent hardwood.
Ninety-eight (98) per cent is located in the West. The national for-
ests are concentrated in the Pacific region, which holds 65 per cent
of the total. The North and South Rocky Mountain regions contain 34
per cent. This leaves only about 1 per cent for the rest of the United.
States, of which 56 per cent is in the South, 18-1/2 per cent in the
Lake region, 17 per cent in New England, 7 per cent in the Central re-
gion, and about 2 per cent in the Middle Atlantic region.


(*) Chart III and Table III
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d. Other Federally Owned or Managed Forests

Approximately 5 )er cent of the total saw-tiixber stand, largely
Indian, is Federally owned or managed in addition to the national for-
ests. It is almost entirely softwood and all but 2 per cent is located
in tho West. Seventy-six (7c.) ner cent is in the Pacific region, with
the balance scattered. New England does not nave this type of ownership.

e. State, County and Municipal Ownersnip

Approximately 3 per cent of the total saw timber is under state,
county or municipal ownership. Of this amount, 97 per cent consists
of softwood. Ninety-three (93) per cent of the saw timber so owned is
located west of the Great Plains -- 62 per cent in the Pacific region;
27 per cent in the North Rocky Miountain region; about 3 per cent in each
of the South Rocky Mountain and 1,e'v England regions; and the balance
scattered.

3. Average Stand of Saw Timber per Acre

One of the principal factors affecti-Lng the cost of logging is the
density of stand, or amo-.unt of timber per acre on the forest area.
Adverse factors so.netimes offset the advantage of dense stand, such as
rough topography, svr/amps, etc., but in general the forests of greatest
density can be logged at the lowest costs.

Table IV shows the stand jer acre on saw-timber areas. It will be
noted that the heaviest stands, 33,127 feet per acre, are found in the
Pacific region and are under industrial ownership.

In all classes of ownership' the Pacific region likewise leads in
density, with an average stand of 23,598 feet ocper acre; whereas the
Central region ranks list, with 1,631 feet oer acre. As the Central
region contains over 90 per cent hardwood (*) and is located in the
heart of a large hardwood consuming section, the conversion of relatively
small trees of low yield per acre into sawv timber is normally profitable.

The average stand per acre for all classes of ownership throughout
the saw-timber area is 8,841 feet. Publicly owned timber lands lead in
stand per acre, with 10,893 feet, followed by industrially owned lands,
with 9,551 feet, and farm woodlands, with 3,456 feet. The relatively
low stand per acre on farm woodlands is probably due to the continuous
selective cutting on such lands, partly for farm use.

4. Forest Growth and Drain

a. Forest Growth

In the following discussion computations of growth are based upon
past standards of forest products utilization. In the case of saw
timber it refers primarily to those species possessing certain physical



(s) Chart III and Table III


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arid ntnhaanical qualities which have appeaEled to consumers, so long as
they could be secured at reasonable competitive prices. Future require-
ments may call to a considerable extent for species which will produce
the greatest vGlume of wood in the shortest possible time. Some of the
most rapid growing species, at present considered as "Iinferior," may
well be in the desired class. Accordingly, the growth data given may
prove to be considerably below present estimates.

The total current growth of usable material on the commercial for-
est areas of the United States is estimated to be 8,912,000,000 cubic
feet. (&) This is a "net" estimate, which allows for so-called "nor-
mal" losses from decay, insects, etc. Abnormal or unusual losses from
disease or insect epidemics, fires, hurricanes, etc., are taken care of
in the estimates of drain. (*s)

Of the total current annual growth the South leads by a wide mar-
gin, claiming 54 per cent of the total. This is accounted for by the
fact that the Sauth, besides possessing some of the bdst timber-grow-
ing conditions and fastest growing species, contains largely second
growth or young timber that is putting on volume at a mudh more rapid
rate than trees in regions containing mature or over-mature forests.
The Central region ranks second, with over 12 per cent; the Lake region
third, with 7 per cent; and the Middle Atlantic region fourth, with
slightly less than 7 per cent.

Softwood accounts for 55 per cent of the total growth, 62 per cent
of which is in the South. The Pacific Coast ranks next in softwood
growth, with ever 7-1/2 per cent of the total, followed by the North
Rocky Mountaih region with 4-1/2 per cent, and the South Rocky Mountain
region with 2 per cent.

The South also leads in hardwood growth, followed by the Central
region, the Middle Atlantic, and the Lake region.

The comparatively low growth in the Pacific Coast region, consti-
tuting a little less than 8 per cent of the total, is accounted for by
the fact that the forests are largely mature and over-mature and hence
putting on very little new growth, although that region includes the
fastest growing species in the United States. Only by cutting off the
mature timber and releasing the land for reproduction can the potential
growth capacity of the Pacific Coast region be realized. The same situa-
tion applies, but to a lesser extent, to all forests west of the Great
Plains.

The total United States saw-timber growth amounts to 11,731,000,000
feet board measure, of which the South has 58 per cent, followed by the
Pacific Coast with 15 per cent, New England with 5-1/2 per cent, and
the Central region with approximately the same. The Lake region has
the smallest annual saw-timber growth,. almost entirely hardwood.



(*) Chart IX and Table IX

(.*) Table VII


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Greatest hardwood saw-ti,aber growth is in the South, or 54 per cent of
the total hardwood growth. The Central region is next with 20 per cent,
followed by the middlee Atlantic region with appro-:imately 12 per cent,
and New England with nearly 9 per cent.

b. Forest Drain

In addition to the supply of available timber, the rate at which
it is being removed and reproduced constitutes a major problem of forest
management, and is of prime importance in t.ie balancing of forest ac-
counts.

This removal, or drain as it is commonly called, is brought about
in many ways, chiefly by cutting for commercial purposes, by fire, dis-
ease, etc. For purposes of this report, the average annual drain for
1925-1929 has been used unless otherise--1 specified, because statistics
on average drain for subsequent years are available only for lumber.
Obviously, the use of only lumber data would distort drain figures, for
lumber comprises more tha.n Oae-half of the total forest products' drain
and the forest products' drain- accounts for 89 -oer cent of the total
drain. The year's 1925-1929 cover a period of generally e:.?pnding busi-
ness, including the pet,- lumber production year of the oast 24 years.
Each of those five years sho'ied a higher reductionn than at any time dur-
ing the past twenty years, with a few exceptions. Further, there was a
general decline in lumber production from 1925-1929 in 'spite of a gen-
eral increase in the production of commodities, of a comroetitive nature.

The Lumber Industry has no assurance that 'in the future the for-
ests will be utilized exactl- as in the past. On' the contrary, a new
conception seems to be forming as to whatt products should be produced.
For instance, clear boards are possibly no more valuable, and perhaps
less valuable, tnan built-up plywood. Such substitution of plywood for
clear boards would make presently available mature timber, suitable for
veneers, sufficient to supply the demands of- a market thirty times as
large as the one which no'.i e-xists for clear boards. Thus, there may be
a potential surplus of clear joards.- Farther, large-dimension timbers
can not now successfully compete with steel or reinforced concrete for
many purposes.

Clearly, new developments in the utilization of forest products
have effected a decreased de:.iand for those products which in the past
have formed the bulk o; requirements, and at the same time these develop-
ments are making available a very much larger volume of raw material
than would have otherwise been the case.' In. brief, any anticipation of
what future consumers of forest products will de:aand must be predicated
upon present conditions rather thon upon those of the past. Any dis-
cussion of forest drain must take into consideration this changing market.

It is common practice in describing the relation of growth to drain
to make this comparison without taking into consideration the large sup-
ply of standing timber which must in many regions be removed before the
full possibilities of growtri can be attained. Again, the relationship
of gross drain to total stand is frequently stressed without reference
to either current annual growth or potential growth. IThe first prac..







tice overlooks the fact that the production of any commodity is ordinar-
ily governed, so far as financial exigencies will -ermit, by the amount
of stock of raw material in inventory. The second assumes that the for-
est is static, that it consists only of what can be seen and measured at
the present time.

In order, therefore, to give proper perspectivee to the problem of
drain, a comparison of forest-products drain and forest growth in rela-
tion to the available stand of timber is here presented. Thus the pos-
sible life of our forest resources ma-, be predicted with so ie degree of
accuracy. (*)

The upper half of Table IX (a) shows forest products expectancy,
assuming that the lumber drain, ot-er forest-products drcin, and drain
occasioned by fire, insects, disease, etc., will continue indefinitely
at the 1925-1929 rate. The lower half of the table is based upon the
assumption that the drain of lumber and other forest products will con-
tinue at the 1929-1934 rate; and that fire, insect and disease drain will
continue at the 1925-1929 rate. This latter drain should steadily de-
crease as methods of control are perfected. However, since the rate at
which this reduction will proceed is unknown, past experience must neces-
sarily be used.

Considering the entire commercial forest area without regard to
the ultimate use or form of its products and assuming no increase in the
current annual growth, it is estimated that the average 1925-1929 drain
of all forest products can be maintained without total depletion for 65
years in the Unit:d States as a whole. However, during this 65-year
period, growth will increase as additional growing lands are released
by the cutting of mature timber and improved forestry practices are put
into effect. (*@) On this latter basis it is estimated that growth will
exceed drain to such a degree that a perpetual supply of forest products
at the 1925-1929 rate of drain will be available, even with a substantial:
increase in consumption. It should be re-emphasized, however, that this
prediction refers to the total volume of wood available for the total
volume of wood requirements and not to certain specialized products such
as lumber.

As for the saw-timber area only and considering only saw-timber
size trees, assuming the 1925-1929 rate of drain, and that growth will
continue at its present rate, a 35-years' supply of saw timber, accord.-,
ing to current manufacturing practices, is available, varying from &
7-years' supply in the Central region to a perpetual supply in the South
Rocky Mountains. Allowing for increased growth as mature forests are
removed, however, and applying the same assumptions just cited, there is
a sufficient supply for 49 years, with a minimum of 8 years in the
Central region.


(*) Table IX (a), Comparison of Forest Products Drain and Forest Growth,

(**) Code of Fair Competition for the Lumber and Timber Products
Industries; Forest Practice Rules.


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-37-


Accepting the above assumptions of drain and growth, it is ap-
parent that a shifting o0 lu_,ber production, from certain regions to
othLers is indicated. Tills ,ill uto.Lticlr t.kc place, as it has in
the pest, as av.il:,ble sxolies of saw timber become temporarily ex-
hausted. On the other h.nd, the conversion of increasing quantities
of trees too small for sa"w timber into products whic-h directly compete
with lumber, .s f- occasion a ?-hift to new wQod-ranufacturing enterprises
in certain regions rtthier tnLn a shift to new saw-timber fields.

The data in the uooer hLlf of Table IX (a), based upon the 1925-
1929 average drain, is orod.,-.aXily taken as an indication of the maximum
orob.ble relationsaio of -0or" -t drain and growth to the supply of stand-
ing timber or to tnk- in-;vento-' of raw material from which forest pro-
ducts are derived. A ;-.,ui ,oLTn-ier rn-.l-fsis is possible from a consider-
ation of the lo-er hal' of Tole I:e (a), in which the probable drain of
forest products is esti .atc(. to be the average of the 1929-1934 period,
with the exception of the fire, insect and disease drain (1925-1929).

The lower ar: If of Table IX (a) shows that on the entire commercial
forest are,:. a vo'.-nme of naterial e-iual to the total volume of all forest
drains will be :t.'nuall a-ivilable for-over. 700 years,..even though no in-
creased grovtth i.- ta'-ken into consider.tio.- With anticipated increased
growth, it aopea's thait nearl twice the 1929-1934 drain can be perpet-
ually maintained.

On saw-timber areas onl- and considering no increased growth as-
mature timber is rs.iovc&, t:-ie saw-timber size trees will sustain the,
1929-1934 drain for an .verao of 73 .years, with a minimumof.,15 years
in the Central regio-A. Witn anticipated increased growth,, the supply of
saw timber is expected to li-st 204 years in the.United Statesas a whole,
varyin- from 19 ,rears in the Central region to a perpetual supply in
New England, the :iddle Atl.-atic section cnd the South Rocky i.'ountaihs.
Before the ei-o"ration o 20-1 -eEars, an&-if sound forest .practice -)ro-
visions such as were orovirdea in the Code -are carried out in the mean-
time, it cajn be confident: e--pected that the forest ledger will be per-
manently -balanced *ith res--.ect to. supply and demand...

In view of this prediction it might well be contended that the
timber supply problems of forest areas an" forest industries are en-
tirely solved nd require no fMurther coop-eration between the industries
and the public. The problems -are not that simple. If liquidation of
forest properties existing prior to 'the Luimber Code were allowed to con-
tinue indefinitely, at least some of the following results night be ex-
pected during the ne:t few decades, or until the cut-over areas in cer-
tain regions had hod -ri opportunity to recuperate:

(1) A shortage in suplr of certain of the most desirable species
or grades and the necessity of eithezf substituting other species or
grades or other mn.teriols for them, or going without during the period
of adjustment. *

(2) A continuation in certain forest regions of the cutting of
immature timber during- the perio(d. of its greatest voluile gro..th, there-
by reducing the wood-producing capecit- of those regions.,


9813





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(3) Gradually increasing cost of forest products as the most acces-
sible and best quality material is removed. This in turn decreases con-
sumption and forces a liquidating industry to again reduce its costs
through the conversion of only the best or most available material, with
a further depletion of the growing stock. Thus a vicious circle is es-
tablished which makes the competitive problems of the industry more acute,
prevents the maximum utilization of the forest resources, and interferes
with the economic stability and general prosperity of the entire country.

(4) A shifting of forest industries from locations of scarcity of
raw materials to new fields, or their temporary discontinuance.

(5) A further concentration of production on the Pacific Coast and
in the South.

It is a basic premise that both the public and the forest indus-
tries have an interest in seeing that ample supplies of forest products
are continuously available at reasonable prices, and that stability of
employment through industry prosperity is maintained. The removal of
all possible obstacles to that result is therefore the obligation of
both the industry and the public.

Based upon the evidence of migrating forest products industries,
rapidly increasing populations and consumption, and a rather sketchy
knowledge of potential forest arcas, stands and growth, it was but na-
tural that a considerable number of persons, some 35 to 40 years ago,
should raise the cry of an impending timber famine which has since large-q
ly resulted in the moulding of public opinion and in the fixing of public
policy toward forest resources and those industries dependent upon them,
It seemed logical that the current rate of consumption of forest pro-
ducts, which had developed during a period when wood was cheap and plenti-
ful and housing and all industry was expanding, should continue indefin-
itely. The "timber famine" idea caught the popular imagination and was
at least partly responsible for the establishment and support of the
national forest system and the other Federal and State measures affect-
ing the conservation of timber resources#

In many regions the time at which the timber resources were es-
timated to disappear has long since gone by, yet forest industries are
still much in evidence. The three factors which were eventually largely
responsible for dispelling the belief that a timber famine was impending
were:

(1) A general, declining lumber consumption during the past
two decades, not only per capital but total.

(2) Inaccurate data covering the total available supply of
standing timber, the interchange of species for given uses,
and particularly the ability of the forests to renew them-
selves after removal of the mature timber with little and
inexpensive assistance from man.

(3) An evolution in the method of utilizing the raw material
through its manufacture into veneer and plywood or its
.conversion first into pulp and then into pressed boards


9813





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and other products whereby a greater amount ofi finished
product may be secured from the same volume of timber
than i saw'n into lumber. (*)

Although any prediction of future forest-oroducts requirements is
largely speculati-ve-, suff'icien-it facts are available to- clearly indicate
that a "timber famine" is improbable. This does not mean that reasonable
care should not be taken of the present forests and commercial forest
areas, both in the interest of tne industry and the public, nor that local
shortages in supply are not likely to occur temporaril/ in certain regions.
It does mean, however, th-.t the forest problem in the United States as
a whole is not one of timber shortage but rather one of proper protection
and management of the 'orestcd areas, in-lu, inL adjustment of production
of forest products bet-.;e-n -n- nd '.-,ithin th. various forest regions, so as
to secure the best results from e-::istin; forest growing stock. The area
now covered with com.niercieil fo_'ests j-qd likely to remain available for
that purpose is more t-i.n su.".L iciCLt to .icet an/ predictable future de-
mand.

Aside from tnhe prudent conversion of forests, to wihici the "timber
famine" idea spccificall- a.,lics, there ere other and important problems
that must be taken into consideration in anr national conservation policy.
These include the protection of watersheds 'here forests or other equally
or moze suitable ccver'my expert important influences on absorption and
run-off; recreation, :,Ad the protectionn of fish anci same. Since, however,
these values apfly onl' indirectly to the industrial use of forests, and
since the industrial forest user is interested in tnieir maintenance no
more than is the average rood citizen, tney do not constitute a part of
the present industrial picture.

5. Value of Forests end Forest Land

a. Privatel,- O'.:ned Lands

The total estimated value of land on whichh the commercial privately
owned forests of the United States are standin- is a little over $1,000,
000,000. (**) On this land is timber witn an estimated value of $4,759,
000,000, or an estimated land .-ind timber value of about $5,836,000,000.

Land values are estimated at from $2 to $4 per acre, with an average
of $2.72; saw timber at from: $1.58 to $16.55 per 114 feet, depending upon
species and location; a-nd cord-nood at from $0.35 to $1 per cord.

The average sol'ftood value is estimated to be $3.36 per M feet;
hardwood $6.34.



(*) If consumption had continued at the 1906 or even at the 1915-1916
rate, and if fire protection had bee,- longer delayed and less
readily accepted, a timber famine rould have .been in sight at the
present time.


(**) Table XI







-40-


Of the tntal land and timber value, 33-1/2 per cent applies to
forcscs in the South. The Pacific Coast region comes next with 31-1/2
,er cent, the Central region next with a little over 10 per cent, fol-
lowed by lew England with nearly 8 per cent, the Lake region with 7 per
cent, and the Middle Atlantic with 6-1/2 per cent. The forests in the
South Rocky Mountain region are of least value, being valued at less than
1 per cent of the total.

b. Publicly Owned Lands

It is impossible to estimate closely, from data available, the val-
ue of publicly-owned forest lands and timber. Questions of relative ac-
cessibility, species, stand per acre and quality of the land itself for
other use if the forests were removed, all enter into the picture.
However, certain facts are known and from them a general idea may be
obtained,

Publicly-owned or controlled lands include an area of 98,659,000
acres. (*) These lands contain 672,636,000,000 feet of softwood and
6,878,000,000 feet of hardwood saw timber (**) as well as 175,424,000
cords of cordwood. (***)

For the purpose of estimate, publicly-owned land values are figured
at $2 per acre (****), softwood stumpage at $2.50 per M, hardwood stump-
age at $5 per IA and cordwood at $0.50 per cord. On this basis the land
value v.-ould be $197,318,000; softwood timber, $1,681,590; hardwood tim-
ber, $34,390,000; and cordwood, $87,712,000; or a total value for pub-
licly-owned land and timber of $2,001,010,000.

Thus, the total value of all commercial forest land and timber,
regardless of ownership, is estimated to be slightly less than $8,000,
000,000.

6. Stumpage Values

For several years the United States Forest Service, in cooperation
with the Bureau of the Census, has been collecting data on stumpage
transfers. In some years and in some individual states the volume of
such transfers has not been sufficient to accurately determine true
values. Accordingly, records for the years 1924-1933 have been averag-
ed to secure estimated stumpage values of softwoods and hardwoods by
states and regions. (*****)



(*) Table I

(**) Table III

(***) Forest Service, Department of Agriculture, A National Plan
for American Forestry,(1933), Senate Document No. 12,
Table 9, p. 188.

***) On the basis of value for grazing.


(*****) Table X





-41-
I
During that period the total volume of sales reported amounted to
104,784,869,000 feet bpard measure, for which a total price of $392,
097,586, or $3.74 per LI feet, wzvs received.

By regions, the highest average price was received in New England,
npmely, $6.64. The Middle Atlantic w. s next with $6.55, then the Lake
region witn $6.35, the .Central region with $6.14, the South with $5.43,
and the Pacific Coast and North Rocky Mountain regions with $2.97 and
$2.96, respectively. Not enough sales were reported from the South
Rocky Mountain region to provide a reliable figure.

The downward trend in stumpage value during the past several years
is quite marked. (t) During the period from 1928 to 1933 reports of
total stumpage sales show tiat soft'.ood stumoage dropped 27 per cent;
hardwood stumpage 32 per cent; and the aggregate sales of both hardwood
and softwood stumpage 30 )er cent.

The above percentages based, as they are, upon a large volume of
sales throughout the timbered states, should be fairly reliable as they
iron out the discrepancies appearing in individual state reports. Each
stumapage transaction has peculiarities which make averaging difficult.
The value of a given bloc'-, of timber depends upon its location with res-
pect to market, topography, soil and climriatic conditions, species, tim-
ber stand per acre, and several otner factors. Thus, the averaging of
softwood and hardwood stumoage siles within individual states and by
individual years is subject to considerable criticism.

In a few states, however, the number and volume of stumxage sales
have probably been sufficient to justify averaging over a three-year
period (**), and these ma- be considered as representing current values
of accessible stumpage.

7. Concentration of Ti.aber 0Tnership

As a result of the U. S. Senate and House resolutions enquiring
about tne high price of lumber o-nd the possibility oi combinations of
lumber manufacturers an. timber owners in restraint of trade, the Bur-
eau of Corporations of the Department of Commerce and Labor conducted
an investigation from 1907 to 1910. This investigation included the
amount of standing timber, tiiaber ownership in important regions and
land holdings of large timbcr owners. (***)

Although the investigation was made about 25 years ago, it is
believed that the principal consolidations of timber ownership had been



(*) Table X (a)

(**) Table X (b)

C('*) Bureau of Corporations, Deoartment of Comaerce and Lebor,
The Lumber Industry, Part I, issued Januar, 20, 1913, and
Parts II and III, July 13, 1914.


9813






-42-


completed prior to tnat time. Certainly for the oast several years,
with decreasing stumpage values, the tendency has been to break up large
concentrations through sale, often forced, or to liquidate the timber by
increasing production.

Considering the industry as a whole, the situation has developed.
somewhat as follows:

In the beginning the most available timber was converted; that is,
timber which was located close to market with low delivery costs, timber
of hign quality and occurring in dense stands, and timber found under
conditions of easy logging and manufacturing. All of this meant low op-
erating costs. The gradually increasing value of stumpage over a long
period indicated to speculative lumbermen that this would continue in-
definitely. Accordingly, large investments, often far from the then ex-.
isting market, were made in standing timber which h could be retired only:
through eventual conversion.

As the areas of virgin timber begai to fail in availability, new
forest areas were opened up farther away from the market, thus increas-
ing the cost of delivery which in some cases became as great as the tots
of all other delivered costs. Costs were also increased as the industry
had to go farther and farther back in rougher country to reach the timbd

Thus the industry -.as faced with two alternatives -- either to get
a higher price for the product or to reduce costs. Both courses were
taken. The quality of the product was improvAd through careful grading:
and seasoning, which made it more desirable to the consumer. New, lowe
cost system of lodging were employed. In spite of these efforts the i.
creasing cost of holding timber, due to interest, taxes, and other carr
ing charges, necessitated a price for the product that permitted many
substitute materials to successfully compete with it, and made possible
the exploitation of young immature timber which had been left behind in
previous migrations.

Up to about 1921 to 1923 lumber prices were generally appreciating
and thus compensating in part for gradually increasing costs. About
that time, however, the competition of other materials became acute,
with the result that lumber prices could no longer be maintained.
Furthermore, stumpage values began to decline for the first time in hi
tory. Thus, many units of the industry faced with steadily mounting c
trying charges found themselves forced to a polic- of liquidating their
surplus supply of timber almost regardless of cost. Up to the time tha
the Lumber Code became effective this policy was generally in effect.

The above outline of industry development covers only the general:
long-time trend. There were many deviations from it. For example,
whenever e satisfactory price situation was attained, new manufacture
facilities would enter the production field, and existing ones would b
increased in capacity. Over-production would then inevitably follow
with a resultant price drop, thus forcing the high-cost operations to J
close down, and stay dorn, until curtailed production and increased
prices again permitted them to compete.



9813





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All of these factors have played a part in removing the incentive
to large concentrations of ownership.

In view of the above facts the conclusions of the Bureau of Cor-
porations are of little present application, although its findings cover-
ing concentration were of interest in showing how mistaken the Lumber In-
dustry and the public nay be in predicting future economic trends.

The Bureau found that at the time of its investigation two rail-
roads and their subsidiaries, through land grants, and one timber company,
held nearly 11 per cent of the esti,.ated total privately-owned timber in
the United States- A l.arie amount of the railroad timber has since come
back into public control. It was estimated that the above holders, to-
gether with five others, held over 15 per cent of the total private timber,

In California, Oregon, .;L.siirnton, Idaho, and Montana, it was esti-
mated that 37 holders owned apjroxi lately one-half of the privately-owned
timber in that region.

In ti.e South it was estimated that 67 holders owned 39 per cent of
the lu-Io- .eef rine, 29 e:,r cent of the c,-p)ress, 19 per cent' of the short
leaf and loblolly pine, and 11 jer cent of the hardwoods.

In -the Lake States it was estimated, tnat 215 holders owned 65 per
Cent of -all the timber.

Io records are available to determine the present degree of owner-
ship concentration, but experience durin.- the past several years has
shown that it is riot now. a material factor in the economic problems of
the industry.

Ci THE PROBLEMi OF HOLDING TIMBER LAND

The cost of holding timber land includes administration, interest
on mone,r b --ri-'r:'-d to acquire the land, fire :.nc other protection expend-
itur !. ;, ., .o aata are available on administrative costs, and
are -r' -.: :;- .. t.i'e ',-ance. However, it is possible to roughly ap.
.pro.. : .- j-Acal annual burden on the forest products industries
through Ltdir s.I tinocer and saw timber holdings, as follows;

interest on indebtedness ..... $ 63,122,835.00
Fire protection ............. 2,541,391.15
Taxes .. .. ......... .. 40,470,862.00
$106,135,088.15

The Lumber Industry obviously does not pay the annual bills for
all forest products industries. However, it produces approximately 50
per cent by vo-ire of all forest products (*) of every kind. Moreover,
it is cor.u.on kncaledge that, as compared to most other forest products
industries, the Lumbur Industry carries a considerably larger reserve



C") Table VIII


9813







supply of timber to justify its plant and railroad investment. Therefo:
it seems safe to assume that it should stand at least 75 per cent of thi
ejcpf..a3 of holding the 'privat6ej i- na d saw-timber area. On that basis
its annual burden would be:

Interest on indebtedness ..... 447,342,126.25
Fire protection .............. 1,906,043.36
Taxes ............... ........ 30,353,146.50
$79,601,316.11

Since conversion of timber into lumber must, in the long run, be
relied upon to meet the carrying charges, this annual cost, if charged
to lumber production per i.[ feet would be:

Based upon 1934 production .................... $5.14
Based upon average 1929-1934 production ....... 4.01

The bases for these estimates are developed in the following
sections:

1. Interest

The largest cost involved in holding timber consists of the inter
on the money invested in it. With a total stand of privately owned saw
timber amounting to 988,289,000,000 ft. b.m. (*), and valued with the
land at approximately $4,208,189,000 (**), interest at the rate of 6 pe;
cent would amount to $252,491,340 annually.

It may be contended that interest represents profit on the invest-
ment and, therefore, has no place in the cost of holding timber and tim
ber land. This might be conceded if the privately owned timber lind wa
paid for. However, that is not the case and the interest on money bor-
rowed to acquire and convert it has to be p-id through conversion in thi
long run.

Studies made in California and the Southeastern States in 1914 (**,
show the following relationship of indebtedness to total investment:

'lumber Total 3onded Per Cent of
of or Indebtedness


Opera-


Total


Other Indebt-


to Total


Region tions Investm;eht edness Investment

California Pine 12 $ 19,248,014.32 $ 9,029,672.48 46.9
California Redwood 18 38,691,393.63 17,139,710.30 44.3
Southern Pine 108 137,476,360.63 52,629,210.63 38.3


(*) Table III
(.*) Table XIII
(***) U. S. Forest Service, The Lumber Industry in California, and
Timber Ownership and Lumber Production in the Southern Pine
Region; unpublished reports.


9813


I






The above fi"_ res, represent4nE probably the largest and most im-
portant operations in the repi.rts studied, "indicate that a substantial
portion of the money in.rested in the enterjri'ses in 1914 was borrowed.

A corsiC.ereble- portion of *this consisted of bonded indebtedness
incurred largely for the purpo-.e of acquiring timber and to extend
short terTm. oLlira-'ons over e period of years. Such bonds were sold
with the -,rovision for a siziuL-i L frr.nd to retire theu within the speci-
fied period. Usu-Ally fl-om $L to $3 oer M feet cut (log scale) and to
be laid aside for a sinking fand. Bonds carried 6 per cent interest as
a rule and sold at from 90 to 98, thus -iasiig the actual interest obliga-
tion 7 per cent or over. Short term notes sometimes bore interest at
10 per cent or more.

It is thus shown that in 1914 the larger operators in the United
States were carrying a debt varying from 38 to 47 per cent of their
total investment. The condition of the small operators is unknown, but
there is no reason to believe that they we,:e in a substantially different
position except that their obligations werp generally short term and
their interest rates correso..idi.ngy }-ijher

Statistics of Income frro i the Bureau of Internal Revenue for 1933,
covering 6,161 -.rou,.ucers of .orest prodizcto, show that bonded debt and
mortgages anounted to ily- 17 .er cent of t'e depreciated and depleted
tof "-,e de )reciated and depleted
capital assets, To dJ.-i are a;,.il&Ve to show other possible liabili-
Sties against the c,?pi-t,-.1 assets.., nor is there information on interest
rates now -prevailing on idolcbt-Liess. Accordingly, for tho purpose
of this discussion, ccrtcin p'smxzptions are necessary.

The first is that 25 -er cent of the present total investment in
saw-timber lands rons'rits of i.Tobtedizes.,. The second is that this
indebtedness beers at lee.st 6 -er, Cent interest. .he t>.ird is that the.
Lumber InCustry pays the bill on 75 .per cent of the saw-timber lands*
On this basis the annual interest ch,%r-F against th.e Lumber Industry.
would be $47,342,126.2` or $2.38 per M feet on the .1929-19.34 production.

2. Fire Protection Cots

Since -public and privatel.y-o'ned forest lands in certain regions
are intermingled or adjiace-nt, it is often impractical to protect one
class without protecting the other. Accorcdn22-r z, tih- e has developed
the cooperative system financed jointly by. bot"'. public and private in-
terests, with the benefits sEoread over all lands included. In addition,
there are large blocks of public andprivate forest lends not so situated
that the cooperative plan is feasible. These mc,,r be protected by the
particular interest involved. Frequently, in addition to cooperative
expenditures, both public and privatee agencies spend substantial amounts
in order to strengthen the protection of their own lands,

Forests are not always found in solid blocks, but frequently include.
grazing and other types of land. As fir'.s are no respectors of boune a
lines, for the purposes of tiis report the protection of such included
lands is considered a necessary and proper part of the whole protective
effort.


9813






The total annual expenditure for fire protection, both prevention
and suppression, is aporox-imately $16,400,000, (*) or one cent per M
feet on the total stand of sari. timber in the United States regardless of
ownership. Of this, $9,049,077.49 is spent by the Federal Government
direct to protect National Forest, Indian, and National Park lands. The
bulk of this effort is in the West where the largest areas of such lands
are located. The largest expenditure is in the Pacific region, 33 per
cent of the total, followed by the North Rocly lMountain region, with 22
per cent, and the Lake region with 14 per cent,.

Outside of these straight Federal expenditures for the protection
of Federal lands, there is spent annually for cooperative fire protection
approximately $6,000,000. Of this the Federal Governnent. contributes 32
per cent; the States 48 per cent, and private timber land owners the
balance. This cooperative effort covers privately-owned, State, and some
Federal lands on the theory that only through a pooling of resources can
a satisfactory job be accomplished and the public interest in all forest
lands, regardless of orinership, be safeguarded. Such cooperative effort
is administered by the States. In addition, private owners spend ap)rod-
mately $1,300,000 for the more intensive protection of their own lands,
thus making available approximately $7,400.000 annually for the protection
of private and State lands.

Of this amount 31 per cent is s-ent in the Pacific region alone, 19
per cent in the La2:e States, 15 per cent in the South, 11 per cent in the
Middle Atlantic region, 11 per cent in the Uorth Rocky Mountain region,
and 8-1/2 per cent in the Newr England region. Less than 1 per cent is
spent in the South Rocly. Mountain region.

Charging the entire fire protection expense, outside of straight
Federal e:zoense, to the average lumber production of 1929-1934, gives an
average annual cha-ge per i' feet of $0.37, varying from a maximum of
$2.84 in the Mliddle Atlantic region to a minimum of $0.07 in the South
Rocky Ijountain region. It is obviously incorrect to charge the entire
cost of -rivate and coonerativo fire protection on State and private lan&s
to the Lumber Industry, since other forest products industries participate
to a considerable extent in some regions. Nor is the fact that lumber
constitutes only approximately 50 per cent of all forest products produced
a safe guide, since the Lumber Indust.r is better organized, holds more.
forest land, and generally cooperates to a greater extent in any fire pro-
tection movement than most forest industries. It is therefore assumed
that 75 ner cent would better represent the Lumber Industry's stake in the
fire -protection effort. On that basis, the cost per I feet produced
(average 1929-1934) would be $0.28, varying from a maximum of $2.13 in the
Middle Atlantic region to a minimum of $0.05 in the South Rocky Mountain
region.

If charged against the stand of saw timber industrially owned, the
annual cost of the present fire protective effort (private and cooperative)
would be about 8 mills -per li feet for the United States as a whole, vary-
ing from 2 mills in the South Roc1, Mountain region to $0.135 in the New
England. If charged against the total saw timber stand privately owned,
which includes industrial and farm ownership, the average per M feet for
the United States would be 7 mills, varying from 2 mills in the South I
Rocky Hountain region to $0.068 in New England.

(*) Table XI.
9813




-47-


Since the forest products industries annually pay $2,541,391.15
of the total private an,-l coo e--'tive p:,:enilitures of r:oroxiantely $7,
400,000, and since the Lwuwber Indastrrso share is assmned to.be-75 oer
cent, its annual expenditure would ainount bo $1,906,043.36, or $0.096
per M feet on the average 19.9-1934 nrod.ction. -

The U. S. Forest Se-vice estimates that complete and adequate pro-
tection for Sta6e and plivale forest area *7ill cost $13,381,100. aonnual-
ly. This would involve protection of 209,557,738 acres in addition to
the 280,422,032 acres now protected.

The proportion of protected to unprotected State and private for-
est areas and the degree of present protection vary widely in different
forest regions. Thus in -Tea England the entire State and private for-
est area is under some sort of protection, end the forest ii.d-z.triLes
and the Federal ac-nd State agencies are s-endling a 'proxi-iately $641,453.
48 annually, or b1 per cent of the $792,000. esti..iatAd to be needed.
However, in l.!aassachusetts end lihode Island. iore money is being spent
for fire protection tLwan is believed absolut61-r necessary in comparison
to the otner States.

In the Middle Atlantic region, viwere nearly 1,430,260 acres of
State and private forest land are still unprotected; approximately $808,
000. is being sent a- against needs for $955,000., or a coverage of
about 84 per ce.it. The amount of private e::-.-nditure in this region is
relatively smi ll.

In the Lak'- region .s a whole, where all State and private forest
areas are protected- to some extent, expenditures are 82 per cent of the
amount needed, although in W7isconsin slightly more thrn the required
amount is being spent, w;iierjas Minnesota is considerably short of its
needs.

In the Central re-ion over 65 per cent of the State and'private
forest area is unprotected, and only 16 .er cent of. the 'amount needed
is being spent for fire protection.

In the Soath, w.,here only 32 per cent of the State and private for-
est area is protected, the per cent of actual to estimated required ex-
penditures is only 20.

In the Pacific region, '--here fire risk is very great and where
most of the State and private forest xrea is under prot action, the an-
nual expenditures for fire orotecticn are estimated to be ao,-r'o-i ately
$2,275,159.02, as against $?.185,000. needed. Over 60 per cent of the
total is paid by private agencies. In Oregonr and t7ashington more than
the estimated amount required is being spent.

In the North Rocky Mountain region, another region of high risk,
where approximately 95 per cent of the State and private forest area
needing protection is -orotectcd, private c-cenditares are over one-
half of the total expenditures for fire -'rot.ction. Total expenditures
are approximately 125 per cent of the amount estimated to be needed.





-48-

In the South Rocky Mountain region, '.with only a nominal fire risk,
about 80 per cent of the State 'nd -private forest area. is being pro-
tected. In this' region onlY $44,100. is considered necessary for ade-
quate protection, or less than the amount required for .aost individual
states. Abo-..t one-half of the required amount is being spent.

3. Taxation

The annual burden of taxation on mature standing timber is one of
the most important single factors i-n stimulating the sale or cutting of
timber and proportionally influencing the manufacture of forest products
without due regard to current market demand. Upon the solution of this l
problem substantially depends the -oresent and future security of owner-
ship of privately ovned timber as well as the maintenance of reasonable
balance between production and consumption.

Late in 1931 the Secretary of the Timber Conservation Board re-
quested the opinion of the members of its Advisory Board on the subject
of the timber taxation. (*) The Advisory Board was composed of 22
leading authorities on the subject, including foresters, economists,
educators, conservationists and executives. To the question as to
whether state and county taxation hed become a sufficiently heavy burden
in enough regions and instances to be an important factor in determining
ownership and management plans for mature timber, all answers directly
received were in the affirmative.

To the question as to i.hether taxation had in ny important degree
already hastened cutting undesirably, from an industrial or community
viewpoint, the relies were in the affirmative, although two members em-
phasized the locl rather tin the national effect.

In January, 1932, tne Kational Lumber i,,anufacturers Association
addressed a questionnaire to prominent lumber producers throughout the
United States for the purpose of determining the effect of taxation up- a
on lumber production. (**)

The questions were:

First: "Do you think taxation is in any important degree the
cause of hastening timber cutting undesirably from an indus-
trial or community viewpoint?"

Seventy-three operators answered unqualifiedly in the affirmative. One
answered "No", one "Niot in this section", and one "Difficult to say."

Second: "Have you put any timber into production in ordet to
carry taxes?"

Forty-five operators answered "Yes", End 27 "No." Two operators answer- .
ing "TNo" stated that they owned no timber.


(*) Timber Conservation Board; Taxation Questionnaire (1931)

(**) Table XIII (a)


9813






Third: "How much capacity to -ro-ucc have you added?"

Of the replies received, 19 iniicatei i.icreasea capacity and in several
cases specified the amount.

The above c0o-,s-scction cf inrlustryi and oablic opinion i s'uifi-
cient to indicate the serio'-srn-:sc 'f ,e existi, t.a-.: s/stan'- in its ef-
fect upon the n.jdiinj oa t;A.atciy.-c.n:.-. tibr iende. In ad> it-.on to
the current and knojrn tax bLr I1n, -1-e ut.,-rtL. in.,y of the future o-"ffers
little enccuragerent fcr tiii'er..l:ci cnarls. Ti 3s is illustrnued by
Table XIII (b) and the fnllo.-: !g s-uxars.ry baced ucrn reu:orts from o2
lumber manufacturing ccm-aries ovrniLrc ti .ber a,,d roducln.r lu_.iber during
each of the three years 1909, 1919 eana 129.

Tat es
Per Per
Cent Cent
In- In-
Total Total Per crease Per crease
Timber Production : ft. I'ton 1K ft. from
Year M ft. b.m. Ml ft. b.m. Gross O;-1icdd K.09 C-it 1I09

1909 44,504,507 2,051,169 $ 856,136.47 $.319 --- $.417 ---

1919 37,3153,134 2,177,278 2,27E,312.31 .OLi 221 1.044 150

1929 30,-719,043 2,34-4', ?37 2,79', 205.80 .091 379 1.192 186



The rntio of increase since 1923 is not knrrn. At nny rate the
owner of timber land f<;ced witn a ros-ib!e t-' in-reqse of from 200 to
400 per cenit ever-y 0 ;.eirs "s hpry :" a :trio1!ir such
land from conve:'-ion indefinitely, 1 t'tc .i-'cJ" sGrc= saur.pga has
shown a consistent decline in vnlae durin'f tre rast si.ver'l years. (*)

The estimated present annual tax P'urcn on corar.orcial rrivPtely-
owned forests is $58,353,675. () Tnis nulies to 3--,239,Q`JO acres
with an estimated land value cf $1,077 169,0lG; sa'- ti-:ber Pamoun ting
to 988,289,000,0n0 feet board rrme:,s'e ;nd. 9_25,7M',COO ccrds of cordrood,
together valued at A4,T58,493,540; cr a toi.al for pnd and timber of
$5,835,667,520. Land velaecz, without ti:.ber, are ectiraued rt rn overage
of $2.72 per acre, vFryring f rLn $2 to 34. Unit stnirpq6e values (***)
averaged $3.40 per bl, for oft-.-.ood a;.d $:6.'5 for harciacd.

The timber of highest value is fourd in the Pacific region, namely,
$1,771,472,580. The South is next with 51,397,6F1,450. and the South
Rocky Mountain region last with $.24,15n,3,00.

(*) Table X (a)
(**) Table XII
(***) Table X


-i5-





-50-


The ratio of assessed to total value varies from a high of 96.6
per cent in Wisconsin to a low of 12.7 per cent in Iowa.

The total estimated assessed value of $3,313,398,247. is bnsed upon
the totpl estimated land and timber value for each state multiplied by
the ratio of assessed to total value for that state.

The highest assessed value c-f l-,nd and timber is in the South,
$998,073,936., followed by the Pacific Const region with $937,388,826.,
the Central region with $381,526,562., and the Lake region with
$354,815,452.

On the basis of an estimated one per cent tax on total value, the
South pays the largest timber land nnd timber tax bill, amounting to
over 33 per cent of the total, followed by the Pacific Coast with a
little over 31 per cent, and the Central region with a little over 10
per cent. The South Rocky Mountain region pnys less than one per cent.

The estimated current annual tax burden on commercial privately-
ovned saw timber areas is $40,470,862. (*) The mnximum is in the
Pacific Coast region, 41 per cent, followed by the South with a little
over 31 per cent, New England with about 9 per cent, and the Central
region with slightly less. Thus the I-ncific Coaist and the South pay
approximately 70 per cent of the total tax bill on commercially-owned
saw timber areas.

Charging the entire tax burden of '40,470,862 on commercial private-
ly-owned osaw timber areas to the Lumber Industry would mean $2.04 per
W/ feet produced (average 1929-1934). Assuming, however, the same
relationship in obligation between the Lumber Industry and the other
forest products industries a-, in the case of interest and fire protection
costs, namely 75 per cent, its annuall tax bill per feet produced would
be:

Based upon 1934 production 1. ..................$1.96
Based upon the average 1929-1934 production ...$1.53

D. PRE-CODE EFFORTS AT CONSERVATION

It is well to reiterate that both the public rnnd the forest products I
industries have an important stake in conservation. The public wants a
plentiful supply of various forest products at reasonable prices. It
also desires permanent and prosperous forest industries which will pro-
vide stable employ-nent, in addition, it wants its soil and navigation
safeguarded through watershed protection, its fish and game supply
fostered and increased, and a reasonable area of forest lands kept in
forests for recreational purr.oses. The forest products industries are
interested primarily in the perpetuation of their supply of raw material,
but at a reasonable cost and in location, form and volume most attractive
to the buying public.

The operations of the forest products industries in the past have
been neither conducive to stnbilit;. of employment, nor to the protection
(*) Table XIII.

9813






values other than tnose affectKpn,; their imnmeclate timber supnly,
Such protection .s was givev -WVs -iupll4y con Tined. o the time necessary
tn retire sneci-ic fret irnvestm'not. crestt were s5 ileiitiful tnat
the cutting nut of g+'/.i locdit; simTly jv iut aioving to a new one.
Thus there developed t.i" ge-.oral ides. thae,, forest indi:.tries v/ere no
more perr.a1,ent turn nlinr-.,, oil welis, or otner indu:stries based uoon nmn-
renewable nroducrs. Fr... t lobo.i w.,s lrgl'litinera;t and seldom re-
mained long at on- oper. tion, gr'a2ess of i't't -ne4=rnpncy.

As tne for-t indi.tries moved farther nway from their markets and
as eosti of d'li.-'y c-,rrespvj-'dr,R1, ircfras-d, le'dera in the industries
beg-in to rea,.i.e t'.iat rAr .: er was .po.,sby. nrot inexhaustible, at least
such timber as could be c ,nverted at -,a .cot low enough to assure its
use in large volume in competition with. .its various substitutes.

Trie' public alsr, develloned increasing interest. in the future of its
wood supplies, as evidenced' by bhe e.s abliscient. uof forest schools *:nd
various public agencies fur the purpose of stuj.,.; ng the forest problems
and assiBtirn in their coluticn. In this movement the Bureau of
Forestry, U3. Dpe rtment cf Agriculture (now. d sJina~ed Forest Service)
assured lPsers,,in, Proo.bly ro other natub-Fl resources have received
the rp-me aount of con.. j. .ration and the spaae amount of rlaning- as to
what should be duil pb bot it as have the forests, All of this.*audy and
discussion h-,s resulted in'a clearer uder standing of tnepublic and -
industry prnj1 eri-n involved and the develo.m.-'.it of a long-time ,program
for solving them. :-

Measures ta4en tn meet 'the situation prlor tn the Code of' Fair.,Coom-
petition for tne Lumber and Timber Products- sTr.dn-L.st are as follows:

1. Public i

Tne -first major development in forest Cnsr-r'. n in the Unitpd,
States 'dates from I.E91, inr.which year' Co:ITresn...Ah-_.--Cd th"& President
to set aoart as nu."lic r.servationrs such of the1' oabl. .ands as containoA
timber or udirl.ro *,n. As a result of tni3 't,'.,r.:.z.-'Wiuon, toe'ither with
later legislation nermitfng exch'tnge and o'icha, prxirty
165,000,O00 acres of nptlonal forests ha-ive baei,.-aets-'aide unFe1 :mnage-
ment of the Forest Strvic', U. S. reT, rtrient of. AqTjrv.1ture. These lands
are not rrservL-d in the ,' nne that the rt-.s1.', r 0'6'ckd4 up.' bn the
contrary the 'Goverr-'nmen-., -olicy is 'to -ermi't .'t.rL',.., out'.unde'r such
eondltionc tLat triLir rr-_r-wab-1l: resou-rces,; s '.'..;- as t.zarp'ahd forage,
_.lll. be incrcasd in voiur'e and quality td the'f' 1 ill*c'iity of the land.
In addition to the national forests, an.6j -y .+'7 11,70Q,000 acres
of timber aad woo.1 land .re fo'.uid on Iudan revtr-c.'e under the juris-
:dinttion ef tie Comrmiszio-ner of Indian Af aia-`c.r'ta'snt of the Inoerlor.
Theee land .re ha;idled in substantially ,'th. oA`1jr:: as tne national
Sreg", -- tiat is, to..ijmrove while wisely. toe.-i v tae ucs.

The I'-tional Park S;rvice, under the DepiA-Tr-n'-e f tie Interior,
also ha-.jurisdiction over approximately I C,OL.O acres f public
.lands, sf wrJ ca slightly less than.ni.e-alf *i Ltjci.roA.' The timber
rescur'cea on





-52-


these lands are kept in as nearly a natural state as possible without 1
regard to maximum ,:-rowth. Tney are not subject to exploitation. 1

In addition to the Federal Government, several states have set aside
or purchased considerable areas of forest lnd which, outside of parks I
and other special use areas, are managed under policies somewhat similar 1
to those of the Federal Government. Nearly 16,000,000 acres of forest :
lands are estimated to be under stnte control.

2.. Private

The problem of forest conservation by private timber and timber land
owners has generally encountered insuperable difficulties. These have
long been recognized by the forest products industries and to some i
b extent by the public. The objective of keeping all timber lands, both
private and public, in a high state of productiveness is fully endorsed
by leading members of the forest industries, and they have been willing
to assume their full share in a broad program of national forest con-
servation. However, many of them have felt that alone this could not be
accomplished on most of the privately-owned forest area.

... The condition of the Lumber and Timber Products Industry may be
briefly summarized as follows: (a) A top-heavy investment in standing
raw material -- approximately $6,0r,'0,00,000 worth of land and timber
and an unknown amount in plants, railroads, etc.; it is inconceivable
that this investment under its present and increasing load of carrying
charges can be retired without severe loss to capital assets; (b) a
manufacturing capacity far in excess of reasonable market consumption
resulting in recurrent periods of over-production and low prices; (c) I
a drastic reduction of market requirements due to a decline in domestic
use of wood and increasing restrictions in foreign trade.

To better its financial situation, leaders in the industry have from
time to time explored the possibilities in consolidation and in coopera-
tive control of certain important factors affecting it, such as product- It
ion or prices, but without material success. The first failed from lack
of adequate finances and the second from lack of assurance from Federal.
and State authorities that the cooperators would not be held liable under
State and Federal anti-trust laws. The only assurance possible to get
from Federal agencies has been that the legality or otherwise of a sug-
gested course of industry action would be considered after and not before
the action had been taken. Under such circumstances few industry leaders
were willing to jeopardize their investments or reputations by subecribi. .0
to any effective price or production control plan.

* The result has been unrestricted competition between producers of
single species or similar products within a region, competition between,
different producing regions, and competition of all regions with other .
materials.

As an illustration of the Lumber Industry's current situation, the
record of lumber consumption is illuminating. In 1906 the visible con- I
sumption was approximately 45,000,000,0'0 board feet, or over 500 feet


9813




-53-


per capital. In 1926 it had dropped to 38,000,000,000 board feet, or a
little over 300 feet per capital, and in 1932 it had dropped to
12,On0,O00,000 board feet, or 95 feet per capita....

In 1926 the number of wage earners engaged in primary conversion
was approximately 455,000 as compared to slightly over 155,000 in 1932.
In order to keep costs down and remain in business, long hours of opera-
tion and low wage scales were inevitable in some producing regions.
As a result of competition, laborers in one section of the country re-
ceived for a long day's work a smaller wage than did laborers in another
section for one hour's work.

In. the past the Lumber Industry had usually been considered as a
so-called "wasting" industry because the forests had persisted for
nearly three centuries without economic necessity for replacement.
Only in close proximity to markets capable of using lumber derived from
second growth trees had it been feasible to establish permanent forest
enterprises based upon timber regeneration. Forest management had
generally meant protection of mature stands, and the young growth had
possessed no demonstrable value except in a few localities accessible
to markets which could absorb low-grade material from second growth
stands.

Forest ownership is divided roughly as follows: About 50 per cent
of the mature saw timber is owned by industrialists, over 7 per cent by
farmers, and 38 per cent by the Federal Government. Yost of the cut-
over land not needed for agriculture is privately owned, although from
50,000,000 to 75,000,000 acres may return to public ownership through
tax delinquency. Over 50 per cent of the cut-over area is fairly to
satisfactorily stocked with growing forests and capable of producing
annually more lumber than was cut in 1934.

Recognizing that fire is the greatest single menace to forest
replacement, and that adequate control of fire will solve one of the
major problems of forest management, the forest products industries
have vigorously advocated fire protection and have cooperated with the
State and Federal authorities financially and otherwise to secure it.
Toward this whole protection effort on private and state forest lands,
including cooperative and private non-cooperative expenditures, private
interests spend nearly 35 per cent, the states 39 per cent, and the
Federal Government the balance.

In 1934 over 65 per cent of the private and state forest lands
believed by the U. S. Forest Service to be in need of protection were
receiving it, varying in degree from practically 100 per cent coverage
in New England, the Lake State and Pacific regions, to a little over
30 per cent in the South and Central regions. Of the .amount necessary,
in the opinion of the Forest Service, to secure adequate protection,
approximately 55 per cent is now being spent annually. In the Pacific
and North, Rocky Mountain regions, where the heaviest stands of mature
timber are found and where the fire risk is very great, more than the
amount necessary to do a good job is now being spent.. Of the total,
private interests put up approximately 60 per cent. In the Central
region and the South the lowest ratios of actual to required expenditures
are found, namely 16 and 20 per cent,


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In spite of the uncertainties in the long-time holding -of timber
lands such as unpredictable carr.7ing charges, fire and otherrisks and
uncertain future markets there' has been a considerable effort -on the
part of the forest industries to practice forestry. A survey conducted
by a Committee of the Society of .'hmerican Foresters in 1930 showedd that
288 companies and .'individuals, each owning tracts of more than 1,000
acres, were making conscious efforts to grow timber comn'ercially upon
nearly 30,000,000 acres of forest 'l3nd. Forty of these had put their
holdings on a sustained yield basis. (*)

Such was the situation on June 16, 1933 when the N1.I.R.A. was
approved and the Lumber and Timber Products Industries were invited
to submit to the Federal Government a plan,, the objectives of which
were to include the rehabilitation of those industries, conservation
and sustained production of forest resources, sustained yield forest
management, and permanent sources of forest products employment.-

E. COISERVATIOi UMDER THE .CODE

At a general meeting of the Lumber and Timber Products Industries
on July 1, 1933, the outline- for . Code of Fair Competition was sub-
mitted for consideration by representatives of the National Lumber
Manufacturers Association, the largest and most important federation of
forest industry groups. In presenting the tentative code, it was pointed
out that the industry could not permanently, thrive while destroying or
witnessing the destruction bf thed sources of its own livelihood, and
that no rehabilitation would be eitner complete or lasting which did
not effectuate the protection and maintenance of the forest resource
itself. It was further stated that although the unsatisfactory forest
situation might be largely due to past unwise land policies and present
unwise state timber taxation policies, which contributed largely to ex-
isting destructive competition, the remedy was beyond the combined force
of the Federal Government, the State Governments and the forest owners
and industries. It was then suggested that the 1I7RA afforded the forest
products industries an opportunity., through public cooperation, to
establish effective standards for dealing with the problems of occupancy
and administration of forest lands and forest resources.

(*) During the Code period only 10 concerns were granted extra allot-
ments for being on a sustained yield basis in accordance with the Code
provisions. However, a considerably larger number of applications were
in process of examination at the end of May, 1935. It is undoubtedly a
fact that a large number of operators who were actually on a sustained
yield basis declined to make application for various reasons, including
the following:
(1) Unwillingness to bind the corporation indefinitely into the
future by:, action of the Board of Directors, as committed to appermaneht
sustained yield policy. ,
(2) Unwillingness to send the necessary money for technical -ser-
vices to make forest examination and prepare management plan.
(3) Fear of imposition of higher local taxes following acknowl-'
edgment of use values resident', in cut-over lands and reproduction.
(4) Necessity-of retaining the'right to cut.'heavily in over-ripe
stands and stands menaced by 'insects, diseases, etc.
(5) Inability to qualify as.-eligible because of financial li.mitO-
tionn nr i-irnnn ry Ifflf




-55-


As a result of this meeting a "Lumber and Timber Products Industries
Code" was submitted to the President by the National Lumber Manufacturers
Association, acting in behalf of 48 associations representing almost the
entire national range of timber products industries which, after public
hearings, was approved by the President on August 19, 1933.

This Code declared among other purposes, "and to conserve forest
resources and brine about the sustained production thereof." Article X
provided for the conservation and sustained production of forest re-
sources as follows:

"The applicant industries undertake, in cooperation
with public and other agencies, to carry, out such practicable
measures as may be necessary for the declared purposes of this
Code in respect of conservation and sustained production of
forest resources. The applicant industries shall forthwith
request a conference with the Secretary of Agriculture and such
State and other public ind other agencies as he may designate.
Said conference shall be requested to make to the Secretary of
Agriculture recommendations of public measures, with the request
that he transmit them, -,ith his recommendations, to the President;
and to make recommendations for industrial action to the Authority,
wnich shall promptly take such action, and shall submit to the
President such supplements to this Code, as it determines to be
necessary ard feaoible to Piv- effect to said declared purposes.
Such suppler-.onts shnll provide f~r the initiation and administra-
tion of said measures necessary for the conservation and sustained
production of forest resources, byr the industries within each
Division, in cooperation with the appropriate State and Federal
authorities. To the extent that said conference may determine
that said measures require the cooperation of federal, state and
other public agencies, said measures may to that extent be made
contingent upon such cooperation of public agencies."

Article VIII, which refers to control of production, provided:

"(i) The Authority may modify, or cause to be modified,
production quotas and allotments determined hereunder, and
the bnses therefore, in s'uich mariner and to such extent as may
be necessary to effectuate the purposes of the Code in respect
of the conservation and sustained production of forest resources.

"(k) The Authority, as promptly as practicable after
its action pursuant to Article X hereof, shall submit for the
approval of the President appropriate changes in the b.sis of
allotments."

Immediately after approval of the Code by the President, the National
Lumber Manufacturers Association, on behalf of the forest products in-
dustries affiliated for th.nt purpose, requested a conference with the
Secretary of Agriculture to lay before him proposals for effectuating
the purposes of A.'ticle X. In the meantime, at the joint invitation of






the Secretary of Agriculture and the Lumber and Timber Products Indus-
tries, the Pulpwood Industry, the Naval Stores Industry and the owners
of farm woodlands were invited to participate in the proposed-conference
through their various organizations.

With their request for a co.iferience, the forest industries submitted
to the Secretary of Agriculture a complete program for industry and pub-
lic action, and in doing so emphasized tnhe belief that the purposes of
the conference would not be served by a review of past conservation his-
tory but rather with a consideration of the present and the future, andl
the hope was expressed that public agencies would join with industry in
the planning and establishment of permanent productive forest industry.

The Secretary of Agriculture issued a call for a conference. The
first session was held on October 24-26, 1933 and was participated in by
delegates representative of the regional divisions of the industry and
of public agencies, including Federal, State and other conservation
agencies. The Secretary of Agriculture was represented by the U.S.
Forest Service, which took leadership in representing public agencies.
The purpose of the first session was to formulate a preliminary conser-
vation program to be submitted to the regional agencies of the Lumber
Industry for critical analysis and suggestions prior to adoption of a
final program at a later session. Initial deliberations were on pro-
posals submitted by both public and industry representatives. In order
to facilitate discussion and the forming of conclusions appropriate
committees made up of public and industry members of the conference
were designated to deal with various subjects. The reports of the com-
mittees were laid before the general conference, freely discussed and
acted upon by a vote of the whole conference.

Following the first session of the conference the proposals as
adopted were submitted to the regional agencies of the industry for
their further study and recommendations ;nd with instructions that each
regional agency prepare rules of forest practice appllcable to its
region for presentation at a later conference. So similar were the
proposals of industry ana the public on forest practices that an execu-
tive committee was provided and instnmicted to reconcile the proposals
into a joint statement. This statement was later submitted to the
regional divisions of the industry.

In recognition of the immense task of preparing regional reports
and formulating regional rules and regulations of forest practice, the
second session of the Conference wns not called until January 25, 1934,
Representation at this session wps the same as on October 24-26, and
the subject natter was handled through the same committees, with all
reports and recommendations finally acted upon by the general Conferenci

With notable unanimity the Conference representatives agreed upon
a well-defined plan of procedure to accomplish the objectives of conser,
vation and sustained production of forest resources. The program call
for definite action on the part of the Lumber Industry in the prompt
initiation and administration of forest practices designed to promote
the conservation of its resources; it called upon the States and the
Federal Government for a cooperative program of public action in respect

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-"57-


to forest protection, public timber disposal, public acquisition of
forest lands, forest credits. forest taxation, forest research and other
aspects of the forest problems involving public responsibilities.

1. The Private Forestry Program

On February 26, 1934 at a Public Hearing there was presented and
approved a schedule of forest conservation rules based upon the Confer-
ence findings and officially recommended and adopted by the Lumber Code
Authority and unofficially approved by the Secretary of Agriculture and
his representatives. As a result of this hearing the National Rec6very
Administrator submitted the recommendations applying to industry to the
President on I'areh 21, 1934 and they were approved by him on March 23,
1934, becoming amendments to Articles X and VIII of the Lumber Code and
designated as Schedule C.

The declared purpose of the amendment to Article X was to conserve
and sustain forest growth. This was to be accomplished in several ways:
First, by improving logging methods so as to conserve young growth and,
where possible, to leave part of the original stand, and by the intensi-
fieation of forest protection. A long-time goal was the orderly trans-
formation of the industry from a quick liquidation basis to sustained
yield. The industries subscribing to the Lumber Code declared this to be
an industry undertaking, and public representatives agreed that it should
be aided by a broad program of. State and Federal legislation to remove
certain economic obstacles and'to aid in research.

The amendment to Article VIII provided that persons securing their
raw material from forest lands operated on a sustained yield basis might,
upon securing the necessary certificate to that affect from the Code
agency under whose jurisdiction, they were operating, have their product-
ion quota as allocated under Article VIII increased by 10 per cent.

In submitting these amendments to the President for approval, the
Administrator said:

"From the testimony taken at the hearing, it is apparent
that these amendments represent a tremendous step toward the
establishment of effective mechanism necessary to carrying out
a successful program of conservation" and sustained production
in one of the nation's most important natural resources.
As you know so well, the means of embarking on such a program
has long been sought in this country, but the divergent
interests involved, while seeking a common goal, defeated each
other in its attainment by failing to reconcile'their opinions
in the matter of detail. In the light of this knowledge, the
unanimity of opinion supporting these proposals revealed at
the hearing can only be regarded as promising much In future
achievement. That this reconciliation has beenpossible is
undoubtedly'due more to your interest and'leadership than to
any other force."


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Immediately follov'ihg the approval of these amendments there were
set up under the Lumber Code ten administrative agencies to formulate
local rules of forest practice. and to administer locally the provisions
of both amendments. Ench division or subdivision agency consisted of
one or more committees, composed of industry men and having as advisory
members representatives of the State Forestry Departments and the United
States Forest Service. Rules of forest practice suitable to local con-
ditions were.formulated, approved by the Lumber Code Authority and, in
the absence of disapproval by the Administrator, became effective June
1, 1934.

Production control, to be effectuated by a mechanfisih specifically
set up in the Lumber Code, promised to correct one iremdiate economic
ailment of the subscribing forest industries, and at the same time it
was recognized as offering a basis for the permanent encouragement of
sustained yield forestry.

The subscribing industries now undertook to do three things: -(I)
to change over gradually, but as rapidly as possible, from quick l1'iqui-
dation to continued forest production; (2) improvement of woods practices
and general strengtnening of forest protection upon all lands, particu-
lrly those being logged, wnich was to be accomplished by the forest
practice rules; (3) a broad program of study to improve logging'practices,
encourage selective cutting and to train technical personnel, which was
to be undertaken in cooperation with organized public agencies.

Direction of conservation in the divisions was handled by 25
technically trained foresters. The United States Forest Service organized
a staff of approximately the same size, chiefly specialists in economic
study and men with considerable experience in contact with the industry,
to cooperate. At 'the end of the first year of application of Article X
to the woods (June, 1933 June, 1934) approximately 60 per cent of all
operations were estimated by the Code Authority to be fully complying
with the forest practice rules, and an additional 30 per cent were com-
plying in part. Definite progress had been made in fire protection.

Prior to the Code the largest holders of timber land were well
awnre of the over-supply of timber, the over-capacity of the mills, and
the chronic over-production of the Lumber Industry. However, nothing
effective could be done about regulating production to demand on account
of legal restrictions against cooperative action to that end, and the
thousands of small producers that could not be controlled even if there
had.been no legal objection.

During the Code period it was found that the larger operators were
interested in and anxious to observe the forest practice rules, and the
colossal task of educating some 27,000 operators was well under way. It
was impossible, however, to discover all of the scattered small operators-
even those who came under the jurisdiction of the Code. I.f they had been
found and educated as to their privileges and obligatibnris, the problem
of Code effectiveness would still have remained unsolved, owing to the
fact that farmers, owning 12-1/2 per cent of all the saw timber in the
United States and in many instances producing forest products for the


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general market, were specifically exempt from its provisions. In
addition, the important forest-using groups producing pulpwood, dis.-
tilletion wood, mining timbers, etc., not subscribing to the Lumber
Code were entirely outside the scope of .Article X and its amendments..
This was a serious disadvantage.

The Administration, as well as the Lumber Code Authority, recog-
nized the difficulties involved in this situation through lack of suit-
able forest practice rules applying to those industries, different wage
*scales, and other factors directly affecting the successful operation
of the forest practice rules Ps applied to the forest products indus-
tries under the Lumber and Timber Products Code. Accordingly, on March
12, 1934, at a Public Hearing called for that purpose, there was presen-
ted by the Authority the so-called "President's Amendment" to Article JI,
Section (a) of the Lumber and Timber Products Code, providing for the
inclusion under the jurisdiction of that Code of the products of those
industries which were not specifically covered by a Code of their own.
Coincidentally, there was issued by the Administration, with the approval
of the Authority, an "Office Order" which provided that all codes then
under consideration or whichh might later be considered and which covered
primary forest products not then clearly under the jurisdiction of the
Lumber and Timber Products Code should include forestry provisions sub-
stantially equni to those in th Lumber and Timber Products Code.
It was further proviceedl that the Deruty Administrator in charge of the
Lumber and Timber Products Code should be consulted as tb the adequacy
of zuch provisions. The purpose of this order was to.fuarantee that all
'timber lands, except those owned by farmers a:-.d which were specifically
exempt by the NIRA, sho')ld be handled uniforly- and in accordance with
sound forestry practices. As a result, forestry provisions were included
"in a proposed Code for the Pulpwood Industry, :nd suiLable:amendments
were prepared for an existing Hardwood Distillation Code.

At the date upon which all Codes were terminated, the so-called
"President's Amendment" had not been aprproyed. :

Although accomplishments under the forest practice rules of the.
Code were substantial during the short time it was in effect, it was
apparent that if those persons subject to them had been exclusively large
timber owners and producers, those accomplishments night have been
materially increased. Thus, from tne public standpoint of getting the
timber land under suitable forest nrra:ag-me.it with the least possible
delay, greater concentratiOn of ownership might have been a decided
advantage. .

A second difficulty, and one which made almost impossible a proper
administration of the forest practice rules in some regions, was the lack
of jurisdiction over ll forest products producers.
A,third difficulty, the effect of which it is impossible to appraise,
* was the delay that occurred in getting the public portion of the forestry
program under way. Article X of the Code provided that if the Conference




-60-


should determine that the measures initiated by the industry required
the cooperation to some extent of Federal, State and ot ler public agencies
said measures might to t:at extent be made contingent upon such cooper.aic
Schedule C, the amen'mont to Article X, .did not contain this language, bul
stated., ".... it being recognized that the extent tc u.hich these undertald
by the Lumber and Timber Products Industries are capable of successful
accom-lishment is dependent upon the extent and character of public coope<
ation in each state." The industry promptly put into effect the forest
practice rules, and it is reasonable to suppose that the failure of public
agencies to initiate and carry through the public measures approved by th4
Conference during the life of the Code may have seriously interferred wit|
successful administration of the forestry provisions by the Code AuthoritJ

Thus, at the end of the Cede period the obstacles to continued pro- 1
gress in private forestry latge.ly remained.

2. The Public Forestry Program

The Conservation Conference of October, 1934, and January, 1935, re-
commended to the Secretary of Agriculture a definite program of action th.
would form the contribution of the Federal and State governments to round.
o-at the private Code measures in a coordinated plan of American forestry.
As provided by Article X of the Lumber and Timber Products Code, the
Secretea7r of Agriculture made recommendations to the President for a Fed-
eral program. These recommendations fll1red those of the 'Conference and
vere presented in the form of a bill drafted by the Forest Service and d
signated as the "Omnibus Foreetrr Bill." The -oresentation to the Preside
took place on Hay 9, 1934. Co-ngress was anxious to adjourn and the Presi
dent felt it inadvisable to request the proposed legislation at that Con4
gressional session. It is proba-ble that the large appropriation called f
in the bill may have influenced his decision to some extent. Undoubtedly
some of the provisions could have been omitted and the amounts called for
reduced in some instances without materially affecting the public's immed
iate obligation toward the whole forestry program. Some of the proposals
of the Omnibus Bill are, however, being met temporarilyr in other wai qe.
For example, increased cooperation vriti the staten is being carried on th
ough increased appropriations under the existing Clark LlcNary Act (43 Sta
683). The usual fire protection efforts have been supplemented by those
of the Civilian Conservation Corps. Emergency funds have been made avail
able to acquire large areas of land for national forest purposes and cre
has been extended to several lumber companies by the Reconstruction Yina
Corporation. The extension of long-term Government credits to forest ow
through a forest credit bank, to enable them to handle their properties
a basis of sustained production of timber crops, as recommeidded by the ao
ferences, was presented to the 74th Congress in Senate Bill 3417 on Augutl
14, 1935. In addition, on January 2, 1935 the President wrote to the Go'
ernors of the several states urging them to call together representative.
of the Federal and State Governments and of private industry to consider
tax deliquency on .timber lands and other forestry questions as set forth
by the Conference. Some such meetings have been held.

The future of forest management necessarily rests upon continuity o0
forest ownership. Unstable ownership prevents long-time planning and dl'.
courage efforts to refine management methods. At present nearly 80 per
cent of the best forest lands are privately owned. There is small likely

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blood. that public funds can be made available sufficient to recapture a
arge portion of these lands and the timber upon them within one or even two
decades, even if the public should desire to do sol Ownership, then, must
remain predominantly private, an'l the task is to secure continuity by re--
oval mf the recognized obstacles such as excessive carrying charges, un-
ertainty as to future mor.cets, ineffectual protection assistance by the
public and inability to secure low-cost financing.

At the close of the session on January 26, 1934 the Article X Forest
conservation Conference provided for a committee consisting of an equal
lumber of public and industry representatives whose duty it should be to
ake promptly sunh action as might be appropriate to give effect to the
recommendations of the Conference. -

It warn provided further that the Conference should not definitely
i sband, but should consider itself in recess, to be reconvened on re-
ommendation of the Joint Committee upon the approval of the Secretary of
agriculture.

This committee met frequently during the'period of the Lumber Code,
nid again on June 12, 1935, after the Code had b'.;en dissolved. After con-
sultation with public arici. industry leas.ders it found:

"That the Joint. Conservation Program, recommended by the
Forest Conser-.-otion Conference and further developed and estab-
lished by ap-rori"' e agencies '.nd P-oroved by this Committee is
adequate, fea-ible, and s-iculd be carried forward withon change,
except as to method;

"Phat the Lumber nnd. Timber Products Industry be urjed volun-
tarily to continue to carry out the provisions of Schedule C and the
Rules of Forest Practice through their tri'-.C.e associations and by
their individual members;

"That all other forest-using industries and all owners of for-
est land, whether public or private, including farna woodlots, be
urged to join voluntarily in this enterprise;

"That the U. S. Forest Service and, other public agencies, federal
and state, be urged to coninuc and enlarge their cooperation in carry-
ing out the work toward the objectives set up under Article X;

"That in the pursuit of the federal and state forest acquis-
ition program, prompt ateri be rkon b-y the U. S, Foreut Service
to bring about cocperaticn of federal and state authorities and the
forest industries in working out the place of each type of obvnership
in sustained yield units;

"That the legislatures of the several states containing forest
lands be urged to meet the wishes of the President of the United
States, as exores;ed in his letter of Januar-r 2, 1935, by early en-
actment of appropriate laws to aid in carrying forward this joint
program;





-62-

UThPt the Presid.ent 'of the United States be respectfully urged.,
as promptly as is compatible \7ith the national interest, to submit
to the present Congress the program of forestry legislation founded
upon the recommendations ofx" the Joint committeee of the National
Article X Conference and approved by the Secretary of Agriculture;

"That public .ta.te-ients of intention to carry forward the foreI
conservation progro-m be ir.iued by authoritative spokesmen of both
industry and the public."

The National Lumber l.Manufacturers Association, a federation of the
principal regional lumber manufacturing associations which had function
under the Lumber Code as Division and Subdivision Agencies administering
Article X, as well as other provisionss of that Code, has declared the in-
tention of its member organizations to proceed voluntarily with the indu
try.'s part of the agreed program. This membership represents considerab
-more than half the lumber production of the country.

The personnel of the U. S. Forest Service, previously assigned to
this work, has continued to cooperate in basic studies and in educational
activities among private operators.

The Forest Service his also prepared a revision of the original "Om-
nibus Bill" for consideration of the :resent Congress, Which is calculate
to give effect to the recommendations of the Conservation Conference. Th
outstanding features of this bill are proposals to: (1) Increase the
Clark-Ilciary cooperative fire money authorization from $2,500,000 to
$5,000,OCO; (2) authorize an a.-oropriation of $1,000,000 to carry on For-
est Service end State and private forest cooperation; (3) authorize an
appropriation of $6,000,000 for completing the Forest Survey plus authori-
zation for an annual a.oropriae.tion of $250,000 to keep the data current;
(4) provide authorizations for forest research along several lines; (5)
authorize the Secretary of Agriculture to enter into cooperative sustained
yield management egreementc with private operators, who should place their
forests in units to be jointly 'nan'-ed u'ith public forests; (6) provide by
bond issue, or otherwise, for a lvrfe-sc.a.le Federal forest acquisition
program to be carried on for ten yenrs by the an-oropriation of $50,000,00O
per year to permit acquisition b- the Federal Government of 224,000,000
acres of forest land an6 15C billion feet of privately owned timber.

As already stated, there is before the Congress a proposal (Fletch-
er-Cal-driell Forest Credits Bill) to e::tend the facilities of the Farm
Credit Administration to the field of forest management, in order that
forest ov-ners who desire to operate on a sustained yield basis may secure
loans at low retes of interest commensurate with the risk and return.

It is apparent that this joint conservation program contains the
beginnings of an effective national forestry enterprise. Three actions
are necessary: First, the Legislatures of the forested states should
overhaul their tax systems, should arrange fo.r State management of tax
reverted lands, and should assure the maintenance of adequate Forestry
Departments; second, the Congress'must enmct legislation to carry out
its recognized obligation to encourage continued forest ownership and.
thus make private forestry possible; third, -privte operators and timber
oviners must carry on that portion of the joint program assumed by the


9813


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SI


3m


"Ii




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Lumber Code Authority under Article X. It is also necessary to bring into
the picture owners of farm woodlots and forest users not members of
existing lumber manufacturers1 associations.

Although the forestry provisions of the Lubi,'er and Timber Products
Code were in effect lees than one year, that experience was sufficient
to demonstrate that the 7ygtem of control set up under the Gode was sound
and would adequately meet all the needs of the public interest in private-
ly owned forests if it had continued to receive the wholehearted support
of all those under its jurisdiction and public forestry agencies and if
it had been legally enforceable.




-64-

CHAPTER III

THI- PROBLEkiS OF PROrJUCTIOl;

A. CtPACITY

Caoacity, as related to sawmills, is a relative term, and the basis
for the use of the word in this chapter is as follows: 54 hours per week,
50 reed's to the year (2,700 hours) multiplied by the rated hourly output
of the sarr.iill equipment. Some such arbitrary basis must be determined
for the reason that there are many sawmills that are equipped to operate
only dur-ing the hours of daylight, while other and larger plants are so
equiprecl as to permit operation during all hours of the twenty-four.

On the basis of the formula outlined ebove, the annual capacity of
17,467 saxr.iills to which a rated hourly capacity was allocated under the
NRA Code, a-iounted to more than 69,00C0,000 ,I1 b.m. (Thousand Feet Board -
Measure.) (*) The largest production within the last ten years was
39,000,0C0 II b.m. (**) And it is a matter of record that many of the
very largest mills in the country operated regularly on a two-shift day
during the -rear 1929 when this peae of production wras reached.

In Okiscussing the capacity problem the standing timber will be
referred to as being in areas or in regions, but when reference is made
to sawmills and production the reference vill be to divisions as compre-
hended in and established by the Code of Fair Competition for the Lumber
and Timber Products Industries. The divisions and subdivisions under the
'Code generally follow the geographical boundaries of the regions, but for
specific delineation of any division, reference should be made to the
Code in Api-endix I.

Areas of merchantable standing timber have been or are now in ex-
istance in practically every state in the Union except Kansas, Nebraska
and North Dak:ota, and as the settlement of land progressed from New
England and the Eastern seaboard, small sawmills were established to
supply local needs. These mills ware followed by larger units for the
commercial production of lumber, and then as the sup-oly of merchantable
timber was exhausted, or as centers of demand developed closer to other
areas of merchantable standing timber, commercial sawmills were establishE
in these new areas. Thus many small neighborhood and some commercial
sawmills have been left behind in areas practically or completely denuded
of comrierial saw tmiberand in areas where saw timber is available but is so
far away from the centers of demand that it is not possible for the fin-
ished product to compete with 1-unber fro:3 other areas more advantageously
situated,



(*) Unpublished compilation by Research & Planning Division, NRA, Mill
Canoacity Statistics, June 1, 1935 and Table XIX.

S**) Table V.


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With the change of production'centers for lumber influencing
the establishment of new mills, iftcan readily be seen thnt a very
considerable portion of the rented capacity of the sawmills is not much
more than a figure of speech,, It is known that many hundreds of mills
still carried on the records as being able to produce have not actually
produced, and thnt man.r thousands of other mills have been in operation
for but a very s-ai1ll fraction of the basic hours per year, in any year
of the past ten. This is true particularly of several thousand small
mills located in the Northeastern Softwood and Hardwood Divisions and
in the North Central Division where the supply of virgin stands of saw
timber was virtually eliminated several years a.;o and only second growth
timber is now available or is bpcomring available. Many of these small
sawmills have reverted to original -type and are operated only to supply
an immedaite neighborhood lumber requirement.

Many of the small sawmills do not have the type of equipment
that would permit them to produce a grade of lumber that would compete
with the output of the larger mills in the principal consuming markets.
Coupled with the fact, as previously discussed, that so many of these
mills are located away from the present centers of production where
distributors tend to congregate, the lower grade of output and the
difficulty of placing the product in the market would normally tend to
reduce the effective capacity of this very considerable group of mills.

There must also be taken into consideration the fact that as a
result of the movement of centers of production and the consequent change
from large mill to s:nill mill operation within producing centers, there
are known to exist many lar-e mills with rated hourly capacities ranging
upward into the thousands of feet that can not produce more than a frac-
tion of this rated capacity for the reason that the timber supnly either
has been completely exhausted or is so far removedfrom the mill site
that it is practically impossible to deliver logs to the mill in quantity
sufficient to keep the machinery operating even the theoretical number
of specified hours.

These sawmills, under handicap of location, are always potential
producers of lumber but seldom actually produce except when the price of
lumber reaches a level that will permit recovery of high costs from the
sale of this marginal production.

The West Coast Region is an exception to the general statements
above. In this region the standing timber areas had been the object of
speculative purchase since the period of the land grants to railroads,
and particularly after many in the Lumber Industry became convinced that
when the supply of virgin pine of the Southern states was exhausted there
would be no further production from that region and the only available
softwoods would be those of the West Coast Region. Trany large and costly
mills were erected in the West Coast Re&ion to meet this expected demand,
but the South continued to produce softvood lumber when much second growth
timber began to reach maturity or merchantable size, and that region has
not yet failed to offer competition for its share of the consumer demand
for softwoods.


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With Southern pine competition continuing, the West Coast mills
could not find a profitable market for lumber from all of their in-
stalled capacity, and many have never manufactured even to 50 per cent
of the rated capacity. In fact, so-ic of the finest sawmill machinery
urocurable has never operated in actual production although installed
in West Coast Region sawmills backed by ownership of standing timber
sufficient to sustain capacity operation for fifty years.

Carrying charges of interest and taxes ultimately became too great
a burden and in many cases 1,t ras necessary to liquidate the investment*
Under this economic pressure large areas of standing timber was converted
into sawmill products even though it was recognized that this center of
production was handicapped by a location distant from the then existing
centers of demand and that difficulty would be encountered in marketing
such products in competition with those originating in areas much more
advantageously located. Data (*) indicate', that rated mill capacity in
the West Coast Division is equal to several times the annual effective
demand for its products. This #xcess capacity and the economic demand
for liquidation of the investments in standing timber have forced saw-
mills to produce when there was no effective demand for the lumber and
when the market was created largely through reduced prices and without
regard to return of total cost of production.

Seasonal weather conditions and the terrain upon which the merchap-
table stands of timber are located also have a decided effect upon the
actual as compared to the theoretical or rated capacity to produce. In
the Southern Pine Region the land is fairly level and the weather con-
ditions will permit woods operation and consequent sawing of lumber
practically throughout the year. In the West Coast Region generally
favorable weather conditions are also encountered but there is a more dif-
ficult terrain and logging operations can not always be carried on.
Moving inland to the Western Pine Region, general comnorising the mountain
range country, severe seasonal dislocations and unusually rough terrain
are encountered, adding to the difficulty of -nroducing logs. Rated cap-
acity of the sawmills in these latter tro regions is undoubtedly a very
different quantity from effective capacity to produce lumber.

Other factors governing capacity of sawmills are size of trees;
compactness of timber stand and character of logs. It has been pointed
out that production in the Southern Pine Division is now largely re-
duced to utilization of second growth, and consequently smaller trees
are being logged and worked into lumber with greater ease of operation
than would be the case if a virgin stand of large trees was being utilize,
The stand of trees is not heavy but the logs are sound and clean. It
is true that the small trees will not produce lumber in similar quantity
and grades as will the large virgin stock, but the ease of operation per-!
mits larpe use of manual labor'and does not require expensive mechanical
equipment for logging and handling to the saws.

(*) Unpublished compilation by Research & Planning Division, NRA.
Mill CaDacity. Statistics, June 1, 1935.




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The production in the 7est Coast Region is practically all-from
virgin timber. The trees are large, the stand is very dense, and most
of the operatiQns are "clear cutting" takingg all merchantable trees
and disregarding condition of remaining young growth) so that logs
of all sizes and conditions reach the Faws. (*) Being required to handle
a preponderance of large logs over difficait terrain, these logging
camps and large sawmills are highly mechiaiized units requiring that the
majority of the employees shall have scrue degree of technical training.

The production in the western Pine Region is largely from virgin
timber and over very rough terrain. Here again clear cutting until
recently has been the rule but the timocr stands range from sparse to
very dense, and the trees from small to very large. To fit these widely
differing conditions the sawmill capacity is made up of many small mills
and some few large mills. All mills are required to handle the miscellan-
eous types of logs resulting from clear cutting.

Hardwood is produced in every state in the Union except Arizona,
New Mexico, North Dakota, South Dakota and Wyoming, the production in
the states of California, Nevada, Colordo, Idaho, lontana and.Utah being
very slight. (**) Siaall mills predominate but there are a few large
mills. The ca-orcity-of these large mills is largely .taken up- with pro-
duction for special orders and for use by integrated processing plants.
Selective logging (cutting trees selected as best suited to produce; the
type of lumber desired) is largely prrcticad-in the hardwood divisions
and usually the mills have only first class logs to handle through the
saws. .

.- The over-extended capacity to produce lumber.has tender to the
establishment of excessive inventories, for in many instancesjthe shadow
of this unused capacity has fo-reed other oier-tting units into .production
schedules which they knew to be in excess of the effective demand for
their product. 7With the unused -oroduction capacity in existence it has
always been necessary for those sawmills producing lumber to avoid any
semblance of under-production that would tend to a real or an imagined
shortage of lumber. This was demonstrated about the time the Lumber Code
was being discussed, and when it was expected that there would be a very
cQnsiderable demand for lumber in the carrying out of the then proposed
Government building program. It has been reported that many thousands of
small mills in the Southern Pine Division were then encouraged to, and
actually did start operating under the reported prospective shortage of
lumber as a result of that proposed building program. Not only did the
small mills go into production but many of the large mills stepped up
production, not only in the Southern Fin:- Division but in the West Coast
Division and in the Western Pine Division; and this hopeful production
was indulged in despite the fact that tb,- industry then had on hand a
heavy inventory of wholly or ioa t-1Ay malln'factured stock and the effective
demand for the-prior -ar had been at the low for more than fifty years.

(*) Oregon and Washington have slash disposal laws which do not allow
consideration of young growth.

(**) Table XVII B


9813







References have been "iade to the three major softwood divisions
only, as these three divisions have produced from 81 to 84 ner cent of
all lumber consumed over a period of years. Reference also has been
made to the Southern and Appalachian Hardwood Divisions, which two
divisions have produced approximately 70 oer cent of the total hardwood
consumption. The above quoted figures are particularly applicable to
the period from 1929 to 1934, inclusive.

Commenting briefly on the above displayed data, and bearing.in
mind that production in the year 1929 was the largest in any of the pas
ten years, it will be noted that the peak production of 1929 utilized
less than 50 per cent of the Southern pine rated capacity and slightly
more for. Western pine, while West Coast utilized about 70 per cent of
its rated capacity, with the Appalachian and Southern Hardwood Division!
utilizing less than 25 per cent of their rated capacity.

When the results of the depression began to be definitely felt in
1931 and 1932 the position of these four principal lumber producing
divisions was particularly acute, and the actual utilization of the rat
capacity of the sawmills in those divisions, as indicated by the data,
was almost negligible.

In viewing these data it should also be borne in mind that the
rated capacity of the sawmills in the Southern Pine Division is about
equally divided between small mills and large mills, and that this con-
dition also largely prevails in the Western Pine and the Appalachian
and Southern Hardwood Divisions. The rated capacity of the mills in thi
Test Coast Division is largely that of the big mills.

Remembering that large mills generally are expensive installations
almost universally backed by extensive timber holdings all requiring
considerable investment, and that the small mills are almost universal.
without extensive, timber backing and usually re-oresent but small invest.
ment in equipment, it can be seen that the economic pressure of taxes
and of interest would be less severe on the small mill caDacity than
on those divisions in which the large mills predominate. These economaii
considerations would largely dictate whether mil-Is actually continued
operation in the face of declining prices and over-extension of stock o0
whether production would stop and the rated capacity be not utilized.


















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The excess capacity of the sawmills may best be illustrated
by the two following very brief tabulations:


Sawmills: Ratio of Rated Caoacity for 1934
to renorted-Production in the Princioal
Lumber Producing Divisions


Southern
Pine a/


West Coast
Fir, etc.


Western
Pine a/


Appalachian
& Southern
Hardwoods b/


1929 Production
(million feet) 11,630 10,147 5,217 5,315


Year
1929

1930

1931


2.3

3.6

6.1

8.8

6.4

5.8


".;" 1932


1933

1934


1.4

1.8

2.6

4.4

2.9

3.2


2.1

2.7

4.0

6.0

4.7

4.1


4.2

3.8

4.4

5.7

6.8

6.6


1934 Production
(million feet)


4,680


4,275 2,649 1,959_____


a/ These softwood producing Divisions re-oorted 81 to 84 ler cent
of all lumber shipments originated therein.

b/ This hardwood producing group shipoed approximately 70 oer cent
of all hardwoods.









Sawnills: Ratio of Rated Canacity for 1934
to reported rroductio-n in the minor
Lumber Producing Divisions


Northeastern Ncrtnern Northern
Softwoods Hemlock Pine Redrood- Cypress
1929 Production
(million feet) .4 .A_8f ..... _35 590 . 381
1929 2.4 1.4 1.3 1.3 -1.6---.
1930 2.8 '1.8 2.2. 1.6 1.6
J. 1931 4.7 2.7 5.0 2.7 2.4
1932 6.6 6.2 8.2 "'4.4 52......
S" 1933 6.0 6.n 9.8 3.7. .5.4
1934 5.4 3.9 5.7 2.2 5.6
1934 Production
millionn feet) 290.9 110,3. 84.4 350.5 110.3

In connection with this group of data relating to minor lumber pro-
ducing divisions, it should be considered that these various divisions a
the capacity arid the production listedrepresent, for the entire group,
only from 10 to 15 ner cent of all lumber used; so while the figures are
informative and are presented for comparison rvith similar data for the
principal lumber producing divisions, this indicated excess of capacity
would have no serious effect upon production in general. The above com-
ments do not apply exactly to the Redwood Division, for in this particul
type of operation the large mills and highly mechanized operations are
again found, but the number of operators is very limited. It will be no
that the data disclose the Redwood Division operated at nerrly-.B;Diar-c e
of its cara .ty in the peal- year of 192,; that in the low year o-f 1932
it was operating at less than 25 per cent of its rated capacity; and tha
in 1934 the mills were operating at nearly 50 oTer cent of their rated.
capacity.

As would naturally be supposed, with more than 17,000 sawmills lo-
cated in practically every state in the Union, many different manufacture
ing methods are involved. These methods can be roughly classified into
the methods and practices followed by the small sanmills, the methods
and practices followed by the intermediate size sawnills, and the method&
and practices that are a necessary oart of the ooerptions of the large
sawmill units.

Aside from the size of these operating units there must also -be con
sidered the methods of manufacturing used by the different tyres of saw-:
mills. Generally speaking, a considerable part of the nroductinn of thi
small hardwood mills is custom sawing. This is simply the bringing in
of logs by their owners who desire them to be sawed up into certain
specified articles of lumber generally for their own consumption. Anoth
type of small sawmill is more prevalent in the Southern Pine Division.
Here are several thousand mills that are engaged in the manufacture of
lumber products from the available standing timber in their particular
neighborhood. The -oroduction by this group of mills is a more direct a
less purposeful utilization of the standing timber. It is in fact a ty


9813





-71-


of operation that may best be described as mopping up an area. In
other words, these sawmills are engaged in the sawing of logs from trees
that are too small in sizn or too far removed 6 make their utilization
profitable in regularly established sawmill operations. The purpose is
simply to get the most possible out of the logs and to get that prodlat,
all too often of a low grade, into the market and sold for anything that,
it might bring. Most of the equipment is of low efficiency and produces
lumber of distinctly substandard quality. Among mills of this classi-
fication is the group known as "roofer" mills of the State of Georgia,
These mills produce lumber from small and immature tree and the product
is usually the roughest, the poorest and the most irregular of any lumber
production worthy of that name. The products of these mills are, as the
term would indicate, simply rough boards of varying widths and lengths
that are used as a foundation for other lumber or substitutes for lumber.
Thesp boards do not have to be of any particular width or length and they
simply replace better manufacturing material in any type of construction
to which they are adapted.

Manufacturing of lumber products of standard grades, sizes and re-
presentative qualities cannot vary considerably between mills in the
same species area or between mills in areas producing competitive species.
The lumber must bi produced and sold in competition with the products of
all other mills of similar character. Hence the manufacturing processes
and procedures must be such as to produce lumber comparable in grade and
sized with other mills irudnain, the uamo. or oomlyi t ive suoecies,


9813






-72-


There is another type of mill. and one which added a distinct factor
to the general problem of production -- those mills which are produ-
cing lumber from their own trees, in tneir own mills, which is not ex-
pected to and generally does not ever reach the channels of distribution
for the reason that these products are put into other processes for
finishing special items for their own ase. These sawmills with inte-
grated operations created a distinct problem under the Code administra-
tion and a problem which apparently had not been given adequate conside-
ration and had not been solved in the drafting of the Code. It is
plain to be seen that if one of thosb integrated operations -- the
making of sawed wooden boxes -- was carried on by a sawmill manufacturing
its own material for the box making o-Derations, it would have a distinct
competitive advantage over other box plants. Not only would such an
integrated mill have the advantage of beins able to use short length
and low grade lumber from its actual lumber producing operations, but
it also would be possible for it to transfer all of its products over to
the box making factory at a price which might result in a loss for
the sawmill but in an exorbitant or unreasonably large profit for its
box making activities. This is just a sample of several of the per-
plexing conditions which arose through failure to properly comprehend
and provide for the effect of integrated manufacturing operations
within the sawmill industry.

The method of manufacturing by the various types of mills as
discussed above added one other phase to the general production
problem. It can be readily seen that the small mills operating spo-
radically would secure their labor only from people in the immediate
neighborhood who would necessarily nrovide themselves with other
means of livelihood than working in the sawmills. In fact, practically
all of the labor in such type of mill was purely the type that used
the sawmill wages as a supplement to other earnings. This type of
mill could suspend oreducticn at any time or fail to resume production
at any time and it would still not seriously affect any considerable
number of wage earners. This same condition prevailed also in con-
nection with other small sawmill operations whether those sawmills
were of the movable type or whether they were of reasonably permanent
installation. In either event, with production not being forced upon
the mills, the labor that would be employed in those mills would or-
dinarily be suoplementing other earnings with their sawmill wages.
Also, as a general rule, these small mills were not burdened with any
investment in standing timber and consequently added no burden of
interest and taxes to be met regularly.

But the condition would be very different when the production of
the larger sawmill units would be interrupted. These larger mills
were accustomed to and were expected to operate about 60 or more hours
per week. It was therefore necessary for them to build a reservoir
of labor uoon which they could depend for the sustained hours of
operation. As a consequence of these conditions, labor migrated
to the vicinity of the spwmills; in fact there had been many towns
and small cities located or built up around sawmill activities.
These mills were dependent upon this labor and this labor was de-
pendent upon them. The mills also, because of their size, the
amount of capital required for their building and the securing of
the necessary timber to back them up, involved very considerable


9813




1I -

investment and the properties v/ere all subject to taxation. In connection
with this _rolps of lar.:e mills, economic pressure for continued operations
would, i-.- many cases, force thez.e sawmills into production.ev~en when
there w-as no immediate demand for their products. With demand being
reduceC', rices would decreap e under the pressure of the increasLin
*:su-n1y and these spwmil's found themselves compelled to operate at a
direct loss. Thi necessarily caused the labor wage to be reduced.
The vwa.e of labor .- s the most imn)ortant factor of the out-of-pocket
or actual ,ioney cost of production; it was the one which would be
subjected to the .i.oqt pressure for reduction and in most instances
was the Icast fixed item of cost of-any that had to be met currently
by the mills if they were to continue in existence.

After the adoption of the Code niany hundreds of these small
mills, faced wvith the necessity of paying ar minim'un wage and supplying
inforn.tion relative to, their operations, did not again resume saw-
ins. The lrjer mills, however, were not able to dispose of this
proble,.i so ea'il,', but were actually faced with the necessity of
continuing; their manufacturing operations. They paid the minimum
wage specified in the Code; they operated the maximum number of
hours permitted ; they produced their lumber andpit it on the market
ex)ectin.v to find it moving in the usual channels of trade at the
minii.riun prices set b- the industry Code Authorities, only to be faced
with L volume of production, from other similarly located mills that,
in the a olrej.te, vas more than the market was demanding. These mills
were virtually forced to co:.tirnue proCuction and their products had
to be d-isp)osed of in some manner and at some price so thpt additional
money could be secured for continuing operations.


9813




-74-


B. PRODUCTION VOLUTE USAGE

Lumber production is largely % forced and involuntar:r process. It
is not similar to factory production -here Epecified materials are pro-
cessed to mnke particular products. Articles Iroduced in the usual factor
may be for orders already, in. h-nd, for rerlenish-inent of stocks, and in
anticipation of results from a prear'an.-ed selling campaign. Usually
these production processes may. be brought to a stop at Pny tine and not
leave any large stock of raw materials on hand to burden the cash re-
sources with recurring fixed charges of interest and taxes.

!erchantable standing timber is the raw material of the saw mills.
It must be either owned or controlled in s'cn quantities as to furnish
saw logs at the mill for such n period as will be economic justification
for the establishment of the converting units and at such a cost Fs will
permit the sale of the resulting lumber products at a price, under
reasonable competitive conditions, that vill return a profit. Standing
timber must be converted into logs and other forest products under pressuz
of nature, for trees reach maturity as do other crops and then deteriorate
and slowly but certainly lose value. Logs usually must be so sawed as to
produce the best possible assortment of sizes and grades of lumber,
whether those si2es and grades are wanted or needed.

Thus it will be seen that in the production of sav.mill products,
as a usual thing, there cannot be a particular choice of the raw material,
and that the product will, to a ver;.' large extent, depend upon the size
and quality of saw logs, the efficiency and ability of the men, and on
the type of mill equipment operated by them. This is particularly true
where lumbering operations are carried on purely as a salvaging operation1
In later years, salvaging of values from standing timber has been the
predominant factor in the production of lumber, as the mills were estab-
lished and equipped and the standing timber had been acquired, all of
which necessitated payment of the carrying charges for the investment
vhich in turn forced the sawmills to operate without regard for the
immediate value of the products.

Other economic pressures required that quantities of standing
timber be converted into sawmill products. Land under lease must be
cleared before the lease period expired. Standing timber purchased to
be paid for out of progressive utilization demanded liquidation. Vast
holdings of standing timber (*) acquired possibly as a speculation and
covered largely by mortgages and bond issues, demanded sufficient oper-
ation to realize cash to pay carrying charges of interest and taxes.(**)


(*) Table III Stand of Saw Timber in the United States by Regions,
States and Classes of Ownership.

(**) Tables XII, XIII, XIII (a), XIII (b)



9813

,.1




-7',-


The downward trend of the volume of lumber production has been
arked by the well-recognizud turn. or tread of population from the rural
to the urban centers. (*) Then the density of city population required
ore and larger buildings, br"lging ,jc".t fire hazards and resulting in
the adoption of stri-4'enL fire re1-W. ; !ons restricting the use of wood
for construction purposes irn mrny cf tite l,.rger cities, Coupled with
this downward trend of lumber use rln, as o-e of its contributing causes
was probably the develou.ent cf tie use of brick ond the development
of the use of concrete a"',1 construction materials wnich had come onto
the market with the deve]omrncLic of science and the arts. This influx
of materials, new in fa.-t or new in use, wa.s of nri.ne importance to the
Lumber Industry as it coincided with a period of rising costs which had
made necessary rising prices -fr a grF,-at mU y of the products of this
industry. With these increasirng prices dzim..,ni.-hing the price differen-
tial between lumber products and these new building materials, there

(Footnote continued)
born population. The South Atlantic and the East South Central States
all lost population throughout this 60-year period.

There was a gain in population in the West South Central States
and in the Mountain and Pacific Region.

The movement of population into tihe West North Central States
reached its peak in the period 1890 through 1900. The movement of
population into the West South Central States, while continuous frnm
1870 to 1930, reached its peakc from 1900 to 192M, Beginning in 1910
and continuing through 1930 the Pacific States absorbed population
apparently from every other rroup of stt-tes, as those sections which
were losing population registered heavier losses in the yenrs from 1910
to 1930, and usually those sections :,aining population gained at a lesser
rate in this period than in the prior period.

(*) In 1933 the U. S. Dep-,artment of Conmerce, Bureau of the Census, re-
printed a part of Chapter I, Volue 3, 15th: Census, Reports on Popula-
tion. In this reprint, on pa-e 9, a.'e displayed data concerning
urban and rural population. In Table III are published data from
1790 to 1930, and it is therein clearly shown that population in places
of 8,000 or more has increased from 3.3 per cent of the entire population
in 1790 to 49.1 per cent in 1930. It is further shown that one very
definite movement took place between 1880 -nd 1890, and that from 1900 to
1930, the -"ivement to urban centers of 8,000 or more increased more than
17 per ce:.t.

It ". a2 so shown in Table IV that the population concentrated in
places f3:.' 2.50) tnT.r r-i increased from .7 4 per cent of the popula,-
tion in J'.' tho 5.2 1 Z cent of the por-' -.tion in 1930. It is also
intero': in. .9 I'? -,i :i- this same table C-ows that the greatest concen-
tratior. n :,-e .fis Di-'n in places of orc million or more, although all
size .-oo':-- -ic:t-. 3md i.L. population except" that group of cities between
500,0CO0 aru 1,00%&'00 e.-.cpt for a slight decrease in the population
centers of 100,000 to 250,000.







These conditions were particularly true of the larger virgin timber
lards in the West Coast region, nnd competing woods,while not possibly
under the same economic pressure for liquidation saw their market dis-
appearing unless they in turn stepped up production even though the
products were in excess of demand and had to be sold only on a glutted
and falling market. From the earliest days lumber has been produced to
meet a natural and not a created demand. It is true the industry has
made many refinements in its products, largely to meet the competition
of its own members, but except for these, the products of most mills
today are little different from those of the earlier mills. The princi-
pal products are not readily susceptible to any uses other than those of
long-established custom.

The capacity to produce lumber has been shown to have been always
in excess of the demand for the product. (*) Changing centers of demand
and changing centers of production have worked one with the other to bul
up a capacity to produce that has always been a weight upon the industry

Ascending volume of lumber production marked the westward movement
of population with the settling of new farms, and the opening up of tow
to supply the new farming communities. This impetus to production was
followed by a long maintained demand resulting from city improvements,
better buildings on the farm, and finally by the turn of population to
the city requiring other and further duplication of habitation. (***)


(*) Table XX-Comparison of Equipment Utilization.
(**) See Table IV Percentage of Distribution of Lumber Production, b
Regions 1849-1934; the Evidence Study Series No. 22, "The Lumber and
Timber Products Industry", W. E. Yost, Division of Review, NRA
(***) The Department of Commerce, Bureau of Foreign and Domestic
Commerce, Forest Products Division, published in January 1935,
data indicating that the peak consumption of lumber was from 1904 to
1913. During this period the consumption of lumber did not fall below
40 billion feet, and in the year 1906 reached almost 45 billion feet.
From 1914 on to 1928 consumption fluctuated from a low of 28 billion
feet in 1921 to a high of 39 billion, 700 million feet in 1923.

This high consumption of lumber in the period from 1904 to 1913,
and which was partially maintained up through 1917, very closely folion
and it is fair to assume is linked with the movement of population thai
is very definitely shown in a publication by the U.S. Department of
Commerce, Bureau of the Census, entitled "State of Birth of the Native
Population" (1932.) This publication is based upon the Census of 1930,
and on page 11, Table VII, the migration of population is very clearly
depicted covering the period from 1870 to 1930. Data therein present
shows that New England constantly lost population and that the Middle
Atlantic States also showed a continual loss, gradually, however, de-
creasing to 1930. The West North Central States gained population con
stantly from 1870 to 1910; then this section began to lose its native-


9813


II


-75- "






as a constantly increasing trend nwK'0 from the use of lumber. *(*)

During this time :'ie.i t.lis latterrrm.vement was in progress and was
contributing to tne decrease i;. T!'e effective demand for lumber products,
he capacities of the mills h-,, b.-n increasing lrFly through the es-
blishment of new proaictionr centers in the L:ke Stes, then in the
u thenn pine sect Lion of thie country' and then in the West Coast region.(**)
E. i: *
Apparently it was thought that with the increase in population of
e United States tnere would never cease to be a progressively increas-
demand for lui.,ber rodacts v.>ich vould drive to their F-r'ro..:imate
city the vast number of saHmi'lis which had been put into operation
the United States. During the last'50 years there his been an enormous
crease in the number of uses to which 1l-rnber has been put, but in spite
this wider use the actual volume per capita has declined and the total
lumne of consumption and of effective demand has been constantly on the
crease for a number of years except for the jeik period of production'
1928 and 1929.

Up to the beginning of the depression there hqd been a constant
crease in the caTncity of the srwmills in the United States and this
crease was installed in the face of the constant decline in the use of
jber both in total volume aric ij, consumption por capital.

After the adoptio/i of tne Code and even under the ma-ximum hours
Imitation and in spite of ot.ier specific methods adopted to control
.*oduction, it war, prn.-ticnU;" im} orsible to appreciably reduce the total
kck of lumber products on rind awaiting demand. (***)

It is fair to state tnat tnis condition did not arise as a result
'v increased production but largely did result from the unforseen and un-
edictable constpr.t decrease in demand for iunbor products. Lumber
EIply did not move. Tnere wa-. pr&,cticaily ro Caerrnl for it as its best
tomrer the Construction In.ustry was virtua2.,- out of the market in
'2 and in 1933. So i, spitz of all the nations that were taken to
ce the Lumber Industry in a better econmrnic position, it is found that
a result of the overcapacity of the mills and the economic necessity


STable XXXIII, comparison between total construction and units hippedd
Super $1,000 of construction for selccted products during the years
1920-1934.
i) See Table IV Fercentage of Distribution of Lumber Production, by
: Regions -1849-1934; the Evidence Study Series IJo. 22, "The Lumber
9 .: and Timber Products Industry," W. E. Yost, Division of Review, NRA.

,*) Table LIII Stocks, shipments and production of Softwood Lumber
! : 1923-1935.





-.73-


for most of them to operate at least some of the time, and with the
decrease in shipment of lumber to the c-onsuming market, the stocks on
hand continued to be unwieldly and an actual threat to the ultimate
soundhess of the industry. After the adoption of the Code and with the
promulgation of minimum prices and more stable conditions in the indus-
try in general through the elimination of many unethical trade practices
there was a general settling down and the reduced production was more
nearly balanced b;r effective demand for lumber and timber products.
There was later a very noticeable drop in the demand, and with production
remaining at the established minimum under production control there was
another short period when stocks of lumber on hand again increased.

However, until a very considerable quantity of the over capacity
of the swmills in the industry; have been eliminated by the passage of
time, which will make many of these mills ineffective, and until a con-
dition of more -sitabi lity in the industry has released many of the units
from the economic necessity of producing lumber to raise money for
carrying charges, there will still hand over the industry the constant
threat of unrestrained production which crn again over balance stocks
and bring a chaos of price cutting and the consequent wrecking of
industry units whenever prices rise to such a point as will nake it at
least seemingly possible for this vast overload of marginal capacity to
gain some advantage, however slight, from again operating this class
of mill.


9813





C. FINANCIAL STRUCTURE


The capital or financial structure and the changes therein over
a period of time naturally constitute a very important -oart of the
problems of the industry. To properly study this phase of the industry
there should be available quite detailed data.concerning the assets,
the liabilities and the capital structure in addition to profit and
loss data of the organizations or firms in the industry. There are
not available any authoritative and reasonably complete data on these
phases of this industry. There are a number of firms aid organizations
purporting to suonly certain of these data, but each covers only a
limited sector of the whole industry.

The Bureau of the Census conducts a census of manufactures in the
odd-numbered years. The classifications adopted by them are not
exactly comparable with classifications of the industry used by other
reporting services and especially by the Bureau of Internal Revenue.
The census of manufactures also includes data from individuals and
partnerships, but excludes all below t5,000 annual volume. It does
not report any balance sheet or profit and loss data for these business
units so reported otherwise. The Bureau of Internal Revenue, in its
annual volume "Statistics of Income," is the only dependable source
giving the related balance sheet and the -rof it and loss data. Their.
figures are presented only for corporatiQns classified as forest product
corporations which include, in addition to sawmills and niolaning mills,
manufacturers of furniture and vehicles. The ..*.'.ber 6f corporations so
reporting to the Bureau of Internal Revenue r-,ngeid between 5,500 and
7,200 for the years from 1920 to 1933, The Bureau of the Census reports
many additional organizations of comparable classification but, as'
noted above, this ground of figures includes allotypes of financial
organizations. The Lumber and .Timber Pr6ducts "Code Auithrity. under the
MBA variously reported that manufacturers of lumber and timber products,
exclusive of manufacturers of, furniture and vehicle products, numbered
anywhere from 17,000 to 24,000. The largest number'of cost reports
secured by them under Coce administration was about 5,000, and there was
no information from any of these reporting members. of the industry as.
to assets, liabilities and type of financial structure.

As the data published by the Bureau of Internal Revenue are the
most reliable data that can be secured and cover not only the financial
factors but also the profit and loss results, these are the data which
have been classified and analyzed, although it is recognized that such
data also represent only a cross-section of the industry as they do not
include reports from many of the. larger corporations in the United States
which, while not nrincinoally engaged in sawmill and lumbering activities,
do control a very considerable area of standing timber and produce a
large volume of sawmill products; nor do. the figures include, any of the
business results of a not inconsiderable group of the partnership or
sole-trader tyne of financial organizations.

Remembering that stands of merchantable timber exist in nearly
every state in the Union and that conversion of this standing timber
into sawmill products is being carried on by practically every type and
size of sawmill equipment under conditions of weather and terrain

"9813
Si,




-80-
i
differing just as widely, it w..s only to be expected that there would
be a wide range of financial results secured by the differing tyoes of
mill operations. These were affected also by the varying methods of
conversion made necessary by the changes within the industry that
largely resulted in the establishment of mills with rated hourly
capacity of production largely in excess of any effective demand within
the later years.

While this industry is mostly one of manufacturing and the actual
usable -oroducts are the result of one or more manufacturing processes,
the industry itself is based upon a natural resource. It must orovlde
a dependable source of the raw material for its manufacturing plants,
and by the very nature of this raw material the industry, as it has
been constituted uT) to this time, has been compelled to carry very
heavy investments in standing timber. Owing to the shifting bases
of production made necessary by actual or effective elimination of
first one area of standing timber and then another, and to a certain
extent by the shifting centers of demand, the industry has built up a
duplication of manufacturing equipment and has acquired an excessive
supply of the raw material or standing timber.

While it is true that a considerable portion of this duplication
of manufacturing equipment and of the ownership of excessive quantities
of standing timber may be charged to faulty judgment on the part of the
industry, such a condition actually does exist and must be considered
in the broad view of the industry necessary for a study of its economic
problems.

Viewing the industry only from the standpoint of the actual available
figures covering not all but most of the corporations engaged in the
industry, the following analyses are submitted. All figures quoted herein
are from Statistics of Income, Bureau of Internal Revenue, or are de-
veloped from those statistical data.

While the presentation of data by the Bureau of Internal Revenue is
quite complete for the industry as a whole, the classification of data
is not as detailed as might be desired for the forest products industry.
The deficiencies principally to be noted are that there are no separa-
tions cf capital assets into:

(a) Standing timber.

(b) Plants and plant facilities.

(c) The related depreciation and depletion are not
separately disclosed.

There is no segregation of the source of borrowed capital employed
in the industry. It would be particularly desirable if information were
available as to the current loans from banks and from individuals and
parent or subsidiary corporations.

The published data of the Bureau of Internal Revenue do not permit
a classification of the invested capital of this industry but it is

9813




-81-


livedd that a very considerable portion is and must be in standing
imber,.and without definite data as to the extent of this particular
estment one. especially interesting- vie'.7 of the industry is either
ompletely obscured cr very materially f.reshnrtened.

Over the period of years represented by the statistics, the
orporations whose reports are tabulat-d in the yearly Statistics of
-bcome, Bureau of Internal Revenue, fr.-om 1926 t) 1933, inclusive, are
Classified by the Bureau as corporations reporting:

1. Net income
2. No net inc':me.
3. Inactive

These classifications and data cover a period from the year 1926,
st commonly referred to as the major or standard year, up through
the year 1929 and the following years of the depression, which reached
Its depth insofar es this industry is concerned in the year 1932.

The Bureau of Internal Revenue does not require all corporations.
to accompany their income data with balance sheet information, so that
while the corporations actually reportin= to the Bureau have ranged in
nUm'ber from 7,862 in 1926 uo to 7,947 in 1928, and since that date
continuously declined to 6,707 in 1932, with a slight increase to 6,879
In 1933, those corporations which have submitted balance sheets have
been smaller in n-Lumbcr'and-have decreased from 7,244 in 1926.to 6,137
in 1931, with a slight increase to 6,147 in 1932 and to 6,161 in 1933.,
Therefore, data concerning assets, liabilities and capital structure
are from a group of corporations about five per cent fewer in number
than the groups submitting data as tc income,

The division of these corporations into classes of those reporting,
a net income and those having no net income will probably offer as
complete a gauge of the actual trend in this industry as- any other
possible factor. (')

The corporations reporting a net inc .me numbered 4.,591 in the year
1926 and 4,135 in the year 1929, decreasing to 2,3-10 in 1930, to 1,525
in 1931, and to 541 cr just about nine per cent nf the total number
reporting in the year 1932, In 1933 profitable operations was reported
by 1,638 cut of F,879 corporations. Except for the elimination of some
1,100 corporations between 1926 and 1932 this difference was naturally
taken up by that class of corporation which re-ported no net income.
This group numbered 3,271 in 1926, increasing .slightly each of the years
1927 and 1928 and being practically the s-.me in 1929 as in 1926. Be-
ginning with 1930, however, the number of corporations reporting no net
income in the forest products group numbered 4,868, a 50 per cent in-
crease over the previous year, and.this group had increased to 5,929
in the year 1932 and decreased to 4,882 in 1933.


(C) See Table XXIV




9813
,Ii




-82-

This review of the results of business operations of the corpo-
rations is given as one of the details concerned with the very definite
and marked changes in the capital structure of the industry as reflected
by this group of corporations. While the very marked decrease in
corporations reporting incomes and increase in number of corporations
reporting no net income has been one of the important reasons for the
change in capital structure, one other factor should be considered,
which is that the corporations as a class, irrespective of the yearly
profit or loss results, continued to disburse cash dividends. (*)

These dividends and income tax payments to the Government were in
excess of earnings .in each of the years from 1926 to 1929, inclusive,
and dividends were paid'7i n the years 1930, 1931 and 1932 although the
industry as a whole had lost nearly $110,000,000 in 1930, more than
$177,000,000 in 1931, more than $202,000,000 in 1932, and $66,000,000
in 1933. Some corporations reported a net profit each year, but in no
year were the reported earnings of the industry as a whole equal tn the
cash' dividends paid out by all of t'.e corporations reporting the pay-
ments.

W'.ile th.e year 1929 was generally represented to be and is shown
by the statistics of most industries to have been t::e peak business year.,
this condition was not true in this industry. The dollar value of gross
sales of the industry was t.,e highest in 1926, being slightly more than
$2,900,000,000. Gross sales decreased to $1,910,000,000 in 1930, to
$794,000,000 in 1932, with a slight upturn to $923,000,000 in 1933. (0*)

Analyzing the balance si;eet figures of the industry as a whole
from the close of 1926 to the close of 1933 (***) it will be noted that
the assets decreased from more than $4,023,000,000 to less than
$2,549,000,000 or 36.6 ner cent. In tliis very material shrinkage of
assets over this period of eight years the following Items are of
interest and should, in themselves, reflect information important to
those interested in tie industry.

Cash and receivables, the principal elements of the current assets
of this industry, reached their neak of about $751,000,000 in each of
the years 1926 arid 1928, and beginning with 1929 decreased sharply to
about $360,000,000 at the close of the year 1933. The other very
important factor in the current assets position, that of inventories,
also registered a very material and a much greater loss shrinkage from
a .kigh point of $770,000,000 in 1926 to a low of $338,000,000 in 1932,
with a slight upturn to $367,000,000 in 1933.

A reference has previously been made to the fact that in these
statistics the capital assets of this industry were not segregated as
to standing timber and plant facilities, so the shift in this class


(6) See Table-XXXVII-I

(**) See Table XXXIV

('**) See Table XXXIV

9813




--83-

... assets cannot'.be as.accurately and'as completely'analyzed as it should
to bring, out-the true conditions. The group of capital assets, less
reciation and depletion, shrank bout .'100,00,000 over the period of
eVeb years from the high mnar. of $1,8 Kb ,000,000" in 1926 to the low of
J,448,000,000 in 1932; If it were noszible to segregate the capital
0set group,into its principal factors r.f standing timber and of .plant
mill site and manufacturing; facilities, it would doubtless be shown
t many of these larger corporations have divested themselves of
lsiderable values -oreviously invested in standing timber. While there
no definite figures available, it is safe to say that during the
iod from 1926 to 1929 there was a very heavy investment in sawmill
winery and in -nlants. Necessarily during those years when production
is quite high there was also a correspondingly high decrease through
.etion of the dollar value of the standing timber assets and de-
eciation of the plant facilities. It is also believed that the
rest productss industry has rmade but very little addition to its
pital assets of mill sites and equipment since the close of 1929. As
p consequence of these factors and because of the fact that most de-
eciation in mill site and equipment is on- a basis of -amortization with
te natural resource and not on a straight line basis, much of the equip-
nt and many of the plants have suffered-actual deterioration consider-
Sly larger than that measured by the write-down of the values reflected.
the composite item of capital assets, which, by reason of paucity
data, must include these twro very differing types of assets.

As the total assets employed by this industry had decreased 36.6
|ier cent over the period of seven years and ,s'tthe current, assets de-
-reased approximately 50 per cemt in tiat period of time, the changes
in the current liability and b6nded indebtedmnss position' of this in-
Oustry also reflected a differing but understaiidable trend. The current
liiabilities did not nace downward with the current assets, th'e shrink
here being 49.4 -ner cent instead of 51.5 per cent. t he capital liabili-
ties represented by bonded debts and mortga es iere about $160',000,000
In 1926 when the capital assets were cver $1I850,000,000. These ca-i.tal
liabilities had shown a constant yearly increase'u-o' to $265,000,000 in
'931, decreasing to $231,300,000 in 1933. But during this time. the
capital assets uoon which. these cap-ital liabilities were based had
creased more than $400,000,000. The data cominiled by the Bureau of
internall Revenue classified "other liabilities under one general heading.
:Vithout the details and the information that'would come thercfr6m the
iare statement of the change in this particular liability is not as in-
f:!'ormative as it might be. Nevertheless it is very important to note
Eithat this. group of liabilities decreased from nearly $462,000,000 in
1926 to about $168,000,000 in 1933.

With the very definite shrink in the assets employed in 'this
industry it would be expected that the stockholders" partLciation or
:Anterest in th-e cor-oorations wbuld have changed materially; 'There has
3lbeen a change in the actual capital structure as preferred -tock has
creasedd from $285,O00,000 in 1926 to $176,000,000 in 1933, and the
common stock has decreased from $1,378,000,000 in 1926 to $1,159,000,000
in 1933.




813





-84-

Naturally the greatest measure of decrease in the stockholders'
interest is represented in the decrease of the surplus accounts. ThisB
decrease was from $1,047,000,000 in 1926 to $463,000,000 in 1933. In
this connection it should be noted, however, that all of this decrease
in the stockholders' participation is not alone the result of losses, but.
can be largely attributed to the dividends, both cash and stock, that "
were disbursed to the stockholders as previously referred to. The cash
dividends over this period of eight years amounted to $593,000,000, and
stock dividends were declared amounting to $56,717,000.

In consideration of the broader problem of credit which is also
connected with the financial problem, the analysis of the balance sleet
data of the corporations classified by the Bureau of Internal Revenue
as members of the Lumber and Forest Products Industry show the following:
Current assets (consisting of cash, receivables end inventory) repre-
sented 37.8 per cent of the total assets in the year 1926, 27.4 per cent
in the year 1932, and 28.3 per cent in the year 1933. The capital assets
in 1926 represented 46 ner cent of the total assets; in 1932, 53.5 per
cent; and in 1933, 52.5 per cent. Miscella-nenmus assets and tax exempt
securities together represented 14.2 per cent in 1926, 19.1 per cent
in 1932, and 19.2 per cent in 1933. As has been noted previously, the
total fund of assets of this group of corporations decreased more than
36.6 per cent from 1926 to the close of 1933.

In a similar analysis of the liabilities and the capital structure
or proprietorship items other very startling changes are found. In the
year 1926 all liabilities represented 32.7 per cent of tie assets and
the capital stock and surplus represented 67.3 ner cent. In 1933 total
liability had been reduced to 29.4 per cent of the total fund of assets,
and the capital structure represented 70.6 per cent. Considering the
separate classifications- of liabilities and their percentage to the
total of all liabilities, it is found that in 1926 the current liabilities
represented 52.7 per cent of the total and that the capital liabilities
represented 12.1 per cent. The classification of "other liabilities" is
a very indefinite ene, but as tabulated these liabilities represented 35.2
per cent of all liabilities in 1928 and 22.5 per cent in 1933. In 1933
the current liabilities represented 46.7 per cent of the total liabilities,
this being a drop of six ner cent as compared with 1926, and the capital
liability represented 30.8 per cent of all liabilities in 1933 as com-
pared with 12.1 per cent in 1926.

In the period under comparison the changes in the capital items
have been quite sharp. In 1926 the stock, both common and referred,
was equal to 41.3 per cent of all assets, while in 1933 it was equal to
52.4 per cent. In 1926 the surplus of all of these corporations was
equal to 26 ner cent of all the assets, but in 1933 this item had de-
creased to 18.2 per cent of all assets. Again it must bo remembered that
during the period 1926 to 1933 the total fund of assets had shrunk more
than 36.6 per cent.

In analyzing these data from the credit standpoint, consideration
must be given to those factors which affect the credit of the industry
and probably the best gauge is the simple but effective and long-used
formula of the banking fraternity, namely: that current assets must be
.Ji




- -"


least two and one-half tiuet the current 1.inbilities before a business
A.naidered to be in P dtIrre'er borrowing state. Depending u-pon this formula,
generally accepted element o' current assets should be further analyzed.
I* comparison would not be n fair one if consideration was not also given
| the naiticular character of this inixsitry&l' And this is -oarticularly so
at the inventory Tfactor of the curreut asset grou-o is considered. While the
ilable figures and daTa do not defi,.itely disclose these facts, it is
sBonably assumed that tnis industry must include as inventory in the usual
le of manufacturing a very considerable quantity of so-called raw material,
ending upon the practices of the individual manufacturer, 'ranging from logs
the woods, down through transportation from woods and uoto the so-called
detk and then through to the drying and the planing processes.

In many instances and in several localities the cycle of -production
|tends over a number of months in each -production year. In some sections
I is not Dossible to fnll trees in the winter. In other sections it is not
ssible to transport logs from the woods to the saw-deck during all -periods
the year. In other sections and with certain species of wood it is not
Sinducive to good first quality products to cut logs in the woods if they can not
almost immediately sawn into rough lumber -products. With these considera-
flons in mind it is natural that this industry as a whole should carry an .
Sinhventory which in other manufacturing industries would be considered excessive.
|he comparison to be now given should be read with'the above facts in mind.

S Based on the amount of inventory of the industry a- the close of each year
it is found that in 1926 the pross sales were slightly less than four times
the inventory and this condition prevailed with gradually decreasingg er-
.entage through the year 1J.29. Beginning Pith 1930, however, with the
inventory remaining high and the sales constantly dec'reasihng, it is found that
.the sales for 1930 were just about three times the inventory; less than three
times in 1931; about two and one-half timys' in 1932; and two'and eight-tenths
times in 1933. The cost" of goods. sold offers.a,more -reliable indicator of
.Merchandise turnover, and using this as the basicfibure t6 be coTp'ared with
.the inventory on hand it is found that in. n.year between 1926 and 1933 did
'.he goods or merchandise moving out intochannels of trade amount to three
:.times the inventory. In 1937 the cost of goods sold aggregated less than
.twice the value of the goods on hand to be sold,., "

; In addition to this slow turnover o' inventory, the analysis of the
figures also indicate collections for billed merchandise to have been very
.slow. In 1926 on the basis of the usual method of com-outation (the ner-
7:.entage of outstanding accounts to total: sales atnlied to the days in the
iyear), the average sale was not collected until 75 days after invoice date.
'..his condition had gradually grown worse even during the -eriod up to 1929, at
which time the average between invoice an4 collection was 84 days. Naturally
during the depression period this condition was aggravated, and in 1932 there
e's an average of 150 days between the date of invoice and the date of -ayment,
ra'.And this excessive number of days was almost a 50 -Der 6ent increase over the
year 1931, when the average el'uosed period between invoice and payment was
3|:105 days. In 1933 this period between billing and collection had decreased to
1:!!? days, but even tnis reduced period is very much in excess of the experience
'record of other industries not indul-ing in sales on the deferred or installment
HIlan.



9813




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