Front matter
With special reference to the influences
determining the prices of lumber
in the United States
Preface
The solution of many of the economic problems associated with the conservation of natural resources is intimately connected with the analysis of prices. This conception has led to the presentation of a study of the influences w T hich have largely determined the recent course and the present level of the prices of lumber in the United States. Of the necessary incompleteness of the analysis, the writer is aware. It is hoped, however, that the appraisal of the price-determinants may be found to have sufficient foundation in fact, to warrant its acceptance by those who are interested in the lumber industry, its history and its organization in the United States.
The method of price study employed is a novel one. But the character of the source material to which the writer has had access has left open no other practicable way. For the peculiar nature of these statistics the organization of the lumber industry is largely responsible. Had the writer been able to avoid the almost exclusive use of relative prices, he would have been spared much of the laborious effort that has been devoted to the diagrams, tables and appendices. It is confidently hoped, however, that the initial inconvenience due to the method of treatment may be compensated by the resultant greater completeness and accuracy of the evidence.
Acknowledgment is made of special indebtedness to the Department of Commerce of the United States and to the Forest Service and the Bureau of Labor Statistics. Their libraries and files have been generously placed at the disposal of the writer in the preparation of this monograph. Grateful acknowledgment is rendered also to the National Lumber Manufacturers' Association; to its affiliated associations and to the many individual lumber manufacturers who have assisted with much useful information. Special mention is made of the American Lumberman. Because of its long identification, through its predecessors, with the lumber industry and because of the representative character of its interests throughout the United States, the American Lumberman has been a useful source to which the writer has had frequent resort.
Of his indebtedness to Professors Frank A. Fetter, E. W. Kemmerer and W. M. Adriance of Princeton University, the writer wishes to record the grateful acknowledgment. Without their constant encouragement and advice this monograph would have lacked much of whatever merit the student of the lumber industry may now find in it.
Wilson Compton.
Hanover, New Hampshire, January, 1916. • in
Key: To facilitate the citation of sources reference to the trade literature, throughout the present study, has been made as follows:
Cited as:
American Lumberman A. L.
St. Louis Lumberman St. L. L.
New Orleans Lumber Trade Journal N. O. L. T. J.
Mississippi Valley Lumberman M. V. L.
New York Lumber Trade Journal N. Y. L. T. J.
West Coast Lumberman W. C. L.
Pacific Coast Lumber Trade Journal P. C. L. T. J.
Northwestern Lumberman N. L.
Southern Lumberman S. L.
Hardwood Record Hardwood Record
The Timberman The Timberman
IV
SYNOPSIS OF CONTENTS
Introduction
Page
Relative lumber prices : scope of study 1
Price influences peculiar to lumber 1
Characteristics of lumber industry : production 4
"Cost of production" 4
Taxation of timber 6
Characteristics of lumber industry : distribution 7
Foreign trade in lumber 7
The tariff on lumber 9
Transportation of lumber 9
Encouragement of lumber industry by the railroads .... 10
Rate increases 10
Transcontinental rates - 11
Increases annulled 12
Willamette Valley to San Francisco rate. 13
Principles asserted in lumber rate cases 14
Interstate Commerce Commission 14
Supreme Court 14
Transportation costs as a price influence 15
Influence of changes in rates 16
Labor conditions in the manufacture of lumber 17
The lumber trade press 18
Normal range of actual sales prices 20
"List" prices 20
Grades of natural agents used in lumber manufacture 21
Conditions of timber supply in the United States 21
CHAPTER II. Organization of the Lumber Industry : Production
Magnitude of the lumber industry 25
Timber resources 26
Extent of the lumber industry 27
Species of commercial importance 27
Early manufacture 30
Geographical distribution of production 31
Cycles of lumber production : shifts of sources of supply 32
Evolution of technology of manufacture 36
The sawmill 36
Development of the individual mill 38
Number of mills 38
Increase in mill capitalization 39
Average mill capacity 39
v
CHAPTER III. Page Organization of the Lumber Industry: Distribution
Competition between species of lumber 41
The lumber markets 41
Relation of wood-using industries to sources of supply 42
Market for low grades 43
Development of lumber industry in the South 43
Extension of market for southern yellow pine 43
West Coast lumber 44
Invasion of eastern markets 45
Hardwoods 45
Distribution of hardwood product 45
Distribution of lumber for factory uses 46
Higher grades 46
Lower grades 47
Divisions within the lumber industry 48
Ownership of standing timber 48
Logging 48
Selling agencies 48
Manufacture of lumber 49
( "Line-yards" 49
Wholesale distribution 50
Associations of wholesalers 50
Retail distribution 50
Associations of retailers 51
Organizations of manufacturers 51
Early permanent association 52
Extent of organization 52
Minor species 53
Hardwoods 53
Purposes of association 54
Southern yellow pine 54
West Coast lumber 54
Northern pine 54
Hemlock 54
Minor species 55
The type of manufacturer's association 55
General purposes 56
Price policy 56
Uniformity of lists 56
The National Lumber Manufacturers' Association 57
Official purposes 58
Special activities 58
Extent of affiliation 59
vi
SYNOPSIS OF CONTENTS
Chapter IV
Ownership and Prices of Standing Timber. Page
Public land legislation the cause of present distribution 60
General laws -. 60
Special legislation 61
Character and policy of ownership 61
Effect upon stumpage prices 62
"Concentration does not imply higher prices" 62
Principle of competitive timber price fixation 63
Subjective valuations cause of with-holding of timber. . . 63
Classes of timber owners 64
Attitude toward present use of timber 64
Continuity of upward tendency of stumpage prices 64
Current stumpage prices 65
Demand with intent to current manufacture 65
Timber with-holding a potential price influence 66
Historical development of timber ownership 66
Effect of historical conditions of ownership 66
Concrete application of principle of competitive price
fixation 67
Effect of exhaustion 67
Recent finding misleading 68
Concentration a problem for the future 68
Average prices of leading species 69
Southern pine 70
Northern pine 71
Other species 72
Stumpage prices and "cost of production" 72
Fallacious conception of "cost of production" 72
Relation of log prices to lumber prices 73
Log prices and stumpage prices compared 73
CHAPTER V. The Prices of Lumber
General movement of prices 78
Lumber prices and general commodity prices compared 80
Relative rise since 1880 80
Prices of building materials 81
Price classification by species 81
Total supply compared to annual cut 83
Interpretation of price movements 84
Southern yellow pine 84
North Carolina pine 86 vii
The Prices of Lumber. — Continued.
Page
Northern pine 86
Hemlock 86
Cypress 87
Effect of financial strength of holding 87
Relation of supply to price 88
Actual and quoted prices compared 89
White or northern pine 91
Relation of grade to price 93
Relation of transportation costs to price 93
Price differential between markets 95
The normal differential 95
Influence of competition from other species 98
Relation of general building activity to lumber prices 98
Credit conditions in relation to building enterprise 99
Effect of building activity on prices of dimension lumber. . . . 100 Reaction of lumber prices to building prosperity before 1907 . 100
Lumber price phenomena since 1907 102
Prices of lumber and of other building materials 103
General influences affecting lumber prices 103
Increase in world prices of lumber 104
Chapter VI
The Influences Which Have Affected the Prices of Lumber: Educative Agencies and Exhaustion.
Methods of accounting and statistical practice 107
Dynamic influences on lumber prices 108
Lumber prices and general prices compared 109
Influence of industrial depression 110
Analogy to lumber prices, 1860 to 1873 Ill
Educative agencies in the lumber industry 112
Early interest in technology of production 112
Stability and efficiency of organization and method 113
Exhaustion of timber supply 113
Character and range of influence 114
Extension of transportation facilities 115
Classification of influences due to exhaustion 116
Cumulative evidence of exhaustion in leading states 116
Exhaustion of important species 117
Relation of lumber prices to exhaustion 119
Universality of influence of exhaustion upon prices 119
Hemlock an apparent exception 120
Cheap and high priced species compared 121
Continuity of phenomena of exhaustion 122
Coincident lumber price phenomena in Canada 122
Similarity of conditions of manufacture 122
viii
SYNOPSIS OF CONTENTS
Page
Significance of Canadian lumber price movements 123
Prices in the United States and Canada compared 123
Analogy to Canadian export prices 124
Analogy to Prussian prices 125
Chapter VII
The Influences Which Have Affected the Prices of Lumber: Substitution and Association Activities.
Substitution of competing materials 126
Definition of substitution 126
Substitute building materials 126
Influence of substitution upon prices 127
Diversion of demand since 1907 127
Organized artificial restraints upon competition 129
Natural influences adequate explanation of prices 129
General restraint upon competition impracticable 130
Erroneous interpretation of price phenomena 131
West Coast lumber 131
Fallacious assumption respecting prices 132
Association price activities not a substantial influence 132
Arbitrary increases unsuccessful: Poplar 134
The Michigan Maple Co 136
List prices of actual prices compared 136
Southern yellow pine 136
Northern pine and Douglas fir 137
The Boston Agreement 141
The Missouri Ouster Suit 141
Static influence of joint action 141
APPENDICES.
I. Sources of items constituting the general index of lumber prices . 144 II. Relative general lumber prices in the United States : 1860 to
1913 149
III. Relative monthly average prices of lumber of important species :
IV. Relative prices of lumber and of "all commodities" in the United
States and in Canada; prices of substitute building materials. 151 V. Letter : Conditions of lumber manufacture in the United States. 152
IX
DIAGRAMS.
PAGE
1. Comparison of lumber prices with general prices 3
2. Imports and exports of lumber 8
3. The range of lumber prices 19
4. The available resources in standing timber 22
5. Proportionate production of lumber 28
6. Actual production of lumber 29
7. Successive sources of lumber supply 33
8. Shift in sources of supply of lumber 35
9. Prices of fir logs and fir lumber 75
10. Relative general lumber prices 77
11. Relative prices, 1860 to 1913 79
13. Relative prices of eight species 85
14. Relation of prices to changes in supply 90
15. Prices and supply of Southern yellow pine 92
16. Different grades of Northern pine 94
17. Price differential between markets 96
18. Building activity and prices of lumber 101
19. Relative prices of substitutes for lumber 105
20. Distribution by species of annual lumber product 118
21. Consumption of substitutes for lumber 128
22. List prices and actual sale prices ; Southern pine 138
23. List prices and actual sale prices; Northern pine; fir 140
TABLES.
1. Production of lumber in the United States 25
2. Timber supply of the United States 26
3. Number and capitalization of mills, 1850 to 1909 38
4. Average mill capacity, by groups 39
5. The prices of standing timber 69
6. Periodical fluctuations in lumber prices 83
7. Relation of production to timber supply 83
8. Lumber prices in Europe and Japan 103
9. Distribution of lumber cut by states 117
10. Canadian lumber export prices 124
1 1 . Relative monthly prices of important species 1 50
12. Lumber prices in the United States and Canada 151
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