Douglas Fir Rcview for 1938 and Outlook for 1939

Seattle, Washington, January l, l939.-summarizing the story of West Coast lumber for 1938 and forecasting its 1939 trends, Colonel W. B. Greeley, secretary-manager of the West Coast Lumbermen's Association, today placed strongest emphasis on last year's losses by the industry in foreign trade and on the prospect for an expanding homebuilding market for this year. Colonel Greeley pointed out that one must go back to the earliest days

Col. W. B. Greeley of sailing ships to find so small an annual volume of West Coast lumber exports as the 289 mil,lion feet shipped to foreign countries in 1938. On the brighter side of the picture, he declared that, although in dollars U. S. residential building dropped a hundred million below 1937, the number of 1938 dwelling u,nits was higher than in any year since 1929, and cited authoritative forecasts which estimate an increase in 1939 residential building of from fr to 32 per cent over 1938. This, said Colonel Greeley, represents today the backlog o'f lumber trade.

The market for timbers or "heavy cutting" yielded little business to West Coast lumbermen in 1938, the Association executive said, greatly'handicapping many of the mills which depend upon the sale of large items. There were indications, he said, that lumber purchases will be aided by P.W.A. projects in the early part of 1939'but that this was only a temporary market. Colonel Greeley described the new trade agreement with Canada as a'blow to West Coast lumber, while the treaty with Great Britain offered no hope for an appreciable increase in lumber exports.

Colonel Greeley's complete statement follows:

"1938 has been a pretty tough year for the West Coast lumber industry, breaking a little better than 1935 but distinctly worse than either 1936 or 1937.

"The total volume of lumber manu'factured by the Douglas fir mills in the Pacific Northwest-during 1938-was close to 5,2m,00O,000 board feet, which was 82 per cent of the volume produced in 1937; and 88 per cent of the cut in 1936. Last year's production was a trifle over half of the industry's activity in 19D. Broadly speaking, it represented about half-time employment for West Coast sawmills and their employees. About 25 per cent of the Douglas fir operations in Oregon and Washington ran steadily during most of the year. Around 4O per cent ran intermittently or on a three-day or four-day-per-week schedule; and approximately 35 per cent were down for at least ten months, if not for the entire year.

"The 'West Coast lumber industry sold in 1938 a little more lumber than it manufactured, about 5,475,000,000 board feet. The volume of new business was also better than that booked in 1935, but less than the orders received in 1936 and 1937. The decline below 1937 rvas approximatety 8 per cent.

"The lumber charts f.or 1937 and 1938, put together like matched pieces of curly-grained Douglas fir, resemble the two slopes of a valley-a fairly steep downgrad,e in 1937; a gradually rising upgrade in 1938. True to this general picture, the lumber prospects brightened as 1938 came to a close. West Coast sawmills blew the whistle on December 31 with 8 per cent smaller inventories and 33 per cent more unshipped business than at the end of 1937.

"The backlog of the Douglas fir lumber business in 1938 was residential building-particularly the construction of small homes. While the dollar volume of new residential building dropped a hundred million below 1937, the number of dwelling units built or started was higher than in any year since 1929. The total is tentatively estimated at 360,000 homes. This is small enough compared with the 675,W homes built in the average year from Dn to lgD; but the widespread building of little homes is the most encouraging thing in the national picture for lumber.

"The total new constrution in the United States was also down, $140,000,000 below 1937; and, was about 58 per cent of the $9,000,000,000 annually which went into new building in the decade from l9N to l9D. Private factoiy construction declined to one-third below 1937:' and the expenditures of public utility companies was one-fifth less. However, new public construction by the Federal Government reached the highest total of the last three years$1,310,000,000 plus $1,000,000,000 for W.P.A. work relief.

"To the West Coast sawmill, all this has meant a fairly steady 'yard trade' in the usual light construction items. There has been a serious lack of railroad and other industrial lumber buying; and a serious lack of timbers or 'heavy cutting,' which has greatly handicapped many West Coast mills in the utilization of their logs and operation of their equipment.

"Still of most serious import to the West Coast lumber industry is the terrific shrinkage in its foreign trade. The combination of preferential tariffs, diverting the trade of British Empire countries to Canada, and stagnation in the lumber markets of the Orient cut the total offshore business of the Douglas fir mills in Oregon and Washington, in 1938, down to 289,000,000 board feet. One has to go back to the earliest days of the sailing schooner to find so small a volume of export trade. The offshore shipments represented 5 per cent of the total movement of West Coast lumber. In 19D, these trade routes took over 1,600,000,000 feet of lumber-l7 per cent of the total production of that year.

"Barring an early settlement of the war in the Orient, the offshore markets hold scant prospect for improved trade from the Pacific Northwest in 1939. The Trade Agreement recently concluded with Great Britain provides slightly more favorable tariffs on the clear, shop and industrial grades of lumber from the Pacific Northwest, and on its larger sizes of deals and timbers. These will create a little better competitive opportunity to merchandise the cream of the West Coast production in the United King-

' dom; but will not appreciably affect the voltrme of export trade.

"The nerv Trade Agreement rvith Canada is a blorv to West Coast lumber. The import duty remains at $2.0O per thousand feet, established by the trade negotiations of 1935. This is the lowest duty permissible under the Trade Agreements Act. The new agreement removes the former limitation upon the volume of Canadian imports of Douglas fir and West Coast hemlock at the reduced rate of duty; and also removes the requirement that imported lumber be marked to show its foreign origin. The practical effect of this concession is to throw open all Federal construction in the United States to imported lumber, contrary to the intent of the Domestic Origins Act. The competition of lower-cost Canadian lumber will be felt more keenly in the future by the industry of the Pacific Northwest. The trade agreement also raises a definite issue as to the retention of the Lumber Excise Tax by the American Government; and whether the removal of barriers to free trade means ditching the protection of American wage scales and working qonditions from foreign comrpetition.

"The average price received for all grades and items of West Coast lumber sold in 1938 will be not far from $19.25 per thousand board feet. This may be compared with the average oL $22,19 received in 1937; and the ar.erage of $19.50 received in 1936. In 1935 the average price was $17.28. -

"In the domestic market of the United States, the prospects for 1939 arc somewhat brighter. Construction appears to be one of the more stable factors in the current revival i.n general business conditions. Well-known authorities in the construction field forecast a 6 to 10 per cent increase in construction, in 1939 over 1938. Residential building is in the lead of these forecasts, with estimated increases of from 20 to 32 per cent-in 1939 over 1938.

"The Dodge Statistical Research Service, estimating for the 37 eastern states, believes that ,publicly-built construction will decline 7 per cent in 1939; and privately-built construction will increase 25 per cent. This would leave the total for next year at $1,900,000,000 of private construction and $1,600,000,m0 of public; or a grand figure of $3,50O,mO,00O. This is 8 per cent over t937 and not far from double 1935. This agency, however, cautions that the construction revival is still largely a matter of Government 'pump priming'; afld that a tapering off in the latter half of 1939 should be expected.

"From its own surveys, the West Coast Lumbermen's Association looks for a moderate upward trend in the first half of 1939, based primarily upon the gradual widening and greater momentum of low-cost housing in the United States; and the probably slightly greater consumption of lumber in farming districts. In the early part of the year, lumber purchases will be aided by P.W.A. projects; but this will prove a passing phase.

"The best chances for restoration of normal employment in the lumber industry lies in the country's entering a new period of home and farm building like that which followed the World War. If present trends in this direction are not seriously set back, 1939 should see us somewhat farther on that road."