A Powerful Argument

Eaery paragratk of the following letter is interesting, to both mill men and the retailers. It was zwitten just last weeh, by one of the large'California wholesalers.

March 6, 1924. "".'' Co' Seattle, Wash.

Gentlemen:

We have received several requests from our Agcncies as to conditions existing in Southern California, bolh from a standpoint of present prices, but also supply and demand conditiotrs, togethcr with prospects for the future, so lre have decided to write all Mills with whom we are doing business, in order that they shall know what the exact situation is as far as we arc able to inform you.

In the first place we will give you prices as they today exist. We misht say that in our estimation these prices are about as low as stock will go, unlss an abnormally large amount of unsold stock were pushed in here quickly, under which conditions, of course, there would be no market at all.

The following prices are ex-vessel San Pedro to datc: stocks on hand. By persuing the above ngures you will see that from a statistical standpoint conditions are made to order. Now, let us go a little deeper into conditions. In the first place'you will find pessimists who will tell you that the new rail rate of 50c from Portland to Los Angeles will reduce to a Large degree the cargo ship- ments. This is absolutely all bunk. The only effect rail shipments will have in the first place will be on worked uppers and thesc have always come in large quantitics regardless of rates. Another thing is that 80Vo of, rail shipments into Southern Calilornia are in mixed cars, something that never did come cargo anyway. In addition to this, there is a ceftain p€fcentage of yards who feel that they are not satisficd with thc way Flooring is handled cargo, therefore prefer to pay more for rail ship- mcnt. Right at thc prcsent time, howcver, cargo shipments of uppers are light, not due to price conditions, but instead to wcather conditions, as a buyer of Flooring cargo at this time of the year is frankly taking his chances of his stock getting damaged by rain, as all cargo uppcrs are reshipped from San Pedro or Redondo in FLAT CARS. never in BOX cars. Thcrefore, to sum up this angle, we will say that cargo shipments of uppers by water will not be reduced 107o by the new rail freight ratc. staad between the Mills and; thc Retail Yards here.

Last year practically every yard in Southern California did 50Vo more business than they did the year before. But on January lst', when they took their annual inventories they found almostt without exception that thcy had, SOVo more stock than they usually caried. They, thereforg all immediately stoppcd buying to bring this down to normal, awaiting the time when they could take a look at the outlook for 1924. Orders ceasing, what did the Wholcsaler do? He brought in 148,000,000 in January and 100,000,000 was consumed retail in that month. In February he brings in 142,000,000 and the samc amount approximately is consumcd. AND 85% of THAT LUMBER WAS SHIPPED UNSOLD. What happcned? The only thing that could happen, the markct broke bad. In other words on March lst, the yards herc were 50,000,000 ft. additionally ovcrstocked over Jan. lst. This \rould in it clf look to be an extremely unhealthy condition, and would tend to appcar that tpe could not look for any improvemcnt in conditions locally for some time. And still as a matter of fact we fccl that conditions will improvc both from demand and ALSO PRICE within 25 days WHY?

5.50 fsl No. I Fir Lath Wire Tied 5.75 to 6.25

Above prices are sometimes incrgased one dollar per thousand or morc where sold in carload lots.

Every price that we have listed above, we know of sales that have been made at there prices; in fact made a good many of them ourselves.

Now as regards conditions that exist at present. We believe it will be more or lcss interesting to know the building per- mits, and rcceipts for January and Febru1ly, both fot 1923 and 1924 in Los Angeles. Therefore note the following:

Building Permits

January February

1923 ...$11,215,517.00 $12.080,310.00 t924 .. 13,158,526.00 16,083,412.00

Lumber Receipts

January February

You next will find some member of that estimable organization lmown as 'lfhc Royal Knockers of anything pertaining to Southern California," who will tell you in convincing terms, that things are going to Hades in general, that the Bubble is bursting, that thc banks are in a panic, and a whole lot more bunk. Now, only one thing that they tell you is true, and that is, that the banks are drawing in their horns as regards the loaning of money for the furthering of opening up new Real Estate Subdivisions, This is absolutely true and is the greatcst thing that can be done; in fact, it should have bcen done a year ago.

Statistics are available to the effect that there is enough subdivided land already in Southern California for a population of 10,000,000 people. The population is 1,000,000 with an additional floating tourist population steadily of about 200,000 people. Now, what is the use of doing more subdividing. The banks feel there is already plenty of land and too much money being tied up in spec- ulation of Real Estate. Granting that fhis be true, it is therefore very easy to sec that if the banks refuse to loan more money for this purpose, they will have money to loan for other purposes, of which the main one will be the loaning of money for the building of Homes on Tracts already subdivided. This is what interests us, so, in fact, we feel the curtailment of the banks instead of working against the continued building program, will instead increase same.

The cause of this will bc in our estimation as follows: t923 .. ttt,2t5,5t7 it l!2,080,310 ft. 1924 r,8,595,500 ft.

142,435,000 ft.

Now from a mill's standpoint, what you desire to see is for building permits to increasc here in 1924 over 1923, and from a standpoint of lumber receipts during January and February, granting that this market was overstocked on January lst, 1924, you would prefer that they should bc lower for thcsc two months m ordcr to reducc thc

_ No!" as to Housing conditions. Today Los Angeles is short of Houses, Apartmenti and Flats, also Hotels. ft is almost impos- sible to get into a hotel unlcss you have several days reservation. This would. therefore, tcnd to show that there is no surplrts of buildings at the present time.

We therefore find that from a standpoint oJ conditions, things look very healthi for the retail yard as regards demand. We should next turn to find out how conditions

Our sales for February were approximate- ly 5,000,000 cargo and 1,000,000 rail. Our normal sales are 12,000,000 cargo and 2,00O000 rail. Reason for our declinc was due to fact that we advised our Agenies not to chip into this market, due to prices and also thi fact that the less they shipped the sooner would conditions return to normal and they would be receivers of the benefit. Most of them did this. It was not our desire to quote our sales in anyway, but instead to show that our sales were deliberately reduced, and also to impress the fact that TSEI of our cargo sales were made to five local yards. This was due to the fact that rrhen a market slumps, 75 of the 100 lumber yards in Southern California. namely, the Coirntry yards, quit buying cold. Therefore 25% ol the yards, namely, t\e city yardg have to take up the burden of the Country yards and buy all distress stock that comis in. Inasmuch as we would guess that 6O% ot the lumber used in Southern California is used by the City yards and 407o by the Country yards, you will therefore sei that the City yards by absorbing 30% of this 4O7o consumption of the Couhtry yards. therefore on a weak market take in balf again as much lumbcr as they do at thc best times. Add to this the faot of our frantic efrorts to deliver all orders we have before expiration of time, in order to avoid cancellation. and finally you have a condi- tion of afrairs cxisting that would be considered tough in Hades. Can you wonder that the price slumps?

Now with this condition existins. how will conditions improve, and why sri-ti thev improve within thirty days if Southern Cati- fornia is still overstocked and the stocks keep coming? They will improve simrly bccause of the fact ttrat the very ones wh6

(Continued on Page 64.)

(Continued from Page 63.) cause it to slump so badly, namely the Country Yards, are the ones to bring it back. Having almost unanimously stopped buying at the same time, it therefore naturally comes to pass that they will have to start in buying at the same time. They have heard all these low prices and therefore wish to place all their orders at a low price. The Wholesaler is not interestcd in bringing in these small orders at a low price, as he only vrants to sell what is forced on him, and when their stocks are depleted and therefore badly brokcn, the small yards must have what thcy want. So what do they do? Thcy go to the Big yards and commence drawing on their surplus stocks. The Big Yards think "All the llttle yards are now buying, and pretty quick we will have our surplus reduced so we better get busy and buy ourselves." And they do. And the Mill man hears.that and up goes the price. The little fellow gets excited and buys twice as much as he should, and pretty soon every boat is running, 200,000,000 ft. per month.is coming in and the Mill man and Wholesaler is extremely happy. But they don't stop to realize that actually only 150,000,000 is being consumed all of this time. So in 90 days the market is overstockpd 150,000,000 again, the little yards stop buying and down goes the market. Now this market is going to improve within thirty days. It is going up, not as high as it did last time, for each time it stops on a lower level, but it will go, in our €stimation to around $20.00 Mill fcir Common random Milledi and $19.00 rough.. Now when it gets up there will it stay there, and if it stays there, for how long, and if it does not, whose fault u/ill it be. , This will no doubt secm far fetched, but we feel it is absolutely up to the Mills

You Know Quality!

You know Filron themselves as to what happcns, for you arc the only ones who will be able to control snmc. The only way we believe you can do this is to curtail operationg, until such a time comes, that you have a steady market for all you cut. supply is to curtail thi output so that thcrc WILL NOT BE ENOUGH LUMBER OBTAINABLE TO BREAK TFIE MAR.

Clothes are the-BEST outdoor clothel rnade!

According to such statistics as we are able to secure from the Northwcst, wc find that the demand for Japan, Australia and the lWest Coast is light, while the rail trade seems to be consuming around 1800 cars per week which would seem pretty good. It is also stated that notwithstanding the lack of demand from other markets, the Mills are still cutting 23qo 6 25Vo above normal. If this continues thcre will be a big surplus and a large amount of it come to California.

Now to sum up the situation. Today there is coming in to Southern California around 150,000,000 ft. per month. That means 1,800,000,000 ft. per year or practically two billion feet which the writer has been predicting right along. On the dther hand we hear reports that there are at present 25 lumber schooners tied up in San Francisco Bay. Figure them to carry an average of 800M ft. per trip, that means 20,000,000 ft. per trip, and with an average oi 20 days to the trip it means that tonnage is waiting to go out that cordd bring in. an additional 30,000,000 ft., cr a total ol 180,000,000 ft. to Southern California. Add to that the saving in time the ships can make in the Summer months due to better weather, and it means 200,000,000 ft.

KET.

Southern California will take the lumber this year. Don't worry about that. Whethcr it will be a good market for you and one that will cause your operations to be profitable, or whether it wiu take lumber sim- ply at a loss from you is absolutely up to the Mills. The rnarket is here. Lei us hope the Mills will not "Kill the Goose that laid the golden egg."

There is another thing that we would like to impress upon you and that i8 the fact that.regardless of how good conditions are elsewhere, if Southern Califorr.ia gits overstocked, the market will break. Conditions here will either raise or lower the price. This market controls itself and will continue until the Mills are in a position where they can make us beg for lumber.

The yards here want to pay higher prices. They are bitter over the fact that no at. tempt is made to stabilize their market for th9m. Don't ever get that thought in your minds. 'Oh, California uses lumbei all ri-ght, but they.. won't pay anything for it.', If they don't, you have nobody io blame but yourselves.

'

\Me rnean to convey by this that there is tonnage available to break the markct at any time. And when things gct better you can figure that they will run if they ian get the lumber. Therefore the only way to keep the market from breaking from ovcr-

Our letter may appear rather cgotistical and positive, but wi have written ihat wc in our minds firmly believe, and our sole reason for forwarding' same is-that it -that it might bring out soinc lifre of thought that- has not in the past been givcn serious consideration.

Yours truly, ......LUMBER CO. pcr .:.....

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