Building and Lumber Market Conditions Discussed by Chas. S. Keith

The following is a letter by Mr. Chas. S. Keith, president of the Central Coal and Coke Co., recently sent to their sares repres""r*nx

For three years there has been a general conclusion in well informed circles that the building program would decline. This fear has been more pronounced this year than in previous years, yet notwithstanding this conclusion, the year 1925 and the year 1926 were each record years as compared with the previous years. The figures received today from F. W. Dodge Corporation, released to the newspapers for April 9th, show construction contracts let in the United States during the month of March of practically $621,000,000.00, which exceeds the total for any other month in the history of the United States, even the previous record-breaking month of August, 1925. March also exceeded the contracts placed in February by 57/o, The first quarter of the year 1977 was 4/o less than the first quarter of last year, but the fact that the total for the first 2 months of the vear was l0/o less than the first 2 months of the previous year, me.ans that 6/o of the decline in the first two months was absorbed by the increase in the month of March, over March of last year, thereby reducing the figure for the first quarter to 4/o below the first quarter of last year.

Contemplated new construction reported in March was practically $1,200,000,000.@, or an increase of. 16/o over March, 1926, and it was the record amount of contemplated work reported in the history of the United States. The Dodge Corporation says, "The record total of contemplated work indicates an up-turn in construction demand."

The estimates for construction for the year t927, as compiled from the average estimates made by the Building Age, F. W. Dodge Corporation, and S. W. Straus Company, show an average of. $5,767,0N,000.00 f.or 1927, as compared with their statements of $6,000,000,000.00 made in 1925 for the year 1926. The average of the estimates for the three years, 1924, 1925 and, 1926, was $5,632,000,000.00, as against ihe acutal average performance for a year for the period of $6,219,000,000.00, or an actual volume over estimates of 10.43%, ranging from 2.49/o over in L924, to 17.5/o over in 1926.

It is fair to assume from the foregoing figures and from the present outlook for building demand, as shown by lhe last report by the Dodge Corporation, that the building volume for the year 1927 will approximate, if it will not be greater tlran, the year 1926. In other wordp, there will be io appreciable, if-any, decline in the building program of the United States for this year. Not to exceed 50/o of.lumber production is consumed in building operations. T!t. rest bf it is consumed by industries and the export trade.

Each week and each month this year has shown an increase in the total railroad carloading over the same weeks and months of last year, indicating that the total volume of commerce in the United States is increasing, and not declining.

Notwithstanding this fact, there are many soft spots in the country in various general lines of business. This is not due to a decrease in the volume of business, but rather because of the greater number of distributors in business, which fact has diluted the volume of business to each one. This is the real cause for complaint. The number of distributors has increased disproportionately with the increased volume of trade. Yet the volume of trade is increasing weekly, monthly and annually against similar previous periods, in all lines of industry.

- Production is not increasing in the lumber industry. Figures from the South for the year 1926 indicate it was the first year since the war in which we had an actual decline and rumber in Southern Pine production. This decline was approximately 1,765,000,0Cb ft. This resulted in a decline i:n'shipments from the South last year of. 1,L47,0@.@0 ft. and-a liquidatlon of stocks from the mills cut out, of 618,000,000 ft. This situation was felt in an increased volume of lum!9q goying,from the West Coast, amounting to 1,25O000,000 ft. in 1926. The Southern Pine production of the Kansas City companies showed a decline last year of. l4/o, as against 1925, and the estimates for their production ii l9A indicate a decline of. 23/o in 1927 as against 1926. This has been reflected in a reduction in sales of Southern Pine by the Kansas City companies, of %/o since the first of this year as against last year.

The indicated production under normal operating conditions for 1927, in the South, will be 2,000,000,000 f1. less than 1926. This will probably result in a reduction of 1,320,000,000 ft. in shipments, pius the liquidation of stocks that occurred last year of 618,000,000 ft., or about 1,950,000,000 ft. in the South this year. This is the result of known depletion of timber supply of the large mills. It is also the result of the purchase by large mills of cut-over land and wood-lot timber, as well as isolated tracts of timber, located so that it can be hauled to a railroad siding 20 to @ miles distant from the large mills. This has resultid and is resulting in the curtailment of operations at the small mills, and has in fact caused many of them to cease production.

Weather conditions throughout the South, rains and cyclones, have had a further tendency to retard production, and the reduction in production in the South will probably be greater than that indicated under normal operatlng conditions.

In the'West, because of unusual weather and market conditions, the production for the year 1927 will probably be less than 1926, although the demand for the product should be greater because of the swing of demand flom the South to the West, by reduction in shipments from the South. One must replace the other.

Stocks of lumber throughout the United States, while we may assume they are normal under present conditions of quick transportation, are at the lowest ebb they have ever been in the history of the building trade. There has been a swing from stocks on hand in distributors' yards to stocks on hand at the mills. The Southern Pine Association figures indicate there is no substantial increase in stock on hand at the mills in the South today since the lst of January, 1927. The West has never iarried any substaitial stocks, and more than 5O/o of the stocks in the 'West are in the hands of a very limited number of companies, and the stocks on hand at the present time in the West are more than 50/o sold. The figures of the National Lumber Manufacturers Association show thatfor the frrst 12 weeks of this year, shipments of softwood lumber were ll4/o of the cut, indicating a corresponding reduction in stocks of all softwood lumber.

Agricultural conditions, so far as can be foretold at this season of the year, were never better from the point of view of production. In the absence of drouth this iummer, we should have marvelous crops, with good returns to the farmers. Money is easy. There is no difficulty in financing any sound proposition and there are ample funds to provide for the Nation's commerce.

With demand for lumber from all sources equal to that (Continued on Page 30)