History of the Wholesale Market in Southern California

An Analysis of Market Conditions and Price Fluctuations during the past year.

By T.B. Lawrence, Hart-\|/ood Lumber Co., Los Angeles

:, As the title suggests, this article is intended i;to give a history of wholesale market condii:tions in Southern California during the past ,year from July First, Nineteen Twenty-Four, 'to July First, Nineteen Twenty-Five. We will try to follow the fluctrration of lnarket prices 'and bring out some of the conditions that ..caused price changes and conditions that rer;sulted therefrom.

i : To get the right background to the picture ' let us go back to the early part of 1923 when ''the lumber available for coastwise shipment from the combined capacity of the Northwest ..cargo mills rvas hardly enough to supply the demand in Southern California. Everv kind of ship was pressed into service and every efiort made to s_pegd up p-roduction until in May 1923, the mills were pro' ducing I4O%! of their normal eight hour capacity and 9n9ggh ships were in coastwise service to put ovei 200,000,000 feet per month into Southern Califoinia.

This was a little more than enough as we all remember. 'If you will refer to the chart below, you will note how the .,large amount of lumber receipts in June 1923 affected the 'prlce.

' The market for the balance of 1923 was irregular in ',pric-e but good for volume. The effect of the Jap earth- 'lquake is shown by the price line in September and the resulting slump in the Fall, due to the large receipts in Octo- ber and November. The December price line shorvs the results of abnormal buying before inventory. Southern rr About this time the Ship Owners, of San Francisco, deicided that the over abundince of tonnage was one of the :lg_ain contrib_uting factors to the falling market. During iMarch of 1924 most of the regular coastwise lumber car-tiers were in operation, This, of course, did not include D1r1g.-r and o{shore steamers such as were used during the iL923 boom. During April the Ship Owners commenced to ilay up. tonnage u"i Uy ttre miaati of May "Uo"i gO-.tript .lwere tled up. i About May 15th, 1924, prices on consignment-lumber at lSan Pedro hit bottom. Now if you will refer to the chart, ;San ;n_ote the influence of the mills'-curtailment on price. Ai 'the beginair-rg of t924 the mills were cutting about 125/ot ;of normal eight ho-ur capacity and by May fi}st they were i down to about 103/ot and by May 31st, only 69/o- of. the lpittr were operating and t6ey were cutting SOi" oi tii. eight hour capacity for the entire field. As result of this curtailment and the steady laying up of more tonnage, price moved up in Southern California about $3.00 from May 15th to June 15th and remained firm until July First.

;.California buyers at that time were anticipating a volume : similar to that enjoyed in L923 and were making the 'necessary purchases.

From January l}th, 1924, to the latter part of May, there was a gradual decline in price and also in volume as is '"reflected by the line showing low receipts. The receipts, ihg-wever, do not tell all of the story regarding the falling off in volume, as by the middle of April lhere had accumu-ilated at San Pedro about 20,000,000 ieet of unsold lumber. lWhen this fact became generally known it added to the jimpetus of the price decline.

One Year ago today July lst, 1924, we had the following situation:

Mills cutting 80701 of normal eight hour capacity-

Fifty-two steam schooners laid up at Oakland CreekLumber receipts lowest for two yearsPrices firm with upward tendency-

Buying inactive.

By the First of August the mills' production_had come- up to g5% but the steamers laid up increased to 55 in number. The building permits were showing a steady,increase each month sincJ May. These facts caused the Southern California buvers to realize that conditions were sound and prices in no condition to weaken; They started one of their periodical orgies of buying which lasted thirty days and ihereby moved prices up about $3.00. This buying coaxed sixteen steam schooners from Oakland Creek to make deliveries.

More buying continued in September which helped to get the mills' production up to 9O/o for the entire field and got the cargo up to tOO/o normal eight hour capacity and it was necessary to take out 11 more steam schooners to make delivery.

October saw a slight break in the market due to the fact that deliveries were being made in such large volume that the yards wanted to see what they had before buying more. Prices went off $2.00 in October only to come back $1.00 in November and hold firm until December First.

During December the buyers started another boom which mbved the price up $1.50 to the high point for the Year. -

The situation at the half way point December 24th, L924, (this date given instead of December 30th on account of annual shut down) was as follows:

Mills cuttinC lO0% of eight hour capacity-

Twenty-one steam schooners laid up in Oakland Creek(Most 6f them unsuited to compete ft going freight rates.)

Lumber receipts at high point for the year-

Prices at high point with nothing in sight to keep thern firm except a possible hard winter in the north.

The hard winter came with a vengeance. The North had not had such storms and low temperature for many years. They were grand old storms and the wholesaler was happy for he had speculated freely during December and had bought much more lumber than he had sold. The wholesalei's joy did not last long however, as by the Tenth of January when it was time for the loggers to come up for air and to go back to work, the weather cleared up and the industry started ofi the year of L925 with a bang. The wholesaler's speculative stock commenced to pile up at San

Pedro until by the latter part of January there was again a capacity load on the public docks at San Pedro of about 22,000,000 feet.

The wholesaler prayed for snow, ice, wind, fire or anything to stop lumber from coming south for the winter. Crow's Index for January printed the following poem to express the wholesaler's sentiments.

Come, Boreas, raise your bewhiskered head and give us the blessing of your frigid breath. Drive the warm Chinook winds back to the South Seas from whence they came and transform the pattering drops of rain into drifting fakes of snov.

Sing your cheerless song of frost through the moaning firs and make the woodsrnan huddle by his fire, Crystallize the silvery surface of the pond and in your cold embrace hold the logs from the folly that threatens them.

Like a tottering baby that depends upon a faithful mother to catch it when it falls, rre stagger 9n to ruin, praying for the fury of your wrath to check us.

Come Boreas, raise your bewhiskered head and give us the blessing of your frigid breath. Drive the warm Chinook winds back to the South Seas from whence they came and transform the pattering drops of rain into driftine flakes of snow and- BLow' BrOW; BLOW.

Steamers Laid Up At Oakland Creek

Carl Crow didn't seem to have very much influence with Mr. Boreas as after the one set of Holiday storms the Northwest has seldom seen such an open winter.

The Shipowners were the first to come to the wholesalers' rescue, which is natural as in many cases they are one and the same firm. In January there were forty-four steam schooners parked in Oakland Creek.

During January the wholesalers were given courage by the rapid dropping off of receipts due to the laying up of steam schooners *hich held the price firm -att -auiing January.

During February, however, the wholesaler decided it was better to have dollars in the bank than lumber on the dock and followed this decision up by selling lumber which r-noveq the price down $2.50. The extremely low receipts in February enabled the wholesaler to clean up the doiks at San Pedro in pretty good shape.

randoms.

It was in February that the great curtailment movement in the Northwest was started. In January, due to good weather and heavy December buying, the mills were going full tilt and by the latter part of the month the entire field was cutting lO5/o of capacity and the cargo mills were up to about 123/ot This was due to the operation of many extra shifts in the cargo mills. Several meetings were held in the Northwest during late January and early February at which the problems of the Industry were discussed. It was apparent that too much lumber was being produced, much.more than there was any possible demand for and to continue to produce at this rate would be ruinous.

Each mill operator. went back and tried to work out some way to curtail production. The result was by February Fifteenth, L32 mills were operating only five days per week, cutting production down to about 85/o of. the normal eight hour capacity. This curtailment was reflected by an increase in the price of consignment stock at San Pedro of $1.00 and a much more radical increase in the price of special cutting.

The stock on hand at San Pedro continued to decrease during the Spring until by the first bf June, there was no surplus on hand. At this time we seemed to have struck a very happy balance. Lumber was being consumed as fast as it arrived and the price remained very steady. Much tie business was taken on from the Railroads during the spring, the delivery of which took up much of the tonnage that would otherwise have been given to unsold lumber. This helped to keep the surplus at San Pedro down to a mlnlmum.

About the middle of June the mills did not seem to have enough ties ready to fill the boat space provided for them and many undesirable items of unsold stock were substituted therefor. This has somewhat weakened the wholesale market at present. The weakness, however, is not general .on all items, but seems to be limited to the par- ticular items which the Atlantic Coast has not been ible to absorb readily. This brings us up to the present time when the situation seems to be about as follo*s:

Mills cutting lW/o of. normal eight hour capacitv-

Twenty-eight steam schooners laid up in Oakland CreekLumber receipts in line with consumption- fn connection with the number of ships now operating it: must be noted that these have not brought the San Pe-dro receipts up as high as would be expected. This is because of the fact that this summer many bf ttre ships formerly in the coastwise trade have been chartered out for tripi to Alaska and Honolulu and in addition to this the whole-,

Prices about the level of one year ago with no immediate strength in sight.

(Continued on Page €.)

(Continued ftom Page 47) saler sold considerable lumber for railroad construction in Mexico which is being freightcd by water from northern ports to Guaymas.

Reference has been purposely omitted to the influence of the Export, Atlantic Coait anil Middle Western demands. The Cilifornia market is undoubtedly the largest single consumer of Pacific Coast Forest Products and for this reason our market has not been influenced to anv great extent to these other consuming fields. With us it is pretty much a straight matter of production and consumption or supply and demand.

Let us consider one thing-here we are engaged in one of the largest industries in the world. We are harvesting a crop that has taken from 200 to 1000 years to.grow and a crop which certainly cannot be replaced in our generation or the next.

For the past twelve months we have all rvorked hard and diligent af our business and we have nothing to sho-w {or ourilabor. 'The industry as a whole has not been profitable during the last year. Let us figure o-ut some way to make some money out of this business before our crop is gone.

Just recently President Coolidge created a federal oil coiservation bbard. That it is an important committee is evidenced by its personnel, namely, the secretaries of War, Navy, Interior and Commerce. The board was formed to make a broad study of the petroleum industry with a view to accomplishing the following things:

To prevent periods of over-production

To reduce excessive stocks cdrried in storage

To better leasing and royalty practices

To eliminate unnecessary waste in drilling, production and transportation

To increase efficiency of refining operations

To improve the methods of consuming the finished production

Conservation of proven reserves

Exploration but not exploitation of new territory w6at more could we ask than to have a committee such as the above to do something like this for our industry. We hope that the time will come when the executive department of our government will realize that our trees, our limber resources, rank in importance with our petroleum resources and will try to help us to keep from throwing away the only timber crop we will have for several_generationi. TherC is no doubt but what we need guidance of some kind.

Autho/s Note:-The wryiter does not utant to hang if sonte of the figures given are oft a few dollars or feet. They are giaen for the purpose of comporkon and most of thern como from records kept by the writer. Thanbs for part of the data giaen is ertended to "The Colifornio Lumber Mercha,nt," Crow's Inder, Paul Hallingby, the oracle of Ahmeda Street and Uncle Hank Riddiford the statistician's friend,.