Kenneth smith Pictures conditions And Makes Pertinent Suggestions To Northern Mills Regarding California Situation

Kenneth Smith

(Editor's note. Here is one of the grandest business letters I have ever read. The picture Mr. Smith drar*'s of the Southern California lumber situation is amazingly true and concise. His suggestions to ihe Northern mills are forceful and wise. It is 'a recital that no California lumberman can afford to overlook. We strongly recommend its earnest and careful digestion by this entire industry in California.)

Mr. w. B. Greeley, secretary-Manager, August l' 1929' West Coast Lumbermen's Association, 364 Stuart Building, Seattle, Washington

Dear Mr. Greeley:

I very deeply regret that it will be impossible to attend your meeting on the 7th, for the reason explained to you, but I have some definite ideas with respect both to what you might and could do here in Southern Caliiornia, to your own great profit, which I will outline in this letter in the hope that it may contribute something helpful to your discussion of the Southern California situation.

You are undoubtedly as familiar as I with the situation and you are undoubtedly just as anxious to see that the lack of harmony or the lack of understanding between the great producing industry served by your Association and the great consuming market that they have here is cleared away and the stage set for them to go forward into the future side by side to the greater profit of both. In order to make the present situation clear I think it would be well to outline the events that lead up to it.

I would not help you any ifI misled you into thinking that you had an ideal situation with which to deal, and it is my thought that you will be able to approach the solution of the problem of "selling" the West Coast Lumbermen's Association to the dealers here more intelligently if you understand at the outset that the West Coast is not understood or known in many quarters; is regarded in other quarters as being of little importance and as having only a very limited influence; and in still other quarters the Pacific Lumber Inspection Bureau and the West Coast Lumbermen's Association are thought to be the same organization and you are judged on the basis of their unsatisfactory experience in the past with the P. L. I.B. You will have to "sell" yourselves to the dealers first in. order to develop a mutuality of understanding between the two groups that will make possible cooperative solution of the complex distribution problems of this market, which is the only way, in my opinion, that they can ever be adequately handled. Neither the retailers nor the manufacturers, working independently of each other, can ever possibly do as well as they can workino together.

I am sure you personally will understand that the criticism which follows of what is regarded here as a reflection of a lack of interest on the part of the manufacturers in our problems is not said just for the sake of criticizing but in order to give you an honest picture, as I see it, of the feelings of the dealers in Southern California; but if you should read it to others who do not know me, I trust you will explain that it represents the opinion of just one man and is passed along only for the reason that he thinks more progress can be made if the atmosphere is cleared of misunderstandings first.

Southern California was, prior to ten years ago, a one grade market so far as common was concerned and that one grade was not No. l, or No. 2 or No. 3, but a mixed grade known as "common" and supposed to be No. I with about 15 per cent of No. 2 mixed in. It was a reasonably well settled and saiisfactory situation. Then two tlings happened to it. Los Angeles experienced a phenomenal growth that resulted in an unprecedented demand for lumber and a consequent willingness on the part of the public to take anything it could get. At the same time there was a tremendous increase in the -production of Douglas Fir which necessitated the finding of a market for greatly increased quantities of low grade common.

The need on the part of the milrs was urgent and the oooortunitv presented by the boom in Southern California was tempting,'wiit tf,i result that low grade common was dumped into this rirarklt t;ilh a great extent that it c_ompletely disrupted the establishea market- ing practices. A contribufing f-actor was thelact-ih;;;i.;;;i; the growth of Los Angeles there had been a great increai. -rn -trr. number .of lumber yards, without any organizia enorf 6 d;;"i; cooperation between the new comers and those l""g "rt"bliJ.t in the field. -.Largely it was these new yards which beJam; ;h;-;;; let of the mills for the bulk of the No.-3 common and they did not market it for what it was but as_,,common,', the only grii"-irt"t_ Iished in the market; a practice which grew 6asilv an,i,i"t"i"ffr'""t ot the careless merchandisjng pr-actices, which had grown up in our market of not even describing-the one grade whicihad U.6n or.u_ iously sold as "common," but of listii'g it merety;; b-.-"p:'a;, Oregon Pine).

, Wfen volume..began to decline these conditions naturally pro_ duce.d a demoralized price market for the reason that theie was no drstrnction between No. 3 and No. l-it was ail Oregon pine. The price of Common was beaten down to the price ; Iri". J-;; uncontrolled competition. Merchandise that is unldentifiable oi uri- recognizable, except.by.experts, never brings a price ate \,vrth rts value and this maxim was certainly proven with a venge_ ance in the competitive situation that deveioped in the 4".- E;_ getes market as an aftermath of the boom. rne other was that there was a great excess of coast_wise ton_ nage available which the owner_s weie just as an*iour- lo k.;; b;;y as the mills were to dump their low grade commons into ou'iart ei. A-number of efforts to bring abouf the maintenance of a uniform price. on common by the old yards which did not handle No.-J weie wrecked. upon the rock of meeting the price of the dealer who car_ ried nothing except No. 3 in stock-and for many years there has been a growing re?lization upon the part of the dealirs that there-coulJ never be profitable conditions in-the indusiry again u"tit .o-. ioiu- tion was found to the p_robl-em presented by irarketing all lrades of common, No. I and No. 2 and No. 3 as icommon,' -or eveln less logically, as just "Oregon Pine."

Two other factors contributed a great deat to the demoralization. One. was that facilities existed at Sin pedro for piling ;t j-_---.- million feet of unsold lumber, without any charge fo". ,i"iis., (a sword that is still hanging over our heads,-by the-way).

As far back as 1925 a determined movement was begun within the ranks of the California Retail Lumbermen's Associafion to secure the adoption of s,traight grades of No. l, No. 2 and No. 3, irr accordance with the grading rules of the manufacturers, as the bisis ot purchase and sale and it has continuously been a live issue among the dealers since that trme.

Also there has been a continuous effort on the part of the dealers here since that time to get the manufacturers of'the Northwest to help us to find a way to do it. In 1927 then the West Coast Lumber Trade Extension Bureau sent Mr. Titus to California for sixty days and he developed a number of interesting possibilities for cieatine new business for the mills in this market, iome of them still pre..nil ing attractive opportunities that I will mention a little laier, but the thing.that stood out in his report was the damage that was done to the price situation and to the reputation of Douglas Fir in this market by No. 3 lumber.

So far as we were able to learn then or since the report of Mr. Titus was discussed more by the .leaiers here than b5. the manu- factur€rs who sent him down here after the informatioi, and, in an effort- to get something done the Retailers, at their annual conven- tion in November, 7,927, alter a long discussion of the subject, passed a resolution asking the West Coist Lunrbermen's Associaiion and the West Coast Lumber Trade Extensiorr Bureau to meet with

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