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Cof. Gteeley Explaing Method
Used in Arriving at Minimum Prices For \(/est Coast Lumber
The letter reproduced below, from Col. W. B. Greeley, secretary-manager of the West Coast Lumbermen's Association, Administrative Agency of the West Coast Logging and Lumber Division under the Lumber Code, was written in reply to a letter from a California wholesale lumber dealer who asked for information as to how the figures on the Minimum Price List were arrived at.
In his letter the wholesaler stated. that some retail lumbermen had asked him how it 'came about that while on November 10 squads of salesmen were begging for orders in the San Francisco Bay district f.or 2x4 Rough Common Fir at $17.00 per M, and the next day were refusing to sell at less than the minimum price of $25.00. These dealers seemed unable, he said, to believe that costs could jump $8.00 to $9.00 overnight.
Col. Greeley's letter is as follorvs:
"In response to your letter of November 24:
"I worked with all phases of the establishment of minimum, or 'cost protection, prices by the Lumber Code Authority; and am glad to describe the steps by which this program was carried out.
"1. In July and August, we obtained production costs from as many mills as possible,83 mills all told in the West Coast territory representing over 90 per cent of the current production. A considerable number of these production costs were verified from the books by our own Association auditor. but not all were verified.
"2. These production costs were extended by our Auditor for the new wage scales effective August 19 under the Code, representing an approximate increase of the labor cost in this Division, per thousand board feet, of 65 per cent. The costs were also extended for the decreased operating time (3O hours per week) enforced under the production control features of the Code.
"3. This composite cost record was submitted to the Lumber Code Authority, and was checked and verified (not back to the mill, however) by its firm of Certified Public Accountants. On the basis of this verification there was established the "Floor" and "Ceiling" within whi'ch, in accordance with Article IX of the Lumber Code, our weighted average minimum price should be established' The "Floor" ($17.80 for the West Coast) was the total of the production cost items enumerated in Article IX of the Code, excluding capital account charges, that is, stumpage and depreciation costs. The "Ceiling" ($21.54) was the same set of Code costs including the capital account charges. That is, our weighted average selling price for the product of the log could not be less than $17.80 nor more than $21.54 per M board feet.
"4. We took the best data we had, reports from the Davis Statistical Bureau f.or 1929, of the experience of the industry in the percentage of production of the different items of Fir and Hemlock lumber. These percentages were used in making up the weighted average price in the minimum prices for Douglas Fir and West Coast Hemlock approved by the Luniber Code Authority on November 4.
The weighted average of that price list is approximately $18.75.
"In other words, the industry has the use of a price list under the authority of the Code that recovers less than one-third of our capital account costs, in addition to labor and other 'out-of-pocket' ,costs under Code wages and scale of operation.
"lMhat is usually not appreciated is that, in accepting the provisions of the Lumber Code, the industry assumed an increase of approximately $4.00 per thousand in its average cost of production on account of the marked increase in wages and the reduction in operating hours per week. The primary purpose of the Code is to increase wages and employment, thereby aiding to start an upward spiral of buying power. The Code may be said to set up the lumber manufacturers for a public service of employing labor and disbursing high wages; and the cost production prices are established to enable the manufacturers to perform this service.
"lJnder our present minimum pri'ces there is no profit except for mills which are able to manufacture lumber at considerably less than the industry average cost. I"or the industry as a whole we are continuing to lose two-thirds of our ,capital account costs; and the increases in lumber prices which have occurred since mid-summer of 1933 can be accurately said to have gone almost wholly into paying higher wages and employing more men by running shorter hours.
"The rush of certain mills to build up an order file at the eleventh hour before Code prices took effect simply illustrates the 'defeatist' attitude so common among'lumbermen. They were unhilling to take a chance that the establishment of the Code prices might not be followed by a long dearth in lumber orders. Some of them doubtless were impelled by financial necessity or banker pressure to protect themselves with an order file.
"However, while business has necessarily slumped heavily since the bulge just prior to the effe'ctive date of the minimum prices, it is now coming in on the minimum prices in a reasonable volume; and I feel sanguine that within two or three months we will see a material expansion in the sale of West Coast lumber."
Rcdwood Delegation Attends Po*land Meeting
Harry W. Cole, president of the California Redwood Association; C. R. Johnson, Union Lumber Co., San Francisco; C. E. De Camp, Caspar Lumber Co., San Francisco, and Herb Klass, The Pacific Lumber Co., San Francisco, left December 7 to attend a meeting at Portland, .December 12, of the National Control Committee of the Lumber Code Authority as representatives of the California Redwood industry. They expect to return about December 17.
Mr. De Camp was accompanied on the trip by Mrs. De Camp.
