FOREST SERVICE WILLIAM B. GREELEY, FORESTER TIMBER DEPLETION, LUMBER PRICES, LUMBER LETTERS OF TRANSMITTAL. JUNE 1, 1920, The PRESIDENT OF THE UNITED STATES SENATE. SIR: I have the honor to submit herewith a report on forest depletion in the United States, prepared by the Forest Service in this department pursuant to Senate resolution 311. 4. The effects of depletion upon the concentration of timber ownership and manufacture and the relation of such concentration to the public welfare. The outstanding facts reported by the Forest Service are: (1) That three-fifths of the original timber of the United States is gone and that we are using timber four times as fast as we are growing it. The forests remaining are so localized as greatly to reduce their national utility. The bulk of the population and manufacturing industries of the United States are dependent upon distant supplies of timber as the result of the depletion of the principal forest areas east of the Great Plains. * (2) That the depletion of timber is not the sole cause of the recent high prices of forest products, but is an important contributing cause whose effects will increase steadily as depletion continues. (3) That the fundamental problem is to increase the production of timber by stopping forest devastation. The virgin forests of the United States covered 822 million acres. They are now shrunk to one-sixth of that area. All classes of forest land, including culled, burned, and cut-over areas, now aggregate 463 million acres, or a little more than one-half of our original forests. Of the forest land remaining and not utilized for farming or any other purpose, approximately 81 million acres have been so severely cut and burned as to become an unproductive waste. This area is equivalent to the combined forests of Germany, Denmark, Holland, Belgium, France, Switzerland, Spain, and Portugal. Upon an enormous additional area the growth of timber is so small in amount or of such inferior character that its economic value is negligible. The merchantable new timber remaining in the United States is estimated roughly at 2,215 billion board feet, something less than three-fourths of which is virgin stumpage. The rest is second growth of relatively inferior quality. About one-half of the timber left is in the three Pacific Coast States, and over 61 per cent is west of the Great Plains. A little over one-fifth of the timber left in the country, or 460 billion board feet, is hard woods. There is now consumed or destroyed annually in the United States 56 billion board feet of material of saw timber size. The total yearly consumption of all classes of timber is about 26 billion cubic feet. Our depleted forests are growing less than one-fourth of this amount. The United States is not only cutting heavily into its remaining virgin forests every year, but is also using up the smaller material upon which our future supply of saw timber depends much more rapidly than it is being replaced. The two striking effects of timber depletion already apparent are: (1) The injury to large groups of wood users and to many communities resulting from the exhaustion of the nearby forest regions from which they were formerly supplied; and (2) The shortage of timber products of high quality. Less than 5 per cent of the virgin forests of New England remain, and the total stand of saw timber in these States is not more than one-eighth of the original stand. New York, once the leading State in lumber production, now manufactures only 30 board feet per capita yearly, although the requirements of its own population are close to 300 board feet per capita. The present cut of lumber in Pennsylvania is less than the amount consumed in the Pittsburgh district alone. The original pine forests of the Lake States, estimated at 350 billion feet, are now reduced to less than 8 billion feet, and their yearly cut of timber is less than one-eighth of what it used to be. These four densely populated regions, containing themselves very large areas of forest land, are now largely dependent upon timber grown and manufactured elsewhere and are becoming increasingly dependent upon timber which must be shipped the width of the continent. The bulk of the building lumber and structural timbers used in the Eastern and Central States during the last 15 years was grown in the pine forests of the South. The virgin pine forests of the South Atlantic and Gulf States have been reduced from about 650 billion board feet to about 139 billion feet. The production of yellow-pine lumber is now falling off and within ten years will probably not exceed the requirements of the Southern States themselves. The United States at one time contained the most extensive temperate zone hardwood forests in the world. One region after another has been cut out. The production of hardwood products on the past scale can not be long continued. The scarcity of high-grade oak, poplar, ash, hickory, walnut, and other standard woods is now placing many American industries in a critical condition. The depletion of forest resources is not confined to saw timber. Since 1909, the country has ceased being self-supporting in newsprint paper and now imports two-thirds of the pulp, pulp wood, or newsprint which we require. This condition is due in part to timber depletion, in part to failure of the paper industry to expand in our western forest regions as the lumber industry has expanded. In 1919 the production of turpentine and rosin had fallen off 50 per cent. Within ten years the United States will lose its commanding position in the world's market for these products and may in time be unable to supply its domestic requirements. The termination of the war found the lumber industry with depleted stocks. Production during the war had been much less than normal on account of shortages of labor and equipment and embargoes on transportation. A large part of the lumber produced had been taken by the Government for war purposes. During the same time, the normal construction of dwellings and industrial structures and the use of lumber in many manufacturing industries had been greatly curtailed. Following the war, these pent-up demands were released. They caught the lumber industry not only with its stocks short and broken from war conditions but unable, on account of labor difficulties, lack of freight cars, and bad weather in important producing regions, to respond rapidly with increased production. Aside from the general causes affecting prices of most commodities, the expansion of credit accompanied by currency inflation and the wave of speculation and extravagance, an "auction" lumber market would no doubt have resulted from the frenzied competition of buyers to obtain the limited stocks available, wholly inadequate to satisfy current demands. Under the combined influence of the general conditions making for high prices and this situation in the lumber industry itself, prices rose to unprecedented limits. In March, 1920, average mill prices in the South and West had increased 300 per cent and more over the prices received in 1914, and average retail prices in the Middle West showed increases ranging from 150 to 200 per cent. In the case of high quality hardwoods and other specialized products, the average advance in eastern wholesale markets was from 200 to 250 per cent, and the demand at this advance was still unsatisfied. The timber market has been more unstable than ever before in our history. Many industries have been unable to secure their supplies of timber at any price. The output of certain entire industries has been reduced as much as 50 per cent. Middlemen and manufacturers of wooden commodities have been able to pass on to the consumer and even augment any price they might pay. Necessities have fared worse than luxuries. The ramifications of lumber shortages and high prices are limitless and have affected seriously practically our entire population. Obviously these lumber prices bear no relation to the cost of production and distribution. While the costs of production in the lumber industry have at least doubled as compared with 1916, lumber prices have much more than doubled and have become wholly disproportionate to operating costs. Excessive profits have been made by the industry. The division of these profits between manufacture and distribution has varied in accordance with circumstances and the ability of the various elements in the industry to dominate the situation. That prices have been too high is recognized by the best thought in the industry, and some manufacturers have sought to stabilize the market. The depletion of timber in the United States has not been the only cause of these excessive prices on forest products, but has been an important contributing cause. It has led to the migration of both the softwood and hardwood lumber industries from region to region and each is now cutting heavily into its last reserves. The exhaustion of timber in near-by forest regions has compelled many large lumber consuming centers to import their supplies from greater and greater distances. The wholesale prices on upper grades of softwood lumber in New York were from $20 to $25 per thousand prior to 1865 when mills in the same State supplied this market, from $35 to $45 between 1865 and 1917 when most of the supply came from the Lake States and the South, and are now entering a general level of $130 a thousand feet with a large part of the material coming from the Pacific coast. In the Middle West, the building grades of white pine lumber cut in Michigan, Wisconsin, and Minnesota, retailed at $15 to $20 per thousand feet prior to 1900. As lumber from the Lake States became exhausted and southern pine took over this market, the retail prices rose to a level of $25 to $35 per thousand feet. The replacement of southern pine by West Coast timbers now in progress is initiating a new price level of about $80 to $85 per thousand feet. The increased cost of transportation is but one factor in these new price levels, but it is an important one. The ireight bill on the average thousand feet of lumber used in the United States is steadily increasing as the sawmills get farther and farther away from the bulk of the lumber users. Much information is available to show the disadvantages of the lumber consumer in regions whose near-by forests have been exhausted Retail prices in the Ohio Valley, for example, on certain grades exceed retail prices on the identical grades in Oregon in some instances by as much as $50 per thousand board feet after allowing for all transportation costs. The curtailment of lumber output in the eastern regions not only has compelled the average consumer to pay more for freight but has enhanced the effects of congestion in transportation and of climatic and other factors limiting the production in regions which still support a large lumber industry. It has restricted opportunity for competition and thereby increased the opportunity of the lumber manufacturer or dealer to auction his stocks for higher prices. In other words, the effects of forest depletion can not be measured in terms of the total quantity of timber remaining. Its injury is felt particularly through the steady process of regional exhaustion. Our remaining timber is so localized that its availability to the average user of wood is greatly reduced. Particularly does such a restricted location of the timber supplies assume a serious national aspect in the face of transportation congestion and inadequate transportation facilities such as the United States is now experiencing. Had the forests and forest industries of the Eastern States still existed, the opportunities for regional competition in supplying the lumber markets and the wider distribution of lumber transport undoubtedly would have afforded a curb upon rising prices which did not exist in 1919. The export trade in lumber does not have a serious bearing upon timber depletion from the standpoint of quantity, but does have an important bearing upon the duration of our limited supply of high-grade timber, particularly of hardwoods. The exports of high-grade oak, walnut, hickory, ash, and other woods essential to many industries in the United States which now seem probable will further enhance the shortage of such products for the domestic market and the tendencies already evident toward sustained high prices. On the other hand, the United States imports from Canada about two-thirds of its total consumption of newsprint or newsprint materials. The effects of our export trade in lumber should be considered from the standpoint of the specific timber grades or products whose depletion is most imminent and threatening to American industries. The concentration of timber ownership has not changed materially since the exhaustive report made upon this subject by the Bureau of Corporations in 1910. One-half of the privately owned timber in the United States is held by approximately 250 large owners, the ownership of the remaining timber being very widely distributed. The tendency toward the acquisition and speculative holding of timber beyond operating requirements has been checked, and the present tendency is toward the manufacture of large timber holdings. At the same time the lumber industry, particularly in the Western States, is going through a partial reorganization into larger operating and marketing groups. In this there is a tendency for small mills to disappear and small timber holdings to be blocked into larger ones adapted to extensive lumber manufacture. While there is still a large number of individual timber owners and of sawmills operating as separate units, the larger interests are acquiring a more dominant place in lumber manufacture in the West. It is to be expected that these large interests or groups will maintain, as time goes on, a fairly constant supply of timber for their manufacturing plants by acquiring smaller holdings. No information is at hand which would justify a conclusion that monopolistic conditions on any general scale have grown out of this situation. There are many instances to the contrary. On the other hand, the degree of control of the timber remaining in the United States exercised by a comparatively small number of large interests will steadily increase as timber depletion continues, approaching a natural monopoly in character, and this control will extend particularly to the diminishing supply of highgrade material. In 1918 our per capita consumption of lumber was about 300 board feet. The homes and industries of the United States require at least 35 billion feet of lumber yearly, aside from enormous quantities of paper and other products of the forest. A reduction in the current supply of lumber below this figure would seriously curtail our economic development. Appreciable increases in lumber imports are not possible except at excessive prices. We can not afford to cut our per capita use of lumber to one-half or one-third the present amount |