There are good times coming

By Perc NlebllnS Executivc Vicc Prcsidcnt North American Wholcsale l.umbcr Association

rN DUSTRY

lorganizations, including ours, have numerous forecasts rcgarding 19E5. Thesc predictions, however well researched, are subject to a number of unpredictable factors. One major example is interest rates and their effect on housing. By the end of October they were declining, yet the consensus of many economists is that rates will increase sometime between now and the end of next year. Next, nearly every lumberman agrees that the market problems in 1984 were largely due to overproduction. How else can one explain the depressed mill prices in a 1.7 million housing start year? Last year NAWLA termed it "a tad too much production." With many others, we simply didn't realize how production capacities had been improved at the mills between 1978 and 1983.

Which leads us to the conclusion that we should "crystal-ball" the 1985 marketplace environment rather than cite a litany of projected statistics. Sooner or later demand and supply will come into balance in 1985. We have no more idea when that will be than anyone else. Perhaps by March, logically by mid-year, or it could be next fall, before production curtailment is sufficient enough to provide a strong market for lumber.

When this demand-supply balance occurs we will find our industry in a very healthy environment that should lead to excellent business activity. Let's look at some of these pluses.

Lumber manufacturers in North America have worked successfully to become low-cost converters. Although this translates into high mill production rates on the one hand, it can also be stated that surviving mills will be well positioned when demand equals supply.

More importantly, today's producer is thinking more about adding value to his products than adding a new high-speed widget to push up production. Manufacturer's have geard up their trade associations to promote and expand lumber markets. We mentioncd this change in thinking last year,and it's nice to report that these promotion projects are going ahead full throttle. NAWLA foresees slight improvement in every major lumbcr market except housing in 1985. These promotional efforts by the producer may do even better in terms of demand than we expectl

At the wholesale distribution level there are many changes going on. Wholesalers have also been forced to

Story at a Glance

Promotlons wlll help achleve demand-supply balance...lncreased speclallzatlon by manufacturer, wholesaler and re. taller..."lt's golng to be a hell of a year."

bccomc "lean and meanr" and many have dcvelopcd a profitable niche in specializcd products or narrow product mix6 or spocial scrvices for both supplicr and customer. They too are positioned well forthe comingbalance in supply and demand. Wholesale distribution is currcntly receiving further impetus from the simple fact that when produccrs start thinking about addcd valuc rather than added production it helps wholesale distribution.

Finally, there is the retailcr. He is fast becoming a larger and a more sophisticated operator. He has reduced his inventory costs and is already a "survivor" from much higher interest rates than we have now, or are likely to experience in 1985.

Wait a minute. What about the fact that production is becoming concentrated in fewer hands? What about the concentration at the retail level? How about the growth of the superlarge wholesaler? We would submit the following:

Can the vertically integrated producer invest as many dollars in his production units (thereby remaining the lowest cost producer) as his competitor who does not have to invest in

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