LANE co.

Business Forecosl: 197O

Bright spots few and far between in the coming year

WENDELT B. BARNES Erecutive Vice President Weslern Wood Products Assn.

66fT LOOKS Iike a long. hard winter

I ahead," said Wendell B. Barnes, in an exclusive projection for The Merchant Magazine on the lumber market in 1970. Although the exec. vp. for Western Wood Products Association detects some bright spots in the coming year, his assessment of a poor winter is largely based on lean predictions for new housing starts.

Barnes cited some parallels between his economic report of 1967 and the one for the coming year. "Then, as now," he said, o'harsh fiscal and monetary restraints were l:urting the lumber industry. Available mortgage funds were scarce. But there are some significant differences, too.tt

In September of 1966, he pointed out, V/WPA estimated l.t million housing units for 1967, then six months later boosted the estimate to 1.3 million units. The seasonally adjusted annual rate of 1,336,000 in July of 1969 was still above the 1967 prediction, reflecting a high level of activity this past spring.

'oW'e worried about the availability of mortgage funds then as now. Multi-family unit developers today are feeling the squeeze as lenders ask I0 percent for mortgage money plus a percentage of rentals, locked in for ten years or more."

Barnes said the Federal Reserve Board later admitted surprise that its restrictive fiscal policies of 1966 had such an immediate and dramatic effect on home building and the lumber industry. He said the Nixon administration, with the lesson of the past in mind, today is taking steps to cushion the restrictions to permit housing construction to continue.

The Federal National Mortgage Association has weekly multi-family mortgage. purchase commitments of between $30 million and $40 million and marketed a $600 debenture offering late in August to raise additional funds for mortgage purchase commitments.

Story qI s Glonce

Continuation of the downward economic trend on into 1970 much hangs on the extent to which present monetary standards are reversed ... hoped for reversal may come in first quarter of the new year.

o'Fannie May, (FNMA) which regulates the activity of savings and loan associations, now has a greater flexibility to control the competitiveness of saving and loan institutions with other investments-" Barnes said. "This comes from legislation passed in 1967-68 in response to the credit crunch oI 1966, enabling the s&l's to stem large outflows into other money markets."

Barnes said recent cutbacks in heavy federal construction may have an unexpectedly helpful effect by freeing labor and money {or the housing and lumber industries.

The trade association executive said fears that federal construction cutbacks will halt timber access road construction will not have the effect that some predict. He said WWPA's field foresters have found 3 billion board feet that could be made available for sale by the Forest Service with no additional roads. If the sale is large enough, Barnes said, industry will build the roads.

Barnes said that many lumber dealers were caught with substantial inventories when prices began to fall and now seek to avoid repetition of this situation by allowing the inventories to fall. "It would seem that now is the time for retailers to begin replacing depleted inventories," said Barnes, "since we cannot expect the present price level to be maintained when the change occurs, a change we expect early in L970."

Barnes also pointed out major increases in the manufacture of the new Il2" l:umber thickness. In dimension lumber volume reported to WWPA, more thar. 7O/o of dry hemlock and more than 8O/o oI dry Douglas fir production is 1$" thick. Barnes cited this as strong evidence of product acceptance which promises an easy transition to the new sizes recommended for the proposed revision of the national lumber standard.

"The best projection at this time," said Barnes, 'ois for a continuation of the downward economic trend which very likely will carry through into I9?0. What happens then will depend upon the extent present monetary standards are reversed. We r:xpect this reversal to come in the first quarter of the new year.'o

Business Forecosl: l97O

Present industry problems temper outlook for 1970s

CRISES C0\DITIONS created by rapidv ly escalating and declining demand for softwood lumber and plywood and a disintegrating housing market have marked conditions {or the forest products industry in 1969.

The contrasts of highs and lows were dramatic. But so have been the industry's accomplishments on the national scene.

A scapegoat for price and availability problems early in the year, the lumber and plywood industries by year's end had developed a genuine understanding in the Congress and the Administration that only intensified management of the nation's publicly owned lorest resources could insure sufEcient timber supplies to meet present and future housing and construction needs.

.More importantly" the crises ol 1969 required the production, distribution and consuming sectors of the industry to join together in a unified, cooperative effort to correct the early misimpressions and to strengthen the raw material supply position.

Important, too, is the fact that the events of the year have been related to future needs of the industry as well as overcoming current problems.

Two major issues for the industry in 1969 were timber availability and the credit crunch affecting housing activity.

The forest products industry faced the first problem squarely. Legislation is now before the Congress which could go a long way toward relieving much of the raw material insecurity which has been a constant threat to the industry for many years.

In seeking solutions to the credit crunch which has affected home building activity, NFPA and other industry organizations have worked closelv with the National Association of Home Builders and other build-

Sfory qt a Glonce

Money market uncertainty clouds the near future . . . tight money expected at least thru first quarter 1.5 million housing starts probable next year softwood production should drop about 27o from this year housing demand will become increasingly critical.

ing-oriented groups concerned with thc worsening housing situation in urging the Congress and the Administration to take immediate steps to reverse the downtrend.

These are only a few examples of the way the industry's national association has been responsive to the needs of the entire {orest products industry.

A particularly thorny area has been the revision of the standard for softwood lumber. While the industry has been on the threshold of a breakthrough in resolving this issue on numerous occasions. it now appears that definite progress is imminent.

Forecasts of business activity in 1970 are mixed, due primarily to the uncertainty of money markets and their affect on housing activity. Federal monetary and fiscal policies have zeroed in at controlling inflation. As ususual, these policies have affected the credit sources for housing.

New housing starts in 1969 have dropped steadilv {rom an annual rate of 1.9 million units in January to J 4 million units in August. The September rate showed a I0 pelcent increase over August, but most housing experts call it a one-month aberration and not indicative of a turnaround in housing activity. Starts for the year should total about 1.4 million units.

Housing activity in 1970 is difficult to forecast. However, even if production reaches the 1.7 million unit mark in the fourth quarter, the year's total should be about 1.5 million units.

Softwood lumber production in the U.S. should total about 29.5 billion board feet in 1969, a two percent drop from the previous year. Forecasts of 1970 softwood production are for another year at the 29.5 billion board foot level.

Forecasts of long-range softwood lumber requirements are for a 50 percent increase in demand for lumber and plywood b1- the year 2000. With the 1969 credit crunch following so closely on the heels of the tight mortgage credit situation of 1966, the demand for housing-both rental and sale -becomes increasingly critical. Vacancy rate: are at record low levels. This trend should continue as family formations in the 1970's increase.

Hardwood lumber production in the U.S. should total about 7.8 billion board feet in 1969. a 12 percent increase over the previous )ear. In 1970 hardwood production is forecasted to decline to 7.3 billion board feet, reflecting the expected slowdowns in both consumer spending and industrial production.

Business Forecosl: l97O

Brisk if not booming market for shingles & shakes

VIRGIL PETERSON

*". E'i:1"'J'' [: 3t"i* " " o Splil Shoke Bureou

T)ESPITE curl.ailment in the pace oI u home buildins in the U.S, during 1969. official-. oI the Red Cedar Shingle & Handsplit Shake Bureau, trade association for the industry, are anticipating a "brisk, if not booming" market for its products in 1970.

According to bureau secretary-manager

Virgil G. Peterson, the shingle and shake industry occupies a somewhat unusual position by virtue of merchandising a specialty product rather than a commodity item. 'fhe net result, says Peterson. is that "we need not be a slave to housing starts."

He pointed to the industry's inability to produce unlimited quantities of cedar shingles and shakes. regardless of demand from the marketplace, citing raw materials and available skilled labor as governing factors.

"Cedar shingles and shakes are a sPe' cialty product," he said, "and by all indices can account {or only a small segment of the nation's annual need-. for new con' slnrction and re-roofing.

Story oI o Glonce

Not tied as closely to housing starts as some wood products, shingles and shakes maintain their market wider application has sustained industry volume and profit Popularity continues to grow.

"A fall-ofi in home building can hurt us, of courst, but if we can obtain a bigger

SHINGLES ond SHAKES

slice of the smaller pie. rve can maintain our momentum," he pointed out,

As evidence of a burgeoning demandPeterson cited "per-capita consumption" in' creases by comparing annual production in recent years with one- and two-family house starts, as follows:

He stated that the steady increase in the numb'.'r of squares of shingles/shakes per housing unit is due in part to a general increase in product popularity and in part to a spectacular increase in their use for non-residential rconstruction: chu rches. schools, office buildings, shopping centers, et cetera.

"Not rnany years ago," he continued, "non-residential uses of cedar shingles and shakes were considered somewhat of an oddity. Today, they are commonplace. Further. we have such'new' uses as {ancy-butt shingles and interior paneling to add to the size of the industry's piece of the total construction pie."

The shingle business received considerable impetus as a result oI a violent hail' storm which damaged thousands of roofs in residential sections of Amarillo, Texas, in late June of last year. It is estimated that approximatelv 100,000 squares of cedar shingles were used to repair or replace these roofs.

Business Forecqsl: 197O

Redwood's forecast sunny under cloudy single-unit skies

qTEADY SUPPLY and a demonstrated r*,r ability to adapt to changing markets are the factors underlying redwood's stability in our protean economy. Large mill inventories, necessitated by the species' long drying time, and steady, reliable shipping facilities have reduced redwood's market fluctuations to a minimum.

The interestladen clouds, which are casting a pall over the single-unit market, have not afiecteil garden apartnent construction as strongly. Indeed, this latter market seems to be one of the brightest hopes on the building horizon. Redwood Iumber and plywood are currently filling demands made by this relatively new market, abatement of which seems unlikely as we enter the 70's.

Echoing the garden apartment construction rise are sound sales records in redwood manufactured products. Redwood specialty products and plywood are enabling builders to incorporate the traditional warmth and "feel" of redwood into lower cost multi-units through pre-fab procedures.

And according to buyer-tenant preference studies, a garden apartment, town house or condominium which has the "feel" of a single-unit family dwelling is preferred over t"hose which have an apartment building "feel." The warm, homelike quality of redwood, plus its low maintenance and high durability make it a first choice for low-rise residential construction, an important part of most builder's current programs.

But this should by no means be construed as a reversal of redwood's most basic appealquality. While redwood manufactured products and plywood are being used extensively in multi-unit construction, no concessions have been made, or will be maden to alter redwood's tradi-

Siory dI d Glonce

Garden apartment construction continues strong, more stress on redwood in the home improvement market ... recent change of A-grade to clear ... multiple use forests help redwood's public rmage.

tional appeal. There will always be a quality market, single-unit or cluster, and it is there that redwood belongs.

Just as redwood belongs in the home improvement market, originally a spin. off of the new construction lag of rwo years ago. In lieu of a new home, many homeowners are spending significant sums to improve and enhance their present residences. This market will be given even further impetus with the forthcoming "ft's Home Improvement Timer" in which redwood products figure prominent. ly.

Redwood appeals to diversified markets in terms of grades as well as in terms of new products and uses. Of no little significance is the recent grade name change -from o'A-Grade" to o'Clear." I heartily endorse this splendid change; one which I feel is long overdue. It gives redwood a completely cohesive grade nomenclaturg the first, I believe, for any commercial species. This means a grade for every pur- pose, whether with knots or without, all heart or heart and sapwood.

West Coast architects and builders have long specified clear redwood for siding and paneling and the trend has spread across the country. In addition to use for paneling and siding, this excellent and distinctive building material is selling well {or decks and other garden applications where there is no direct contact with the ground.

Much of the outcry from preservation. ist groups has waned with the redwood park Iegislation which withdrew 28,000 acres of redwood timberland from pri. vate ownership. The efiect of tlis appro. priation will vary with individual redwood producing companies. However, the forestry practices of CRA member companies will insure continued re-growth and har. vest of redwood treesthe fastest growing North American commercial coniferassuring perpetual supply as the industry nears its long-sought goal of sustained yield.

Demonstrating that our highly productive lands need not be limited to single uses, the Redwood Industry Recreation Areas program will continue as we enter the new decade. For the fourth year, the industry has opened 380,000 acres of privately owned land to recreationists, a fine example of progressive land management.

And so we, as an industry, enter the 70'sinvading new markets and ex. panding selected old ones, providing recreation facilities to the public we serve, and perhaps most importandy, adapting to the changing needs and wishes of our society.