Prices

By Richard P. Neils Manager of Marketing Lumber, Plywood & Door div St. Regis Paper Co.

tTtHE transiI tion from 1973's booming building activity to the expected high interest rate conditions of 1974 is reminiscent of I969-70. From our viewpoint, we do not expect 1974 to be another 1970, however.

On the positive side, there are two significant differences. While interest rates will undoubtedly be at a high level, there is money available for mortgage loans. Secondly, there appears to be very little inventory build-up either at producing mills or distribution centers.

The delicate balance between

Story at a Glance

The delicate balance between production volume and market demand will largely determine price levels in 1974 . long range outlook is very favorable.

production volume and market demand will largely determine price levels in 1974. From our viewpoint, 1974 does not shape up as a year of high price levels for the following reasons l fl Competitive non-wood materials made inroads on traditional wood systems during the recent shortage and this will have a negative effect in the future. n The effect of futures trading in lumber, plywood and studs will likely eliminate the extreme highs and lows of the more volatile commodities.

D Industry production capability has been significantly increased, particularly in plywood and studs.

! Particleboard will continue to erode plywood usage in underlayment and siding markets.

A final factor likely to assert itself in 1974 is the high cost of logs. Not only are most mills facing extremely high log prices but also more sophisticated cost reporting systems will likely prevent traditional production continuation at a loss level, as has been the case in the past, i.e., 1970.

We think 1974 will be a year of adjustment, but for the reasons stated not the disaster of 1970. The long range outlook for our industry is very favorable.

Wholesaling

By H.M. "Pete" Niebling Western Manager North American Wholesale Lumber Assn.

Droviding

I a business forecast for the coming year is always a "chancey" thing and I want to start my 1974 prognostications by reviewing what I said in November ness in 1973.

1972 about busi- production over the last few years. Dimension lumber could be a "drag" on the market if homebuilding falls off to between 1.5 and 1.8 million starts. ln short, a pretty good year for the astute and hard-working lumberman. Possibly some very poor months during the first half, with the uptick beginning next summer.

We predicted a substantial decline in housing starts in 1973, and history has proved us wrong by about 90 days. We anticipated that the decline in construction activity would begin by early summer. We may yet be proved correct, but with lousy timing!

Having confessed, let's look to 1974. Right now, we are experiencing tightening mortgage money, declining prices in commodity items and some substantial pessimism for fourth quarter 1973 and first quarter 1974. Although marketplace inventories are medium to low, this pessimism would seem to preclude distributor inventory building during the middle of the winter.

Inadequate mortgage financing will be the familiar villain in 1974 home-builder activity. The savings-and-loan people have experienced substantial outflow of assets to those areas offering a better rate of return on invested capital.

Industrial and export items remain in tight supply at this writing, and we see no reason why these markets should not continue healthy through the coming year. A production cutback on commodity items means less supply of the uppers.

Finally, receivables could prove to be a real problem in early 1974. We suggest close attention to credit from now until money becomes easier and less expensive.

Finally, we predict that the NBA Portland Trail Blazers will win more games than they did last year.*

*Ed. note: Wow, that Pete'sfearless!

Story at a Glance Redwood

Could be a pretty good year, but watch out for receivables in early 1974 . .. inadequate mortgage financing and the December-February "CD Turnover" may be big Problems.

What really is bothering them is the "CD turnoveroo that will occur between the middle of December and the middle of February. We are told that an unusually high percentage of S&L 2-year Certificates of Deposit mature within these dates. Will it be turned over into a new CD or will it flow to some other money market? We suggest that this is something to be carefully watched during that sixty-day period. It may be the difference between a fair-to-good year or a poor one.

Another factor in looking at I974 is the ability of mills to adjust production to something less than record housing starts. We think they can, and even something between 1.5 and 2.0 million starts is what we used to call prosperity. Our only word of caution here is the preoccupation with framing lumber

By Keith Lanning Exec. vice president Calif. Redwood Assn.

tTtHE redwood

I industry is looking toward 1974 with great expectations.

While most economic indications point toward a decrease in housing starts for next year,1974 is projected to be the third best housing year ever. Estimates range from I.7 to I.9 million housing startsdown from the record levels of 1972 and 1973. but certainly a respectable plateau.

Redwood, basking in increasing popularity, should continue to be in high demand. Since higher-priced homes are less affected by the fluctuating economy, the upper grades of redwood will still be a primary choice of specifiers. The upper grades are used for siding and in- terior paneling to take the fullest advantage of redwood's beauty.

The garden grades of redwood (commons) will enjoy the carry-over demand from the California Redwood Association promotion of the past two years which will continue in t974.

Story at a Glance

Continued high demand for redwood non-residential construction looks extremely strong tor 1974. uppers still a primary choice for specifiers.

To accommodate the increased popularity of home entertaining, new houses require decks, fences, screens, patiosand redwood garden grades are the natural choice.

Non-residential construction looks extremely strong for 1974. In conjunction with this, there is a growing recognition on the part of builders and designers ofthe need to blend commercial buildings to fit the environment. Natural materials are called for and are particularly appropriate for increasingly popular amenities such as decks, screens, plazas, and outdoor recreation areas. And, once again, the natural choice is redwood.

To protect their resource, responsible redwood growers limit their production to a level which allows for an equality of growth and harvest. This past year the demand for redwood out-stripped the supply, resulting in temporary shortages in some areas. Happily, redwood is the fastest growing commercial species of timberan eminently renewable resource. Thus, proper husbandry of forest resources assures a perpetual supply.

The vanguard of the responsible forest management movement is formed by the member mills of the California Redwood Assn. These companies, the producers of the very highest quality of redwood lumber and plywood, recognize their responsibility to the public as well as to the construction industry.

Our member mills now represent a higher percentage of the industry than ever before, thereby assuring that the redwood association can be looked to for complete and thorough technical and promotional advice by all segments of the building industry.