ls Production ControL Legaliz,ed bV the Lumber Code, Accomplishing lts Purpose?

By A*hur Bevan Chiel, Production Control Department, Lumber Code Authority

It would seem that there is a growing impression, as typi'cally exemplified by an editorial in a lumber trade paper, that "in the sense of regulating production to the prospective demand, the N. R. A. schedules. of production allotments have not been effective." Taken without analysis, this statement signifies to the uninformed that production control is not working as it should. As such it is a direct challenge to the efficacy of the Lumber Code Authority in its administration of the Code. This impression as to inadequacy of control, which seems to be spreading, is due to a lack of understanding of the purposes of the Code and the manner in which it is being administered.

In analyzing the Lumber Code in respect to the application of any of its provisions, whether it be production control, cost protection or any of its other provisions, the intent and purposes of the Code as a whole must be considered in arriving at an understanding of the manner in which it is being administered.

On first thought Article VIII of the Code which gives the right to control production would seem to be a simple problem of adjusting production to current or prospective demand and that the duties of the Lumber Code Authority under this Article had been carried out if this were done' Such ideas result from a very superficial knowledge of the purposes and spirit of the Code. Article VIII is not a ieparate code but a part of the Lumber Code and its application.must carry out the purposes of the Code as a whole' Therefore, the question of quotas for the Industry must be viewed not only in the light of current or prospective demand but also in relation to the declared purposes of the Code in respect to labor-"to reduce and relieve unemployment", and in respect to lumber,-"to assure adequate supplies thereof".

For the benefit of labor, it is obviously of the greatest importhnce to maintain quotas at as high a level as possible' The general trend of lumber production in the past has always been upward for the first half of the year reaching a peak in late summer and then rapidly falling to the end of the year. On the other hand, from a socialogical viewpoint there is no question but that labor shall be employed to the greatest possible extent in the winter and that a reduction of normal employment in the summer season can be faced more cheerfully with the expectation of employment in other lines; the growing and maintenance of gardens and the much lower cost of living in most sections of the country ' This has clearly been visualized by the Federal authorities in the establishment of Subsistence Homesteads which is now in the experimental stages but which ofiers a hopeful solution to alleviate the unemployment problem.

Snouta we be optimistic as to future demand or should we be pessimistic? If the former we are prepared to take care of any business that may come our way; if the latter, any unexpected plums in the way of business that may fall in our lap will be lost because we must remember that many kinds of lumber, in fact it might be safe to say that most lumber and timber products require considerable periods of time to season and prepare for the market. This leads to a consideration of stocks on hand in the lumber industry. What are normal stocks? The Timber Conservation Board has, after due consideration, bssumed that stocks at the mills were normal to consumption for the year 1929. The assumption has been that this "normal" year provides a ratio which can be used to determine what "normal" stocks should be at the close of 1933 with a consumption for the year of 13,000,000,000 feet board measure. Such estimates would indicate that stocks are excessive in the huge amount of over tr,rio billion feet board measure. From the viewpoint of the maintenance of adequate stocks to meet demand, is this a true picture ? If so how can the reports by mills of broken stocks be explained? There are two kinds of stocks in the mills' inventories, stocks that move rapidly into consumption, which may be termed "fast movingt' or'"live" items, and "slolv moving" or "dead" items. It cannot be considered as an assumption that the lower annual produ'ction falls the greater the per'centage of "slow moving" or "dead" stocks in inventories will be. So that, theoretically carried to the absurd absolute limit, stocks might be 10O per cent "slorv moving" or "dead" and there would be no lumber available to move into consumption and take care of demand' Analysed on this basis, stocks on hand do not show an excess, and, in fact, in respect to "fast moving" or "live" stocks are estimated as below normal, so that the industry might well find itself unable to meet a sudden demand. This would undoubtedly set the stage for rapid increases in prices possibly amounting to a runaway market which inevitably leads to opening the door to the further inroads of substitutes. Such markets when lost are rarely, if ever, regained, and the Industry cannot afford to lose any more markets.

These are some of the more important considerations which have properly led the Lumber Code Authority to establish quotas during the two winter quarters of 1933 and. 1934 much larger than current or prospective demand would seem to justify. If demand increases unexpectedly the industry will be prepared to meet this demand and quotas for subsequent periods can be safely increased' If on the other hand, consumption remains stationary, normal summer production can be redu'ced by keeping quotas down. Through such means the Authority is carrying out to the fullest possible extent the responsibility laid upon it by the Code of Fair Competition for the industry' The point I wish to make is that the Authority, in its administration of the Code, is entitled to be judged on all the factors involved in its decisions and acts.