Lumber Industry Outlook for 1959 ond Review of 1958

(By the U. S. Department of Commerce)

Lumber production .t lil#llybillion board feet in 1958 was approximately 3/o below 1957. Accelerated construction activity, particularly housing starts, significantly strengthened the lumber market, although it did not provide sufficient stimulus soon enough to boost lumber production to the 7957 level. IJncertainty with respect to the real strength of the market and a downward trend in wholesale lumber prices deterred buying during the early part of the year. A spurt in buying in mid-year was not sustained, owing to the seasonal decline in building activity and the desire to keep year-end inventories down.

The lumber industry was optimistic regarding the outlook for 1959. Based on an expectation of continued improve- ment in the national economy, the industry forecast a modest increase in production ind sales. Tighi credit, par- ticularly as it affects residential construction, was ionsidered the economic factor most likely to have an adverse effect on the industry

Trends in 1958

In 1958 the industrv. which includes some 50.000 sawmills, employed about'325,000 persons and produced products valued at approximately 3.0 billion dollars. Average monthly employment of production workers in the lumber industry during thefirst 7 months of 1958 was 19/o less than the same months of 1957. The average wholesale price indeJ for lumber (1947-49-100) declined lrom 121.3 during the first half of 1957 to 116.4 during the first half of 1958.

IJncertainty with respect to future business activity had a major influence on both lumber producers and consumers. Despite the encouraging upward trend in housing starts, distributors were reluctant to build up stocks until it could be foreseen that the trend would continue. Also distributors were reluctant to buy while lumber prices were declining.

Competition from metal, plastic, paper, etc. continue to have a major influence on the use of wood for many purposes.

Lumber exports in 1958 were expected to total 725 ntrllion board feet, or lI/o below exports of 81 1 million board feet in 1957. TotaI imports, based on 8-months data, may reach 2,3@ million feet, or 20Vo less than the import of 2,959 million feet in 1957. Net imports of 1,635 miiliorr feet in 1958 therefore would be 24/" less than net imports of 2,150 million feet in 1957. Net imports amounted to 4.7/o of ap- parent consumption in 1958 and 6.0 percent in 1957.

The 1959 Outlook

Improvement in the nation's general economic situation in 1959 was expected to stimulate the demand for lumber. The most significant single factor which influences the lumber industry favorably in 1959 is the prospect that residential construction will be sustained at a level of 1.200.000 or more units. The relatively low level of mill and retail stocks would necessitate acceleiated purchasing to supply a higher level of demand.

Rising cost of production, and strong competition from metal, plastics, paper, and other materials are among the principal factors adversely affecting the lumber industry. The Industry has launched a multimillion dollar campaign to promote wood consumption and to offset the competition of other materials.

The outlook for the lumber industry in 1959 was encouraging. The industry anticipates a moderate increase in production, based generally on the continued improvement in the national economy and, in particular, in the expected level of residential construction. The availability of mortgage money will be one of the principal factors which will influence the lumber situation.

In response to a private nationwide survey, the industry expressed optimism with respect to the outlook for 1959. Based on replies by 400 respondents, the industry expects arr increase of about 3.5/' in production, 6.6/o in gross sales, and 3.8/a in lumber consumption. Employment should remain about the same as in 1958, costs increase about 4/o, and net profits after taxes may increase 5o/o. The industry was expected to spend about the same amount for new plants and equipment.

"The veneer and plywood industry has registered a huge increase of production in Cal'fornia srnce the end of World War lL Measured in terms of log scale used in raw material, the increase is from nearly 50million board feet in 1946 to about 44O-million boarci feet in 1957, or a nine-fold increase. From Douglas fir logs, the increase was from nothing in 1946 to 410mrllion board feet in 1957. California, which received almost one-seventh ofall the Douglas fir plywood in the country from 1940 to 1957, is now rated as selfsufficient iir that it can produce within its boundaries the plywood i1 uss5."-Cal. Forest-Range Exp. Stat., Forest Serv., USDA. (Perhaps of greater concern to the plywood industry is the fact that the Douglas fir plants (in California) have a capacity of about 900million square feet annually. They actually produced 672-million square feet in 1956.)-National Plywood Distributors Assn.

SOFTWOOD PLYWOOD INDUSTRY Summary

The softwood plywood industry is expected to establish its 13th consecutive production record in i959 with an output in excess of 6,500 million square feet, 3/g," basis, an estimated increase of l0/o over 1958. Despite the many encouraging signs, little, if any, expansion in production facilities is forecast. Increased promotional activity aimed at diversification in market outlets and a healthier national economic climate are expected to eliminate the recurring and too frequent price valleys which have plagued the industry since 1955.

(This survey covers those establishments primarily engaged in manufacturing softwood plywood from veneer produced in the same establishment or from purchased veneer. ) In 1958, the softu,oo<l plywood industry, which is conceutrated in western M/ashington and Oregon and northern California, employed approximately 26,000 persons and had a payroll of about $155 million. Value of sales during this period amounted to an estimated $591 million. Production througlr the third quarter of 1958 was lI.4/o above the corresponding period of 1957. However, faced with over-production and falling prices in the fourth quarter, a period when demand usually declines, industry leaders announcecl a procltrction cutback ol 20 to 25/o for the balance of the year. (This cutback occurred at a time when mills were operating at 100/o of production capacity, whereas a more drastic cutback of 32/o was made during the fourth quarter ol 1957, when mills 'r,vere producing at only 85/o of capac- ity.) Nevertheless, the industry should establish in 1958 its 12th consecutive production record, estimated in excess of 6,000 million square feet, /s" basis, compared with 5,653 million square feet in 1957.

During 1958 the softwood plywood industry expanded its weekly production capacity from 135 million to an estimated 144 million square feet, an increase of 6.7/o. However, this expansion was slow getting underway, and it was not until the last week of the first quarter that any pronounced growth was noted. With more than 50/o of the softwood plywood production destined for the construction market, the fall-off in housing starts during the first quarter of 1958 was the largest contributing factor to the industry's slow start.

The 1959 Outlook

New home construction was expected to be at approximateIy 1.20 million starts in 1959. It was anticipated that mortgage money would be available. The softwood plywood industry is gearing itself to participate to the maximum extent possbile by encouraging the establishment of local component fabricators and generally attempting to increase the percentage of softwood plywood used in home construction. It is believed that the new techniques in siding will result in greater use of softwood plywood for exterior coverings. Further, the industry plans to work closer with the Lumber Dealers Research Council and National Plan Service in the development of complete home construction plans.

Softwood plywood demonstration farm structures, such as life-cycle hog production buildings and specially designed barns, will be tailored in an effort to more fully exploit the farm market. A greater percent of the money for the highway program probably will be channelled into actual construction during 1959. This program will create a substantial demand for softwood plywood for concrete forms. The low-cost school construction program, which many local communities have adopted, will use considerable