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st 1955 V olum e X X X V I I Number 8 Arkansas and Mississippi A HE LUMBER INDUSTRY of Arkansas and Mississippi has had three major stages of development: (1) big-mill processing of the virgin timber, (2) the harvesting of second growth by small portable mills and (3) the current period of transition toward dependence upon annual growth of sustained-yield forests. Changes in markets and rising costs stimulate technical develop ment to increase timber yields and labor productivity. Changes in sawing techniques and mechanization of materials handling are increasing mill efficiency. Use of sawmill waste for pulp is a new 'development with a great potential. The industry in the future will be influenced in size by forest capacity, processing costs, and markets, presenting complex planning And management problems. Small mills appear likely to diminish in importance. Long-run changes may eventually increase the shares of Arkansas and Mississippi in national lumber markets. Thus, the current transition promises a long and productive life for the industry. / 1 Survey o f Current Conditions — p . Lumber in Arkansas and Mississippi The lumber industry of Arkansas and M ississippi. . . O v e r a s h o r t s p a n o f s o m e 75 y e a r s the lumber industry in Arkansas and Mississippi has gone through alternating periods of wild growth and sharp contraction under the influence o f changes in the national markets for lum ber and in the condition of its basic resource, the forests. The postwar period lias been one o f contraction for the industry. From 1947 through 1953 total production o f all types of lumber declined 36 per cent in the two states. E m ploym ent provided by the industry fell off by a slightly smaller fraction, 33 per cent, or almost 26,000 people, in the same period. Considering the many prophecies made over the years that timber resources in these states w ould soon be exhausted, the recent declines in production and employment might be taken as a sign that the end of the timber was in sight. W ere this the case, it would be extremely unfortunate for both states, b e cause as late as 1954 the lum ber industry provided 27 per cent of all manufacturing employment in Arkansas and Mississippi, and it has provided more than half o f manufacturing em ploym ent in earlier years. The lumber production o f these states is of national importance as well. It made up one-eighth of our national lum ber supply in the peak year 1925 and about one-tenth in the war year 1942. the opportunities presented by the basic forest re source, on the one hand, and the markets for lumber on the other. Three major stages in the developm ent o f the industry may be discerned. They have 110 sharp dividing lines separating them because they overlap to a considerable extent, but each stage can be said to have been dominant over a particular time period. The first o f the major stages o f developm ent from about 1890 to 1925, was characterized b y the m eteor ic rise o f production which came with the cutting o f the virgin timber, often com pared to a gigantic mining operation. This was follow ed from about 1925 through W orld W ar II by the era of the portable mills, such as the one in the facing illustration, a period o f great instability and impermanence in which the industry suffered a general decline in efficiency. The third stage is the current one. Todav the industry appears to be developing a technology and a structure suited to the efficient utilization of the timber pro- LUMBER PRODUCTION iN A R K A N S A S A N D M ISSISSIPPI 1904-1953 B illio n s B o a rd Of Feet . . . has had three major stages of developm ent: . . . Fortunately, the situation is not so dark as it might appear. The industry is not dying out. Instead, it is working toward a new size and shape, influenced by com plex changes in markets and technology, and disciplined by the slow processes of nature. The in dustry in these two states embraces many diverse activities, ranging from grow ing trees, through log ging, sawing, drying, planing, and marketing, which are perform ed separately or in varying combinations by some 2,500 firms. It is sometimes considered to be two industries, divided according to the tw o main branches, pine and hardw ood manufacturing, which differ in some important respects. H ow ever, both branches have been influenced similarly by many of the major forces discussed in this article; therefore, only occasional distinctions are drawn between them here. The lum ber industry’s history can be view ed as a long process o f adaptation o f these many firms to Page 90 So u rce: 1 9 0 4 - 1 9 4 6 , Lum ber Production in the U nited States, 1 7 9 9 -1 9 4 6 . U . S . D e p a r t m e n t o f A g r i c u l t u r e M i s c e l l a n e o u s P u b li c a t io n N o . 6 6 9 , O c t o b e r 1948. 1 9 4 6 - 5 3 , Facts for Industry, t h e C e n s u s , S e r i e s M 13 G . U. S. D e p a rtm e n t of C o m m erce, B u reau of (1 ) S i n c e 1 9 4 7 A r k a n s a s a n d O k l a h o m a p r o d u c t io n h a v e n o t b e e n r e p o r t e d s e p a r a te ly . F o r c o n s is t e n c y in th e s e r i e s , O k l a h o m a p r o d u c t i o n , w h ic h a v e r a g e s a b o u t 10 p e r c e n t o f A r k a n s a s p r o d u c t i o n , h a s b e e n i n c l u d e d in th e e a r l i e r y e a r s a s w e l l. (2 ) N o e s tim a te s a v a ila b le fo r 1 9 4 8 . duced by sustained-yield forests. The key to under standing each of these major periods lies in the condition of the forest resources which prevailed at each time. O f most interest, of course, is the current transi tion period, for in it are being made decisions of crucial importance for the future. While much of the impending change appears to be inevitable, prede termined by things done or not done in the past, there still remains much scope for the exercise of judgment and will. . . . (1 ) big-mill processing of the virgin timber, . . . The first of the major stages of development of the industry began shortly before the turn of the century. The virgin forests stood then as an im mense store of capital ready to be converted into the houses and buildings needed by a rapidly growing nation. As the white pine harvest of the Lake States drew to a close, experienced and well-equipped operators moved down into the South. They did things on a grand scale with railroads and very large mills, ripping into the timber at tremendous speed. Their era reached its peak about 1925, after which many of them pulled up their tracks and machinery to move on to timberlands opening in the West. By the standards of today their operations were wasteful. They destroyed much young growth in order to get the big trees they wanted and, in general, they made no effort to leave good seed trees to re stock the acres they cut. However, it should be re membered that there was a big job to be done then in the building of cities. With urban population of the country growing then by more than 15 per cent per decade, there was a tremendous demand for the swift and inexpensive conversion of trees into lumber. Page 91 .. . (2) the harvesting of second growth by small portable mills, ,.. By 1929 much of the virgin timber was gone. Big mills all over the South were closing for lack of tim ber of the kinds they were accustomed to using. The national building boom had crested in 1926 and con struction activity was already embarked on its long slide into the depression ahead. One of the leading lumbermen of Arkansas today recalls that in 1929 he was just starting out with his first small mill. He was consoled by his father—a lumberman of the old school, who believed that all of the worth-while tim ber was gone—with the observation that at least he was still young enough to start over again in some other business after going broke, as he was sure to do. A proliferation of small mills, colloquially known as “peckerwoods” or “groundhogs,” began to glean the timber overlooked in the first cutting and to har vest the volunteer second growth which had sprung up unbidden on the cutover lands. The new growth was too small and too sparse to support the railroad and skidder type of logging operation employed be fore. Trucks became the chief means of transporta tion. The portable mills moved from tract to tract, producing rough green lumber for sale to concen tration yards or to larger saw mills where the final drying and finishing were done. The small mills had a number of advantages over the larger ones. By locating right in the tracts from which they got their logs, they were able to save on log hauling costs. In addition, by sawing the logs at the site, they greatly reduced the weight carried to market. They did not require a large capital in vestment in equipment and they had almost no ad ministrative or selling expense. Many operators worked part time, returning to farming whenever the demand for lumber slackened. Thus overhead costs in periods o f slack demand were not such a problem to them as to the larger mills. W hen demand re vived, as in W orld War II, the portable mills were able to get into production without delay. However, the small mills required more labor per thousand board feet than did the big stationaiy mills because o f a lack o f facilities for mechanical handling of logs and lumber. They also had a higher per centage o f waste in the form of sawdust. The cir cular saw used in most portable mills is approximately twice as thick as the band saw used in the larger mills. The logging practices of the small operators were wasteful of timber also. They generally had no more interest in preserving the productivity of the stands they cut than had the large operators of the Page 92 preceding era. The trend toward small mill opera tion, therefore, resulted in a reduction in efficiency in terms of two of the main inputs, labor and timber. O f course, not all of the large mills disappeared. Many of those that stayed supplemented the timber from their own lands by buying logs or rough lumber wherever they could. Some of them began pro grams of forest management on their lands, pioneer ing in the development which is of so much sig nificance today. And an intermediate size fixed mill developed. Apparently the large mills, too, suffered a loss in efficiency in terms of labor requirements. Some evi dence of this was provided by Bureau of Labor Statistics studies of labor requirements in 1935 and 1946 in the southern pine industry. Plants surveyed in 1946 required an average of 41.2 man-hours of labor per 1000 board feet from felling the trees to loading the finished lumber, roughly a third more than was required by similar plants in 1935. Much of the change was attributed to the cutting of smaller trees in 1946 than had been used earlier, and to the competition of higher paying industries for skilled labor.1 The use of smaller logs which increased labor re quirements also increased the percentage of waste because the smaller the log the larger the proportion of waste material included. In 1946 none of the plants in the sample of mills surveyed was using the waste material for anything except fuel with the result that the increase in waste was nearly all net loss. The timber resources of both Arkansas and Missis sippi deteriorated seriously in quality and quantity during this period except in the relatively small part of the commercial forest under intensive manage ment.2 ... and (3) the current period of transition toward dependence upon annual growth of sustained-yield forests. The third major era to be discussed is the current one of rapid transition, which began soon after W orld War II, and probably has a considerable time yet to go. The period appears to be one in which the lumber industry is adjusting practices and structure to the utilization of sustained-yield forests. In order 1 "Labor Requirements in Southern Pine Lumber Production,” Monthly Labor Review, December, 1946. 2 For discussion of changes in the timber resources see: Forest Statistics for Arkansas, Forest Survey Release 71, March 1953. Southern Forest Experi ment Station. Forest Statistics for Mississippi, Forest Survey Release 59, May 1949. Southern Forest Experiment Station. Mississippi Forest Resources and Industries, Forest Service. United States Department of Agriculture. Forest Resource Report No. 4. to understand the changes which are taking place, it is necessary to consider certain of the influences tending to bring them about and some of the techni cal and organizational possibilities available to the industry which might facilitate adjustment. of the ones described here have been demonstrated in the states under study or elsewhere, but, like advanced techniques in other fields, some of them are far from typical. . . . to increase timber yields . . . Changes in markets . .. First among the influences at work is the compe tition of other materials for markets. For example, according to estimates of the Stanford Research In stitute, the use of lumber in home building has de clined from 18,900 board feet per dwelling unit in 1920 to 10,520 board feet in 1953, a 44 per cent drop.3 About half of this decline in lumber use was attrib uted to changes in architecture and size of dwell ings and the remainder to the increasing use of other materials. Rises in prices of lumber relative to the prices of other materials have encouraged substitu tions. Furthermore, the price of lumber is expected, according to the Stanford report, to continue to rise more rapidly than the prices of competing materials. In addition to the unfavorable position of lumber generally in comparison with competitive products, the situation of southern pine versus western soft woods works an extra hardship on the southern pine producers. The western producers enjoy cost ad vantages in processing large virgin timber which partially offset the freight costs required to reach eastern markets. The combined competition from other materials and from western softwoods puts a virtual ceiling on the price of southern pine. To start with the trees, it is becoming more and more apparent that timber is man-made, that trees are the product of investment of capital, even if much of the investment consists merely of waiting. And yields can be sharply increased with improved management.4 A concrete example of the results of good forest management is cited by the most recent forest survey of Arkansas. A seven-county area in Southern Arkan sas, according to the report, is one of the few large areas of the country in which there has been a siz able gain in pine volume since the middle 1930's. A gain of one-third in pine saw-timber volume from the 1930’s to 1951 has resulted from the conserva tive timber harvesting, hardwood control, and fire protection employed in the region.5 Experiments of the Mississippi Forestry Commis sion and other public and private agencies on selec tive breeding of superior trees look considerably beyond the management practices conventionally used. Productivity per acre could be greatly in creased if a larger percentage of the young seedlings planted, or the growth naturally seeded, could come from trees having higher than average growth rates, small branches, straight trunks, little taper, and re sistance to disease and insects. . . . and rising costs stimulate technical development. . . . . . and labor productivity. W hile prices of pine are being held down, the in fluences tending to increase costs—such as declining saw timber supplies and the accompanying use of smaller trees which were mentioned earlier—are still very strong. The price of labor is rising also, as al ternative employment opportunities increase within and without Arkansas and Mississippi. No doubt, this cost-price squeeze has contributed to the reduction in production of recent years. It is at the sawmill that the most exciting possibili ties for changing techniques can be found. Without watching a sawmill work, the average layman can 4 There is a vast literature on increasing yields through improved ment. For a report on one case study see Clifton B, Luttrell, "T h e ton Farm, A Case Study in Planning and Financing Farm W ood lot tion ,” Federal Reserve Bank of St. Louis, Monthly Review X X X V I , (December, 1954). manage C oving Produc N o. 12, 5 Forest Statistics of Arkansas, p. 10. Given such pressures on the industry, what are the possibilities for adjustment? Two major objectives being sought are: increased efficiency in the use of timber and increased productivity of labor. By fol lowing the lumber manufacturing process through from the growing of the trees to the loading of the final product for shipment, many possibilities for ad vancement toward these objectives can be seen. All 3 America’ s Demand for W ood 1929-1975, summary of a report by Stan ford Research Institute, Stanford, California, to: Weyerhaeuser Timber Com pany, 1934, pp. 33, 34. Page 93 have little conception of the complexity of its opera tion or of the infinite number of places within it where skill and judgment must be applied. Skill and judgment come to their clearest focus at the headsaw (illustrated on the adjoining page) where the sawing of the logs is begun. In a technique hundreds of years old the sawyer appraises each log with a glance to decide how best to start breaking it down into lumber, much as the livestock buyer at the stockyard sees not live animals but what they will dress out. His practiced eye takes in such characteristics as density, crook, or taper, and location of scars or other faults. In an instant the log is hurled onto the carriage where the blocksetter riding the carriage dogs it down securely. The sawyer then feeds the log into the saw and a slab is peeled off. On the back side of the saw (the one illustrated here) the slab or board falls onto rollers or a moving chain to be carried away to the next operation. The sawyer then signals to the block setter how he wants the log held for the next c u t advanced by the thickness of the next board or tim ber he wants to make, or perhaps rolled over for a cut off the other side. All of this is done with almost unbelievable speed and precision. cost-conscious engineer today, each puff represents precious horsepower forever lost. This was not of much consequence in the old days when the steam was produced from burning the scraps and sawdust. But now the waste w ood is becoming too valuable to be used for fuel, and many of the carriages are being converted to electric or hydraulic drives. A more radical change in technique than speeding up the conventional headsaw and carriage is the use of gangsaws. The gangsaw, as its name implies, has a number of blades cutting at the same time so that it can reduce a log to boards in one operation. The blades are thinner than the bandsaw, and thus make less sawdust. The gangsaw has another advantage in that once it is set for producing boards of a certain thickness, it will do so with great accuracy, avoiding the chances for error that creep in with the continual setting and resetting required in sawing one board at a time with carriage and headsaw. The gangsaw technique has been developed to perhaps its finest pitch in Sweden where sustained-yield forestry has been practiced much longer than it has in the United States and where the average sawlog is smaller than in this country. Changes in sawing techniques .. . However, the use of gangsaws has some disad vantages for application to Arkansas and Mississippi timber. Best results are obtained when logs of uni form size and quality are sawed, and these are not generally found in the typical timber tract in these states. Furthermore, pre-sorting of the logs to get uniformity at least in batches runs up the handling costs. What appears to be a good compromise is a combination of the conventional bandsaw headrig with a battery of gangsaws. With this technique the sawyer would quickly slab off two or more sides of each log, making the best of its crook, taper, or other faults, and then send the cant (as the slabbed-off log is then called) to a gangsaw for further processing. By this combination the mill would economize in the use of the special talents of the sawyer and his costly equipment, while not losing the possibility of his giving special treatment to the occasional superior log. And the gangsaws could be operated at their most efficient rates by confining each to cants of a particular size. Improvements in headsaw and carriage have off set to a considerable extent in some mills the effects of declining log size. One man rides the carriage now, doing electrically or with compressed air what used to be done by two or three men by hand. The carriage itself runs much faster. Most of the carriages were formerly powered by a long steam cylinder, called a 4shotgun” , which puffs big clouds of steam into the air with each stroke of the carriage. To the In another application, used at several Arkansas mills, logs below a certain size are automatically shunted off to a round-log gangsaw, while the larger ones go to a bandsaw headrig. Roundlog gangsaws used in this way provide an efficient means for saw ing the small logs from the top sections of the trees cut. They also up-grade some crooked logs because they can be made to follow the curvature of a log which has a moderate "sweep,” producing several Beautiful though the performance of a skilled sawyer and blocksetter may be, it was the fact that such an operation had to precede all other mill op erations that has had much to do with the deteriora tion of the big mills’ position in the industry over the past 20 or 25 years. It was this step in the manu facturing process which was largely taken over by the portable mills. Sawing logs into lumber with carriage and headsaw alone, and especially the care ful sawing for maximum quality or grade, requires big logs to pay out. It takes but a quick mental cal culation to realize that the bigger the log the greater the average amount of lumber produced with each pass of the carriage because the face is wider. Since the headsaw sets the pace for the whole mill, when headsaw efficiency declined with the sawing of smaller and smaller logs other operations suffered from loss of volume. Page 94 full-length boards which would have shown up as short material or scraps on the bandsaws. This is because the bandsaw and edger necessarily cut in straight lines across the arc of a curved log at some points, producing several short boards and only a few full-length ones from each curved log. . .. and mechanization of materials handling are increasing mill efficiency. The succeeding operations of trimming, edging, drying, and planing in the mill probably present some other opportunities for tightening up on costs, but the really impressive opportunity is in materials handling. From the saws of a big mill come literally millions of separate pieces of material each year to be moved, graded, sorted, stacked, and re-sorted. When labor was less expensive, manpower was used lavish ly on these tasks which are now increasingly being taken over by machinery. The forklift truck sketched for the cover is but one of the more obvious signs of the revolution in materials handling within many of the mills. Use of sawmill waste f or pulp is a new development with a great potential. Practically all of the possibilities for technical im provement discussed above are of the type to be achieved within the individual plant. However, one of the most signficant innovations in years is one based upon the integration of separate enterprises within the region. This is the utilization of sawmill waste by paper and pulp mills. For years sawmills and smoke have gone together because there was no economic use for the slabs and other scraps produced by the mills. Even after papermills came to the South, sawmill waste was not usable because it contained too much bark and no inexpensive way to separate wood from bark had been found. But within the last few years sawmills in the South have begun to install debarking machines to strip bark from the logs before sawing. All of the slabs and trimmings, being free from bark, can then be fed into a chipper to be made into pulping chips for sale to pulp mills. There are about seven or eight barker and chipper installations at Arkansas sawmills now, with more planned. There Page 95 are apparently none in Mississippi yet, but several installations have been planned. The potential value of this step toward fuller utilization of timber is enormous. Experience with the barkers and chippers now operating indicates that about half a cord o f chips, with a sale value of about $6.00 at recent prices, can be produced with every 1,000 feet of pine lumber. This will provide the operator an estimated net profit on the chips (or a net reduction in his cost of producing the lum ber) of from $3.50 to $4.00 per thousand feet of lum ber produced. The significance of this developm ent for the individual sawmill is clear, but the signifi cance for timber utilization in total is great also. For example, the Stanford Research Institute projections for p u lp w ood production indicate that about 7 per cent of total pulp w ood production in the South may be in the form o f mill residuals by 1960, and this p ro portion may exceed 10 per cent by 1970.° The industry in the future will be influenced in size by forest capacity, processing costs, and markets, .. . At the beginning of this article it was noted that the lumber industry was working toward a new size and shape, influenced b y changes in markets, technology and resource conditions. Some of the past changes in the industry were related to the shift from use of the dense-growth, large-tree virgin forests to the use o f the more scattered, small-tree second growth forest. If the industry is now com ing to d e pend more and more upon sustained-yield forests, what can be said about the size and structure o f the industry in the future? Obviously, there can be no simple answer to such a question, but some observa tions can be made. One determinant of the future size of the industry, measured in lum ber production, will be the annual rate of growth o f sawtimber, which in turn will d e pend largely upon the size of the growing-stock in ventory. Between the forest surveys made in Mis sissippi and Arkansas in the 1930's and those made after W orld W ar II, the growing stock declined in both states. In a sense, the, industry had continued over that period to consume part of its capital stock of trees instead o f living off the “interest.” However, there are signs that the capital liquidation may be com ing to an end, if it has not already stopped. In Arkansas at the time o f the most recent survey, 194751, annual net growth of sawtimber was almost 2.2 billion board feet, as com pared to a sawtimber drain for all purposes of 2.1 billion board feet. Since 1948 the drain, as indicated by lumber production, has declined, so some net accumulation in growing stock $ America's Demand for W ood , Table 15, p. 59. Page 96 could be occurring. Similarly in Mississippi, the sharp decline in lum ber production since the 1946-48 survey may have halted the depletion o f sawtimber grow ing stock. On the positive side, there has been an upsurge of interest in forest managem ent through out both states. Educational efforts of public and private agencies and w ider recognition o f the e co nom ic benefits o f forest investment are bringing about im provem ent in the forest resource. W hile the inventory decline in the tw o states may have leveled off, this does not necessarily mean that lum ber production will not decline further. Not all o f the indicated annual growth will be available for marketing because m uch of it will be in trees b elow marketable size and quality. Furthermore, efforts to rebuild the stands may reduce the annual cut at least temporarily. . .. presenting complex planning and management problems. In view of the sawtimber inventories as estimated b y the postwar forest surveys in Arkansas and Missis sippi, the typical saw log processed when the indus try is on a sustained-yield basis will be small. A large part o f the saw log volum e o f both states at the time of the surveys was concentrated in the smaller sizes. Just h ow small the typical log will be in the future will depend in part upon the policies o f the saw mill operators and timber landowners. Some o f the co n siderations affecting the ch oice o f an optimum size log for milling are relationships am ong lo g size and yields o f lum ber by quantity and grade, yields o f b y product chips, costs o f loggin g and processing, and grow ing time. Management o f an integrated timber grow ing and lum ber manufacturing firm trying to maximize re turns over the long-run has a difficult time with such a com plex planning problem in view o f uncertainty as to future market preferences. For example, if the firm decides to gain volum e at some sacrifice in quality with, say, a 10-14-inch log as the target, it may find 20 years from n ow that it should have planned for a larger average log size in order to obtain a better price. Or, conversely, the firm that holds back cutting to get larger logs may find the extra quality does not offset the loss in volum e. In either case, the forestry program o f the firm cannot be quickly turned toward another objective if the first proves to have been a p oor selection. Small mills appear likely to diminish in importance. One of the most striking structural changes in the industry over its history was the shift in relative im portance of the b ig mills and the small portable mills. As has been pointed out, the small mills, with their flexibility and low overhead, had some advan tages in the utilization of small scattered stands. But the nature of the technical improvements in lum ber manufacturing coming into use and the rising price of labor suggests that the pendulum is swing ing back again toward the larger fixed installation. This by no means implies that portable mills will disappear. Their operators are hardy and resource ful, and some of them are using recently developed equipment which is considerably more efficient than the machinery in the typical older mill. However, the smaller mills as a group will probably produce less of the total output of the industry in the future. With labor and sawtimber increasing in cost, the lumber manufacturer is under much more pressure to make the best possible use of each of them. The very small mill cannot well apply the mechanical handling or the large volume sawing which are in creasing yields for the larger mills. The question is whether it will, in the future, cost more to saw logs into rough lumber near the timber stand and then haul the lumber to a concentration yard or mill for finishing, or to assemble the logs at a mill where the whole manufacturing process can be completed in one place. The big mills apparently were at some disadvantage in comparison to the small ones in the initial sawing step when they had to apply their biglog techniques to small logs. But it appears now that they will be able to offset the larger log-hauling costs with lower processing costs at the mill by adopt ing methods specially designed for small logs. O f particular importance in influencing the future structure of the industry will be the use of barkers and chippers. One of the chief advantages of the portable mill operator was that he located his mill near a heavy raw material from which he removed a large part of the weight before shipping it. Now, most of the weight he removed would be a valuable byproduct for a mill large enough to install a de barker. This confers a compelling advantage upon the larger mill unless, or until, very small debarkers are developed and widely used.7 Long-run changes may eventually increase the shares of Arkansas and Mississippi in national lumber markets. A special circumstance which may some day benefit the lumber industry in Arkansas and Missis sippi is that eventually the western states will have to depend much more on second growth timber than they do now, which may substantially weaken their advantage in processing costs. If by then the Ar kansas and Mississippi producers have mastered the small-timber manufacturing techniques with which they have been experimenting, and have increased the productivity of their forests, they may be able to capitalize on their freight cost advantage in reaching the big eastern markets and thus increase their share of the total market. Thus, the current transition promises a long and productive life for the industry. To sum up, in two major periods in the past the lumber industry of Arkansas and Mississippi has de veloped a technology and a structure suited to the utilization of a particular kind of timber resource. In the first a relatively small number of large pro ducers harvested the standing inventory of virgin timber. In the second, many small producers with simple, light equipment processed the small scat tered growth which first replaced the virgin timber. At the present time a new industry with new tech niques is in course of development for the eventual more stable processing of the annual growth of sustained-yield forests. What this industry will be like 25 or 50 years hence depends to a peculiar extent upon the decisions made today, because the num bers of trees and the kinds of trees provided for today will do much to set basic conditions for the industry in the future. A. Ja m e s M e ig s 7 Slabs w ith the bark still on are collected from sm all m ills in som e parts o f the South to be put through slab debarkers and chippers. Extensive de velopm ent o f this system w o u ld aid the sm all m ills but probably w ou ld not yield as large a saving as w o u ld lo g debarkers and chippers at larger saw m ills. Page 97 o F CURRENT CO NDITIO NS J jI G H T H DISTRICT business activity continued at a high level in July, after allowance for seasonal slackening in some industries, and demands of busi nesses and consumers for bank credit were large. Farms of the district benefited from the best grow ing weather in several years, but prices of major district farm products declined. Strength of commercial and industrial activity in the district . . . Some district manufacturers reduced production in July for vacations, but there was no apparent slacken ing in the demand for their products. Steel ingot production at St. Louis declined a few percentage points during July, but held at a high level of 96 per cent of rated capacity and producers' order books reportedly are full. Similarly, production of Southern pine and hardwoods was down over 10 per cent in REAL ESTATE A N D “OTHER” LO AN S E ig h th District W e e k l y Re po rt in g Ba n ks Millions O f Dollars early July, an approximate seasonal drop, but orders and shipments were exceeding production of softwoods and were at least equal in the case of hardwoods. Livestock slaughter in the St. Louis area was some what lighter in June and early July than a year ago, reflecting the more favorable rainfall situation this year. Last year the drouth compelled some distress selling of livestock from areas where pastures were below normal condition. . . . was revealed in demand for bank credit and in shrinking unemployment figures. The strength of industrial and commercial activity was clearly reflected in active demands for bank credit during the four weeks ended July 20. A busi ness loan increase of $32 million in the four-week period resulted from a sharp rise during July, more than offsetting a reduction in late June. Most types of borrowers, by major industry classification, in creased their loans outstanding in part to finance the expansion of inventories and accounts receivable accompanying the upswing in activity. The demand for business loans was heaviest at the St. Louis banks, where commodity dealers increased their indebted ness more than normally for this time of year as the result of a relatively large direct movement of the wheat crop into hands of commodity dealers. There was an increase in loans to finance real estate and security purchases during the period. The high rate of business activity, including the construction industry, caused a further reduction of insured unemployment in the principal labor markets of the district during July. Consumer spending was also high, bolstered by the use of credit . . . Consumer spending at reporting district depart ment stores in the first half of July was substantially higher than in the comparable period a year ago. Sales in housefurnishings were the dominant factor in the increase. A year ago the bulk of consumer spending on cooling appliances occurred in June Page 98 with a slump in July; this year the hot weather boost to sales came in July. Also traditional and special promotions in July apparently proved more attractive to buyers this vear. Consumers continued to borrow heavily at district banks, reportedly to finance autom obile purchases. In the four weeks ended July 20 at weekly reporting banks, the group o f loans w hich consists largely of loans to consumers increased $16 million in contrast to an average rise of $5 million in the corresponding weeks o f the past six years. In addition, sales finance companies were large net borrowers during the period, districtwise and nationally, presumably for the purpose of relending to consumers. . . . and by an apparent reduction in accumulation o f liquid savings. There are some indications that consumers have been supporting their expenditures not only with increased incomes and by greater use o f credit, but also by reducing their rate of accumulating liquid savings. For example, time deposits at district m em ber banks rose 4 per cent in the first half o f 1955, while they rose 5 per cent in the same six months of last year. Published reports o f 29 savings and loan associations operating primarily in the St. Louis metropolitan area showed that share accounts rose 11 per cent in the first half of 1955 as com pared to a rise of 16 per cent in the first half of 1954. Farms benefited from a month o f good grow ing weather . . . Farms of the district are enjoying one of the best grow ing seasons in years. Am ple rains and m oderate temperatures have kept large areas green w hich were burned brown by this time in each o f the preceding three years. Largely as a result, the yields per acre of all major district fo o d and livestock feed crops are expected to be high. Increases from 1944-1953 averages for district states, according to United States Department o f Agriculture estimates, may range from about 10 per cent for rice to 45 per cent for wheat. Yields per acre o f corn and hay are ex pected to be approximately 25 and 15 per cent, re spectively, above last year. W hile official production estimates for soybeans are not yet available, observa tion of district fields indicates that yields per acre mav be well above those o f last jvear. * During the past month district states production o f cattle, hogs, and dairy and poultry products was higher than a year ago, as it was for the nation. The gain in output reflected, am ong other things, increases in the livestock population on farms and greater p ro duction per animal. . . . but price declines have reduced cash farm receipts. In face of favorable crop yields per acre and high production of livestock com m odities, prices received for the products o f district farms declined during July. Average prices o f important district farm p rod ucts on July 22 were 2 per cent low er than they had been four weeks earlier and 7 per cent lower than a year ago, reflecting sharp drops in soybean, hog, egg, and oats prices o f 33, 20, 19 and 17 per cent. District cash farm receipts during the first five months of 1955 were 7 per cent b elow receipts in the comparable 1954 period, and 12 per cent below their level of two years ago. Page 99 V A R IO U S IN D IC A T O R S OF INDUSTRIAL ACTIVITY June 1955 com pared with* M ay 1955 June 1954 Fune 955 Industrial Use o f Electric Power (thousands o f K W H per w orking day, selected industrial firms in 6 district citie s)........................................................................................ Steel Ingot Rate, St. Louis area (operating rate, per cent o f capacity) C oal Production Index— 8th Dist. (Seasonally adjusted, 1 9 3 5 -1 9 3 9 = : 1 0 0 )............ Crude Oil Production— 8th Dist. (D aily average in thousands o f bbls.) Freight Interchanges at RRs— St. Louis. (Thousands o f cars— 25 railroads— Terminal R. R. A ssn .)................................................................................................................ Livestock Slaughter— St. Louis area. (Thousands o f head— w eekly a vera g e).......... Lum ber Production— S. Pine (A verage w eekly production— thousands o f bd. ft.) Lum ber Production— S. Hardwoods. (Operating rate, per cent o f ca p a city )............ — 1% — 6 —0— + 3 13,829 100 128 p 374 .9 105.8 8 0.0 210.4 92 •— — -— + + 15% 4 -41 +14 +13 6 + 9 — 3 +14 + 3 14 4 2 * Percentage change figures for the steel ingot rate, Southern hardw ood rate,and the coal production index, show the relative per cent change in production, not the drop in index points or in percents o f capacity, p Preliminary. BANK DEBITS1 June 1955 (In m illions) C A SH FARM IN C O M E June 1955 1 com pared with M ay June 1955 1954 Six Largest Centers: East St. Louis— National Stock Yards, 111..................................... Evansville. Ind. .......... Little R ock, Ark........... Louisville, Ky................ Memphis, Tenn. . . . . St. Louis, M o ............. T otal— Six Largest Centers .................... Other Reporting Centers: Alton, 111.......................... Cape Girardeau, M o. El D orado, Ark. . . . . Fort Smith, A rk........... Greenville, Miss............ Hannibal, M o................ Helena, A rk................... Jackson, Tenn................ Jefferson City, M o. . . Ow ensboro, Ky.............. Paducah, Ky. ............... Pine Bluff, Ark.............. Q uincy, 111...................... Sedalia, M o. ............... Springfield, M o.............. Texarkana, Ark............ (In thousands of dollars) M ay 1955 M ay ’ 55 from M ay >54 ( 1 9 4 7 -1 9 4 9 = 1 0 0 ) M ay 1955 Apr. 1955 M ay 1954 1955 com pared w ifk 1954 1953 Unadjusted T o t a l............ R esidential. A llO t h e r . Arkansas . $ 20,858 — 1 4 % 119,890 — 20 Illin ois......... Indiana . . . 68,1 86 — 8 Kentucky . 25,6 47 + 5 Mississippi . 20,7 07 + 2 2 Missouri. . . 63,4 69 — 6 Tennessee . 28,1 77 + 1 0 + 3% — 12 — 10 — 8 — 8 — 9 — 4 —0 —% — 8 — 4 — 14 — 33 — 9 7 States $ 346,934 — 8 th District. $143,341 — — — — 10 — 12 . / 9 7 9 7 — 11 Source: State data from U SD A preliminary estimates unless otherwise indicated. + 23% 4- 5 ^ I N D E X OF C O N ST R U C T IO N CON TRACTS AW A RDED EIGHTH FEDERAL RESERVE DISTRICT* Percentage Chai < 221.0 p 304.3 p 182.4 p 237 .4 300 .8 2 08 .0 205.9 2 35 .5 192.2 Seasonally adjusted T o t a l............ 195.6 p Residential. 269 .3 p A l l O t h e r .. . 161.4 p 2 17 .0 273 .5 190.8 182.2 208.4 170.1 * Based on three-m onth m oving average (centered on m id-m onth) o f value o f awards, as reported by F. W . D od g e Corporation. p Preliminary Total— Other Centers .................... $+ 66 T otal— 22 Centers IN D E X O F BANK D E B IT S — 22 Centers Seasonally A djusted (1 9 4 7 -1 9 4 9 = 1 0 0 ) 1955 1954 June M ay June 159^3 156.4 145.2 $ + 30 — 16 — 1 + 53 1 Debits to dem and deposit accounts o f individuals, partnerships and corporations and states and political subdivisions. DEPARTMENT STORES Net Sales June, 1955 com pared with 8 th F.R. District T otal. . . — Fort Smith Area, A rk .i. . — Little R ock Area, A rk.. . . — Quincy, 111.................................— E vansville Area, In d ......... .....— Louisville Area, Ky., I n d .. — Paducah, Ky........................ .....— S t Louis Area, M o., 111. — Springfield Area, M o ......... .....— M emphis Area, T e n n .. . . — A ll Other Cities 2 ....................— 8% 13 13 6 10 8 9 5 4 20 2 — 4% + 4 — 7 — 8 — 6 — 7 — 20 — 3 +25 —-5 — 4 6 mos. ’ 55 to same period *54 + 5 % +10 — 2 + 2 + 1 + 4 — 9 Percentage o f Accounts and Notes R eceivable Outstanding June 1, ’55, collected during June Excl. Instal. Instalment A ccounts Accounts 17 12 49 43 44 20 50 + 6 19 56 +38 + 4 + 4 15 11 37 43 1 In order to permit publication o f figures for this city (or area), a special sample has been co n structed which is not confined exclusively to department stores. Figures for any such nondepartm ent stores, how ever, are not used in com puting the district percentage changes or in com puting depart ment store indexes. 2 Fayetteville, Pine Bluff, Arkansas; Harrisburg, Mt. Vernon, Illinois; Vincennes, Indiana; D an ville, H opkinsville, Mayfield, O w ensboro, Kentucky; Chillicothe, Missouri; Greenville, Mississippi; and Jackson, Tennessee. IN D E XE S O F SALES A N D STOCKS— 8TH D IS T R IC T June M ay Apr. June 1955 1 955 1955 1954 Sales (daily average), unadjusted 3 ..................................................... 106 121 117 110 Sales (daily average), seasonally adjusted 3 ...................................... 118 121 122 122 Stocks, unadjusted 4 ................................................................................... 130 127 134 119 Stocks, seasonally adjusted 4 .................................................................. 130 121 125 119 3 D aily average 1 9 4 7 -4 9 = 1 0 0 4 E nd o f M onth average 1 9 4 7 -4 9 = 100 Trading days: June, 1 955— 26; May, 1955— 2 5; June, 1954— 26. O U T S T A N D IN G ORDERS o f reporting stores at the end o f June, 1955, were 16 per cent larger a year ago. than on the corresponding date RETAIL FURNITURE STORES Inventories June, 1955 June, 1955 com pared with com pared with M ay, ’55 June, ’ 54 M ay, ’ 55 June, ’54 8 th Dist. T o ta l* . . — 1 St. Louis A rea. . . — 2 L ouisville Area. . .— 10 M em phis Area. . . — 6 Little R ock A rea. + 4 4 Springfield A re a . . + 7 * N ot shown separately due to insufficient coverage, but included in Eighth District totals. 1 In addition to follow in g cities, includes stores in Blytheville, Fort Smith, Pine Bluff, Arkansas; Ow ens b oro, Kentucky; G reenw ood, Mississippi; Evansville, In diana; Cape Girardeau, Mo. P E R C E N T A G E D IS T R IB U T IO N O F F U RN ITU R E SALES Cash Sales ................. Credit Sales ., Total Sales ............ June, ’ 55 14% 86 100% M ay, ’55 15% 85 100% June, ’ 54 14% 86 100%
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