TABLE 124.-Pulpwood: Holdings reported by United States pulp mills of uncut and cut-over timberlands and estimated quantity of pulpwood thereon

ESTIMATED QUANTITY OF PULPWOOD ON TOTAL ACREAGE HELD (THOUSANDS OF

Source: Data obtained by the U. S. Tariff Commission in this investigation.

The reporting pulp and paper mills were not asked the detail of the method by which the timber is held, but from supplemental information obtained by the Commission it is estimated that 65 percent of the timber is owned outright.

On approximately 11,000,000 acres of uncut and cut-over timberland held in the United States by mills reporting to the Commission, the average of the estimated recoverable pulpwood per acre is 5.3 cords. However, the stand in the Pacific Coast States is far heavier than elsewhere; for the remaining regions combined the average is only 3.6 cords per acre. Table 125 shows by regions the estimated average quantity of pulpwood recoverable per acre from lands held by the reporting pulp and paper companies.

10243-38--18

TABLE 125.—Pulpwood: Estimated average cords recoverable from uncut and cut-over lands held by United States pulp mills

Source: Data obtained by the U. S. Tariff Commission in this investigation.

per acre

Cords

2.7

4.6

5.0

5.0

3.6

77.2

5.3

4.9

Reasons for variations in the timber holdings of pulp companies in different regions.

As shown in table 124 the largest acreage of timberlands is held by concerns whose pulp mills are located in the New England and Middle Atlantic States. This is a logical situation growing out of the heavy drain to which the forests of this territory have long been subjected. The lumber industry, which flourished in this region until about 1860 or 1870, had already made heavy inroads on the large original stands of timber before the pulp industry developed, and in the last 50 years the wood requirements of the pulp mills themselves have contributed to the drain on the timber of the section. In addition, fires have taken their toll and thousands of acres have been cleared for cultivation. Under such circumstances the pulp companies have thought it advisable to gain control of as much as possible of the remaining stands of timber to insure their future supplies of wood. The 5,312,000 acres of domestic timberlands held by the reporting mills in New England (most of the lands being in that region itself) represent a considerable fraction of the total forest area of that section. In most other regions such holdings by pulp mills are very small in comparison with the total timber area.

The situation in the Middle Atlantic States in some measure resembles that in New England. In other regions pulp companies have not been confronted with such serious problems of wood supply. Logging operations carried on in conjunction with sawmill activities in the Lake States and in the South left in their wake much land from which only the mature timber had been removed. Such logging operations resulted in a rapid growth of the remaining young timber and in natural reforestation where protection was afforded from fire and other forest enemies. These forest crops serve the pulp industry of the Lake and Southern States, and the incentive to pulp mills to acquire large holdings has not been as great as in New England. However, shortages of wood readily accessible to the pulp mills are felt in some parts of the Lake States.

Some of the larger companies interested in the pulp industry on the Pacific coast have large holdings of timber. For several of these organizations, however, the establishment of pulp mills was but a means of utilizing certain species of wood from considerable holdings of timber acquired with the intention of using them in the production of lumber. The acreage of timberland reported to be held by pulp companies in

the Pacific coast region is less than that held by pulp companies in any other region, but as a result of the heavy stand of timber in the Washington-Oregon area a large volume of wood is represented by the holdings of the Pacific coast companies.

Considerations affecting the cutting of wood by pulp companies from their own holdings.

The large acreage of uncut and cut-over forest lands reported by active pulp concerns, especially in the Northeastern and Lake and Central regions, as owned or controlled by them is to a considerable extent held as a reserve for future use rather than for immediate exploitation. Some areas reported as held are too remote from a railroad, good road, or stream suitable for log driving to warrant being tapped for wood at the present time; the cost of providing transportation would add too great a burden over and above the cost of pulpwood obtainable from other sources. In other areas, fully accessible, little or no cutting of wood is being carried on because of the desire to conserve the stand against the day when it will be more urgently needed. So long as supplies may be drawn from outside sources and acquired at a figure less or not much above the cost of getting out wood from their own holdings, pulp and paper companies will buy their wood supply in whole or in part rather than deplete their own stumpage. The timber holdings of pulp companies protect them from being forced to pay wood prices which they consider too high, at present or in the future.

The cost of holding timberlands is of importance to the controlling company and this cost, if high, is not infrequently the governing reason for cutting the timber on a given tract instead of keeping it in reserve. The two principal elements of the cost of holding are (1) interest on investment, and (2) taxes. If the investment is to prove profitable, these costs combined must be offset by appreciation in value of the tract through increase in the volume of wood which may be removed or through a rise in the price of the wood. In most States forest land for the purposes of taxation is treated the same as land from which may be derived an annual or even semiannual crop, although, in the case of timber, years must elapse between crops. Ordinarily the rate of assessment is lower on timberland than on farm land, nevertheless the burden of taxation may be so heavy that recourse is had to cutting. The taxation of forest land is a problem which is being studied by many States as well as by the Federal Government to arrive at an equitable solution and avoid the loss of revenue through the cutting of timber and the abandonment of the cut-over lands with consequent increased cost to the individual State for fire protection.

Wood inventories of pulp mills.

Mill inventories of pulpwood at the close of a calendar year represent in the aggregate huge stocks of raw material and a considerable investment of capital. Wood in pile at the mills reporting to the Commission in the investigation, at the end of calendar years or other dates at which inventories were taken, was equivalent to one-third of their total receipts of wood in each of these years; as of September 30, 1935, total inventory was equal to four-fifths of the total wood receipts of the 9-month period.

A comparison of receipts with inventories of 140 mills is shown for 1934 in table 126. The comparison for 1934 reveals a considerable variation in the ratio of inventory to receipts as among the several

geographical regions, ranging from about 19 percent in the Southern and Pacific Coast States to 59 percent in the Middle Atlantic States. The heavier inventories of the mills in the New England, Middle Atlantic, and Lake States are essentially due to climatic conditions which materially hinder the transportation of wood during the winter season. As pointed out, the actual cutting of wood is carried on during the winter months in the regions mentioned, but its transfer from woods to mill is done chiefly during other seasons. On the other hand, in the South and on the Pacific coast the wood is cut and moved to the mill throughout the year. In these two regions there is consequently no need to accumulate large reserve stocks of wood.

The carrying of large inventories of pulpwood imposes an additional financial burden upon the mills through the tying up of working capital, in the interest paid on bank loans, and in depreciation through deterioration of the wood. Moreover, wood in pile at the mill presents a fire hazard, and the risk increases with a greater volume of wood. The stock is ordinarily in one huge pile and, once fire starts, it is difficult to control; further, many mills are located in small communities with a minimum of fire-fighting apparatus available.

TABLE 126.-Pulpwood: Comparison of receipts with inventories of 140 identical mills, 1934

[Quantities in thousands of cords. Values in thousands of dollars]

Source: Data obtained by the U. S. Tariff Commission in this investigation.

COST OF WOOD TO PULP MILLS

The average cost of wood per cord to mills in different sections of the country varies considerably. In general the unit cost of pulpwood used by mills in the Middle Atlantic States is higher than that of the pulpwood used in New England, and in New England it is higher than in the Lake States. In the Pacific coast region the cost is lower than in the Lake States; in the Southern region it averages lowest of all. The low average in the South is attributable to the almost exclusive use of Southern pine which has been low in price, both because of its abundance and in the last few years because of the reduced demand for it in the form of lumber. Southern pine pulpwood has been used up to the present practically only in the production of sulphate pulp. The unit cost of the relatively small quantities of spruce, balsam fir, hemlock, and other woods used by southern sulphite and ground-wood mills, located principally in the more northerly part of the Southern region, has not been conspicuously below the cost of similar species in

the Lake States. There are variations, though none so conspicuous, in the average unit cost of wood of different species in the other regions. Table 127 shows the average unit cost of pulpwood received in 1933, 1934, and the first 9 months of 1935 by pulp mills reporting to the Commission, distinguishing domestic and imported wood. These data have been segregated according to the region in which the mills are located.

TABLE 127.—Pulpwood: Average delivered cost per cord of wood at mills in different regions

Source: Data obtained by the U. S. Tariff Commission in this investigation.

The figures for average cost of wood used by pulp mills in different sections of the country reflect only roughly and incompletely variations in the unit values of pulpwood at different mills. The average unit values shown in table 127 are based upon the reported values both of purchased wood and of wood received from lands owned or controlled by the pulp-producing company. The reported values of wood received by mills from land owned or controlled by the pulp concern are those, usually based on estimated cost, at which the wood is transferred from one part to another of the same organization. Such values may not conform at all closely to the prices which the same mills may be paying for similar wood from independent sources. The values of purchased wood entering into the averages shown in table 127 are for wood laid down at the pulp mills. Some of this wood is delivered to the pulp mills by the sellers of pulpwood. In such cases the values used were simply the prices paid by the pulp companies for the wood. Sometimes the pulpwood is bought by the pulp-producing concerns at points distant from the pulp mills, as at railroad sidings near the points of origin of the wood, and the pulp companies pay the freight to the mill. In these cases the values used include the freight paid by the pulp-producing concerns.