Green’s Dictionary of Slang

cedar (pencil) n.

[the cedar wood of which it is made; such pencils are usu. unpainted and cheap to purchase]

(US Und.) a cheap pencil.

[US]‘Mark Twain’ Innocents Abroad 398: It seems to come as natural [...] as it is to put a friend’s cedar pencil in your pocket.
[UK]Barrère & Leland Dict. of Sl., Jargon and Cant.
[UK]Farmer & Henley Sl. and Its Analogues II 63/1: Cedar 2. (prison) – a pencil.
[US]B.W. Green Virginia Folk-Speech (1912) 81: Cedar-pencil ... Lead-pencil used for writing.
[US]DN III 297: Cedar-pencil ... Pencil, lead-pencil.
J. Phelan Jail Journey n.p.: A ‘chip o’ cedar’, i.e. a tiny stump of pencil, was a treasured possession.
[US]PADS II 5: Cedar pencil... An unpainted pencil.
[US] in DARE.