will there be a pellet shortage this fall?

So you are happy as can be. Sold out of all of your pellets with most folks in the single digits of bags burned so far this year.

Did you grossly under estimate your demand?? If that is the case you should be fired. Did you not secure enough?? If so, same result as prior. Or, you nailed it and deserve a huge bonus and you dont have a care in the world until next year. If that is the case enjoy the time off!!

 

Since you must know Ihatepropane....let me explain....1st year doing a hardwood, didn't really know what to buy, so we picked a number that we thought would be a good first year amount without going overboard...brought the product in and then ....a number of hardwood mills started having issues, won't go into detail, but you know who they are and the demand exceeded our expectations, so sold out of hardwood much earlier than expected....circumstances beyond our control...can't get more till spring....the pine was a case of Europe taken priority and got pushed back ...as for the others, we have them coming but again, we only can order, process and ship so much...not to mention store on the ground for so long and orders started to come late this year, but when they did, the flood gates opened all at once....pretty much the same for everyone ...so here we are...next year the game plan is to have some sort of covered storage, order more, earlier and start packaging earlier than we did this year and hopefully we don't have some of the same problems....of course that is given we have a decent winter this year and next..I don't have a crystal ball to see in the future and if I did...I wouldn't be doing this for a living...I would have be living on my yacht moored at my private island somewhere hot and wet.....but I guess you are better at this business than I am ...good luck to you ...

 

No margins in pellets. Wouldnt be my preferred business!!

But that is a little better write up......

 

If you say so ....must be true

 

My neighbor just downed a large hemlock and had it cut into rounds. He's going to let me go over there and take a large share off his hands. I'm always surprised how free wood just seems to fall into my lap. It will, of course, require some labor to go get it, split and stack it. But it's free and I'm not dependent upon distributors for my warmth. Of course, I'll be warm when I go over there because my pellet stove will have been running over night on the pellets I bought in the summer. Read into this what you will.

 

I will say upton seemed pretty bare all year. less pellets on the ground then i have ever seen. Like bigely less. Maybe someone shouldve bought their product earlier. before all the ramp up issues and euro weenies stole all of their products; instead of blaming the consumer.

 

Not fighting anyone's battles, but there is SOOOOOOO much more to this game,
than just putting in orders... or estimating.
So many things play in to whether or not you do or do not have stock.
One botched step in the process, can screw everything else down the line.
One thing I can tell you... some of our brands are out, and nearly all are going up.
And it isn't like 'we' waited until the last minute. we tried getting,
and really pushed selling, all summer.
One would think that is an easy time to get them.
Wrong. Trucking sucks.
We get a truckload in, and take orders for 1-1/2...
Here it is November, and people scream because they can't get their
stuff tomorrow... Sorry...

That isn't a sales gimmick.. that is the way it is.
I never would have thought it was such a tough business to be in,
'till I started working with Henry..
Honestly?
I wouldn't do it.

Dan

 

I was at menards last week and the guy said they where out of pellets most of the week and they just got a truck load in.

The next day they where all gone. I stopped in 4 days later and they where still out. I've never seen menards over the last 4 years not have any pellets.

 

A lot has happened in the last 60 days.
TARIFFS and extremely wet weather/hurricanes in wood producing regions.
China has basically stopped buying US lumber which has been a large percentage of US production for many years = raw material shortage.
With the many hurricanes the last couple years chip production is going into OSB = raw material shortage.
Could get ugly unless the tariffs come off.

 

The wood pellet market has really been a game changer for a lot of markets; firewood, coal, even oil. While I am not a huge fan of burning pellets for heat, their consistency has a lot going for it.

One thing the competition has tried to leverage against the industry, is blatantly suggesting there will be a shortage of pellets. That has fueled (forgive the pun) a lot of the "shortage of pellet" naysayers out there.

I do not buy into it.

Pellets are no different then making snowplows, which is what I used to weld up. We were always busy making snowplows in the summer, for winter, just as pellet makers do. IF stock piles get depleted, they ramp up production to meet it, but there is a lag in doing so. A little ebb and flow and people panic.

I would like to get Scot Linkletter's thoughts on this as he actually runs a pellet manufacturing plant.

 

Ask him.

 

I think i am gonna come visit you saturday.

 

I wonder what constitutes a shortage to people?
For me, its when I can no longer buy certain pellets....Northern Warmth Premium Pine, for instance. If I cant get them, its a shortage.....this depresses other brands, in somewhat a domino effect.
Just because your got 23 tons in your basement doesn't mean there isn't a shortage.
Just because you see 20 tons at HD doesn't mean there isn't a shortage (we sold 115 tons on Saturday and a half day Sunday two weeks ago)

What causes a shortage? A lot of things. Maybe a BB ties up supply allocating crazy amounts they know they will never use, since they don't have to pay for them until they take delivery. Maybe trucking, or lack thereof. Maybe a producer didn't order enough raw material. Maybe a retailer didn't have enough cash to buy as much as he wanted to. Maybe the winter was colder and longer than usual. Maybe a retailer or producer felt it would be a warm winter, when it wasn't. Maybe another outlet, like Europe, bought all the supply. I can go on, but no use.

The majority of folks here do the smart thing....buy early. Many people don't, Just the fact that people come here in the off season tells me pellets and heating is on their mind, whereas for the extreme majority of users, well, they don't think about pellets until the weatherman tells them its gonna snow.
I still don't know if there will be a shortage, but I am thinking so.....and that's how I voted when I created this thread in May....

 

Agreed!



Dan

 

There's a lot of industries with the same problem. For us it's in the fall. For the mulch guys it's in the spring. I think they have it worse because nobody buys mulch in the winter.

We run all summer and build a stockpile but it's still not enough and it's expensive to sit on inventory that cost several million dollars to produce. Not every mill can do it. If you don't sell that inventory, you'll be out of business.

We should finish the year at over 100,000 tons but we will still have to disappoint some distributors these last 3 months of the year. We don't slow down production in the summer so we can't ramp up any further in the fall. Besides, the EPA limits how much wood we can dry per hour and how many hours we can operate per year. At least we're not in California where they consider wood to be a carcinogen.

Some of our customers also keep an inventory on hand and purchase pellets throughout the summer. Those are the best customers to have and the kind you want to keep happy. So when everyone wants pellets at the same time and there's not enough available, they come first because without them it would be much harder to keep producing when sales are low. They help us succeed so we want them to succeed. We try to encourage distributors to build their own stockpiles instead of relying on ours through a lower price in the summer. Then, when the rush comes, they are already stocked.

This seasonal nature has to make it difficult for the little guy trying to get started. There's a lot of investment involved.

There's been a few pellet mill closings too which may be contributing to a larger demand this fall than the last couple years. Even if they weren't very large, several of them closing adds up. This fall has been more busy than recent years. In October this year we shipped almost 15,000 tons so almost 15% of our annual production in 1 month. But I think that will slow down by January.

There was mention earlier of tariffs. I'll just say that here, in the North East, Canadian imports have an unfair advantage with their government subsidies and cheap wood supply.

 

A guy stopped in the other day... thinking of selling pellets.
He is a mulch/stone/sand/topsoil guy, like you say, in the spring/summer.
He just bought the business. Looking to stay busy longer.
Keep in mind... he lives 1/4 mile from Henry.
2 miles from Lowes... 3 miles from Home Depot.. 6 miles from Tractor Supply.

So the big questions were... Do you have a truck/trailer/forklift,
because a lot of the sales are for deliveries.. not to mention the forklift is a must regardless..
he has a bucket tractor.. you can get forks... but it doesn't make it a forklift!
and also, what brands do you think you will sell.
Chances are good he won't sell the Lowe's/Depot/Tractor brands..
And doubtful he would get any of our 7 brands...
We looked in to a couple of new brands a short while ago.. they didn't even want to talk..
Doesn't leave a lot of wiggle room there!
And like you said.. a lot of money gets tied up in inventory.
When you stock your yard,
in spring/summer you got thousands and thousands just sitting there..
With LOW sales.

I think when he left, he probly was not as enthusiastic about selling pellets.
Just a guess...


Dan

 

If the convenience store is out of Diet Mountain Dew, no one would say there is a soda shortage. So just because there is one brand you are having trouble getting, it does not mean there is a shortage. Although you can define it however you like.

Every year we have these same conversations. Dealers do not want to stock up, or over stock during the summer because it takes up valuable space and ties up cash. Well, what do you think it does to the customer?? The only way to get them to do so is to make it attractive to do so, which means savings worth their while. Generally, the average joe will save like $30. Not worth it to them.
And you need to remember, no one really needs pellets. So, a lot of folks just go back to the other options they have if prices,convenience, access is not desirable.

 

I wish you wouldn't say "dealers".
Maybe 'some', is more appropriate.
The ones that wait for people to start calling for pellets, before they order.
I can tell you matter of factly, at one time we said just keep sending them..
IN THE SUMMER... and could not get them delivered.
Right now we are OUT of some of these brands.
As for the Mountain Dew.
If the store manager called for some, and he was told,
we don't have any, and don't know when we are getting more.
There is a shortage. Of Mountain Dew. Not necessarily Pepsi.
When you are told that brand A pellets are gone, and you won't have any more for 3 months.
That is a shortage.. Of Brand A.
No one said ALL brands will be short.
Just some.... they already are.
That puts a strain on the other brands to fill the void...
If they are operating on a level to meet their expectations,
now they will be short..
And people haven't even started burning yet...

Dan

 

There's a few different "shortages"....

One, there's no raw fiber available and the mill isn't producing more....that I would consider a true "shortage".....

Two, mill is still producing but just not shipping to you but shipping somewhere else....to me, not a true "shortage"...maybe classified as a regional shortage

Three, a trucking shortage, they just don't want to make the trip and not maybe backhaul anything....again, not a true "shortage" to me


I'm sure there's more examples but at least HERE, there's doesn't SEEM to be any type of shortage what-so-ever....and quite frankly, I hope it stays that way.....but I may buy more just in case, even though I don't "need" any

 

Correct.. it's a shortage in "THAT" region..
If in my city... there isn't a pellet to be found. My city has a shortage.
Yours doesn't.
Last winter, my city ran very low on road salt. They had to cut down a lot
on how much they used late in the season.. We had a shortage of salt.
A 'shortage' doesn't have to be national... the situation doesn't have to be
only a hundred bags of LaCrete left in the country..
I know it's just semantics.. but a shortage, just means you came up short on what you need.
Not that there isn't any to be found...

Dan