Is this really a pellet shortage?: My 2 cents on this! I don't think its a shortage, But more like what happens before a storm. Similar to batteries. Just before the storm hits batteries get wiped out and it last a bit after the storm. And that's mainly because people stock up and put more than they might need in their supply(AKA hoard). Industry patterns the market and doles out the usual supplies in a basic chain. What breaks this chain is the rush on supplies. The industry reacts but usually not quick enough. So it takes a bit to build the supply back to normal status. So its not really a shortage, But more a crunch. The supplies will eventually return as long as materials are available. When the material isn't available. That is when you have the shortage. Pellet sellers(both big box or local dealer) have a number than normally order. The order is usually sent into the mills around between February/April. And its for pretty much the whole seasons worth. When sales start they don't initially see the rush we cause by hoarding. So once the season starts and the late entries also try to hoard their supply the shelf's get bare rather quickly. The dealers try to react and order more from the mill. The mill has already reached their quota(summer rush to meet orders) and pretty much geared down to normal pace or even to a shutdown. Reduce work force and possibly shifts to the winter pace. This is when they make their other products like horse bedding or one of the other wood fiber products. The mills don't only make wood fuel. They also have alternative product lines to keep employment for the workers. So it may take a bit to gear things back to making replacement pellets. And even if they can switch to or gear production up, They may have to wait to get the fiber to do so. As the fiber supplier may have also geared his production down. Some mills have already exhausted their fiber supply and aren't as adapt or have the resources to make their own. So they are at the mercy of the other wood trades to supply fiber. But that chain has seen the ripple and they probably get put on a order list and have to wait for the fiber. Or in the worst case are told no more is available until the next season. So those mills are out until the next season. The mills that are in and have material, Begin sending in the additional supplies. But its usually at a reduced rate or rationed and at a higher cost to the dealers. Pellet house(I have also heard that some of the box stores) start to ration the supply. Their supplies are rationed in so they have to also ration what is going out. Usually at a higher cost due to the mills price increase. This is also an attempt at stopping the surge on the supplies. But by this time its usually too late! With the price increase, the hoarders are kept away. We only hoard deals, We don't continue to hoard when the higher pricing comes to play. Only people that really need it will purchase(or go burn oil/gas/propane or fire wood if they can find it). With the higher pellet prices, It makes other fuel options seem more affordable and less of a hassle as well. Eventually the mills that can produce enough, Keep them rolling and the dealer supplies start building. There could be more pieces to this? But I think I got most of them. What caused this: Same as the battery rush. A storm was predicted. In this case weather forecasters predicted colder then normal winter,-Polar vortex's and so on. Everyone panicked and started to put in their supply plus some extra. Funny how most of these I have seen over the years have been during election years. I don't have the pieces for that puzzle and do I dare try to figure that out! Over Reactions: I also think there could be a ripple at the end of the season. If the pellet seller over reacted and re ordered more on a guess to what they were actually going to sell. We could see some have an overage come spring. Not likely, But there is somewhat of a chance with a bunch of big "if's"! Some Questions: I wouldn't mind some answers to why it seems to be more New England related as we don't seem to hear the Central, Western states going through this like we do. Its somewhat obvious that the Southern states don't have the heat requirements we do. But many of the Central-Western states are just as dependent on pellets as the New England states. How to avoid the crunch: Pretty simple really. Start buying you supplies early. Long before the average burner usually thinks about getting their fuel. Not many think pellets in April through August. Most don't think about getting ready until Late September or Early October. Note: Big box has a slightly different schedule and don't usually carry fuel over the summer months. You need to adjust things if you rely on them, Buy in Late February or As soon as they restart pulling in supplies which is generally late August or early September. Being first to the pellet pile usually means better pricing, larger supplies and brand selections. Plus while your sitting on yours you get to watch the others frenzy for them with an "I told ya so" attitude!
I wish I could move some of the posts in the prices thread in to this one. Some of the response there are a good fit to this topic. But my super powers are limited! A link will have to do!! The topic changed right after Doug posted this. http://firewoodhoardersclub.com/forums/index.php?threads/prices-coming-down.5497/page-8#post-167862
I think New England has has more oil burners and higher oil prices per capita than say the midwest and therefore maybe more pellet burners per capita? Just my 1-1/2 cents worth! Gary
couple other things..... The New England pellet market is BY FAR the largest market in the country.....as mentioned above, they are the most dependent on heating oil. Most of the rest of the country which has bitter cold temperatures relies much more heavily on natural gas. There are no new mills in New England either. Some more enterprising manufacturers and retailers will bring product in from further away, but, transportation and handling cost more money, further increasing the price. Now, even including the Craig's List stoves, how many more stoves are running this year than last year? Thousands? Tens of thousands? Assume an average of 3 tons per stove, and that increases demand significantly, even factoring out the hoarders. As for ordering early, ya know, there's folks who always seem to forget that winter arrives about this time of year every year, and they don't order early. There's folks who simply cant afford to tie up cash and order early either. You'd be surprised at how many folks come in every few days to buy 5 bags at a time. The mainstream Firewood Hoarder forum member knows a lot of what seems obvious to us all, but the great majority of folks simply don't come to the forums, or even educate themselves. No real excuse these days not to. With the resources available today with manufacturer websites, owners' manuals, and how-to video sites like YouTube, the FIREWOOD HOARDER website and forum, etc., there's no excuse not to properly maintain their units, but alas, they don't...... Also don't forget to factor in the export market......the US is exporting more pellets than EVER BEFORE, to Europe and Asia, etc. Doug can tell you more about that, that's his companies' bailiwick, I just sell them retail. The battery analogy might be a good one, and certainly is accurate in the short term, with everyone waiting and ordering at once, but when you have retailers out there who placed paper orders (not paid for), and have only recently found out that "....sorry, you aren't getting your order this quarter...." or some such, its pretty tough to handle. The retailer created these issues in the past as they would often create "hedge orders" where they would order considerably more tonnage than they knew they'd need, and then, when push came to shove, they'd simply cancel the order they didn't need, which would totally suck as a manufacturer if the market was already soft. Now, off to grocery shop!
No shortage here. I can get Somersets for 194.50 a ton all day long. Feedmill has AWF for 199.00 ton. Must be the greedy east coasters running up the price and causing shortages.
Is there a generally higher population in the Northeast states compared to the Midwest states that may account for some of the higher demand of pellets?
Some very useful information JustWood shared in another thread. I'll also add that the oil industry has been using wood pellets in the oil fields. They are using it as an absorbent at rig sites and in the oil sands. They are willing to pay a premium for them as well. Not sure how much this effects us, As most are more likely industrial grade pellets. But I have heard they are also using premium grade which is also reducing the supply. Thanks for the info Lee!
Why do you not see Rocky Mtn, Confluence, and Heartland on the market this year (or at least in only very small numbers)......oil fields....and those aren't industrial grade pellets. Not to mention Spruce Pointe and even LaCrete selling far more into their local markets (oil field use as well) ....It has certainly made a difference if the mill is located near some drilling/fracking operation.
Thanks Doug, I didn't have brand info besides Heartlands. I did not know that Confluence, Rocky Mountain(owned by Confluence), Spruce Pointe and La Crete's were also getting sucked up(literally) by the oil industry. How dare they take our good chit, We have mills that make total crap(Fram-AKA ACP brand) they should be using!
hey, its why so much is being exported.......whoever pays the most, gets the product......hmmmm.....used to work in the patch, weirdly, cementing, acidizing, and fracing oil wells........Doug......if you cant sell those Okies, gimme a call.......I might be able to help you out.....
great information - thanks for putting all this together. I think the battery shortage is a great way to explain it and it makes sense. As an aside: the teenage cashier at agway told me "We only have this type of pellet [Satisfaction Brand], there are no more Hamer pellets being produced until at least January. We might be more pellets in in February because they ahve to make them and then send them to us, you should probably just get the ones we have in stock because they aren't making more of those till January either" After that conversation, I am really really glad my pellets are getting delivered today! Don't wanna have to deal with stupid people anymore
I wouldn't say stupid, I'd just say uninformed. The thing is, those batteries wont keep you warm, but the gist possibly is correct. We can minimize the possibilities of shortages by doing what so many here do....buy them early......now isn't early. May, June, July is.
If you don't have them lined up by Mid August? It a good bet you'll find less and usually pay more too. Each month added, it only gets worse! I like having pick of the litter, Let the others scurry for the crumbs!
