Pellet Exploitation

Good point Rich. Although I dont advocate the customers setting the price level, they do in a way. The retailer has to understand that for many folks, this is their source of heat....they dont wanna use electricity, wood, gas, oil, etc, for whatever reason. By jacking the price up, they surely arent making themselves look good. On the other hand, Im in bidness to make money. Unfortunately, i cant base my price on the idiocy of my competition. We see this alot in dealing with the big box stores. They'll take price-sensitive items, and sellthem below cost, to project an air of being a great value. People see that one low price, and extrapolate that to all the other hi-prift items in the store. So far, the boxes havent done this with pellets, maybe because they have a hard time getting them, I dunno. We try to make them affordable as we can....its in our better interests, but we also have to make a profit on them, and cover the many costs of doing bidness, as well as poay our people. Whats gonna happen this spring? I dont KNOW, but can hazard a guess. Hows this: The prices will be slightly lower in '07 than '06, there will be another scarcity of pellets in the east, with more plentiful supplies in the west. There will likely be some good deals in the spring, if the end-user is vigilant. Have a good day.

Here is what i dont understand about Pellets and prices. ( not pointing at any dealers in general )

Here in the midwest of Nebraska , Kansas , Iowa ect the price of pellets are about $160. - $210. a ton and everyone keeps yelling about shipping cost , bla , bla , bla and thats why pellets are so high. Well the last time i looked around i didnt see a logging company , mill or any forests around here so that would mean all our pellets are trucked in with no pellet manufactures around.

So if shipping cost is the big factor then wouldnt it be cheaper like in the NorthEast and other places were pellet factories , mills, logging and forests are located ?

Good points our society runs like this ther is gas buddy for gasoline pricing everbody know what there are competition is selling gas for and adjust their prices yes that borders on monoplistic practices but that's how it is done. Forget what the fuel in the tanks cost, what can we get for it today? they charge what ever they can get away with..
A while back there were insulation shortages come to find out whearehouses were full waiting for prices to increase then all of a sudden there is plenty of insulation.
Tankers are left out at sea waiting for price increases before unloading. Benn alot of talk about looking into oil companies but few answers by politicians to solve the practice
the oil companies can sell it to China or elsewhere.

To an extent the pellet industry can do the same, thing when demand is high and sell to Europe IT is estimated that 120,000 more pellet stoves were sold this year added on top of 140,000 last year if each used 3 tons is there capacities for an additional million tons needed , not counting future stove sales.

We have had heated discussions that pellet pricing is taking the pellet heat alternative out of the market. There is a distrobution problem and a supply problem. Will the market correct this anyone's guess? Did you know in Ca., there now is a program with an $800 incentive, to remove wood burning appliances for gas

There is a $300.00 rebate for Santa Clara County for switching to gas. But no $800.00 rebate for California, as far as my search panned out.

All Is I can to it state my facts
My Freight bill has almost doubled in the past year and my cost for the pellets have only gone up $15
I sell the pellets at around $20 per ton over what I pay after shipping.
I do not change price for Demand. my current selling price is $265 per ton.
But next week I have to go up to $285 because the only pellets I can get are coming from the Mid west.

NOT ALL PELLETS COME FROM THE WEST
There are a lot of mills in Med west and east coast.
list of mills broke down by location
http://www.pelletheat.org/3/residential/fuelAvailability.cfm

Aren't there any pellet mills in the northwest? Quick

It seems that there is a shortage in the west. Don't they store any?

I dont think it would be prudent for a pellet co to keep huge supplies. If they can sell all of their product, why wouldnt they? What point would it serve to "stock" large quantities of pellets when you can sell all that you make?

HarryBack said:

I dont think it would be prudent for a pellet co to keep huge supplies. If they can sell all of their product, why wouldnt they? What point would it serve to "stock" large quantities of pellets when you can sell all that you make?

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Because of issues like they are having year after year.

I burn wood and use "about" 4 cords a year , so that means i might use 2.5 cords and or i could use 5 cords for some odd winter reason. I'm not the smartest man in the world but I'm smart enough to keep over 8 cords of wood on hand to heat my house , why , because as stated , whats a normal winter.

A few things we know.............

#1 Who knows what the winter is going to bring for weather.
#2 Sales are growing on Pellet stoves.
#3 There are NO normal #'s to go off of with sales when pellets keep running out.
#4 Are people stocking up in the summer are waiting through the winter to buy ?
(A) we dont know because pellets keep running out.
(B) some buyers that waited could now be stocking up
(C) Some people gave up on pellet heat
(D) Prices keep going up on Pellets and other heating sources can be cheaper so it should cause people to wait to buy to see what the market is going to do.

Is there going to be a colder than normal winter and how about if a pellet mill or two goes down.

Add it all up and what do you have for and average market to built to ?

WHO THE HELL KNOWS!?

Now ask "What point would it serve to “stock” large quantities"

All the numbers are different every year so there isn't an average to go off of.

Than you have the flip side of sales.................

How come i have to wait so long to have a have a new Harley Davidson , why not build more factories?
When the new model hog comes out why is it selling for 25% over MSRP ?

When Playstation was scheduled to have a new model 3+ years before it even came out then why was there limited quantities of Playstation3 ?, people had to stand in line and fight for the limited quantities when it did come out right before Christmas ?

Because in both examples you cite, there isn't any negative backlash from the consumer. Quite the opposite; the artificial supply shortage creates publicity and raises consumer demand.

I was replying strictly to his examples of the new Harley and the PS3--not to pellet production.

Roos, You are the man. I was at home depot and they have about 2 truck loads for $170. If it stays cold that should be enough, if it warms up they are alright also.It's always a gamble but you have to order some extra in case. If it stays bitter cold into april we are all scrambling. By the way I live about a mile from the hog plant. Quick

I guess one could make many arguments on the "pellet industry" as a whole. Though I wouldn't necessarily blame the stove shop owners who sell the stoves and pellets. Some of them I am sure go out of their way to provide and guarantee some sort of supply. yeah, we are never going to get away from the concept of just-in-time inventory. Just seems as if it is a cottage industry in its infancy, although with large potential if managed correctly. It is would be hard to place the blame in any one direction. The pellet manufacturers will blame the lumber mills, the lumber mills will blame the slack in housing industry, the stove shop owners will blame the pellet manufacturers, the consumer will blame the stove shop owner. Hell, I am surprised that someone hasn't blamed terrorism (seems like ole' george uses that one in a number of speeches), just kidding. But lets be honest, there has to be a minimum, manageable supply at a price that is non-astronomical. yes, supply will eventually meet demand, but I think in this case it will curtail the growth of the industry. Just too much bad press. I mean no one should think nor should it be implied that pellets can be there sole energy supply (at least in the short term). The different layers within the industry must communicate without providing for colussion (sic). Someone, in the board, alluded to the fact there is a monopolistic theme to gasoline/oil producing side, and if one where to read the NYtimes today about Exxon/Mobil posting record profits; I could see how that could be infered. But lets be honest, when the oil companies were hemmorhaging (sic) cash by the millions in the mid to lat 90's into early 2000, you never saw the US population demanding that the oil companies stand b4 a televised committee of Congress to explain why regular gas was only avg $1.00 to 1.50/gallon. Hell, that was the time, when more and more people choose less-efficient vechiles. Thank god, Congress and to some extent the FTC allowed mergers in the industry where the smaller guys could get bought out and at least keep the majority of refineries running.

I think it is time where incentives should be given that encourage maturity of the industry and allow for continued sustainable supply. The pellet industry can mature if managed correctly. I mean come on, 4 months ago, for what ever crazy reason, I decided to rent of those "industrial" chippers and decided to chip an nice size oak that had fallen on my property approx 2 yrs back. Got at least 3 ton of chips, which has all dried and every day I toss 2 buckets into my Heritage. I just for some reason cannot see why the manufacturers complain about supply of raw material.