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pellet prognostications

Post in 'The Hearth Room - Wood Stoves and Fireplaces' started by saichele, Jan 18, 2006.

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  1. saichele

    saichele Minister of Fire

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    Anyone out there have a guess as to what pellets are likely to cost this summer?

    Extra credit if you give a reason or two.

    Steve

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  2. Sandor

    Sandor Minister of Fire

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    I'm wondering when there will be sawdust mills to create enough dust to meet pellet demand.

    This has been a mild winter, so far. Whoever does not prepare for a bad winter in the future, ah, will be cold or cash-strapped.
  3. roac

    roac New Member

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    Gas prices go down in the winter generally. Why? Supply goes up demand goes down generally speaking.

    Pellet prices are affected the same way. In the winter pellet supplies are low while demand is high but in the summer at least up until July maybe early august demand for pellets will be down and supply high.

    In other words buy your anticipated seasonal usage of pellets before August. I don't think that pellet prices in general will be as low as last summer but that will vary greatly by region with the Northeast being the highest.
  4. richg

    richg Minister of Fire

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    I am keenly interested in this situation, being dependent on pellets for primary heat. I am going to buy a trailer this weekend that can handle at least 2000lbs as to be able to snag a ton here, ton there when pellets become available. Also, a local farm can sell me corn for $2.50 per bushel, so the purchase of a few galvanized trash cans to hold corn is in order. the local lowes and home depots are saying tht they have only one or two more trucks coming in this season, and they will not stock pellets after mid february. a few hearth shops are saying they can get pellets all through the summer, so it may be a case of buying from them to get a bird in the hand.
  5. hearthtools

    hearthtools Moderator Emeritus

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    Trucking cost has everything to do with the price of pellets
    My cost of pellets went up $10 per ton
    but my trucking cost when up over $40 per ton.
    I am paying around $115 cost per ton for trucking alone
  6. babalu87

    babalu87 New Member

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    Prices will stay pretty close to what they are

    Reason:
    THe demand will still be there as people wont want to get stuck when the prices go up in the Fall
  7. begreen

    begreen Mooderator Staff Member

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    What region? I expect Pac NW pellet prices to remain relatively stabile $140-180/ton as long as we don't upset the world between now and then. The east coast is a different animal, but I suspect pellet manufacturers and stores will be stocking up better. If so, best prices from local suppliers should be about the same as ours. I wouldn't be surprised if many dealers set up pre-buy programs where they commit to a price and amount to have on hand with customer pre-buying. Good thing to discuss with local suppliers.

    Late winter is a good time to scout around and try different brands so that you can settle on a brand you want to buy several tons of in the late summer. Nothing worse than finding that that bargain brand you just bought 5 tons of is 20% sawdust and dirty as a dog.
  8. saichele

    saichele Minister of Fire

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    This is good. So for the Great Lakes/Midwest region, something in the ballpark of $200 to $225/ton seems to be a concensus range.

    The discussion is speculative at the moment for me, as I'm tryingto plan a remodel around a new heat maker, either a corn or pellet stove. I'm just tryingto get some numbers for some calculations. Corn has been very stable in the mid $2/bushel range for quite a while, and is locally available. But there's that intangible of mice.

    Steve
  9. joshuaviktor

    joshuaviktor New Member

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    I have been wondering the same thing, and so I am trying to locate a stove(s) that will burn either fuel, in varying mixtures. I can buy a corn insert, or a pellet insert, or a pellet insert that will burn up to 50% corn. I'd like to find a stove that will burn either 100% pellets, or 100% corn, or any mixture in between. Failing that, I'd like to find an insert that will burn at least 80% of either, with 20% of the other. I.E. it will burn 80pellet/20corn, or (in the same insert) burn 80corn/20pellet.

    Not sure what I'll find.
  10. stovemanken

    stovemanken New Member

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    All of us are concerned about pellet availability (and price) next year, and the effect that could have on sales with or without the Energy Policy Act of 2005’s consumer incentive.

    Here is some of the information I have heard, read or surmised:

    Two of the largest pellet mills in New England, New England Wood Pellet and Energex had contractual commitments for bulk pellets for European deliveries. This is not supposed to be renewed for next season, which will free up supplies for that area. (Fact or Wishful Thinking?)

    In response to the New England shortage, dealers began looking to the west for supplies. The closest mills are in Arkansas and Missouri and the out of state demand may explain some of the shortage that the lower Midwest has seen which I believe to be the worst region for shortages in the country. Pennington is reported to be doubling their mill’s capacity and there are new mills reportedly on line already, even though they may be currently supplying New England demand.

    At least one major mill in the West is doubling capacity, and there are new suppliers in this region as well. Western Canada is supposedly capable of a huge increase and has producers looking for more outlets. I know of 1 mill that is shipping by rail and another that is shipping by truck and then rail.

    When pellets stoves were introduced, many dealers sold pellets with a “razor & blades” marketing approach that would get customers to return regularly. Many dealers gave that up when the “big box” retailers drove the profit right out of pellets.

    I believe the time has come for dealers to rethink that approach. There is some concern that more than a few retail customers have purchased stoves for which they cannot get pellets. It won’t take many of those stories to kill this boom. Having the ability to assure customers that they can get fuel, perhaps even guaranteeing fuel for customers, may be the marketing approach needed to prevent this from happening.

    For those dealers with the room to store pellets this makes more sense. The wave of the future will be bulk pellets, and I know more than one company is looking at ways to do this. I also suspect that some mills are ready to look back to retailers rather than Big Box stores. The “Boxes” are notorious for dictating terms and prices to their suppliers; maybe they're ready for some "nicer" dealers?

    Another variation on the “razor & blades” is offering the ability to pay “ton-pricing” and then return for 10 bags at a time. This is a hassle, but it has worked well for some dealers.

    I really do think there will be pellets next year, and the prices will be higher, but not excessively high. In addition to bulk, I am more enthusiastic about higher ash pellets that I am about true “biomass” pellets like switch grass. There are many sources for lower quality feedstock that can be made into commercial grade 3%+ ash pellets. The best protection for that is to be sure your stove will burn more than just "Premium" (1% or less ash) pellets.

    SMK
  11. hearthtools

    hearthtools Moderator Emeritus

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    The problem with Dealer stocking a bulk of pellets is the profit
    why would we have 30K in inventory when we only make less than 10% on it.

    If we made our normal 35% margin on pellets pellets would be $300 or more a ton.
  12. roac

    roac New Member

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    Rod,

    Why do car dealerships advertise oil changes? Sure they make a couple dollars but more importantly they do the following.

    1. Build a relationship between a customer and dealer.

    2. Because of 1 they develop brand and dealer loyalty.

    3. Provides the opportunity to find something else more expensive to fix.

    4. Customer has to look at the new product line while waiting.

    5. It allows them to know that quality service was performed so at trade in they know what they are getting back.


    Fine, how does this relate to you?

    1. Same as above

    2. Same as above

    3. People always have questions, opportunity to provide in home annual service.

    4. Allows the Customer to see new stoves, maybe trade up. You get the trade in and new sale.

    5. Same as above

    Bringing the customer back into the store over and over can only be good for you the dealer. This should be clear to you, it isn't about the slim markup it's about selling new stoves and or service.
  13. hearthtools

    hearthtools Moderator Emeritus

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    Im not saying I do not stock pellets ( we have them year round)

    There are only about 5% of all dealers that sell pellets because of the cost of SPACE to store them to the profit you make does not match up. Pellets take a lot of space and paying $1 - $2 a sq foot for rent you better use that space for something you can make 30% or more on. A better turn around for your dollar.

    My point is most people think us dealers are making a killing of pellets when we acualy break even ofter the cost of space, Labor and a fork lift to have them.

    Yes having them brings people in the store again and again. But if you sold a quality product in the first place to them they are not going to replace it soon.
  14. roac

    roac New Member

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    Have you looked at bulk sales? I know your costs by trucking are high but have you looked into what it would cost from Canada for a rail car? Have you seen the posts about the pellet dealer in Wisconsin that sells this way? Dispensing pellets this way wouldn't require a forklift, just rent a silo. Even if you get bags rail might be cheaper.
  15. hearthtools

    hearthtools Moderator Emeritus

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    I wish
    the nearest railway is 60 miles away.
    We are in the Sierra Mountains at the South gate of Yosemite National park.

    I looking into getting by rail they paying local trucking company to bring them up the hill for me.
  16. begreen

    begreen Mooderator Staff Member

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    This IS a good thread. I am learning a lot about the pellet sales process and developing a much greater gratitude for my suppliers.

    Thanks guys!
  17. Homefire

    Homefire New Member

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    Supply and demand or demand and greed?
    Fair profit or price gouging?
    States Attorney Generals will decide who stinks in all this business.
  18. roac

    roac New Member

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    If they were selling pellets at an extremely high price but supply never was an issue then I could see your argument for gouging. The facts though of limited sales or no sales due to supply issues kind of makes me think it isn't gouging. Attorney generals in most states are elected so they may occasionally rattle the saber to show they are doing their job and win public approval. Don't expect much to come of it though.
  19. HarryBack

    HarryBack New Member

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    Well, just got a truck of pellets in....Energex......only cost me $220.00/ton! As for the state Attourney General saving the day, I hope I never live in a world where some beurecrat can decide how much I can or cant make on an item I take all the risk on. Lets see....the cost to get the truck to my door is $220.00.......Ive got to unload it with my own equipment......Ive got to store it in my own warehouse......Ive got to deliver it to the customer on a flatbed/forklift combo that costs roughly $175000 dollars.....Ive got to pay someone to sell the pellets, ive got to pay someone to load it into their car or deliver it.......I wonder how much that 220/ton pellet really costs me? And what is a "fair" markup? Is "fair" 10%? No....youd be losing money.......20%? The yardstick that measures "fair" depends on who is holding it.....the retailer, or the end-user, or worse yet, some government employee who has no idea what is "fair".......
  20. warminwisco

    warminwisco New Member

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    I get pellets from the guy in Wisconsin. i am geting some tomorrow out of his elevator. he has 2 yards on 2 rail sites, and he has a ton of room to store em to the ski in low rent Dale, Wisconsin. His pellets are really fair priced. 120 a ton bulk for firpellets(pellet gold) and hardwood(marth) take your choice. 190 or so for low ash fir for 1.2 ton, Pinnacle Fir, Bear Mountain, Golden Flame bagged. Anyway, he has been doing this 10 years and has realtionships with the pellet suppliers, and signed a 5 year deal just recently. Says he trys to sell em for 7% over cost and 15% in the winter. The guys seels so many stoves it is unreal, 50 or more a weekend at times. WIW
  21. Homefire

    Homefire New Member

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    So it seems there are plenty of pellets to be had. It is just some want it to appear these made from waste pellets are worth there weight in gold. Well time will tell if the gougers can get away with there games without being checked.
  22. HarryBack

    HarryBack New Member

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    Well, alot depends upon where in the country you live. Here in the Northeast, we generally use hardwood pellets, a bit of softwood out of Canada as well. There are no rail sidings nearby....We would have to have a transfer yard unload out pellets.....how much does that cost? As for bulk pellets, it probably isnt really an option here, as very few folks have a pickup to cart them around in, or a dry place to store them, or also a convenient grain silo sitting around to store them in....i wonder where the closest grain silo is to New England? I know as a retailer, at 7% it would be virtually impossible to make only 7% in a bagged pellet and stay in business, for the reasons a few posts above which I enumerated. many of my customers have us deliver their pellets, as they dont own a truck....here in the east, cars are more common. I also hate to say it, but I really dont see many of my customers shoveling the pellets into a bin either....they complain enough when they have to move 50 bags 5 feet.
    And hey, homefire, the nice thing about a free market economy is that if you dont like one price, you can get the pellets somewhere else for less. Dont patronize the "price-gouger"....simply ignore him....his absolutely outrageous prices will cause him to be out of business in no time......although I submit hes in a better postion to know what to charge for his product and live than you are to sit there an accuse him of price gouging....let me guess.....are you a lifelong government employee, lawyer, etc?
  23. warminwisco

    warminwisco New Member

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    The pellets are unloaded just as grain would be out of the railcars into the elevator. The chute drops pellets real slow, or fast. You can put them into 18 gallon totes as I do and put a doz hundred pound totes in the Van. You can put them right back into the pellet bags from the bagged pellets you bought, it is real ez. You can use 100 lb seed bags or guys back up a trailer with 55 gal drums and load up a ton or 2. But yes bags are easier. i like the totes myself, as someway or another you have to get em in your house. Anyway just ramblin.
  24. warminwisco

    warminwisco New Member

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    Sorry that is 7 dollars over cost and 15 dollars..... But You have to get into the buyers club for 40 a year. Discount off parts, delivery, and repairs. Thansk
  25. Homefire

    Homefire New Member

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    Attorney? Civil Servant? hardly my brother .

    Lets see at 220 a ton times 4000 that is 880000. So he wants to get 25% profit. Thats 220000 bucks . Out of that he should be able to pay his help and his truck and the insurance and the rest of the overhead. He still puts bread on the table plus he puts a large lump in the old mattress.
    Thats just the way I see it, maybe you have a different take on the issue.

    After all it is Hearth supplies and stoves that are the bread and butter ....right?
    The pellet stove only sold because the fuel is cheap heat. Hell if it is the same as oil then folks will use the oil. It is cleaner and a lot less work.
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