Evidence of Pellet Price Gouging?

[richg]

This is a theory, and only a theory. All rights reserved. Consult your physician before using. This product is not intended to diagnose treat or cure any disease.


Living in the Northeast, we have heard many, many reasons as to why pellets cost more here than they do in the midwest....raw material availability, transportation cost, etc etc etc. Well, this morning I was rooting around and found Pennington pellets for $230.00 a ton....in Wausau Wisconsin. They go for the typical $285.00 to $300.00 per ton around here. However, they are produced in Madison, GA. Distance from Madison GA to Wausau, WI: 1059 miles. Distance from Madison, GA to Morristown, NJ: 868 miles. If shipping cost drives up pellet prices, why the inversion? The railroad grid is actually better for transport from GA to NJ, so I doubt that the pellets are transported by train. What you think?

 

[kinsmanstoves]

This is a theory, and only a theory. All rights reserved. Consult your physician before using. This product is not intended to diagnose treat or cure any disease.


Living in the Northeast, we have heard many, many reasons as to why pellets cost more here than they do in the midwest....raw material availability, transportation cost, etc etc etc. Well, this morning I was rooting around and found Pennington pellets for $230.00 a ton....in Wausau Wisconsin. They go for the typical $285.00 to $300.00 per ton around here. However, they are produced in Madison, GA. Distance from Madison GA to Wausau, WI: 1059 miles. Distance from Madison, GA to Morristown, NJ: 868 miles. If shipping cost drives up pellet prices, why the inversion? The railroad grid is actually better for transport from GA to NJ, so I doubt that the pellets are transported by train. What you think?

Did you actually see that price or was it heard from someone else? Once in a while there is a few damaged skids that are sold "as is" for a cheaper price. Some bags get broken or wet. The reason I say this is that I sell pellets for $285 a ton. I get a customer in at least every other day that says Walmart or TSC is selling pellets for $219 or $229. I ask them why they did not buy the pellets there. The response is that they are out of stock or "I heard this from a friend."

Yes in May and June of 2008 I had pellets for $185 but now they are $285. I am making the same margin of profit. And yes you need profit to stay in business.

Eric

 

[jtp10181]

I just bought some perfectly good "Future Fuel II" pellets from Home Depot for $214 for a ton. Other places in the area were quoting around $250 for various other "mystery" brands.

 

[TomPajak]

This is a theory, and only a theory. All rights reserved. Consult your physician before using. This product is not intended to diagnose treat or cure any disease.


Living in the Northeast, we have heard many, many reasons as to why pellets cost more here than they do in the midwest....raw material availability, transportation cost, etc etc etc. Well, this morning I was rooting around and found Pennington pellets for $230.00 a ton....in Wausau Wisconsin. They go for the typical $285.00 to $300.00 per ton around here. However, they are produced in Madison, GA. Distance from Madison GA to Wausau, WI: 1059 miles. Distance from Madison, GA to Morristown, NJ: 868 miles. If shipping cost drives up pellet prices, why the inversion? The railroad grid is actually better for transport from GA to NJ, so I doubt that the pellets are transported by train. What you think?

Did you actually see that price or was it heard from someone else? Once in a while there is a few damaged skids that are sold "as is" for a cheaper price. Some bags get broken or wet. The reason I say this is that I sell pellets for $285 a ton. I get a customer in at least every other day that says Walmart or TSC is selling pellets for $219 or $229. I ask them why they did not buy the pellets there. The response is that they are out of stock or "I heard this from a friend."

Yes in May and June of 2008 I had pellets for $185 but now they are $285. I am making the same margin of profit. And yes you need profit to stay in business.

Eric

please explain the 50% markup cost that you incurred so others can understand where you are coming from

 

[Lousyweather]

Eric-

Just take a deep breath, count to 10, and be patient, for they know not what they say.

Lousy

 

[richg]

Eric-

Just take a deep breath, count to 10, and be patient, for they know not what they say.

Lousy

Will do, you absolute Oracle of Knowledge. Your first post on this board and you are already talking smack? Wow, we need more people like you. Welcome aboard!

I'm not picking on Eric, far from it. He's a vet and vets are heroes to me. I am just trying to figure out where this markup is coming from. Pellet mills say it's not them, trucking companies say that diesel costs are to blame even after oil dropped from $147.00 to $35.00, and stove shops say it's not them. If he had pellets for $185.00 at ton up to the spring of 2008 in Ohio, why were they $300.00 a ton in the northeast at the same time? We are surrounded by mills in PA, MA, NY, NH, WV ME etc.

Right now there is massive doubletalk coming from the petroleum industry about why gas prices are rising even after oil has dropped to $35.00 a barrel. Exxon blames refining costs, Colonial Pipeline blames local dealers, local dealers blame Exxon, etc etc etc.

 

[smoke show]

doesnt eveything cost more where you are?
if pellets cost to much we'll just burn corn.

 

[kelvin]

Other factors that affect price are differences in local economic conditions (such as income and cost of living) and local demand which is based on all kinds of factors such the cost of local alternative heating sources, number of pellet stove users, number of retailers selling pellets, etc.

 

[Lousyweather]

Eric-

Just take a deep breath, count to 10, and be patient, for they know not what they say.

Lousy

Will do, you absolute Oracle of Knowledge. Your first post on this board and you are already talking smack? Wow, we need more people like you. Welcome aboard!

I'm not picking on Eric, far from it. He's a vet and vets are heroes to me. I am just trying to figure out where this markup is coming from. Pellet mills say it's not them, trucking companies say that diesel costs are to blame even after oil dropped from $147.00 to $35.00, and stove shops say it's not them. If he had pellets for $185.00 at ton up to the spring of 2008 in Ohio, why were they $300.00 a ton in the northeast at the same time? We are surrounded by mills in PA, MA, NY, NH, WV ME etc.

Right now there is massive doubletalk coming from the petroleum industry about why gas prices are rising even after oil has dropped to $35.00 a barrel. Exxon blames refining costs, Colonial Pipeline blames local dealers, local dealers blame Exxon, etc etc etc.

Yes, its my first post, Rich, under this name. My old name had...lets see...over 1100 posts, so, I guess by your math, im over 4 times more knowledgeable than you (your roughly 250 posts)?. All kidding aside, the number of posts though, does not invalidate whats written. Eric has elucidated the fact that he made the same margin of profit as when the prices were lower, and in reviewing his multitude of previous posts, I dont see any reason why we shouldnt believe him. We've found one oddity in the transportation business, and that is you cant just look at mileage and say it must be cheaper because the mileage is less. Some areas of the country, the Northeast for instance, due to the fact that they consume more than they import, sometimes necessitate an empty backhaul for the truckers hauling the pellet, and when this happens they charge more, since the trucker makes no money in going home if he doesnt have something to haul in that direction. We are in the Northeast, and the last flatbead load of pruduct we got, from PA, cost us $1500 to bring in. If there are 22 tons of pellet per truck, thats $68/ton, just to get them to the dealer. Noone expects the dealer to eat those costs, so they pass them on to the end user. This increases the cost, obviously. I dont know what Eric's markup is, as I dont see that he listed his cost of pellets in the post. Im thinking that hes charging more simply because he has to pay more. And thanks for the welcome.

 

[kinsmanstoves]

Eric-

Just take a deep breath, count to 10, and be patient, for they know not what they say.

Lousy

Will do, you absolute Oracle of Knowledge. Your first post on this board and you are already talking smack? Wow, we need more people like you. Welcome aboard!

I'm not picking on Eric, far from it. He's a vet and vets are heroes to me. I am just trying to figure out where this markup is coming from. Pellet mills say it's not them, trucking companies say that diesel costs are to blame even after oil dropped from $147.00 to $35.00, and stove shops say it's not them. If he had pellets for $185.00 at ton up to the spring of 2008 in Ohio, why were they $300.00 a ton in the northeast at the same time? We are surrounded by mills in PA, MA, NY, NH, WV ME etc.

Right now there is massive doubletalk coming from the petroleum industry about why gas prices are rising even after oil has dropped to $35.00 a barrel. Exxon blames refining costs, Colonial Pipeline blames local dealers, local dealers blame Exxon, etc etc etc.

My pellet prices have been going up between $5-$10 a ton a month since Aug. 2008. The last couple months it has stayed the same. I am not sure what mill has said there price has stayed the same but I would laugh at them. Shipping right now is the same as it was during the summer. For a short period it did rise but it is back down.

Eric

 

[stoveguy2esw]

FWIW Madison Ga. is where Pennington Corp. is located as well as one of the (i believe) five plants they own and operate is located. they have at least 1 plant in the midwest that im sure supplies the western market. so the "shipping" angle would not necessarily be correct.

also , many plants have in the past had a prectice of offering "early buy" pricing to their retailers. being a seasonal buisness they will do this to bring in some revenue during the off season to help with kicking off the production season. this price allows retailers to offer a similar deal to customers. this practice is not as common as it used to be in years past as pellet fuel has become more of a commodity so the early buy deals may not be as plentiful as they have been in years past. that said i agree with Eric that he does invest money in his fuel to buy it, and he is in the buisness of earning a living so selling pellets without a profit isnt condusive to making a living off them

 

[davevassar]

It's not price gouging, it's called demand. Last year, when oil was $4 a gallon, a ton of people went out and bought pellet stoves. Ask any stove dealer, they were selling like hot cakes. so much that installers were backed up 2-3 months.

When that happens, the pellet companies see the demand going up, so why not raise the price and make more money.

Think about it. If you owned a business that supplied the public with something, and all of a sudden there was a huge demand for it, wouldn't you raise the price of it? Companies are out there to make some money, bottom line.

 

[kast]

When I walk into a place selling pellets and there are three different prices depending how many bags you are buying, I don’t call that demand I call that BS!

 

[save$]

Being mostly retired without an agenda, my wife and I were out for a ride yesterday. Saw a sign near Rumford on Rt 2 for pellets at $4.50
That is an old mill town. Lots of hard workers and not much for frills.
Low price for pellet. Seems like it is supply and demand. Price is determined by many things, not all limited to overhead, but to include what the traffic will bear.
Same thing for most all other products. i.e. Milk is nearly half price of what the farmer was getting last year. At the retail level, it still cost the same. Same Bla Bla Bla why the cost is still up. Supply does have a strong influence on cost, but demand, that is where the real issue of pricing occurs.

 

[woodsman23]

As pellets continue to rise and or do not come down in price people will simply go back to using oil/gas/propane/wood it is just that simple. I will not pay 300 bucks for a ton of pellets no longer when i can burn propane for that much and have no cleaning to do. i will have a fire at times during the evening for atheistic reasons only. They (pellet makers) will simply price themselves right out of business as more and more folks go back to other methods of heating.

 

[mark d fellows]

The following is the main reason the pellet prices are different in the east.

People are willing to pay the prices. This is the same factor that effects all prices.

 

[OU812]

The following is the main reason the pellet prices are different in the east.

People are willing to pay the prices. This is the same factor that effects all prices.

I have to agree with that. It's just a matter of what people are willing to pay. That's the way it is with almost anything. I can drive 45 minutes to the nearest city and get pellets for 5 bucks a bag or I can buy them near my house for $8.49 per bag.

 

[Lousyweather]

It's not price gouging, it's called demand. Last year, when oil was $4 a gallon, a ton of people went out and bought pellet stoves. Ask any stove dealer, they were selling like hot cakes. so much that installers were backed up 2-3 months.

When that happens, the pellet companies see the demand going up, so why not raise the price and make more money.

Think about it. If you owned a business that supplied the public with something, and all of a sudden there was a huge demand for it, wouldn't you raise the price of it? Companies are out there to make some money, bottom line.

sound logic, simply put

 

[jtakeman]

You know this site has some good info, and people, but, unless you have been on here for awhile, all new people are treated like shite.Too many egos, and the funny thing is, most people, just because they had a contractor, install their stove, they are PRO's, or given other false titles.......like "FIRE SOCIETY".CHEERS, I miss Dr.Coolbreeze.......

Post more often and you too could be "FIRE SOCIETY" That statues is earned by how often you post on the forum!

I'm new here they don't treat me like that. I have been welcomed from day one and my post have never been ignored!

I hope you can change your mind, And don't end up like Dr Coolbreeze.

peace
jay

 

[rphurley]

I bought a wood insert so I wouldn't have to be held hostage by the pellet manufacturers. Much like the oil companies that we all complain about.

 

[tinkabranc]

You know this site has some good info, and people, but, unless you have been on here for awhile, all new people are treated like shite.Too many egos, and the funny thing is, most people, just because they had a contractor, install their stove, they are PRO's, or given other false titles.......like "FIRE SOCIETY".CHEERS, I miss Dr.Coolbreeze.......

Dr. Coolbreeze under a new disguise already?? ;-)

 

[imacman]

You know this site has some good info, and people, but, unless you have been on here for awhile, all new people are treated like shite.Too many egos, and the funny thing is, most people, just because they had a contractor, install their stove, they are PRO's, or given other false titles.......like "FIRE SOCIETY".CHEERS, I miss Dr.Coolbreeze.......

Dr. Coolbreeze under a new disguise already?? ;-)

I was thinking the same thing Tink......if so, he'll show his true colors eventually, and will get tossed off again by Craig.

 

[novah]

Being mostly retired without an agenda, my wife and I were out for a ride yesterday. Saw a sign near Rumford on Rt 2 for pellets at $4.50
That is an old mill town. Lots of hard workers and not much for frills.
Low price for pellet. Seems like it is supply and demand. Price is determined by many things, not all limited to overhead, but to include what the traffic will bear.
Same thing for most all other products. i.e. Milk is nearly half price of what the farmer was getting last year. At the retail level, it still cost the same. Same Bla Bla Bla why the cost is still up. Supply does have a strong influence on cost, but demand, that is where the real issue of pricing occurs.

I agree. Go the Walmart in Portsmouth New Hampshire and look at their prices. Then price the same items in Somersworth (10 miles north) then go to the Walmart in Rochester (20 miles north). There is a definite change in pricing as you go further north from the seacoast. Like you said, what the traffic will bear.

 

[novah]

You know this site has some good info, and people, but, unless you have been on here for awhile, all new people are treated like shite.Too many egos, and the funny thing is, most people, just because they had a contractor, install their stove, they are PRO's, or given other false titles.......like "FIRE SOCIETY".CHEERS, I miss Dr.Coolbreeze.......

Irwin - what did you post that brought on the negative reaction?

 

[SmokeyTheBear]

Eric-

Just take a deep breath, count to 10, and be patient, for they know not what they say.

Lousy

Will do, you absolute Oracle of Knowledge. Your first post on this board and you are already talking smack? Wow, we need more people like you. Welcome aboard!

I'm not picking on Eric, far from it. He's a vet and vets are heroes to me. I am just trying to figure out where this markup is coming from. Pellet mills say it's not them, trucking companies say that diesel costs are to blame even after oil dropped from $147.00 to $35.00, and stove shops say it's not them. If he had pellets for $185.00 at ton up to the spring of 2008 in Ohio, why were they $300.00 a ton in the northeast at the same time? We are surrounded by mills in PA, MA, NY, NH, WV ME etc.

Right now there is massive doubletalk coming from the petroleum industry about why gas prices are rising even after oil has dropped to $35.00 a barrel. Exxon blames refining costs, Colonial Pipeline blames local dealers, local dealers blame Exxon, etc etc etc.

Gas prices have been rising because some of the refineries have cut back on gasoline in favor of HHO. Also a lot of the crude isn't even going to refineries yet, but shortly they won't have any place to store it. Oh and OPEC is likely going to have another cut back, the only upside to that is that ole Hugo can no longer pay his bills as his production costs are too high and he has stiffed his material suppliers so much they don't deal with him.

NYMEX futures are currently 40.03/Barrel , we just entered a new trading month, I have no idea how the prior month settled as I don't pay that much attention to oil.