What Waiting To Buy Your Pellets Could Cost You

We have finished contacting all our pellet customers attempting to persuade them to buy their pellets early.  This is in all honesty an exercise in self preservation.  The reality is that we can’t have enough pellets on hand to fill all the orders in the fall when demand goes up.  Naturally, at this point in the season if we run out of fuel, the pellet customer is understandably upset because now you’re cold and you need the pellets.  So the rest of this blog is going to attempt to explain how shortages and price spikes can occur. 

Most reputable pellets suppliers strongly request that we take orders from them 12 months out of the year in an attempt to even out production.  They will typically provide about  a 10% discount in the summer months in exchange for our summer orders.  In addition, we will also discount our normal margin, resulting in your best possible price on pellets.  It is this money persuasion that is designed to help keep inventory moving in the summer.   If customers take us up on the early buy pricing then it’s a win win for manufactures, customers, trucking companies and us.  If customers don’t, it creates spikes in demand in the fall which can result in bottle necks in supply.

The bottle neck starts at the manufacturers.  Remember, the manufacturers want to produce year round not just for the fall and winter.   It is difficult for manufacturers to deal with spikes in demand in a timely manner.  When they do their production costs go up due to overtime and so on.   Next, hauling companies struggle to have enough trucks to deal with the increased demand driving up their prices as well.  Combine this with expired discounts from manufacturers as well as from us and now that $245 ton of Great American Pellets for example could possibly approach $295 in November or approximately a 20% increase, ouch!!! 

 The above chain of events is business as usual for the pellet industry. This process can be negatively impacted further  by various outside factors including oil price spikes.   Have you seen what oil increases have done to food prices lately!  

Now I get it, not everyone can afford to buy now and not everyone has the storage space either.  But based on the lackluster response we have seen to our early buy offerings, it seems to me not enough people are concerned with the above explanation of  supply and demand and how it effects pricing.  Remember hurricane Katrina in 2005 or the 2008 oil spike.  It pays to be prepared!!!!

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