When it comes to the availability and sale of wood pellet fuel, it’s either feast or famine. At times, pellet fuel manufacturers work 24/7 to have fuel available for their customers. Retailers and consumers order early, and then winter doesn’t arrive. Manufacturers and retailers are left with mountains of unsold pellets, and consumers have stacks of unused fuel.

The next year manufacturers, retailers and consumers are all cautious (once burned, twice shy). Winter hits with a vengeance, but no one is prepared. Mills power up but can’t keep pace with the unexpected demand, so there are serious pellet shortages throughout the season.

The next year, manufacturers, retailers and consumers swear there will be no fuel shortages and gear up early. But low heating-fuel prices and another mild winter pummel those good intentions, and the up-and-down cycle of pellet fuel availability continues apace.

Last year was no exception. Pellet manufacturers produced the maximum they could to ensure availability. But low heating fuel prices and another exceptionally mild winter meant there was little demand for pellets. Dealers and manufacturers were left with a lot of inventory.

A survey of pellet fuel retailers by Hearth & Home magazine early in 2016 revealed that 41 percent had more than 25 tons of pellets in inventory, carry over from the 2015-2016 winter. The year prior, the percent of retailers with pellet carryover was only 12 percent.

This year, manufacturers and retailers alike have high hopes that it will be a good pellet year, as crude oil prices moved up from a low in 2015 of $35 a barrel to more than $50 as summer 2016 began. However, the bad news is that weather forecasters are predicting a winter warmer than last, which was the warmest winter on record in the U.S.

Seth Walker, associate economist for Risi.

“Last year was a rough year for the North American pellet industry,” said Seth Walker, associate economist for Risi, an information provider for the global forest industry. “Nearly every mill producing bagged residential fuel has reduced its production or is idle, since most are filled with unsold inventory. Some are operating at only 25 percent of capacity until this inventory is sold.”

Walker says, yes, the problems last year were the warm winter and low oil prices, but because of the strong Euro, some mills lost their buffer of being able to ship to the European market. “The European pellet market is huge for both residential and industrial pellets,” he said, “but after exporting pellets at record levels in 2014, the exchange rate with the Euro means North American mills are no longer able to sell to Europe.”  Walker expects that some pellet producers in the Southeast, who have sold only for export, will be testing bagged pellets for the Northeast residential market.

“We had El Nino last year, and La Nina is expected this year,” according to Walker. “The winter of 2014-2015 was the coldest in 30 years in the Northeast, but the winter of 2015-2016 was the warmest, with 27 percent fewer heating-degree days. The industry needs a cold winter and oil prices to rise.”

“This is just another cycle in the history of our industry,” according to Stephen Faehner, CEO of pellet producer American Wood Fibers (AWF) and chairman of the Pellet Fuels Institute (PFI), “but it’s still a challenging time. Unfortunately, there is plenty of inventory in the pipeline. Some fuel suppliers have carryover, and most have to adjust their production to do what makes the most sense for their particular operation, such as slowing production or temporarily shutting down.

Stephen J. Faehner, president and CEO of American Wood Fibers (AWF).

“We here at AWF are tightening our belts and adjusting our operation to be more efficient. We think the likelihood is that we will have a more normal winter. It will be shocking if last winter was duplicated.” Stressing his optimism, Faehner says that 23 states now offer some incentives for wood and pellet heating, and the $300 Federal tax credit has been continued and made retroactive to Jan. 1, 2015.

Faehner points out that PFI certification to the PFI fuel standard is becoming more popular with dealers and consumers. “Half of all North American mills are now certified,” he said, “and some large retailers, such as Tractor Supply, are now requiring PFI-certified fuel. The program is continuing to gain importance and continuing to grow.”

“Last year was actually two seasons,” said Darryl Rose, senior vice president of Energex America. “The first half of the year we couldn’t make pellets fast enough. Then, in the second half, demand dried up and stopped in November. Just when you think you know what’s going on, you find out you really don’t. This is the most cyclical ever.”

Rose is concerned about this year, as well. “Our average consumer usually buys three tons of fuel,” he said, “but early last year they bought four tons and only used two tons during the season. We thought we’d see a big slowdown this year, probably see the worst spring sales in years, but our dealers are still buying.”

Energex is predicting (or perhaps hoping for) a normal winter. With some mills shutting down and less product available, the company is “guardedly optimistic” for a good sales year.

PFI certification has become a “sales plus” for Energex dealers, says Rose. “It’s a big selling point,” he said, “especially since stove manufacturers’ warranties now are voided unless certified fuel is used in the appliance.”

Lignetics covers the U.S. with six mills, three in the West and three in the East. “Our 2015 sales in the East were way below forecast,” said Ken Tucker, president and CEO, “and the West has been flat for the last three years, with no inventory problems. But in the East, there is a lot of carryover inventory with dealers, and most manufacturers have inventory.

“The farther north you go, the problem becomes more pronounced. We’ve been through this before, so we’re controlling our inventory by running less. But that makes our manufacturing costs go up. Unfortunately for dealers, the Big Box stores are selling pellets at crazy prices just to get their unsold inventory out of their parking lots.”

Tucker’s comments about things getting worse the farther north you go also seems to ring true for dealers. In the Mid-Atlantic states, “We have no concerns about availability, and we’re moving pellets as usual,” says Richard Thomas, co-owner of retailer Courtland Hearth & Hardware, Fallston, Maryland. “Pellet sales were slow in March and April, but now have taken off. We have 12 pellet suppliers, so we can always get product.”

American Wood Fibers (AWF), Circleville, Ohio, pellet plant.

But farther north, “Last year was the first time ever that consumers bought in advance,” says Tom Swan, owner of Black Swan Fireside & Hearth, Newtown, Connecticut. “We were delivering pellets three days a week and Saturdays until demand ended in early December, so we have carryover. This year, demand is only 10 percent of last year, so there will be a big crunch in season, if we have one.”

Swan says trucking pellets from the mills to dealers in the Northeast will be a problem this year. “Two years ago, we all kept truckers busy, but when demand dried up last year, those truckers found other jobs. They’ve now found that trucking produce pays them three times what they get to truck pellets.” Swan solved that problem by purchasing and running his own 18-wheeler.

Don Ferry, owner of Buy The Fire, Oxford, Maine, is not concerned about pellet availability, but he is concerned about prices, which have remained steady to him for five years, a concern most pellet producers shrug off. Although he prefers to have 75 to 89 tons of inventory, he does have 200 tons of carryover.

“Pellet sales are very quiet,” he says, “and we’re not getting early orders from customers, but we’re still optimistic this year will be better than 2015.” Ferry thinks heating oil prices are more of a factor than the weather in his area.

Jed Martin, president of Earth Sense Energy Systems, Dale, Wisconsin, and 2016 Vesta Hearth Retailer of the Year, has no pellet carryover and no concerns about availability. “We have very good inventory and very good suppliers,” he said. But with his pellet stove sales down 35 percent, Martin is hoping oil and propane prices go up.

The up-and-down challenges of the pellet business continue. Oil prices appear headed up, which will help sales. Now it’s up to Old Man Winter to come out of hibernation and put his touch on the season.