From the Director’s Desk:
A Look at February EIA Data, Markets Matter, See You in Mobile – Last Call for a Hotel Room!
February 2026 (5-year average) -in tons
East
Sales – 87,787 (65,737)
Production – 82,341 (80,110)
Inventory – 25,830 (104,829)
West
Sales – 14,589 (29,431)
Production – 23,545 (33,700)
Inventory – 73,249 (41,738)
South
Sales – 16,932 (12,988)
Production – 16,187 (23,708)
Inventory – 2,627 (26,639)
All U.S.
Sales – 119,308 (108,209)
Production – 122,073 (147,189)
Inventory – 101,706 (177,809)
A review of the February 2026 data released in tandem with the January data earlier this month makes it clear that the industry will spend the summer months trying to right-size inventories in the East and West that are ultra-low and ultra-high, respectively. Pellet inventories in the East haven’t been this low since 2019, when February closed with just 18,448 tons on the ground. Out west, the story is inverted, and while inventories are slightly down from last February’s close of 81,881 tons, the 73,249 tons is still nearly twice the inventory position producers in the region typically have on hand at month’s end.
The next four months of data releases will be highly anticipated by retailers and producers alike. Will the East be able to build back an inventory position that everyone in the supply chain can feel good about? The July inventory position in the East has averaged around 172,000 over the last five years. In July of 2024, the region was flirting with 200,000 tons of inventory. Producers will need a strong spring and early summer with ready access to raw materials and limited production slowdowns to build inventory back to comfortable July levels. Last year, producers increased pellet inventories by about 85,000 tons between February and July. They’ll need to do better than that this year and I expect that monthly sales throughout spring and summer will be higher this year as consumers out East fret over heating oil prices and what that might do to pellet demand. In 2019, producers in the East added over 100,000 tons of inventory between February and the end of July, and I expect producers will have their production throttles running wide open in an effort to prepare for the rapidly approaching heating season. Producers in the East have produced over 100,000 tons in a month just once since 2023 (October of 2025). If production in the East doesn’t climb to over 100,000 at some point this summer, then real thought will have to be given to concerns about feedstock availability. For the past two years, production in the East has fallen short of 1,000,000 tons. I expect 2026 will see a return to that level of production, and if we don’t, then we’ll know that feedstock availability has changed significantly in the past five years.
Markets Matter
Last week, I attended the “Markets Matter Convening” organized by the U.S. Endowment for Forest and Communities. The event offered a deep dive on the challenge of markets for low-value wood fiber streams and its impact on the broader forest products industry, and was attended by a broad swath of thought leaders, executives, and trade association staff from across the sector.
The event focused on the declining market for low-value wood fiber, most notably the decline in pulp and paper production in the southeast. At the heart of the discussion was the challenge the broader forest products industry is facing as markets for lower value fiber (pulpwood, logging slash, and mill residuals) shrink or vanish altogether. For the system to work, for everyone from landowners to sawmills, a balance needs to be struck between residual supply and residual demand. Right now, the system is out of balance. Historically, landowners have counted on strong markets for pulpwood to pay for their land management practices. When pine stands are planted, landowners would plant between 400 and 500 seedlings per acre, intending to have 150 of those seedlings grow into sawlogs for lumber production. The other trees are planted to inspire the “straight up” growing style essential for dimensional lumber production. A thinning would be performed 13-15 years later, allowing the best individual trees an opportunity to complete their growth without so much competition. The trees that were culled from the stand were often purchased by pulp and paper operations. These purchases covered the cost of the thinning and, sometimes, even generated some profit for landowners. In many markets in the southeast, pulp and paper facilities have closed. Some estimates have the total capacity of wood-using pulp mills in the U.S. down over 25% in the last decade; nearly 20 million tons of wood fiber demand gone.
New demand centers for this fiber need to be developed and deployed urgently. Interestingly, one of the concerns I hear consistently from our wood pellet manufacturing members is the tightening of hardwood fiber markets. A producer operating in Appalachia shared with me this spring that they would have produced and sold even more pellets this past heating season, but sawmill closures in the area prevented them from accessing and procuring as much fiber as they needed. Wood fiber isn’t very dense, nor valuable, and having it to move it more than a couple of hundred miles strains the economics very quickly. A glut of softwood fiber in south Georgia is of little use to a hardwood pellet manufacturer in southern Pennsylvania. So what does all this mean to the manufacturers of pellets made from hardwood residuals? I think it puts a double underscore underneath the importance of maintaining residual markets we have, wood pellets for home heating, cooking, and absorbency, amongst them. The challenge facing our southern cousins is a cautionary tale and one that we should heed well. There was an urgency and a tone of real concern amongst the participants in Madison last week, and the concern wasn’t centered on business losses, but instead the human costs associated with closures and declining markets. Less tax base for schools. Less work for loggers, millwrights, and plant operators. Jobs. Ways of life. The economic impact of the residual purchases we share with policymakers are more than just talking points. We play a vital role in keeping the wheels of the hardwood forest products sector turning, and it is crucial we continue to highlight that for policymakers and regulators.
See You in Mobile – Last Call for a Hotel Room!
Our team is finalizing plans for the various functions, panel discussions, golf foursomes, and networking opportunities for our annual conference being held next month near Mobile, Alabama. If you haven’t already made plans to attend, I invite you to do so today.
The hotel room block expires today, so if you haven’t already booked a room, please do so. You can find booking information here.
Our sector is exiting a challenging year with strong pellet demand out East and lackluster sales out West. I expect robust discussions about the work to build the necessary inventory for the upcoming heating season and divining what demand might be in the context of high energy prices.
