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In this Week's Pellet Wire:
From the Director's Desk:
Well, that was fun.
The overwhelming feeling at the 2021 Pellet Fuels Institute Annual Conference was how nice it was to simply gather again with industry friends and colleagues. At our collection of networking events, handshakes and conversations came with ease as people caught up, compared pandemic stories, and talked shop. Conference and board chair Kenny Lisle and I were thrilled with the turnout and particularly grateful for the number of wood pellet manufacturers who made the trip. For those of you reading us who were there, thank you so much for being there. I hope you had a positive and fruitful experience.
The story of the conference from a content perspective was labor, followed close behind by the inflationary pressures on almost everything that wood pellet manufacturers must have to produce, package, and ship wood pellets. Wood pellet producers are struggling to attract people back to work in an era of federally stimulated unemployment packages. Producers shared the different strategies they are deploying to bring their manufacturing roster back to the plant including earned PTO, attendance bonuses, signing bonuses, and longevity incentives. Largely, the feeling was that these measures have helped, but not nearly enough. Producers thought the sunsetting of the stimulus would help, but the uncertainty in these assumptions was palpable. Conference attendees didn’t have to travel very far to see this same challenge playing out while onsite. The Starbucks at the conference hotel was closed and the two signs hung on the door told the whole story: “Closed Until Further Notice” and “Help Wanted”. Restaurants in downtown Louisville were either closed or had signs asking patrons for their patience as they worked with skeleton crews. Wood pellet producers taking this all in simply nodded their heads in recognition.
The runner-up talker for the entire conference was the inflationary pressures driving up prices throughout their supply chain. Wood pallets have doubled, and in some markets tripled, in price. Film, lubricant, and replacement parts have all increased and now rising fuel prices are driving up shipping costs. Our appliance manufacturer members and attendees shared similar struggles as the price of steel, wire, glass, and microchips increase and inventories become tight. To maintain any profit margin, these price increases must be passed along to consumers, and there will be some difficult discussions along our supply chain this summer as everyone sorts out where these cost increases will land and how they will be distributed between producers, retailers, and ultimately consumers.
Questions were posed about the inflationary pressures exerted on the fuels wood pellet producers compete with and what impact that might have on the marketplace as consumers search for the lowest cost heating option. In periods of high heating oil prices, wood pellets often get a boost as consumers with both heating oil and wood pellet appliances demand more of their heat load from their pellet appliance (fuel switching). Additionally, there was some discussion that high demand for both hardwood and softwood products would lead to greater fiber availability and potentially some relief on the price of residuals as a result, but it sounded like that has not yet played out in the marketplace.
It will be an interesting (and I suspect stressful) summer as pellet producers simultaneously manage staffing challenges and rising costs across their supply chain as they build inventory for the '21-'22 heating season. That said, this is the same sector that posted an incredibly strong 2020 amidst a global pandemic. The producers at the show shared that the biggest takeaway from their experiences operating during the pandemic was the resiliency of their teams. It looks like they’ll be able to put that newfound resiliency to work right away.
View Photos from the PFI Annual Golf Tournament and Opening Reception >>
One More Hearty Thank You to Our Conference Sponsors
—Tim Portz
Executive Director
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