End-user question: Whats a fair profit margin for wood pellets for a retailer?

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Whats a fair markup for wood pellets, or: What should a retailer make on a ton of pellets?


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Pyro Gyro said:
how about this, my COST as a dealer. In April-May 239/ton, and it goes up from there, September - March $258/ton, oh and no price guarentee. That's three times what i was paying five years ago.

i know the price is high but when pellets out price themselves i will simply go back to burning wood, do i want to NO but will i oh YES in a fast minute and matybe even LP as backup to the wood. I do feel for you guys but the pellet making folks better be aware that they will price themselves right out of business real quick and real fast.
 
A fair profit is the most you can possibly make while still having happy customers. My products are usually marked up 40 to 45% which is almost an industry standard in my business.
 
burnemifyagotem said:
enough that he can pay his bills and have a little left

The above might be the most accurate reply. And this could vary considerably from one shop to the next depending upon rent and so many other variables.
 
woodsman23 said:
Pyro Gyro said:
how about this, my COST as a dealer. In April-May 239/ton, and it goes up from there, September - March $258/ton, oh and no price guarentee. That's three times what i was paying five years ago.

i know the price is high but when pellets out price themselves i will simply go back to burning wood, do i want to NO but will i oh YES in a fast minute and matybe even LP as backup to the wood. I do feel for you guys but the pellet making folks better be aware that they will price themselves right out of business real quick and real fast.
That's pretty much where I'm at after 9 years of pellet burning. The high price of pellets, and more so, the high volatility over the past several years really has me rethinking my appetite for wood pellet consumption.

Over the winter I've built up a multi-year reserve of red and white oak for burning in the future. It took some work (which I very much enjoyed), but it didn't cost me hardly anything to do. My plans are to purchase a new wood stove which has a thermostatic damper, only has to be loaded once or twice a day, and cleaned once a month or so. It will still be a little more work than burning pellets, but I flat-out refuse to pay $250+/ton for pellets, just as I flat out refuse to pay $3.50+ per gal of oil. I might even hang on to my existing wood/coal stove because it gives me the option of burning coal, and having many options has proven to be a real savings at times.

I still have a few tons of pellets left, but once they are gone, I expect my yearly pellet usage to be <1 ton... if not 0.00 tons. I'm thinking if I only use the pellets during the shoulder seasons to break the chill in the house, I should be able to get 2-4 years out of the 3 tons I already have.


Long story made short, the pellet industry is going to lose many customers if the high volitility and pricing continues. If so, I'm sure I won't be the first, or the last, to leave the pellet market.
 
Wet1 said:
Long story made short, the pellet industry is going to lose . . .

It may come down to the pellet industry just NOT being a sustainable business practice with low oil prices. Think of how many industries tried to spring up overnight when oil was at $140 a barrel. Industries once considered not profitable suddenly were. Canada's oil shale industry, which for years was not worth pursuing suddenly sprang to life. Now, it costs more to get the oil out of the shale than it is currently worth. It's got to be feasible in the market of the day. No profit means not worth doing. Economics 101.
Mike -
 
OU812 said:
kinsman stoves said:
I am all for freedom of speech but do you go to grocery store forums and ask what the fair price of oranges is? How about gasoline from your local service station?

If you do not like the price of someone selling pellets, do not buy from them. Kinda makes sense to me.

But everyone is going to be shocked at the price of pellets this summer. Worse yet do not buy early and wait to see what happens. I have a feeling you will be burning up your computer.

Eric

OK that left us hanging. Do you really feel that the prices will go way up later this year? I just want to know so I can stock up now if there is a good chance that the price will increase a lot!

I would expect a large price increase prior to the next burn season. Things MIGHT change but if I was a beating man I would get pellets early and plan on a combination of wood pellets and one other source of heat (i.e. wood, coal, LP, oil, electric, or NG). Do not relay 100% on pellets or you will come out on the short end.

Eric

p.s. Woodsman23 you need to relax and breath, breath my friend.
 
One of my favorite sayings has always been "Retail is a lot of fun. Too bad ya can't make a living at it.".
 
the pellet makers are only hurting themselves with the prices if it is cost affective to burn pellets then we do it if it is not it will go away and we will find the next thing. it is only cool to be green if it is saving you money. and the retailers will find something diffrent to sell. we have never sold pellets because it is not worth the time and i would have to take a loss on it most of the time. only time will tell if it is worth it my guess is it will have to come down when they will do it wish i knew.
 
Wet1 said:
woodsman23 said:
Pyro Gyro said:
how about this, my COST as a dealer. In April-May 239/ton, and it goes up from there, September - March $258/ton, oh and no price guarentee. That's three times what i was paying five years ago.

i know the price is high but when pellets out price themselves i will simply go back to burning wood, do i want to NO but will i oh YES in a fast minute and matybe even LP as backup to the wood. I do feel for you guys but the pellet making folks better be aware that they will price themselves right out of business real quick and real fast.
That's pretty much where I'm at after 9 years of pellet burning. The high price of pellets, and more so, the high volatility over the past several years really has me rethinking my appetite for wood pellet consumption.

Over the winter I've built up a multi-year reserve of red and white oak for burning in the future. It took some work (which I very much enjoyed), but it didn't cost me hardly anything to do. My plans are to purchase a new wood stove which has a thermostatic damper, only has to be loaded once or twice a day, and cleaned once a month or so. It will still be a little more work than burning pellets, but I flat-out refuse to pay $250+/ton for pellets, just as I flat out refuse to pay $3.50+ per gal of oil. I might even hang on to my existing wood/coal stove because it gives me the option of burning coal, and having many options has proven to be a real savings at times.

I still have a few tons of pellets left, but once they are gone, I expect my yearly pellet usage to be <1 ton... if not 0.00 tons. I'm thinking if I only use the pellets during the shoulder seasons to break the chill in the house, I should be able to get 2-4 years out of the 3 tons I already have.


Long story made short, the pellet industry is going to lose many customers if the high volitility and pricing continues. If so, I'm sure I won't be the first, or the last, to leave the pellet market.

Hey I understand how you feel and I don`t fault you one bit for switching to cordwood especially if you are physically able but if a large percentage of pellet users do in fact switch over to wood I wouldn`t be surprised to see cordwood go sky high too. Again it`s all supply and demand but with the cost of doing business and profits margins needed i can see it happening.
 
Wet1 said:
Long story made short, the pellet industry is going to lose many customers if the high volitility and pricing continues. If so, I'm sure I won't be the first, or the last, to leave the pellet market.

Don't think they really care about us! Seems like most of the mills also export. If we don't buy them they will just sell them to Europe or where ever, Probably cheaper too! I think the export is for biomass plants, Don't have to worry about the PFI certs.

They will try to get every dime from use first, What doesn't sell here, They will just dump them over sea's.

Corn and Cord wood are looking better every day to me! I'll work a little more to pay less!

jay
 
kinsman stoves said:
OU812 said:
kinsman stoves said:
I am all for freedom of speech but do you go to grocery store forums and ask what the fair price of oranges is? How about gasoline from your local service station?

If you do not like the price of someone selling pellets, do not buy from them. Kinda makes sense to me.

But everyone is going to be shocked at the price of pellets this summer. Worse yet do not buy early and wait to see what happens. I have a feeling you will be burning up your computer.

Eric

OK that left us hanging. Do you really feel that the prices will go way up later this year? I just want to know so I can stock up now if there is a good chance that the price will increase a lot!

I would expect a large price increase prior to the next burn season. Things MIGHT change but if I was a beating man I would get pellets early and plan on a combination of wood pellets and one other source of heat (i.e. wood, coal, LP, oil, electric, or NG). Do not relay 100% on pellets or you will come out on the short end.

Eric

p.s. Woodsman23 you need to relax and breath, breath my friend.


Eric i do understand that you guys are trying to run your place at a profit and i have no problem with that. It is the pellet people that need to understand what the consumer is willing to pay and adjust to that level. I have 63 acres of hardwoods, ash,oak,maple etc.. so going back to wood for me is much less costly but it involves time and labor and pellets are cleaner but i will go back if need be. I am standing outside right n ow looking into the woods and breathing deeply!!!!!
 
"its only cool to be green if you're saving money" ??? thats how we got where we are. struggling to develope viable technologies to offset, or replace the "seemingly" endless supply natural resources. this mentality has set us back for decades. remember, we are all still pioneers in this game. pioneers are the guys who blaze the trail, walking steadily into the unknown, step by step, looking not only for the $$$ payoff, but the adventure as well. pioneers traditionally risk life and limb to get to some magical destination beyond the horizon. right now we are at the perverbial "Donner Pass" of the pellet story. You dont think the drop in crude price has anything to do with mass exodus of people around the world leaving oil? come on. What better way to stifle the competition than to make it economically unappitizing. there are so many technologies on the verge of becoming commonplace that the oil peeps have to be nervous. they've invested billions in new and exciting ways to dig, drill, and advetise their new and exciting ways to dig and drill. If the future of oil consumpition is destined to be subplanted in the next 2-3 decades it doesn't leave much time for them to recoup their costs. if raising oil prices speeds the transition then they are screwed. don't you find it interesting that HHO, LP, and Pellets are so close in cost/BTU that we have multiple threads debating the use of all 3?? this I'm sure, is not by chance. Most of us understand the pellet thing (cost of woodmass, grinding,drying,compressing,trasport,storage,and elbow grease on the last leg of the journey) and can ALMOST respect where the dealers, and mills are coming from. very few of us understand the oil game at all. oil is bought, sold, bought,sold,bought and sold, long before its even out of the ground. very few know where OUR oil comes from, where it goes, and from whom we buy it. its like the KFC special herbs and spices, its a mystery, wrapped in an enigma, cloaked in shadows. You want cheaper pellets? get your congressman to change forestry policy so we can harvest the millions of acres that burn up every year out west. there are responsible ways to manage land, we just have to make it possible. How many BTU's do you htink were lost last year in California? Not to mention the destruction of private and public property and infrastructure. what's that cost us every year to rebuild? I've never sold pellets based on saving, sure you can save, but pellet is a mindset. How long does it take to recoup the cost of a compact flourescent bulb vs. incandescent? yet we all still switch, because its responsible, I know, its not quite the investment that a Pellet Stove is, but its an analogy people. Very frequently the right thing is harder, more costly and/or inconvenient (i.e. farming your own veggies, splitting your own wood, changing your own oil, heck these days even mowing your own grass is becoming a thing of the past). I'm not for pelelts at whatever price, but to jump ship on something that is here, right now, pushing its way into the most coveted of industries, at a competative price is amazing. Aside from that, I agree with most here that are in retail, 40%ish is as fair as we can expect for the most part.
 
Delta-T said:
"its only cool to be green if you're saving money" ??? thats how we got where we are. struggling to develope viable technologies to offset, or replace the "seemingly" endless supply natural resources. this mentality has set us back for decades. remember, we are all still pioneers in this game. pioneers are the guys who blaze the trail, walking steadily into the unknown, step by step, looking not only for the $$$ payoff, but the adventure as well. pioneers traditionally risk life and limb to get to some magical destination beyond the horizon. right now we are at the perverbial "Donner Pass" of the pellet story. You dont think the drop in crude price has anything to do with mass exodus of people around the world leaving oil? come on. What better way to stifle the competition than to make it economically unappitizing. there are so many technologies on the verge of becoming commonplace that the oil peeps have to be nervous. they've invested billions in new and exciting ways to dig, drill, and advetise their new and exciting ways to dig and drill. If the future of oil consumpition is destined to be subplanted in the next 2-3 decades it doesn't leave much time for them to recoup their costs. if raising oil prices speeds the transition then they are screwed. don't you find it interesting that HHO, LP, and Pellets are so close in cost/BTU that we have multiple threads debating the use of all 3?? this I'm sure, is not by chance. Most of us understand the pellet thing (cost of woodmass, grinding,drying,compressing,trasport,storage,and elbow grease on the last leg of the journey) and can ALMOST respect where the dealers, and mills are coming from. very few of us understand the oil game at all. oil is bought, sold, bought,sold,bought and sold, long before its even out of the ground. very few know where OUR oil comes from, where it goes, and from whom we buy it. its like the KFC special herbs and spices, its a mystery, wrapped in an enigma, cloaked in shadows. You want cheaper pellets? get your congressman to change forestry policy so we can harvest the millions of acres that burn up every year out west. there are responsible ways to manage land, we just have to make it possible. How many BTU's do you htink were lost last year in California? Not to mention the destruction of private and public property and infrastructure. what's that cost us every year to rebuild? I've never sold pellets based on saving, sure you can save, but pellet is a mindset. How long does it take to recoup the cost of a compact flourescent bulb vs. incandescent? yet we all still switch, because its responsible, I know, its not quite the investment that a Pellet Stove is, but its an analogy people. Very frequently the right thing is harder, more costly and/or inconvenient (i.e. farming your own veggies, splitting your own wood, changing your own oil, heck these days even mowing your own grass is becoming a thing of the past). I'm not for pelelts at whatever price, but to jump ship on something that is here, right now, pushing its way into the most coveted of industries, at a competative price is amazing. Aside from that, I agree with most here that are in retail, 40%ish is as fair as we can expect for the most part.

Good points
Please next time write them in paragraphs so My old eyes can read it better.
 
woodsman23 said:
kinsman stoves said:
OU812 said:
kinsman stoves said:
I am all for freedom of speech but do you go to grocery store forums and ask what the fair price of oranges is? How about gasoline from your local service station?

If you do not like the price of someone selling pellets, do not buy from them. Kinda makes sense to me.

But everyone is going to be shocked at the price of pellets this summer. Worse yet do not buy early and wait to see what happens. I have a feeling you will be burning up your computer.

Eric

OK that left us hanging. Do you really feel that the prices will go way up later this year? I just want to know so I can stock up now if there is a good chance that the price will increase a lot!

I would expect a large price increase prior to the next burn season. Things MIGHT change but if I was a beating man I would get pellets early and plan on a combination of wood pellets and one other source of heat (i.e. wood, coal, LP, oil, electric, or NG). Do not relay 100% on pellets or you will come out on the short end.

Eric

p.s. Woodsman23 you need to relax and breath, breath my friend.


Eric i do understand that you guys are trying to run your place at a profit and i have no problem with that. It is the pellet people that need to understand what the consumer is willing to pay and adjust to that level. I have 63 acres of hardwoods, ash,oak,maple etc.. so going back to wood for me is much less costly but it involves time and labor and pellets are cleaner but i will go back if need be. I am standing outside right n ow looking into the woods and breathing deeply!!!!!


This is my take on it. JUST ME.

It takes money to make pellets (i.e. equipment, insurance, labor, transportation, electric, and most of all raw material). If you do not have any of those listed you can not make pellets. I do not feel the mills are making any more profit than they have in the past.

The mills are having to do MORE to get raw materials. Not every mill can take an oak tree and make pellets, yes some can but most can not. Look at how many mills have gone under this year. There are more closed mills than up and running mills. A pellet mill does not run on the price of home heating oil or LP. They have a bottom line and that is it. Just because other fuels used in heating have dropped in price does not mean the cost of pellets will fall in line or should fall in line.

If burning cord wood, LP, NG, or tea leaves will save you over wood pellets I suggest you do it. It is no skin off my back if people in MA, RI, or CT (examples only) can get pellets cheaper than what I can get them for. At this time I deal with one pellet mill and that is the same mill I have been working with for three years. I will not jump on one or ten truckloads of pellets that I can not say are one of the best to save a dollar or two.

I am starting my Summer Buy program and it will be in the area of $245 a ton for pre pay and $250 a ton for p/u in May. (do not even talk to me about prepay nightmares. I am good for it). I have heard pricing from different mills in my area and it is from $160 a ton to $210 a ton WITHOUT SHIPPING. Shipping is in the area of $1.50 to $2.00 a mile. Remember different states have different weight limits for commercial trucks.

It is up to you on what you will spend for pellets. I have not seen any stimulus plan for pellet mills but there is some sweet deals on new stoves. That means more people buying stoves so there will need to be more pellets out there come next burn season. Plan ahead..........

If cord wood is your thing blow the dust off your saw and get to work. I still have a wood stove and it is burning as we type.


I will put my soap box away because it might become fire wood soon.
Eric
 
hearthtools said:
Delta-T said:
"its only cool to be green if you're saving money" ??? thats how we got where we are. struggling to develope viable technologies to offset, or replace the "seemingly" endless supply natural resources. this mentality has set us back for decades. remember, we are all still pioneers in this game. pioneers are the guys who blaze the trail, walking steadily into the unknown, step by step, looking not only for the $$$ payoff, but the adventure as well. pioneers traditionally risk life and limb to get to some magical destination beyond the horizon. right now we are at the perverbial "Donner Pass" of the pellet story. You dont think the drop in crude price has anything to do with mass exodus of people around the world leaving oil? come on. What better way to stifle the competition than to make it economically unappitizing. there are so many technologies on the verge of becoming commonplace that the oil peeps have to be nervous. they've invested billions in new and exciting ways to dig, drill, and advetise their new and exciting ways to dig and drill. If the future of oil consumpition is destined to be subplanted in the next 2-3 decades it doesn't leave much time for them to recoup their costs. if raising oil prices speeds the transition then they are screwed. don't you find it interesting that HHO, LP, and Pellets are so close in cost/BTU that we have multiple threads debating the use of all 3?? this I'm sure, is not by chance. Most of us understand the pellet thing (cost of woodmass, grinding,drying,compressing,trasport,storage,and elbow grease on the last leg of the journey) and can ALMOST respect where the dealers, and mills are coming from. very few of us understand the oil game at all. oil is bought, sold, bought,sold,bought and sold, long before its even out of the ground. very few know where OUR oil comes from, where it goes, and from whom we buy it. its like the KFC special herbs and spices, its a mystery, wrapped in an enigma, cloaked in shadows. You want cheaper pellets? get your congressman to change forestry policy so we can harvest the millions of acres that burn up every year out west. there are responsible ways to manage land, we just have to make it possible. How many BTU's do you htink were lost last year in California? Not to mention the destruction of private and public property and infrastructure. what's that cost us every year to rebuild? I've never sold pellets based on saving, sure you can save, but pellet is a mindset. How long does it take to recoup the cost of a compact flourescent bulb vs. incandescent? yet we all still switch, because its responsible, I know, its not quite the investment that a Pellet Stove is, but its an analogy people. Very frequently the right thing is harder, more costly and/or inconvenient (i.e. farming your own veggies, splitting your own wood, changing your own oil, heck these days even mowing your own grass is becoming a thing of the past). I'm not for pelelts at whatever price, but to jump ship on something that is here, right now, pushing its way into the most coveted of industries, at a competative price is amazing. Aside from that, I agree with most here that are in retail, 40%ish is as fair as we can expect for the most part.

Good points
Please next time write them in paragraphs so My old eyes can read it better.
You're a more persistent man than I am, I gave up after the first sentence.
 
Eric,

So far your prebuy is better than what I have seen in CT. There is still one more pellet house that has not release his prebuy prices. But yours are looking pretty good to me. We know its not you and I understand about the lack of material and such. We are all being stretched in this lack of an economy were in right now! Kind of hard to just toss cash around when there is no OT and such. I am presently on a furlow from work for a week and hopefully will not stuck on a more permanent layoff.

I think the thing that has everyone antsy is the price of oil being down. If pellets were down to say $200/ton. We would all be buying instead of b*tching about it. The Mills are setting the price's, Just hope they giving the best they can do!

Hope I didn't make any comment to get you upset. Your doing what you need to do!

just my 2
jay
 
jtakeman said:
Eric,

So far your prebuy is better than what I have seen in CT. There is still one more pellet house that has not release his prebuy prices. But yours are looking pretty good to me. We know its not you and I understand about the lack of material and such. We are all being stretched in this lack of an economy were in right now! Kind of hard to just toss cash around when there is no OT and such. I am presently on a furlow from work for a week and hopefully will not stuck on a more permanent layoff.

I think the thing that has everyone antsy is the price of oil being down. If pellets were down to say $200/ton. We would all be buying instead of b*tching about it. The Mills are setting the price's, Just hope they giving the best they can do!

Hope I didn't make any comment to get you upset. Your doing what you need to do!

just my 2
jay

To tell you the truth I have had to check the phone 3 times today to make sure it was on the hook and working. Business went from steady to a trickle.

We are in the process of shutting down the Kinsman Store for the summer because lack of business and Brookfield is doing better. The good news is I spend more time on the board.

Lets hope for better times.

Eric
 
jtakeman said:
Well we might have a little more BEER time!

Lets hope those prices don't go up!

If I was a beating man I would risk everything to say that pellet prices WILL be at an all time high next burn season.

Eric
 
kinsman stoves said:
jtakeman said:
Well we might have a little more BEER time!

Lets hope those prices don't go up!

If I was a beating man I would risk everything to say that pellet prices WILL be at an all time high next burn season.

Eric

They are at an all time high NOW so I would not be surprised. Still holding out, hoping the
prices come down in the next couple months tho.
 
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