A recent report from the North American Wood Fiber Review confirms what many livestock producers already know. The market for wood fuel pellets is smoking hot. It has dramatically reduced local availability of sawdust and wood chips and fueled the market for one-time cheap bedding.
Average sawdust prices in the U.S. Northwest were $28 per oven-dry metric ton in 2004, peaked at $74 per odmt in late 2008, then declined to $64 during third-quarter 2009. Prices in other U.S. regions have followed a similar pattern.
North America's wood pellet industry has grown six-fold since 2004. In the past five years, the production capacity has risen from just over 1-million tons to more than 6-million tons according to a recent report from USDA's Forest Service.
Sawmill energy conservation also has come into play, particularly in the Northeast timber market. Sawmills have quickly adopted energy-saving technologies to recycle one-time waste products into boiler fuel for their own operations.
More changes ahead
British Columbia was the first region to buzz into Europe's fast growing market for fuel pellets. But capacity in Canada's western province hasn't grown much the past few years. The U.S. South now is predicted to take over as North America's leading pellet-producing region.
Much of the investment in pellet capacity is fueled by European demand. But domestic demand is the prime pellet market driver for the western U.S. and the Northeast.
But industry capacity and production are quite different. During 2008, U.S. and Canadian plants have been operating at 66% and 81% capacity, respectively. Start-up problems for newly built plants, financial difficulties for some companies and a lack of affordable wood fiber supply have shared the blame.
Pellet manufacturers have increasingly had to accept higher-cost wood fiber sources than the commonly used sawdust from local sawmills. More pellet companies are now using wood chips traditionally used by the pulp industry. That helps explain why Pennsylvania pulpwood prices haven't been as erratic as the hardwood markets.