Supply Outlook

The shavings industry is going through sweeping changes. In the last 10 years we have seen prices to the end customer increase dramatically due to a number of reasons.

Bagged wood shavings were pioneered by the Canadians back in the 1960’s. Originally they took peat moss bagger machines and set them up on sawmills to bag the excess plannings that the mills produced. Mills had so much extra material that they gave this to the shavings baggers for free. Canadian entrepreneurs bagged this product up, loaded it on trucks and hauled it to the US to sell to dairy farmers and horse stables. The free product, cheap fuel and favorable exchange rate made this a good business for them and a cheap alternative for US farms. This form of wood shavings trade continued through  the 80’s and into the 90’s.

By the end of the 90’s things started to change. Sawmills began using more sawdust and shavings to make particle board, heating pellets and fire dryers for lumber. The last 30 years of marketing bagged wood shavings had also created a steady demand for shavings in the US. Competition between shavings manufacturers and other users of the by-products began to heat up and create a stiff demand for raw material. Shavings manufacturers began to outbid each other year after year for the raw material supply to keep up with their steadily growing US demand. This trend continued to heat up through the first 5 years of 2000 even as record demand for lumber in the US kept most Canadian mills putting out maximum production, by product supply could not keep up with demand.

In 2004/5/6 diesel fuel costs added  considerably to the cost of delivering products to the customers hundreds of miles away. The cost of trucking increased as much as 30 to 40% going in to 2007.

In 2007 the credit crisis and bust of the US Housing boom immediately pinched demand for Canadian lumber in the US, their primary market. Mills began to cut shifts or even close as demand for their lumber slowed to a crawl. The US dollar accelerated its losing value against the Canadian currency and in a short period of time going in to 2008 the CAD was worth more than the USD. Currency exchange rates were a huge incentive for Canadian wood shavings manufacturers to bring their products across the border at a significant savings to the US customer. With this gone, prices are driven further up, up and away.

As crude oil begins to soar out of sight in 2008 trucking has begun to add an unprecedented amount of cost to getting shavings delivered from anywhere. The sky rocketing fuel prices have driven up demand for bio-mass fuels (wood pellets) to levels never seen before. Bio mass fuels are also made from the byproducts of saw mills which creates more demand for the raw material at the source.        

All these problems are pulling traditional shavings products off the market, and have driven up prices by over 300% since 2000. With prices so high there have been new industry pioneers in the US that take trees, flake them in to shavings, dry them and bag them. These new companies have begun to pump new product in to the market. These products are very good quality, however due to the process, costs associated are very high. SHAVINGS-DIRECT™ has teamed up with some of these new companies to bring products to you at the very best price.    

As we look ahead we see a few trends that we do not like at all. As diesel has passed $5 per gallon it has stopped many trucking companies dead in their tracks, the trucking industry is changing overnight. The cheap back haul rate is becoming something of the past as truckers would rather let the truck sit than haul the load below cost. As this trend continues to thin capacity toward the end of the year, we see trucking becoming the biggest problem of all in getting shavings delivered to customers.

We also see the overnight demand created by bio mass fuels as customers run from oil. This is quickly eating into the raw material supply for shavings and forcing some shavings companies to cut back production or even shut down.

As of right now we advise our customers to buy their shavings ahead of the upcoming winter season and get the deals we have available while they last. In the mean time we will continue to innovate and find ways to give our customers the best price and the best service.

Thanks for reading and we hope you become a happy customer.   

Nick Fitzpatrick
CEO