Supply Chain Dynamics Affect Wood Feedstock Availability

Wood feedstock availability plays a major role in the success (or failure) of any venture that relies on wood raw materials, and the production of cellulosic biofuels is no exception. Determining how to deliver a consistent and sustainable amount of feedstock to supply a plant that will produce one million gallons of fuel per year is a complicated process.

Feedstocks typically used by biofuels facilities, whether pre-commercial thinnings, in-woods biomass or mill residues, are limited by the fact that each is a byproduct of some other primary process.

The economic cycles associated with primary processes—harvesting, sawmill production, pulp and paper mill production—ultimately determine the amount of feedstock available for purchase.

Each primary process occurs in a market where supply and demand dynamics vary. When demand for pulpwood and sawtimber rises, more timber is harvested, and a robust supply of in-woods biomass is created. On the other hand, when sawtimber or pulpwood markets are depressed, the supply of available biomass also declines.

In a similar fashion, demand for lumber, other building materials, and paper products drives the availability of mill residues. When demand for these products is high, the supply of mill residue expands. When demand for these products shrinks, demand for wood raw materials follows a similar downward path.

Loggers, sawmills and pulp and paper mills earn their profits from their primary processes—harvesting longwood, manufacturing lumber and building materials, and producing paper and containers. Selling residue is an adjunct process that will contribute only marginally to their bottom lines. Subsequently, loggers and mills have very little incentive to deliver residues to bioenergy companies.

In addition to market ups and downs driven by economic factors, the primary industries producing the feedstocks are subject to seasonal patterns of supply and demand. Spring brings an uptick in homebuilding activity, while holiday seasons generally set off vacation and maintenance curtailments at sawmills. Weather patterns and events also dictate the supply of residual materials as harvest schedules rely on dry days.

Tract size, terrain, tree species, volumes removed, road conditions, and distance from the forest to the wood-using facility vary significantly across wood basins, as do the motivations of the timberland owners, wood dealers, brokers, loggers, and companies that buy and sell wood raw materials. All add to the complexity of a forestry supply chain characterized by highly localized harvest and delivery systems.

A portion of this blog post was excerpted from A Crash Course: Supply-Shed Economics.