About That Barrel ShortageMay 27th, 2015
Last week, the Wall Street Journal wrote a brief, yet detailed, story about a bourbon barrel shortage. The piece quoted a university professor, a Brown-Forman executive, the Hardwood Market Report and respected coopers, all of whom pointed toward fewer white oak trees and stave mills to turn logs into barrel staves. It was a reasonable story that got chopped up into unreasonable pieces that became what Chuck Cowdery calls clickbait.
But people wouldn’t click if they were not interested. And the entire world is interested in… bourbon barrels. Who knew?
Before long, neighbors were texting me about this barrel shortage and the story was trending in places where comments take on a life of their own. I came across one commenter who called the Americans inability to reuse barrels “waste.” He was quickly put in his new charred oak place, so kudos to the keystroking whisky police.
Beyond its interest level to the normal people, though, this story caught me off guard. Sure, I’m known to sling the word shortage from time to time, but I stay on top of my bourbon barrel news. I am always asking distillers where they’re procuring wood, what are the prices, etc. At the Bourbon Classic event I emceed, I specifically asked Four Roses, Jim Beam, Heaven Hill and a few other companies if they were having barrel shortages. They all said no.
Thus, this story surprised me. Did the WSJ reporter scoop me on my own beat?
“I have actually read about the shortage (or potential shortage) of white oak trees and bourbon barrels. I have not heard anything different from our barrel supplier than we discussed at the Bourbon Classic events,” says Jim Rutledge, the master distiller for Four Roses. “I don’t know if a possible shortage of barrels is being felt by the numerous small distilleries that have started up in recent years, but as far as I am aware, none of the eight major Kentucky bourbon distillers are feeling a pinch on supply at this time.”
So, who is feeling the supply pinch? Apparently, as Rutledge said, it’s the smaller distillers.
Brad Boswell, president of the Independent Stave Cooperage, says the established whiskey distillers make up the lion’s share of the demand for new barrels. “These established distillers have long-standing relationships with their coopers and for the greatest part their demand is being met by the cooperage industry,” Boswell says. “I’m certain that greater than 95% of the global demand for new American oak whiskey barrels is being met at this time.”
Boswell says the smaller distillers are caught in the gap and are making the “great amount of noise regarding their shortage of new barrels.”
Leroy McGinnis, founder of the Cuba, Missouri-based cooperage McGinnis Wood Products, adds that the competition among the cooperages and the loss of loggers hurts their ability to fulfill new orders. But McGinnis makes about 600 barrels a day for wine and whiskey producers, charging $150 for the average bourbon barrel. He refuses to take on a “highest bidder” approach and simply maintains his existing customers. McGinnis’ largest customer is Heaven Hill Brands, but he also services the Kelvin Cooperage in Louisville and several craft distillers. He must say no a lot.
“We get emails everyday wanting barrels,” McGinnis says. “We have plenty of timber. We just don’t have the loggers anymore.”
The Kentucky-based Dunaway Timber Company acquires timber from private land owners and turns them into logs and then into barrel staves for the Brown-Forman Corporation. Dunaway owner Henry Christ says there’s not even a lack of loggers for his operation. “The logging community (at least in our area) has enjoyed a good logging winter season and stavemills are competing stronger than we have seen in recent years to attract the logs in their direction so that they to can take advantage of this growing market,” Christ says.
As you may recall from a 2013 Whisky Advocate article, I traveled with Christ and Woodford Reserve’s Chris Morris to learn what kind of a tree makes a great bourbon tree. That field research was done more than three years ago and Christ says his stave production has increased 10 percent since then. He says Dunaway pays more per stave log, but the inventory remains strong. “A log hits my yard today and will be inventoried for two to three months before processing,” Christ says. “But the cooperage inventory is so low due to increased barrel production that we are producing and selling this week and delivering next week. The demand for barrels both domestic and export is at record levels and cooperage production is running the same direction. ….For the most part, the stavemill is prepared to ramp up production if and when the loggers can get in the woods.”
There’s even promise for the oak growing in Kentucky, Christ says, with the U.S. Forest Service saying that Kentucky is growing at twice the harvest rate, offering a slight glimpse into the future supply of oak—at least for Kentucky. “We are not experiencing a shortage of timber or logs here in Fordsville, Ky. We can find the timber,” Christ says. “The real question is can we afford it and get it harvested fast enough to meet our current production needs.”
Of course, like anything, money talks. Boswell says his company has continued to raise its pay for white oak logs. At the same time, Independent Stave is developing new suppliers and territories to find cooperage-quality logs.
Since the majority of the oak used for bourbon barrels comes from private landowners in the Ozark and Appalachian areas, there’s likely a significant number of lumber mills driving through oak-friendly towns and seeking land with 65- to 80-year-old straight white oak trees that could be turned into stave logs right now. These landowners are positioned to receive bids from several companies, eventually increasing the price for the log. Independent Stave even has the No. 1 spot on Google for the search term “selling white oak logs,” with this online solicitation.
If you’re sitting on a gold mine of white oak, perhaps it’s time to sell. The value is based on state. A Grade 1 Stave Log in Tennessee averaged $817 per log last year, according to the September Tennessee Forest Products Bulletin, while the Missouri Department of Conservation indicates some stave logs sold as high as $1,400 apiece last year compared to the top price of $415 in 2012.
“Loggers, log brokers, and sawmills are all very motivated to sell white oak logs to our industry at these prices,” Boswell says.
So while there’s a national perception of a bourbon barrel shortage, the world’s largest cooperage says it’s “getting more volume” of white oak logs. And the larger distilleries are not experiencing a shortage. Heaven Hill’s Master Distiller Denny Potter tells me that the barrels are there, but are expensive.
However, for the newer 1 to 50 barrels-a-day distilleries, the barrel shortage is real. The major cooperages are giving barrel preference to their long-time customers, or may also be charging a premium for barrels. So many craft distillers are finding themselves on the outside looking in, either having to make a difficult financial decision to pay more than they can afford or to be put on a waiting list. “The craft spirit industry has a ton of energy and they’re wanting more barrels,” Boswell says. “While they are relatively small players in the industry, their cumulative voice is very loud and rightfully so.”
Meanwhile, as the bourbon boom continues and so-called craft whiskey is beginning to compete against the industry stalwarts, the barrel could become the great equalizer, and I really hope the distillers facing barrel concerns are able to stay afloat until barrels are affordable and available again. I’d hate to see good up-and-coming craft whiskey distillers make the shift to vodka.
Nobody wants to see that.