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Why bourbon’s incredible popularity might actually be a problem

Courtesy of Flickr user <a href="">Joseph Novak</a> under Creative Commons license

Ever since 2000, lumber has been something of a sore subject in the United States. Growth in Chinese furniture manufacturing has undercut many domestic businesses, turning local hardwood production into more of an export-driven endeavor. And the housing crisis has put a clamp on what was, for decades, a healthy demand for kitchens and flooring made with wood. "It's been a very difficult industry to be in the last 10 years or so," said Bill Luppold, who is an economist for the U.S. Forest Service. "We've lost so much of our business."

But while the wood industry at large is suffering, there is actually one segment that seems to be doing just fine. In fact, it might be doing a bit too well. White oak barrels, which are used to age bourbon, are in such great demand that barrel production is actually struggling to keep up. "People are drinking more bourbon and that's increasing the demand for barrels," said Judd Johnson, the editor of the Hardwood Market Report.

The data certainly seems to bear that out. Bourbon production, in response to the growing craze over Kentucky-distilled whiskey, jumped more than 70 percent between 2009 and 2013, according to data from the Kentucky Distillers' Association.

And that's actually a bit of a problem. Bourbon barrel production is a particular process, which requires the use of only higher quality wood. As it happens, that fancier wood isn't as easy to come by.

"Very little of the wood out there is fit to be used for bourbon barrels," said Jeff Stringer, a professor at the University of Kentucky who studies hardwood silviculture and forestry. "Only a small fraction of stave logs are high enough quality. That makes it really hard for the wood industry to adjust."

Stave logs are the oak planks that barrel-makers piece together and then hold in place with metal loops to make the bourbon barrels. Part of the reason it will be difficult to continue to supply enough stave logs to meet the demand of the bourbon industry is that chopping down trees is contingent on the ability to use all the wood—not just that which is fancy enough for bourbon barrels.

"It takes strong timber markets to allow the flow of stave logs out of the woods," said Stringer. "The number one concern is not the amount of logs out there—it's the ability to get them out."

Unlike barrels used to age other spirits, including tequila, those used for bourbon are also never used twice, complicating the issue further.

"The barrels have limited use," said Johnson. "Since they can't be used endlessly, that definitely adds to the problem."

But this problem could also, eventually, prove to be a blessing for the industry down the road. Growing demand from a skyrocketing bourbon boom, which laps up new white oak, never using it twice, means there will be an opportunity for loggers so long as they can supply the demand.

And what better incentive than the current markup in wood prices? White oak staves, in response to the rush to supply bourbon barrels, are selling for more than 20 percent above what they were at the start of the year.