Hoppers + Droppers + Furnaces = Erased Items

I have a loop around a furnace that's meant to make charcoal out of wood, and then fuel the furnace with the charcoal to make more out of more wood.

Basically, it's a hopper on top of a furnace (for wood), a hopper beside the furnace (for fuel), and a series of hoppers under the furnace (for product) that then lead up a dropper chain and are then dropped back into the fuel hopper. I have a pulser connected to the droppers to make them continuously move the charcoal.

At some point in this chain (and I can't figure out where) all of the charcoal is disappearing. I put 4 stacks of wood in the top and when I came back only a few minutes later there was nothing in the entire system (there should have been charcoal backed up somewhere).