There was a time when the Sherry triangle (province of Cadiz in Southern Spain) was producing Sherries and, as a side business, would sell sherry butts to whisky companies so their distillates could be aged or finished in sherry barrels.
The Sherry trade has seen ups and downs over the past 15 years but overall, sales have not been amazing, leading to the bankruptcy of one bodega after the other and consolidation. Meanwhile, whisky sales just keep climbing and so is the demand for sherry casks.
Combined with lower yields over the past few years, this trend might lead to a peculiar situation:
The largest customers of the cooperages in the area are whisky companies who are paying for casks that can be legally called "sherry" casks (1).
Tens of thousands of new barrels are made, typically filled up with Sherry-like wine made in the Sherry DO and stored for at least one year. Note the term "Sherry-like" as the seasoning wine does not need to have the Sherry appellation as long as said wines are made by registered companies registered in the appellation, from grapes grown in the appellation and fortified up to at least 15%.
It is intuitive that Sherry-like wines are cheaper than Sherry DO wines hence any companies offering seasoning services (coopers, some bodegas etc…) will naturally tend to purchase such liquids. Most of the sherry cask business is driven by quantity over quality, the mission being to churn out as many sherry butts as possible (some/few, I am sure, might be looking at using sherry barrels that have held old immaculate Sherry DO wines for decades, which would influence the whisky tremendously. But these barrels are rare and one won't be able to find them in any kind of volume. This is the exception, not the norm).
As alluded to above, weather has a tremendous impact on yields which recently have notably gone down. This led to the little Sherry-like wines available while the sherry cask demand was climbing. Needing liquid to season, seasoning companies started to purchase DO Sherry wines to fill up those casks.
The whisky company purchasing thousands of casks is paying per unit: the price of said unit is mostly calculated based off of cost of manufacture, cost of the seasonning Sherry/Sherry-like wine and storage time. This means that the seasoning company, after 1+ years, empties barrels of their oaky liquid - the wine having sucked up a lot of wood matter from the new barrel - and ships it out to the whisky customer. The liquid has been paid for; its cost to the seasoning company is zero.
The bigger the need for sherry casks, the more zero-cost bulk DO Sherry wines having spent 12+ months in new barrels are available.
From a financial standpoint, it would be hard for any sherry producer to not think about blending a small fraction of these seasoning Sherry DO wines into one’s regular offering as a way to increase profits.
Whether it is done or not, I do not know. But it has to have crossed minds. And if it went further than just being an idea, it means that the average quality of the less expensive sherries is likely to come down and/or taste somewhat woodier.
(1) Wine-Seasoning Technical Specifications (in English): https://www.sherry.wine/documents/183/especificacion_tecnica_de_envinado_ingles_rev_03_2.pdf
(2) Jerez-Xeres-Sherry DO (in Spanish): https://www.sherry.wine/documents/288/Pliego_Jerez_normal_consolidado_RtlY1Wr.pdf