Projects

Commercialization of Forest Biotechnology

Background

The U. S. pulp and paper industry is in the midst of dramatic changes in raw material supply. Over the last 15-20 years the raw material supply has changed from older trees harvested from "natural" resources to recycled fiber and trees harvested primarily from agriculturally grown trees. Improved growth traits coupled with intensive tree farm management techniques have led to dramatic increases in productivity of harvestable wood at an earlier age.

However, the land base used for tree farming is still low and continues to deteriorate under pressures of urbanization. Economic analyses show that in the U. S., fiber costs currently represent up to 40% of the total cost for paper manufacturing. To counteract the shrinking land base and competition from lower cost countries nearer the equator, biological technologies including cloning, enhanced selection methods, molecular breeding, and genetic engineering are being researched with the goal of producing trees that have higher growth rates and modified fibers tailored to specific processing methods and products.

Forest products companies are more vertically integrated since they, for the first time in history, control much of their germplasm, farming methods as well as all aspects of processing and manufacturing. Such vertically integrated companies stand to benefit the most from germplasm improvement since they can capture the economic gains from all levels of production. By applying biological technologies to germplasm improvement, the potential exists to dramatically accelerate growth rates and produce fibers whose altered properties simultaneously decrease processing costs and increase the amount of paper produced from the same amount of fiber. Such raw materials would provide large competitive advantages at all levels of production and could dramatically increase the profitability and global competitiveness of U. S. paper producers.

The aging of U. S. pulp and paper mills and their technologies, the high capital and fiber costs places this industry at a strategic inflection point where manufacturing processes, equipment and fiber supply all need to be improved simultaneously. One of our goals is to provide a fundamental economic framework to evaluate possible coevolutionary strategies of simultaneous change in the sustainable raw material supply, processing and production methods.

A two-phase research program is outlined. Phase 1 analyzes the biological feasibility and the potential economic impacts of biotechnology based changes in the quality of the fiber supply. Phase 2 analyzes the effect of biotechnology solutions on global competitiveness of the U. S. forest products industry, including critical commercial and regulatory issues for international implementation of biotechnology solutions.

Phase 1 will develop an in-depth economic assessment of biotechnology. A cash flow model will be constructed to assess the profitability of wood trait changes relative to pulp and papermaking technologies and their advancements. This model will be combined with a technical assessment of the potential for wood trait changes through biotechnology. Combined, these two tools will help predict changes in profitability for pulp and paper operations available through biotechnological advances.
After the completion of phase 1, a decision will be made whether to proceed with a more detailed plan for the research in phase 2. If the results of the first phase suggest that the potential for biotechnology to affect the profitability of the pulp and paper industry is very slight, then the research will be discontinued. If the results of the first phase suggest that there is significant profit potential for biotechnological advances, then the research extension will be requested to examine the implications of biotechnological advances, both within the U. S. industry and in the international pulp and paper industry.

Even if we assume the potential for processing cost reduction in the U. S. through biotechnological advances is large, we should not immediately conclude that biotechnology is a worthwhile research pursuit for the industry. The impact of biotechnological advances on the competitiveness of the U. S. industry depends on the responses of the U. S. industry and foreign competitors to U. S. innovations. It is this topic, which includes critical to regional/global public policy and environmental issues related to implementing such biotechnology advances, market acceptability's and intellectual property rights in international trade that will need to be addressed in the second phase of the research.

Overall this research is expected to identify the applications of biotechnology in the forest that possess the greatest potential for improving the profitability of the U. S. pulp and paper industry. This research can then be used to guide the spending of future resources towards forest biotechnology research in government, academe and industry.

The economics of land usage for forestry is complicated by the multiple uses of trees for solid wood, engineered wood, energy, and pulp and paper products. The use of all parts of the tree for maximum value is the goal for forest products companies. Generally the best use varies with age of the stand and piece of the tree. The production of solid wood from the stem is most often maximized, since the southern pine stumpage prices for solid wood are typically three times higher than for pulpwood (Harris, 2000). The general strategy foresters have used is to increase the value per unit of land by maximizing growth rates. Dramatic improvements in southern pine growth rates have been achieved through traditional genetic selections, planting seedlings derived from closed pollinated families, and by applying intensive forest management techniques (McKeand & Svensson, 1997).

However, high growth rates lead to dramatic increases in the amounts of juvenile earlywood. These large increases in the proportion of juvenile earlywood in the fiber supply have caused some concerns about the poor quality, low stiffness, of the wood supply. Juvenile earlywood has reduced wood and fiber qualities, such as lower wood stiffness, wood density, lower cellulose/lignin ratios, fiber lengths and fiber strengths when compared to juvenile latewood or mature earlywood and latewood. Thus, growth rate is intimately coupled to wood and fiber quality. Because of these interrelationships, the cost model needs to be able to account for simultaneous changes in multiple tree, wood and fiber traits. For example, maximum growth rates at reduced densities may be less preferable than reduced growth rates with higher densities when trees are used for pulp production. A simple economic model for pulp yields demonstrates that selecting parents for seed orchards based upon wood density alone gives expected gains in profit of 3.3% to the mill; whereas selecting parents solely on volume growth, expected gains in profit to the mill of only 0.3-0.4% (Bridgewater et. al., 1999). Thus, volume growth is not the most profitable trait for selections from the mill perspective, whereas it may be from the forester's perspective.

Even larger gains in volume growth and improvement in wood properties than have been achieved to date without cloning, are expected through implementation of clonal selection and clone deployment, clonal forestry. Clonal forestry has the potential to not only capture the best individuals from breeding populations, but also will provide a new level of uniformity to the wood supply that has not been previously achieved (Ellis & Sutton, 1998). This increased wood uniformity, even without alterations in quality, is expected to have large impacts on mill costs, efficiencies and qualities. In Brazil, for example, clonal selection and deployment of Eucalyptus grandiis provides superior costs, efficiencies and qualities of pulp to companies like Aracruz (Zobel & Jett, 1995).

Genetic engineering of superior clones provides additional avenues for further increasing growth and substantially altering wood and fiber properties. For example, in Aspens reports of genetically modified trees with very low levels of 4-coumarate:coenzyme A ligase, an enzyme involved in lignin monomer biosynthesis, have up to 45% lower lignin levels and 15% higher cellulose contents than genetically unmodified Aspen (Hu et. al., 1999). Thus, changes in the expression of a single gene can have large impacts on the final wood and fiber properties and ultimately translate into large cost savings that lead to appreciable competitive advantages.

There exists a small economic literature within forestry economics attempting to evaluate the profit potential of changing wood traits (Greaves and Borralho (1996), Greaves et. al. (1997), Bridgewater et. al., 1999, Chambers and Borralho (1999)). This literature was developed in the context of adapting wood traits through tree breeding.

Due to its basis in tree breeding, this literature is concerned with the effect of changes in gross characteristics of wood, such as volume, density and form. A further limitation is that this literature evaluates only the effect of these gross wood trait changes on the cost of pulp production. A model of the pulp process is developed and cost savings of wood trait changes are estimated using pulp mill cost data.

This tree breeding literature is of limited value to biotechnology research. Biotechnological advances will involve changes in wood traits on a smaller level, such as changes in fiber lengths, cell wall thickness and chemical contents, that will then cause changes in gross traits, such as volume and density. A production cost model of gross traits is not a sufficiently precise indicator of the profit potential for micro trait changes. This proposal plans to develop a production cost model that will relate changes in production costs to changes in wood traits that can be produced by biotechnology.

The limited literature and research in the public sector that relates directly to this proposal suggests opportunities for pioneering research. Thus, this proposal represents a timely, cutting edge analysis important for both academia and industry. Moreover, forest biotechnology is a vital area of research whose government-sponsored research needs more clear direction.

It should be noted however, that the authors are aware of similar, ongoing efforts being carried out in large U. S. forest products companies. An academic project in this area should to provide information and knowledge that can be more freely disseminated to the public that may help direct government sponsored research. Additionally, if phase 2 is warranted then a 3rd party analysis of some of the critical policy issues should lend objectivity to these important debates.

References

Bridgewater, F.E., Byram, I.D., Lowe, W.J. (1999). Selecting loblolly pine parents for seed orchards to minimize the cost of producing pulp. Forest Science 42: 213-216.

Chambers P.G.S., & Borralho N.M. (1999). A simple model to examine the impact of changes in wood traits on the costs of thermomechanical pulping and high-brightness newsprint production with radiata pine. Can. J. For. Res. 29: 1615-1626.

Ellis, D. & Sutton, B. (1998) Implementing clonal propagation and genetic engineering: Implications for Pulp and Paper, Proc. 7th Intl. Conf. Biotech. In Pulp & Paper, Part 1. A29-31.

Greaves, B.L. & Borralho N.M. (1996). The influence of basic density and pulp yield on the cost of eucalypt kraft pulping: a theoretical model for tree breeding. Appita 49: 90-95.

Greaves, B.L., Borralho, N.M, Raymond C.A. (1997). Breeding objective for plantation eucalypts grown for production of kraft pulp. Forest Science 43(4) 465-472.

Hu W.J., Harding S.A., Lung J., Popko J.L., Ralph J., Stoke D.D., Tsai C.J., Chiang V.L. (1999). Repression of lignin biosynthesis promotes cellulose accumulation and growth in transgenic trees Nature Biotechnol;17(8):808-12

Harris, T. (2000). Timber Mart South. 2000 average U.S. South stumpage prices http://www.forestry.uga.edu/warnell/tmart/prices.html

McKeand, S. & Svensson, J (1997). Sustainable Management of Genetic Resources in Pinus taeda. Journal of Forestry 95(3): 4-9.

Zobel, B. J. & Jett, J. B. (1995). Genetics of Wood Production Chapter 6: Inheritance of the Cellular Components of Wood, Cellulose Yield, and Pulp and Paper Products p. 126-147 Springer-Verlag.