Projects

Commercialization of Forest Biotechnology

Project Description

There are two components to the analysis of the impact of biotechnological advances. The first component examines the potential impact of biotechnological advances on the cost structure of U. S. pulp and paper mills. The second component examines how such changes would affect the global competitiveness of U. S. industry, even when foreign competitors are implementing their own biotechnological advancements.

The initial two years of this research, phase 1, will consider only the first component. The aim is to assess the profitability of potential biotechnological advances in the wood supply on the U.S. pulp and paper industry. If the results of this research point to a significant potential for biotechnology in the industry, the research will advance to the second component in phase 2.

The first step in studying the potential impact of biotechnological advances is to identify the set feasible of changes that can be made to genetic traits and assess what these changes may do to growth rates, pulp and paper yields. The genetic traits that have been modeled previously include, tree growth rates measured as increases in volume (m3) and wood density (kg/m3). We intend to construct our model to also include traits that mostly impact wood processing efficiencies into pulp, wood density and chemical contents (cellulose/lignin ratios); and traits that mostly impact processing efficiencies into paper, fiber length (mm), fiber coarseness (mm/gm) or cell wall thickness, fiber stiffness or microfibril angle. In addition, whenever possible estimates of increased efficiencies and decreased losses due to wood and fiber uniformity will be included.

It is likely that genetic selections, even clonal selections, will simultaneously change multiple traits due to allelic combinations contributing both additive and nonadditive genetic effects. Moreover, growth rates and common wood and fiber traits are quite interrelated. For example, fast growing young trees are enriched in juvenile wood that is less dense and contain on average shorter fibers that have lower cellulose to lignin ratios, less coarse fibers and decreased stiffness due to higher microfibril angles. Therefore, increases in growth rate elevate the proportion of juvenile wood in the fiber supply leading to a potential loss in overall fiber quality for some products.

Genetic engineering strategies should be more targeted than selection based improvements. It may be expected that changes in specific biosynthetic or cellular pathways may have less pleiotropic effects than clone selections. However, decreasing lignin contents in trees through down regulation of a specific gene produced trees with decreased lignin contents, increased cellulose contents and increased growth rates (Hu et. al., 1999). Currently, the ability to modify the expression of multiple genes through genetic engineering strategies is limited to two-three genes. However, improvements in genetic transformation methods and gene regulation methods are occurring rapidly. The most likely targets for improvements by genetic engineering are improving cellulose/lignin ratios and fiber strength.

Once the feasible set of changes to genetic traits is identified, the second step is to estimate the cost savings to pulp and paper manufacturers for changes to specific genetic traits of wood inputs. The U.S. industry is highly vertically integrated, with pulp and paper companies controlling the production process from seedling to final output. Our model of production cost will adopt this perspective by evaluating the profitability of wood trait changes through the entire production process. This will be accomplished by having both a "forest cost" component and a "mill cost" component in our production model.

The costs and effects of forest operations will be integrated into the "forest cost" model: cost variables include land, property taxes, seedlings, planting, silvicultural and management, logging, and transportation; and price variables include: stumpage prices, mill prices. Prices, costs and growth rates will be estimated from, information related to select species grown in the Southeastern U. S.

The "mill cost" model, takes advantage of existing resources available to the IPST. To understand the cost structure of the U. S. paper industry, IPST subcontracting with Jaakko Pöyry Consulting (JPC), developed a useful assessment methodology for reviewing the impact of new technologies on total mill operating and capital costs. Three Greenfield base cases were modeled in a spreadsheet: linerboard, uncoated free sheet, and newsprint facilities from the wood yard through shipping (see Appendix 1). This spreadsheet model was based on engineering equations of the mill operation processes and best-guesses by industry experts of parameter values.

The engineering equations and parameter estimates underlying this JPC spreadsheet will be used as the starting point of the mill cost model. The mill cost model will be modified to incorporate trend prices rather than 1995 prices. Note that Patricia Turner, who created the mill cost models at JPC, will be working at IPST with David White from May to August 2001. If this proposal is funded, her presence at IPST at the beginning of the research will facilitate an understanding of the assumptions made in the Greenfield mill models and catalyze our progress towards integrating forestry related costs with this mill model.

The forest cost and mill models will be linked through summary sheets, where log, and chip prices can be fed into the mill model. The set of feasible genetic changes derived in the first step of this analysis would then be studied using the integrated spreadsheet models. Multiple scenarios will be run to determine whether biotechnology advances can produce profitable changes in wood traits and, if so, which choice of genetic variations would be the most profitable to pursue. It is expected that genetic changes that favor superior wood quality traits will adversely affect wood and fiber qualities; therefore tradeoffs in growth rate and fiber quality traits will need to be assessed for the optimum profitability changes. Scenarios will be run to assess the profitability of single and multiple changes in genetic traits of wood inputs. The outcome of these scenarios will be plotted as profitability curves and optima identified.

Assuming the results of the first phase of this proposal are positive, the research would move to the second phase, examining the response of the U.S. industry and foreign competitors to biotechnological advances.

The impact of lower production costs through biotechnological advances on the U. S. industry is dependent on the structure of the U. S. pulp and paper market, on the reaction of foreign competitors to innovations in the U. S. market and on the proliferation of U.S. technological advances. A variety of scenarios will be developed based on interviews with U. S. and foreign pulp and paper manufacturers. This will be used to form an industry-wide analysis of biotechnological advances.

(Benchmarking paragraph to be completed) Assessment of the impacts of clonal forestry and genetic improvement of planting stocks on mill costs and efficiencies are best studied in the context of South American, e.g. Brazil, pulp production. High growth rate plantations for softwoods are in Chile or New Zealand. Companies in Brazil have been practicing clonal forestry for >20 years and are seeing large benefits in costs, efficiencies and quality improvements using Eucalyptus. We plan to organize a trip near the end of phase 1, year 2, to collect primary data about the status of genetic improvement programs targeting wood and fiber quality traits that would affect pulp and paper production.
This case study of clonal forestry on improved mill efficiencies would provide a benchmarking of the world's best production forests and their usage. It would also provide critical insight into the competitive status of the global competition for U.S. companies.

There are three outputs from the first phase of this research that may be of use to academic researchers. The first output, the biological feasibility study, is a listing of the feasible wood trait changes that may possibly be achieved by biotechnology, as it stands today and for the near future. The second output is an integrated spreadsheet model that includes forest and mill costs that can be used to relate changes in specific wood traits to changes in profitability of U.S. pulp and paper mills. The third output is an analysis of profitability functions carried out for the natural and potential variation in single and multiple genetic changes for log, slush pulp and kraft linear board.

The feasibility study can aid researchers in identifying potential projects for biotechnology research. However the results of this feasibility study alone are insufficient, as this study does not indicate which genetic changes would be the desirable from the perspective of industry. This will be a particular problem when research may change several wood traits simultaneously. The spreadsheet model can evaluate the direction of desired changes for potential genetic engineering research for single- or multiple-trait changes. Using the spreadsheet model researchers can pinpoint biotechnology applications that have the greatest potential for industry and therefore the greatest potential for industry funding.

The results of this research can also be of use to researchers working on new production processes in pulp and paper manufacturing. As biotechnology changes the wood traits of tree species, this opens up the potential for new production processes to take advantage of these changed traits. Those biotechnology applications that present the most profit potential for industry are also likely to be those most quickly developed. Using the feasibility study and the spreadsheet model, researchers working on new production processes can identify the wood trait changes that are most likely to occur in the future and thus identify the changes in production processes that will be most valuable.

There are three outputs from the first phase of this research that may be of use to academic researchers. The first output, the biological feasibility study, is a listing of the feasible wood trait changes that may possibly be achieved by biotechnology, as it stands today and for the near future. The second output is an integrated spreadsheet model that includes forest and mill costs that can be used to relate changes in specific wood traits to changes in profitability of U.S. pulp and paper mills. The third output is an analysis of profitability functions carried out for the natural and potential variation in single and multiple genetic changes for log, slush pulp and kraft linear board.

This research provides the U. S. forestry, pulp and paper industry a framework for assessing the impact on profitability of genetic changes, and a guide for the placement of research funding. Using the spreadsheet model, U. S. industry can ascertain how large gains from biotechnology research might be. If it is determined that biotechnology advances are worth pursuing, the model can clearly identify the avenues for increased mill profitability. Industry and government funded research can proceed with an emphasis in these vital areas.

This information would also benefit biotechnology suppliers as a guide for the most profitable avenues for research. It identifies the genetic alterations that would be most desirable for industry and thus the advances most likely to be purchased by industry.
For U. S. manufacturers, which use wood as an input, an outline of likely changes in genetic traits of wood inputs in the future would be valuable. As manufacturing processes need to evolve along with the changes in the traits of the wood inputs, this will provide a guide for future investment in the industry and for future research in manufacturing processes.

Duration: 2 years