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BP 3503-5503 – Marketing Bio-based Products

Agricultural Residues Dr. Tim Smith Associate Professor, CEM & Bio-based Products Director, Forest Products Management Development Institute University of Minnesota. BP 3503-5503 – Marketing Bio-based Products. The Plan for Today.

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BP 3503-5503 – Marketing Bio-based Products

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  1. Agricultural ResiduesDr. Tim SmithAssociate Professor, CEM & Bio-based ProductsDirector, Forest Products Management Development InstituteUniversity of Minnesota BP 3503-5503 – Marketing Bio-based Products

  2. The Plan for Today • Discussion of factors increasing biomass resources from agriculture: • Crop yields and seed ratios • Collection Technologies and tillage • Biomass for fuels/products and secondary processing residues • Ag. Residues in the Global Panels Industry: • Wood fiber and Ag. Fiber link • Wood fiber per capita dilemma • Growth of Plantation Forests • Crops for industrial use • Residues… | UNIVERSITY OF MINNESOTA, Department of Bio-based Products

  3. Historical Gas/Crude Oil Prices • Minnesota gas prices down 21% in past month. • Crude down 14%. | UNIVERSITY OF MINNESOTA, Department of Bio-based Products

  4. Historical Gas/Crude Oil Prices Bush releases oil from the nation's emergency stockpile | UNIVERSITY OF MINNESOTA, Department of Bio-based Products

  5. | UNIVERSITY OF MINNESOTA, Department of Bio-based Products

  6. Wood Procurement – Mill Costs (Metering Ag. Fiber in Paper) 2002-2003 state stumpage sales of Aspen Statewide Avg. Price per Cord = $28.89 Aspen Pulpwood Stumpage: $28.89 Estimated additional Costs: Production/Harvest Cost $35.00 Transportation $0.17/mile; plus $6.00/cord loading Notes: Stumpage value based on Minnesota DNR data; estimated additional costs generated from talk delivered by Bob DeRoche, Wood Procurement, Stora Enso, April 22, 2004, St. Paul, MN. | UNIVERSITY OF MINNESOTA, Department of Bio-based Products

  7. Wood Procurement – Price/Ton of dry fiber • 1.8 tons of oven-dry wood is required to produce a ton of oven-dry pulp, resulting in total fiber costs of $150 to $313. Assuming that yeilds drop approximately 10% when using agricultural fiber as the feedstock, • 1.98 tons of oven-dry agricultural fiber is required to produce the same ton of oven-dry pulp, resulting inan estimated target agricultural fiber costs of $78 to $158 per dry ton. | UNIVERSITY OF MINNESOTA, Department of Bio-based Products

  8. Wood Procurement – Price/Ton of dry fiber Two Primary Questions • Is adequate straw surplus available within reasonable transportation distances to Minnesota pulp mills? • Can this resources be delivered to Minnesota pulp mills at a price below its highest cost equivalent fiber - $158 per dry ton. | UNIVERSITY OF MINNESOTA, Department of Bio-based Products

  9. Minnesota in pretty good shape… | UNIVERSITY OF MINNESOTA, Department of Bio-based Products

  10. Agricultural Straw Resource Estimated Straw Surplus in North America, 1999 (Bowyer 2001) | UNIVERSITY OF MINNESOTA, Department of Bio-based Products

  11. $36/ton, + trans. 4 1 2 1 3 3 5 2 5 6 6 4 7 7 8 8 Agricultural Straw Resource Daily Prod. (tonsd) 15% Fiber (m tonsd) ≈100 miles Blandin (UPM-K) 550 59.42 Boise Corp. 970 104.80 Cerainteed 100 10.80 G-P, Duluth 350 37.82 I-P 370 39.98 G-P, Bemidji 100 10.80 Sappi 1150 124.25 Stora-Enso 440 47.54 Annual Pot. Demand 435.41 Equivalent to 485,304 cords of green Aspen. (Bowyer 2001) High Straw Concentration Note: 15% fiber requirement based on Sappi procurement data. | UNIVERSITY OF MINNESOTA, Department of Bio-based Products

  12. Potential Fiber Cost Savings Estimated Savings for a Mill purchasing 100,000 tons of Agricultural Fiber • With a metering strategy, the mill doesn’t replace wood fiber at its average cost but at its highest fiber costs. • For a mill purchasing 100,000 tons of Ag. fiber, annually; potential savings of $2 to $11 million are not out of the question. • On average, potential savings to the Minnesota Pulp & Paper Industry of $20 million, annually. | UNIVERSITY OF MINNESOTA, Department of Bio-based Products

  13. Additional Issues – the short list… • Straw Storage and preparation • Additional material handling capital/operations costs • Impact on the farmer (soil conservation, opportunity costs, etc.) • Impact on forest resource, price elasticities | UNIVERSITY OF MINNESOTA, Department of Bio-based Products

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