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Agricultural Residues Dr. Tim Smith Associate Professor, CEM & Bio-based Products Director, Forest Products Management Development Institute University.

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Presentation on theme: "Agricultural Residues Dr. Tim Smith Associate Professor, CEM & Bio-based Products Director, Forest Products Management Development Institute University."— Presentation transcript:

1 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

2 BP 3503-5503: MARKETING BIO-BASED PRODUCTS © T. M. Smith, 2005 | UNIVERSITY OF MINNESOTA, Department of Bio-based Products 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…

3 BP 3503-5503: MARKETING BIO-BASED PRODUCTS © T. M. Smith, 2005 | UNIVERSITY OF MINNESOTA, Department of Bio-based Products Historical Gas/Crude Oil Prices Minnesota gas prices down 21% in past month. Crude down 14%.

4 BP 3503-5503: MARKETING BIO-BASED PRODUCTS © T. M. Smith, 2005 | UNIVERSITY OF MINNESOTA, Department of Bio-based Products Historical Gas/Crude Oil Prices Bush releases oil from the nation's emergency stockpile

5 BP 3503-5503: MARKETING BIO-BASED PRODUCTS © T. M. Smith, 2005 | UNIVERSITY OF MINNESOTA, Department of Bio-based Products

6 BP 3503-5503: MARKETING BIO-BASED PRODUCTS © T. M. Smith, 2005 | UNIVERSITY OF MINNESOTA, Department of Bio-based Products Wood Procurement – Mill Costs (Metering Ag. Fiber in Paper) Aspen Pulpwood Stumpage:$28.89 Estimated additional Costs: Production/Harvest Cost$35.00 Transportation$0.17/mile; plus $6.00/cord loading 2002-2003 state stumpage sales of Aspen Statewide Avg. Price per Cord = $28.89 Miles:50100150250350450550 Transportation: $ 14.50 $ 23.00 $ 31.50 $ 48.50 $ 65.50 $ 82.50 $ 99.50 Total Est. Mill Cost: $ 78.39 $ 86.89 $ 95.39 $ 112.39 $ 129.39 $ 146.39 $ 163.39 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.

7 BP 3503-5503: MARKETING BIO-BASED PRODUCTS © T. M. Smith, 2005 | UNIVERSITY OF MINNESOTA, Department of Bio-based Products 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 in an estimated target agricultural fiber costs of $78 to $158 per dry ton.

8 BP 3503-5503: MARKETING BIO-BASED PRODUCTS © T. M. Smith, 2005 | UNIVERSITY OF MINNESOTA, Department of Bio-based Products Wood Procurement – Price/Ton of dry fiber 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. Two Primary Questions

9 BP 3503-5503: MARKETING BIO-BASED PRODUCTS © T. M. Smith, 2005 | UNIVERSITY OF MINNESOTA, Department of Bio-based Products Minnesota in pretty good shape…

10 BP 3503-5503: MARKETING BIO-BASED PRODUCTS © T. M. Smith, 2005 | UNIVERSITY OF MINNESOTA, Department of Bio-based Products Agricultural Straw Resource Million mt Wheat, barley, oats(100%) a 118.2 Soil conservation(50%)59.1 Agricultural uses(35%)41.4 Surplus(15%)17.7 a Assuming 1 mt of straw for each mt of grain produced (Bowyer 2001) Estimated Straw Surplus in North America, 1999

11 BP 3503-5503: MARKETING BIO-BASED PRODUCTS © T. M. Smith, 2005 | UNIVERSITY OF MINNESOTA, Department of Bio-based Products Agricultural Straw Resource High Straw Concentration 1 2 1 2 3 3 4 4 5 5 6 6 7 7 8 8 Blandin (UPM-K) 550 59.42 Boise Corp. 970104.80 Cerainteed 100 10.80 G-P, Duluth 350 37.82 I-P 370 39.98 G-P, Bemidji 100 10.80 Sappi1150124.25 Stora-Enso 440 47.54 Annual Pot. Demand 435.41 Equivalent to 485,304 cords of green Aspen. Daily Prod. (tons d ) 15% Fiber (m tons d ) ≈100 miles Note: 15% fiber requirement based on Sappi procurement data. (Bowyer 2001) $36/ton, + trans.

12 BP 3503-5503: MARKETING BIO-BASED PRODUCTS © T. M. Smith, 2005 | UNIVERSITY OF MINNESOTA, Department of Bio-based Products Potential Fiber Cost Savings 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. Estimated Savings for a Mill purchasing 100,000 tons of Agricultural Fiber

13 BP 3503-5503: MARKETING BIO-BASED PRODUCTS © T. M. Smith, 2005 | UNIVERSITY OF MINNESOTA, Department of Bio-based Products 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


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