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[Editorial Note: Readers of this study are cautioned that
there has been significant changes in information on Hybrid Poplar and forest
products markets since this study was completed. This does not invalidate the basic premise of the study; however. Readers are cautioned, as always, to
evaluate their own situation and markets prior to taking action based on this
or any other study. It should be
noted that significant additional work has been completed by Potlatch
Corporation and Mater Engineering on the processing and manufacturing
characteristics of the wood and Potlatch Corporation is moving forward with
conversion of their Hybrid Poplar fiber plantations to solid wood
plantations.4-6-01]
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Marketing
Study for a Multi-Region
Plantation Hybrid Poplar Project
Executive Summary
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December, 1998
In the summer of 1998, the Baker-Malheur Regional Alliance and Potlatch
Corporation, in an unusual public-private contract partnership, retained
Mater Engineering out of Corvallis, Oregon to evaluate the market potential
of plantation-grown Hybrid poplar (HP) in the solid wood products markets. In
December of 1998, an added funding source for the project was provided by the
Mid-Snake RC & D in Idaho, allowing for expanded markets research and
increased potential buyer interviews.
Interest in undertaking the project from each of the funding entities was
prompted by several factors:
- In 1996, 70 acres of
Hybrid poplar were established in the Malheur-Baker County region; in
1997 - 400 additional acres were planted; and in 1998, another 400 acres
were scheduled to be planted. Spacing of the trees planted is 14' x 14'
to allow trees to reach intended sawlog size (vs. fibre size) of
14" to 18" dbh in eight to ten years when the trees are
planned to be harvested.
Eastern Oregon's interest in Hybrid poplars is
mainly for sawlogs as an alternative crop, although wastewater treatment,
floodplain and riparian protection, and creation of wind breaks might also be
important results of the project.
- Similar to Oregon, the
Mid-Snake RC & D has also developed a keen interest in evaluating
the potential of Hybrid poplar for solid wood products development.
- Potlatch is one of the
leading forestry and forest products corporations in the State of Oregon
with approximately 22,000 acres of Hybrid poplar plantations in and
around the Boardman-Hermiston area. The plantations, originally planted
for fiber production for use in the pulp and paper industry, range in
age with a substantial percentage in the 6-8 year old range. The
continued drop in the chip markets coupled with the downturn in the
Asian markets have prompted the corporation to evaluate other options
for their Hybrid poplar resource.
For this study, all three
entities were interested in ascertaining the highest and best use of the
Hybrid poplar resource as a solid wood product based on current potential
buyer interest.
The research undertaken for this study was conducted under several
methodologies which have been successfully employed by Mater Engineering on
other similar projects:
- Identification and
comparison of wood species characteristics through review of technical
literature and direct interviews with worldwide specialists in the
industry;
- Evaluation of general
product market trends through prior product research conducted by the
firm, coupled with new product trend information researched for this
project;
- Determination of
specific market demand for targeted products based on direct buyer
interviews with primary and secondary wood product producers, and
brokers throughout a western multi-state region;
- Analysis of new
resource sales and distribution options which might be employed in the
region to capture the highest value off the harvested Hybrid poplar
resource; and
- Evaluation of the
potential for new value-added processing options in the area employing
HP based on the firm's direct facility and equipment engineering and
design expertise in the industry.
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General
Conclusions and Recommendations:
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Over 175 in-depth interviews with primary and secondary
wood product producers, wholesalers, and by-product (bark, residue, etc.)
buyers in an eight-state study region were conducted for this project.
Overall, the in-depth interviews demonstrate a solid opportunity for taking
the next steps in moving Hybrid poplar into solid wood products markets. The
interest identified through the project interviews confirmed a volume demand
that is higher than projected production, though
current price structures appear to indicate a moderate return on investment.
Projected volume of Hybrid poplar to be available to the market through this
project is as follows:
- Potlatch estimated
annual Hybrid poplar wood volume
(Volume to be available by October, 2000)
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= 17.4 mmbf
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- Grower's
Association estimated annual Hybrid poplar wood volume
(Volume to be available by 2004; assumes 500
acres to be harvested annually)
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= 5 mmbf
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- Potlatch estimated
annual wood residue volume
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= 57,000 bdt.
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Several other indicators demonstrate positive potential
for Hybrid poplar. First, many primary and secondary processors are either
familiar with poplar/cottonwood and are currently using it in their products,
or they are interested in obtaining or testing it for the future. Second,
there is a shortage of traditional hardwoods similar to Hybrid poplar that
invites producer interest in species substitutions. Third, Hybrid poplar has
the potential to substitute for both hardwood and softwood species
in a range of non-structural products. Selling points are its light color,
clear smooth grain and appearance, light weight, lower price, and its
acceptance of a wide variety of finish applications (painting, staining, and
surface laminates).
Although many issues must first be resolved before bringing a new material
like Hybrid poplar into the wood products markets, the following indicators
point to a market-driven pull:
- Buyers of
basswood are looking for substitutes. The national shortage
of Basswood is supporting high Basswood prices (relative to Hybrid
poplar) and buyers are actively searching for new sources and
considering substitutes of similar species.
- Buyers of
alder are looking for substitutes because of Alder's high prices.
They will consider Hybrid poplar if it fits the application.
- Buyers of
Yellow poplar are also looking for substitutes in certain
applications which need a bright light-colored wood. Yellow poplar
heartwood has greenish tones and grayish/purplish streaks that
negatively affect its painting and staining qualities.
- There is
growth in demand for sanded core panels made from cottonwood;
these are plywood panels laid up with cottonwood or Hybrid poplar core
veneer without a protective surface veneer. Sanded core panels can be
overlaid with hardwood veneer, plastics, foils, or other laminates and
used for a very wide variety of products from cabinet doors to interior
sheathing.
- There is
growth in demand for other products where buyers have indicated an
interest in Hybrid poplar application. Those products
include furniture, cabinetry, moulding and millwork, window coverings
(especially wood venetian blinds), specialty wood products such as
picture frames, caskets, toys, etc., and log home production.
- There is a
shortage of appearance grade knotty pine for decorative
uses such as paneling, picture frames, finish moulding, and rustic and
contemporary furniture. Less intensively-manager Hybrid poplar
plantations produce wood with numerous small knots that are uniformly
distributed--a preferred quality among buyers of knotty pine.
- The Hybrid
poplar resource may be able to accommodate the main market drivers of
price and supply--buyers are looking for the best price and
the most reliable long-term supply. As a result, buyers are pulling logs
and lumber from a multi-state area, from 200 to 2000 miles. Buyers are
also looking 5 years ahead for new supplies.
- Among
cottonwood buyers, there is a demand for "new improved" cottonwood,
meaning: more clear high grade material with less defect, less tension
wood, and higher sawmill recovery. There is a perception that
hybridization and plantation culture will provide these improvements,
avoiding the losses experienced with "old growth" or
naturally-grown native cottonwoods. New mechanical and
working properties testing of Hybrid poplar conducted for this project
document significant improvements over native cottonwoods
which will prove beneficial in moving the species into targeted solid
wood products markets.
- Among some
buyers, there is a growing interest in "green" certification
(wood that is certified as being sustainably-grown), a preference for a
domestic wood supply, and a strong desire for a reliable wood supply
that won't be blocked by environmental barriers. The concept of growing
a consistent supply of crop trees on farm land, reducing harvest pull
from native and primary forests, is very appealing.
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Potential
Barriers to Investment and Suggested Mitigation Measures:
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- There is
a negative perception of cottonwood:
- In the wood
products industry, it will be necessary to target manufacturers already
familiar with cottonwood and provide them with useful detailed
information on HP's working characteristics in various manufacturing
processes, e.g. technical information about drying schedules, knife
angles, feed rates, etc. Buyers will also appreciate some information
describing how plantation culture and Hybridization has improved the
quality of this material and the consistency of its supply. Wood
samples should be sent to all interested buyers.
- In the
marketplace, improve the perception of HP with information pertaining
to its many qualities: light weight, light color, acceptance of a wide
variety of stains and finishes, etc. Describe some of its uses in
higher value products like furniture panels, mouldings, and wooden
blinds. It may also be valuable to describe how the plantations are
cleaning up water in rivers and streams.
- There is
significant confusion between Hybrid poplar (Populus species) and Yellow
Poplar (Liriodendron tulipifera):
It will be important to clarify the species
distinction up front because HP is a weaker wood than Yellow poplar. Focus
Hybrid poplar on specific applications for which a softer/weaker wood is
appropriate (furniture panels, window/door parts, interplys, sanded core,
some finish mouldings, paint/stain grade mouldings, laminated mouldings). It
may be possible to take advantage of HP's positive features by comparing its
better price, weight, and availability to the more familiar Yellow poplar.
Avoid applications for which HP has not been tested (some furniture parts and
other uses where strength or hardness is desirable).
- There is
a lack of information on the actual working characteristics of Hybrid
poplar:
Buyers and manufacturers will want detailed
technical information on HP such as: gluing abilities in a variety of
processes, drying schedules for solid wood and veneer, peeling and milling
techniques, laminating techniques (surface laminating of hardwood veneer and
synthetic laminates). This calls for testing.
While there is little information about Hybrid
poplar, there is considerable information about its parents, Black cottonwood
(Populus trichocarpa) and Eastern cottonwood (Populus deltoides).
There is also considerable expertise on manufacturing, drying, and finishing
cottonwood/poplar in the southern U.S., Europe, and New Zealand. For example,
Genebank International Ltd. in New Zealand makes chairs and tables from
Italian Hybrid poplar that it stains to look like a variety of other woods.
- Lack of
solid market information and utilization of bark and residue:
A new non-profit research organization can follow
several lines of research on the properties and potential of residuals for: water
and soil protection (filtration material, mulch); bark board production;
composite product manufacturing combining bark and residue with an adhesive
filler under pressure to produce plastic-like parts for furniture or other
items; and on-farm uses such as biofuels, compost, feed, and litter.
- Stump and
root removal/treatment appears more difficult than originally thought,
especially for older trees:
Several methods have been used successfully
employed in Europe and should be tested domestically: 1) Cutting off stumps
at ground level and drilling them out or grinding them up to sever basal
roots; 2) Stump pulling using various types of equipment. Resources and
information are available through the International Poplar Commission.
- Juvenile
wood from small log diameters:
There is a preference for larger log diameters
because of higher mill recovery, higher value, and improved mechanical
characteristics from mature wood. Current research suggests that HP matures
at 12 years, with sawlog quality growth following. This may lead to efforts
to increase the allowed rotation age from 12 years to approximately 15 years
on agricultural lands. Under current law, if HP plantations are allowed to
grow beyond 12 years, they will fall under the jurisdiction of the Oregon
Department of Forestry and the Oregon Forest Practices Act (ORS 527.620) with
its stricter regulations and higher costs.
- An effort
to change the law to allow up to 15-year-old HP trees to remain as an
agriculture crop may result in political resistance:
If a legislative effort is made to change the law
and increase rotation age, proponents can expect political resistance from
timber and paper industry interests who may likely oppose the change on the
following grounds:
- increased
competition
- lack of "a level
playing field" in regulatory and tax structures
- lack of access to
the land resource and to subsidies enjoyed by the agriculture
community.
Two things might occur to mitigate this resistance:
- Develop expertise
and capacity to process smaller logs through existing forest products
companies in order to quickly nurture Hybrid poplar's economic
infrastructure and generate cash flow under existing law.
- Develop a strategy
to address political resistance to increased rotation age by
facilitating collaboration between the timber industry and
with conservation interests, because both may ultimately gain.
The timber industry wants access a reliable, high quality wood supply
and markets. Conservation interests want to improve a host of
ecological conditions by restoring the following: streams, soils, plant
and animal habitat, biodiversity in plant and animal communities, soil
organic matter, and surface and groundwater quality (temperature,
volume, timing or flow regime, purity, suspended solids, biological oxygen
demand, etc.).
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New
Resource Sales and Distribution Options:
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The project evaluated the advisability for Eastern Oregon to implement
innovative sales and distribution options that could promote rural economic
development in the region by:
- capturing the
highest value from the HP resource
- spreading resource
offering costs; and
- adding product value
for the buyer of HP
Based on the survey results, best bet opportunities for
Grower Association focus are:
·
Implementation of a wood resource cooperative
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Consideration of "certified" wood
sales
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Development of "characterwood"
grades
·
New business development options including
cant production and possible compost production.
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New
Smaller-Scale Processing and Value-Added Production Options:
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New Smaller-scale processing options evaluated for this project included:
- Stump/root grinding
systems
- Portable single-pass
cant production systems
- Smaller-scale
composite product manufacturing systems
Value-added productions options evaluated for this project
included:
- Barkboard production
- Activated carbon
production
- Bark as a substitute
for peat moss
- Pellet production
- Agroforestry options
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Recommended
Short-Term Actions:
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This project was initiated on the premise that HP logs would not become
available in the region until the year 2000 from corporate (Potlatch)
resources, and year 2005 from Grower's Association resources. However, the
interview results underscore the need to initiate short-term actions which
can dramatically impact overall long-term success. Based on the study
results, there are eleven (11) key short-term actions which deserve immediate
attention:
- Increase familiarity with
key contacts and players currently working in the HP arena:
- Expand the existing
Grower's Association to a region-wide organization (OR, WA, ID) with two
arms: a non-profit arm with a research, education, and grower support
role; and a for-profit cooperative with a marketing and business
incubation role.
- Initiate immediate
business development opportunities based on in-depth interview results:
- Evaluate options for
value-added processing in the region based on immediate development
opportunities:
- Initiate additional
wood working properties testing with interested manufacturers
- Focus in-field
testing on affordable, efficient stump/root treatment options:
- Identify and evaluate
immediate private investment access opportunities:
- Build public-private
linkages:
- Develop sample
packets for distribution to potential product/resource buyers:
- Build public-public
linkages:
- Initiate additional
feasibility analyses with immediate and future solid wood products
markets in mind:
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Recommended
Long-Term Marketing Strategies:
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Six (6) key strategy areas have been identified which can help facilitate
long-term interest in investing in HP:
- Secure funding for
on-going research and testing for non-traditional product development
and long-term plantation research:
- Consider development
of a HP manufacturing and marketing co-op:
- Evaluate options for
value-added processing in the region based on longer-term development
opportunities:
- Look at the
application of a "Forest Bank" concept for HP plantation
development:
- Evaluate
opportunities and constraints for application of carbon sequestration
designation and investment on HP plantations:
- Analyze potential new
policy changes and incentive programs which could impact HP plantation
growth:
To inquire
about receiving a copy of the full report, please contact:
Catherine
M. Mater
Vice President
Mater Engineering, Ltd.
101 SW Western Blvd
Corvallis, Oregon 97333
Tel: (541) 753-7335
Fax: (541) 752-2952
e-mail: mater@mater.com
Dave
Jensen, Director
Economic Developer Department
Malheur County
676 SW Fifth Avenue
Ontario, Oregon 97914-3436
Tel: (541) 881-0327
Fax: (541) 881-0329
e-mail: mcedd@fmtc.com
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