technical report- final

technical report- final

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  1 Technicalreport on Alternativeuse for excess Christmas trees Summary Christmas tree farmers face challenging markets as the sale of artificial Christmas tree sales increase. High production costs for the average farmer and the long return on investment make their investments unstable. Annual fluctuations in consumer demand because of changes in perception on the environmental impacts of cutting live trees versus artificial trees affect annual real tree sales. Essential oils are a product derived from the foliage, branches, bark, and flowers of plants through a process called steam distillation. They are a highly valued non-traditional forest product that can be derived from coniferous trees. Many species of Christmas trees are also highly demanded as essential oils. Balsam fir, scots pine, and Douglas fir are common species desired for both products and are commonly grown in New York State. Christmas tree growers can potentially form partnerships with essential oils producer in need of raw materials to sell unsellable or excess trees in order to recover lost profits. This report details what makes Christmas trees potentially desirable to Essential oils producers as a raw material source. The methods used to produce Christmas trees make them desirable: trees selected, trimming methods, and foliage density. I recommend that Christmas tree growers create an annual agreement with essential oil producers to sell their second quality and unsellable trees in order to increase their annual revenues. Introduction Christmas tree growers face an ever changing market, as the economy waxes and wanes these farmers face uncertain futures. According to an article by Pennsylvania State cooperative extension (2013), many growers find that they produce more poor quality trees than expected each year; these trees are sold for half the price of the ideal Christmas tree. There is potential for the recovery of lost revenues from these second quality trees. Non-traditional forest products (NTFP) that are made from conifers could be a potential market for Christmas tree growers. Artificial Christmas trees are a well-liked alternative product to traditional cut trees. Increases in artificial tree sales have caused a decrease in annual Christmas tree sales. There was $685 million worth of artificial Christmas trees sold nationally in 2012 (Statistic Brain Research Institute 2015). By considering a secondary market for second quality and unsold Christmas trees, growers have the potential to recover lost revenues from the unsaleable trees or even increase their yearly profits. There is a high demand for NTFPs produced from conifers. Essential oils (EOs) are a high value product produced from the needles and twigs of many species of conifers. Essential oils are the base essence or oils of a plant that contains their fragrance. These oils are desirable for their medical properties. They are produced by steam distilling the needles and branches of pine trees. Both choose and cut, and pre-cut tree markets have the potential to benefit from selling excess or defect trees to essential oil producers. Essential oils are a high value product, but finding raw materials for their production can be difficult. The method of trimming and cultivar selection of trees used for Christmas trees makes them ideal sources of material for Essential oils production.
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  2 High Value Non-TraditionalForest Product: Essential oils The use of essential oils throughout the world has increased as the demand for more natural products has increased. There is a large demand within the United States for essential oils; According to a report conducted by the United States Forest Service in 2003, the United States imported more than 600 tons of pine oil from other countries and exported 5000 tons of pine oil (Kelkar, et al. 2006). Essential oils have many uses in commercial products such as cleaners, food additives, fragrances, and cosmetics (Ciesla 1998). There is also a high demand for essential oils in aromatherapy, massage, and other therapeutic uses. Clever marketing schemes by retail EO producers coined the phrase “Therapeutic Grade” (Shutes 2015, 2). This has created, “fundamental issues when searching for a high quality, unadulterated, genuine, and authentic essential oil in the market place” (Shutes 2015, 2). There are many challenges that essential oil producers face because of these marketing tactics. Producers need definite sources of high quality traceable raw materials in order to create opportunities for themselves within the market place. Young Living is a large scale international EO producer. They sell their products to aromatherapy specialists and the everyday consumer. Their oils are some of the most expensive on the market today; a 5ml bottle of Balsam fir oil sells for $34.21 (Young Living 2015). Figure 1 depicts what a 5ml bottle of EO looks like. Young living markets their products by emphasizing their Seed to Seal® production process. This helps them verify that they are selling high quality pure EOs. Most producers of high quality oils promote their oils quality but Young Living goes the extra mile and allows customers to be involved in the production process through their Seed to Seal® program. They have an entire separate website dedicated to proving their quality. An EO producer’s material source is the bread and butter of their operation. Quality material that can be traced to a sustainable source is essential to success within the retail and aromatherapy section of the EO market. Figure 1. Example of aromatherapy grade essential oil produced by Young living. (Young Living 2015) Current Economic Challenges Alternative Products
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  3 An increase inthe popularity of artificial Christmas trees has created an uncertain future for growers. An alternative market for trees during bad years may save many farms from failing. On average 25-30 million real Christmas trees are sold annually in the U.S. (Dungey 2015), but artificial Christmas tree sales have been on the rise since 2012. According to a consumer survey conducted by the National Christmas tree Association, fake artificial tree sales have increased from 8.2 million in 2010 to 13.9 million trees in 2014 (National Christmas Tree Association 2015). Table 1 was taken from this survey and shows the number of real and artificial trees sold in million between 2008 and 2015. Changes in the consumer perspective regarding live trees greatly affect sales. There are two perspectives on live trees. The first is that it is unethical or detrimental to the environment to cut these trees to use as a decoration for only a few weeks. These consumers buy artificial trees because of guilt. The second is that artificial trees are more detrimental to the environment than cutting real trees. Artificial trees are made from plastics and generally produced in China, many consumers choose real trees because there are many ways they can be recycled. Changes in the consumer perspective dictate year to year sales. Convenience also plays a key role in what products consumers choose. Live trees can be messy; they drop needles in people’s homes. Many people find this inconvenient if they want to have a decorated tree in their home for more than two or three weeks. Many consumers choose artificial trees because they want their display up longer and a real tree may require too much care. Table 1. Comparison between real and fake Christmas trees sales since 2008 in millions of trees (National Christmas Tree Association 2015) 2008 2009 2010 2011 2012 2013 2014 Real 28.2 28.2 27 30.8 24.5 33.02 26.3 Artificial 11.7 11.7 8.2 9.5 10.9 14.7 13.9 Production Costs/ Return on Investment Christmas tree growers incur large establishment costs and a 7-10 year window before any profits can be made from newly planted trees depending on the species. Large capital investments up front and an unknown rate of return can limit Christmas tree grower’s potential profit. Defects in these trees decrease their value over time. Christmas trees are sold in two categories, first and seconds. First are the pretty well shaped trees that sell for premium prices. Seconds are trees of a lesser quality; these trees may be sold cheaply on the market or simply be cut and disposed of. In a case study conducted by the Pen State Cooperative Extension, a one acre plantation of 1200 Fraser fir trees costs $9000 to reach merchantable size, one third of all trees produced per acre were considered second quality trees and were sold for half the price of first quality trees (Pen State Cooperative Extension 2013). Second Quality Trees/ Disposal According to the Pennsylvania Cooperative extension, Intensive management is needed to produce high-quality Christmas trees. Growers must consider planting locations; species and cultivar selection; weed, insect, and disease control; and tree shearing in order to ensure good form and density. Without this type of intense management, the trees produced lack desirable character and cannot be sold for premium prices (Pen State Cooperative Extension 2013). Figure
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  4 2 shows largetrees with poor form taking up usable planting space. These unsellable trees generally must be disposed of in order to create more room for the next generation of trees. There are several options for marketing trees; Pre-cut or cut your own (also known as Choose and Cut). Pre-cut trees are usually sold in retail lots, but are sometimes sold wholesale to retail centers like Home Depot and Lows. Selling trees in retail lots
has
the
potential to generate
larger revenues, but
there is a
risk
of
ending
the
season
with
a
lot
full
of
 unwanted
trees.
Cut
trees
that
must
be
hauled
away
for
disposal
diminish
profits
 considerably (Southern Integrated Pest Management Center 2010). Figure 2. Large unmarketable trees can be seen in the background (Christmas tree farms 2011) Many growers will Mulch their unsold trees and use it to fertilize and protect newly planted trees. This could be a potential deterrent to growers who use this practice. Luckily, after an EO producer is done with the material it can still be used as mulch for the trees. This is a good partnership point because the grower can further benefit from selling the trees by still getting the needed mulch. Methods used to produce Christmas trees and how it affects their suitability for an Essentialoils material Source Species selection Many of the species favored as Christmas trees are also trees that produce valuable EOs. Balsam fir, Norway spruce and Siberian fir are trees that are grown by Christmas tree growers and are desirable essential oil producers (Ciesla 1998). In some areas of the United States; white pine, Scots pine, and red cedar are also grown as Christmas trees (Ciesla 1998). These species are less common in the central New York but are also desirable EO producers. Tree species selected are chosen for their fragrance and ability to retain their needles. It can be assumed that the same traits that make Christmas trees desirable as decorations also makes them potential good EO producers because the fragrance is the oil within the plant. Trimming The precise pruning and care given to Christmas trees during their growth produces trees with thick foliage. Trees are trimmed to create dense foliage; the form produced from this trimming is denser than found naturally. This provides a good way for an EO producer to get
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  5 their coniferous materialin a more compact form. The more needles a conifer has the higher the oil content of the plant since the oil is contained in the needles. Some producers chip whole plants and then steam distill everything, Young living often does this because they use trees planted and grown to timber sizes. The best oils are contained in the needles, so the higher concentration of needles found on the highly maintained Christmas trees potentially would produce high quality oil. Weeding, Pest, and Disease Control Mechanical mowing and weed eating are favorable methods for trees that are grown for EOs. These methods tend to be more costly to the grower; they require significant time investment and hours of equipment operation. If the grower uses herbicides they may need to change how they manage for pests and disease. The increase in cost associated with a change in management may offset the profit made from selling excess trees. Mulching plantations can also limit weed growth. The spent material used for EO production is often resold as mulch, so the partnership could include a return of material for mulching as well. Trees of poor form or color that are unfavorable as Christmas trees are fine for essential oils, but diseased trees are not. If a pest or fungus damages a tree, this can contaminate the quality of oil making them undesirable choices. In areas where some diseases are prevalent, the tree mortality rate in areas where diseases such as Balsam Woody Adelgid and Hemlock rust are common problems may make not using chemicals uneconomical, which is unfavorable (Southern Integrated Pest Management Center 2010). Many growers use preventative fungicide, although proper spacing and aeration around the trees along with moisture control can also prevent fungal damage (Pen State Cooperative Extension 2013). Conclusion The demand for essential oils and NTFPs is on the rise in the US. Christmas tree growers can make up for lost profits due to increasing artificial tree sales. There would be minimal to no change in production methods for the growers so they can simply benefit from selling these second rate trees to essential oils producers. It would help eliminate disposal costs at the end of the marketing season and help the growers keep on a tighter schedule for the replacement of trees in choose and cut operations. Overall this is a good way to limit financial losses each year for Christmas tree growers. Recommendation My recommendation to Christmas tree growers is that they should sell ugly, defected, excess, and oversized stock to essential oils producers. By partnering with reputable essential oil producers, yearly contracts can be formed guaranteeing a way to dispose of second rate trees on a regular basis. It is beneficial to the essential oil producer to have a dependable and regular source of materials for oil production (Shutes 2015). This partnership between producers is beneficial to both parties involved. For pre-cut Christmas tree operations where unsold trees must be disposed of and the grower sells their trees in retail lots, transportation costs can be a financial loss. By selling to an EO producer they will not have to dispose of left over trees. For choose and cut operations, large trees with poor structure tend to be left in the field and eventually become too large for Christmas tree sale. By having a contract with an essential oil
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  6 producer, a profitcan be made from these trees. Freeing up space for new trees to be planted is an added benefit. The potential mulch return from the EO producer also is beneficial to a Christmas tree grower using either marketing strategy. Reference list Ciesla, William M. "Non-wood Forest Products from Conifers." Non-wood Forest Products, 1998: 1-106. Dungey, Rick. National Christmas Tree Association. 2015. http://www.realchristmastrees.org/dnn/Education/QuickTreeFacts.aspx (accessed November 5, 2015). Kelkar, Vassant M., Brian W. Geils, Dennis R. Becker, Stevents T. Overby, and Daniel G. Neary. "How to recover more value from small pine trees: Essential oils and resins." Biomass and Bioenergy 30 (2006): 316-320. National Christmas Tree Association. Consumer Survey Results. 2015. http://www.realchristmastrees.org/dnn/NewsMedia/IndustryStatistics/ConsumerSurvey.a spx (accessed December 9, 2015). Pen State Cooperative Extension. "Christmas Tree Production." Pensylvania State Extension. 2013. http://extension.psu.edu/business/ag-alternatives/forestry/christmas-tree- production/extension_publication_file (accessed October 2015). Shutes, Jade. "The Quality of Essential Oils." National Association for Holistic Aromatherapy. 2015. https://www.naha.org/assets/uploads/The_Quality_of_Essential_Oils_Journal.pdf (accessed September 2015). Southern Integrated Pest Management Center. "CROP PROFILE FOR CHRISTMAS TREES IN VIRGINIA." Southern IMP Center. June 2010. http://www.ipmcenters.org/cropprofiles/docs/VAchristmastrees.pdf (accessed November 3, 2015). Statistic Brain Research Institute. Christmas Tree Sales Statistics. November 28, 2015. http://www.statisticbrain.com/christmas-tree-statistics/ (accessed December 9, 2015). Young Living. Balsam Fir (Idaho) Essential Oil. 2015. https://www.youngliving.com/en_US/products/balsam-fir-idaho-essential-oil (accessed December 9, 2015).
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  7 Tables National Christmas TreeAssociation. Consumer Survey Results. 2015. http://www.realchristmastrees.org/dnn/NewsMedia/IndustryStatistics/ConsumerSurvey.a spx (accessed December 9, 2015). Images Christmas Tree Farms. 2011. Photograph. Christmas Geek url: http://www.christmasgeek.com/christmas-tree-farms/ Young Living. Balsam Fir (Idaho) Essential Oil. 2015. https://www.youngliving.com/en_US/products/balsam-fir-idaho-essential-oil (accessed December 9, 2015)