andrew baum - arborgen president and ceo

ArborGen Confidential

A Look ForwardThe Next 70 Years

Arkansas Forestry Association MeetingOctober 7, 2015

2

Topics

• ArborGen Overview

• Looking Ahead – The Next 70 Years

• Elite Genetics

• MCP Case Study


3

ArborGen: Global Leader in TreeImprovement and Seedling Production


Ridgeville, SC – Global HQ

Whakatane, NZ – Australasia HQ

Campinas, SP, BR – S. America HQ

Americas• 285MM in Sales• ~1/3 of SE Pine Market• 50% of MCP Market• 100% of Varietal Market

Australasia

• 22MM in Sales• ~40% of NZ Pine Market• 20% of Australian Pine Market

Leading seedling producer of over 340 million trees per year

Global operations• Southeastern U.S.• New Zealand &

Australia• Brazil

Providing step-changes in tree productivity

• Faster growth • Disease resistance• Improved wood quality• Biomass production

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Major repository of advanced commercial pine germplasm and technology Built on over 100 years, in the aggregate, of tree improvement research from multiple industry leaders Further enhanced through ArborGen’s broad and strong development program Germplasm includes over 50 distinct commercial tree species and hybrids Catalogued over 13,500 unique varieties for two largest commercial pine species: loblolly and radiata

Hammermill Papers

Federal

Carter Holt Harvey

CellFor

Champion

Union Camp Fletcher Challenge

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ArborGen North American Operations

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Fred C. Gragg Arkansas SuperTree Nursery• First crop of 1980• Has produced 1.7 billion pine seedlings and 47 million

hardwood seedlings• Enough for a more than 3.5 million acres of Arkansas forests• Services the entire industry, from the smallest landowner to

the largest institution


7

DeforestationNative forest are being converted

to agricultural and other uses decreasing wood availability

ConsumptionGlobal population expanding Increasing consumption in the

developing world

A Growing Wood Supply-Demand Gap is Driving the Need forIncreasingly Productive Plantation Forests

2000 – 6 Billion 2050 – 9 Billion

World Population

18 million acres Or

Annual Annual GlobalGlobal

DeforestationDeforestation

Forestry genetics will be a key element in addressing this gap

8

Today, forestry is:

• One-third of the United States land – 751 million acres.• Privately-owned forests supply 91 percent of the wood

harvested in the U.S.• More than 56 percent of U.S. forests privately owned, much of

it by family forest owners who manage their lands to provide value to future generations.

• Harder than ever to get good return on forestry assets


9

70 Years of Pine Yield DriversGenetics….The Last Frontier

0

50

100

150

200

250

1940 1950 1960 1970 1980 1990 2000 2010

Establishment period

Vol

ume

at h

arve

st (

tons

/acr

e)

Clonal andbiotechnology

Tree improvement

Weed control

Fertilization

Site preparation

Planting

Natural stand

Adapted from Fox, T.R., E.J. Jokela, and H.L. Allen, 2004

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Genetics is at the Forefront of Driving Increases in Forestry Productivity• Loblolly pine product genetics are where the Ag. Industry was some 60 years ago –

for forestry the time between rotations has slowed the advance of new genetics• MCP and Varietals are here now and will do for pine what hybrids did for corn


Current stageof US pine

seedlingmarket

Double-CrossHybrids

Single-CrossHybrids

Open-Pollinated

GENext stageof US pine seedlingmarket

1875 1900 1925 1950 1975 2000

50

100

0

150

Co

rn Y

ield

(b

ush

els

/ a

cre)

Open Pollinated

Next Generation

The “Ag-Forestry” Productivity Parallel

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What will Produce the Highest Return for Arkansas Landowners Today?

• Improving productivity in planted forests• Site preparation• Weed control• Nutrition

• Improved tree form (STP)• Improved genetics for plantation forestry


It is becoming increasingly important to take a comprehensive, quantitative view of forestry management practices and decisions.

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Biologic Returns Driven by Genetics + Forest Management


Machine Planting Competing Vegetation Control

13

One Year Old Stand on the Productivity Launch Pad• Top Asset Managers Utilize:

• Best genetics• Site preparation• Vegetation control• Fertilization• Information & decision support technology


14

Genetics Options for Reforestation Today

• Seed Orchard Mix• 10 to 20 improved mother trees• Lowest gain and cost

• Open Pollinated: Half-Sib Families• Single improved mother tree• Better gain and slight cost increase

• Mass Controlled Pollination: Full-Sib Families• Best mother and father trees• Higher gain and higher cost

• Varietals: Best Single Genotype from the Best Full-Sib Crosses• Single genotype• Highest gain and highest cost


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Elite Genetics: MCP® & Varietals

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Plantation Forest Management Startswith Genetics & Nurseries

U.S. South: 1 Billion Southern Yellow Pine Seedlings Per Year

Bareroot Nursery Containerized Nursery

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Mass Control Pollination (MCP®)• Similar to Hybrid Corn

• Genetic potential of the pollen parent is added to the genetic potential of the mother

+

Elite Mother Elite Father

18ArborGen Confidential

-20

0

20

40

60

80

Volume Gain %

0

20

40

60

80

100

Rust Infection Rate

-10

0

10

20

30

40

50

60

Straightness Gain

0

20

40

60

80

100

Fork Rate

AG-89

AG-89 is a powerful parent for MCP production

Selecting Elite Parents for MCP HybridsDistribution of Ratings for Coastal Parents

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Mass Controlled Pollinated

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Varietals: Production Overview

Produce Plantable Germinants

Grow Plantable Germinants into Miniplugs

Grow Miniplugs into Finished Seedlings

ArborGen Lab

Ridgeville, SC

Miniplug

Greenhouses

Ridgeville, SC

Process completed in 12 to 18 Months

Bare Root and Containerized Nurseries

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MCP Family

• AGM 22 at Age 16

• Superb Growth

• Excellent Log

Quality



Varietal Age 9: LA Varietal Age 8: NC

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MCP & Varietal Genetics Value Drivers

• Volume Growth• Higher Sawtimber Potential (STP)• Straightness• Forking Reduction• Rust Resistance• Volume x Quality = $$$• A New System for Reforestation• Higher STP• Fewer TPA


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0 0 1 1 1 0 1 1 1 0 1 1 1 D 1 1 1 0 1 1 0 D 0 1 1 D 1 D 1 1 D 1 1 0 0 1 D 10 0 1 1 1 0 0 1 D 0 1 1 0 D 1 1 1 1 1 1 1 0 0 1 1 D 1 1 D 1 1 0 1 0 1 1 1 11 0 1 1 1 1 0 0 0 1 1 0 0 D 0 0 1 1 1 1 D 1 D D 1 1 1 D 1 1 1 1 1 D 0 1 1 11 1 0 1 1 1 1 1 1 1 1 1 0 0 1 0 1 1 D D 0 1 1 D D 1 0 1 D 1 1 0 D 0 1 0 1 11 1 D 1 1 1 1 1 D 1 1 0 0 0 0 1 0 1 1 D 1 1 1 1 1 0 D 1 1 1 1 1 1 0 1 1 1 01 0 1 1 1 1 1 1 0 1 1 1 1 1 0 0 1 1 1 0 1 1 1 1 0 D 0 1 D 1 D 1 1 D D 1 0 11 1 D 0 1 1 0 1 1 1 0 D 1 0 1 1 1 1 1 1 1 1 D D 0 D 1 D D 1 0 0 0 D D 1 0 11 0 0 D 1 1 1 1 1 1 1 1 1 0 1 1 1 1 1 1 0 1 1 1 1 1 1 1 1 1 1 1 1 1 0 1 0 DD 1 D 1 1 1 1 1 1 1 1 1 1 0 1 1 0 1 0 D 1 1 1 1 1 1 0 1 0 D 1 0 1 D 0 0 0 D1 1 0 D 1 1 1 0 0 1 1 0 0 0 1 1 1 1 1 D 1 1 1 0 1 D 1 1 1 1 1 1 1 D 0 0 1 D1 1 1 1 1 1 0 0 0 1 0 0 1 1 D D 1 1 D 1 1 0 1 1 1 D 1 D 1 1 D D 1 D 1 D 1 11 0 1 D 0 1 0 1 0 1 1 D 1 1 1 1 D 1 1 0 0 1 1 0 1 1 1 1 1 1 1 1 1 D 1 1 1 D1 1 D 1 D 1 D 1 0 0 1 1 1 1 0 1 D 1 1 1 1 1 D 1 0 1 1 1 1 1 1 1 0 0 0 D 0 D1 1 1 1 0 1 1 1 1 0 D 1 1 0 1 D D 0 D 0 1 1 D D 1 0 1 1 1 1 D 0 1 0 0 1 1 01 0 D 1 1 0 1 0 1 1 1 1 1 0 1 1 0 D 0 0 1 1 D 1 D D 1 1 0 1 1 1 0 1 1 1 1 D1 1 0 1 1 0 0 1 1 1 1 0 0 D 0 1 1 1 1 D 0 0 1 1 1 1 D 0 1 1 1 1 1 0 D 1 D 11 1 1 1 1 1 1 0 0 1 1 1 1 0 1 0 D 1 1 1 0 0 1 D 0 0 1 1 D 1 1 0 1 1 D 0 1 11 1 D 1 1 1 0 1 1 0 0 1 1 0 0 1 D 1 1 1 1 1 1 0 1 0 D 0 1 D 1 1 1 0 0 1 1 11 1 1 1 1 1 1 1 1 D 1 1 1 D 1 0 1 D 1 1 1 0 1 D 0 1 1 1 1 1 1 1 1 D 0 1 0 11 0 1 0 1 1 1 1 1 1 1 0 0 1 1 0 D 0 1 D 0 0 1 1 1 1 0 D 1 1 1 1 1 D 1 1 D 0D 1 1 1 0 1 1 1 0 1 D D 0 0 1 1 1 1 0 1 1 0 0 1 0 D 1 D 1 1 D 1 1 1 1 0 1 10 1 1 1 0 D 1 1 0 1 1 0 1 0 0 1 D 1 1 1 0 0 1 0 0 1 1 1 1 1 1 1 0 1 1 D 1 D1 1 1 0 D 1 1 0 1 1 1 1 0 D 1 D 0 1 1 1 D D 1 0 1 0 1 1 0 1 0 1 1 1 1 1 1 10 D 1 1 0 1 D 1 0 1 D D 1 D 1 1 0 1 D 1 0 1 0 0 D 0 1 1 1 1 D 0 1 1 1 0 D 11 1 1 0 1 D 1 0 1 1 1 D 0 0 1 1 D 0 D 1 1 0 0 0 0 1 1 1 0 1 1 1 0 1 1 0 1 D

Open Pollinated Stands: Defect Map9 locations (NC, SC, GA, FL, TX), 7 families, 950 trees, ages 5-9

1 STP tree0 Non-STP treeD Dead

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1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 1 1 1

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 1 1 D 1 1 1 1 1 1 1 1 1 1 1 1 1 D 0 1 1 D D 0 1

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 D 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 1 1 1 1 1 1

1 1 1 1 1 1 1 1 1 D 1 1 1 1 1 1 1 1 1 1 1 1 1 1 D 1 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 D 1 0 1

0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 D 1 1 1 1 1 D 1 1 1 D 1 1 1 1 1 1 1 1 1 0

D 1 0 1 1 1 1 D 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 1 1 1 1 D D 1 1 D D 1 1 1 1 1 1 1 1 1 1 1

1 1 1 1 1 1 1 1 0 1 1 1 1 1 1 1 1 1 1 1 1 0 1 D 1 D 1 1 1 1 1 1 1 1 1 1 1 1 1 0 1 1 1 1 1 1 D

1 1 0 1 1 0 1 1 1 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 D 0 1 0 1 D 1 0 1 1 1 D 1 1 1 1 1 1 1 1 1 1 1

D 1 1 1 1 1 1 1 1 0 1 1 1 1 1 1 0 1 1 1 1 1 1 1 1 D 1 1 1 1 1 1 1 0 0 1 1 1 0 1 0 1 1 1 1 1 1

1 1 1 1 1 1 1 1 1 1 1 1 0 1 D 1 1 1 1 D 1 0 1 1 1 1 1 1 1 1 1 D 1 1 1 1 1 1 0 1 1 1 1 1 1 1 1

1 1 1 1 1 1 1 D D D 1 1 1 1 1 1 1 1 1 0 1 D 1 0 1 1 1 1 1 1 1 1 1 D 1 1 1 0 1 1 1 1 1 1 1 1 1

1 D 0 1 1 1 1 D 1 1 1 0 1 1 1 1 1 1 1 1 1 1 1 D 1 1 1 1 1 1 1 1 D 1 0 1 1 1 1 1 1 1 1 1 1 1 1

1 1 1 1 1 1 1 1 1 D 1 1 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 D 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

1 1 1 1 1 1 1 D D 1 1 1 1 1 1 1 1 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 D 1 1 1 1 1 1 0 1 1

1 1 1 D 1 1 1 D 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 1 1 1 1 0 1 1 1 1 0 D D 1 1 1 1

1 0 1 1 1 0 1 1 1 1 1 1 1 1 1 1 1 1 1 0 1 1 1 1 1 1 1 1 1 1 1 0 0 1 1 1 1 1 D 1 1 1 1 1 0 1 1

1 1 0 1 1 1 1 D 1 1 1 1 1 D 1 D D 1 1 1 1 1 1 1 1 1 1 1 1 1 D 1 1 1 1 1 1 1 1 1 0 1 1 1 1 1 1

1 1 0 1 D 1 1 D 0 1 1 1 0 1 0 1 1 1 1 1 0 1 D 0 1 1 1 1 1 0 1 1 D 1 1 1 1 1 1 1 1 1 1 1 1 1 1

1 1 1 1 1 1 1 1 1 1 1 0 1 1 1 1 1 0 D 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 1 1 1 1 1 1 1 1 1

1 1 1 1 D 1 1 1 1 1 1 1 1 1 1 1 1 1 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 1 1 1 1 1 D 1 0

1 1 D 1 1 1 1 1 1 1 1 0 1 1 1 1 D 1 1 1 1 1 1 1 1 0 1 1 1 1 1 1 1 1 1 D 1 1 1 1 1 1 0 1 1 1 1

1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 1 D 1 1 1 1 1 1 1 1 1 1 0 1 1 1 1 1 1 1 1 1 0 1 1 1 1 D 1 1 1 1

Varietal Stands: Defect Map 9 locations (NC, SC, GA, FL, TX), 4 varieties, 1034 rees, ages 5-9

1 STP tree0 Non-STP treeD Dead

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Varietal Q3802: Age 6 Deltic Timber

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Height Growth: Q3802 and 2nd Gen OP CheckDeltic Timber Junction City, LA

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Parameter Q3802 2nd Gen % Change

STP (%) 100 77 29.9

Crooked (%) 2 14 -12

Forked (%) 2 19 -17

Stem Rust (%) 0 13 -13

Suppressed (%) 0 3 -3

Sawtimber Potential (STP) Age 10Q3802: 100% of trees can become sawtimber

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Spatial Distribution of Stem defectsQ3802 and 2nd Gen OPDeltic Timber Junction City, LA

x 1 1 2 1

1 2 2 1 1

1 1 2 2 x

2 1 2 1 2

1 2 1 1 1

x 2 2 2 1

2 x 2 1 1

2 1 1 1 2

2 1 1 1 2

1 1 2 1 1

x 1 2 3 22 3 x 2 xx x 3 3 22 1 2 1 x3 x 1 1 22 2 2 3 1x 1 3 x x1 2 x 2 14 1 2 1 11 2 x 1 1

1=sawtimber tree no defects2=sawtimber tree with minor defect3=pulpwood tree major defect4=small-suppressed pulpwood treeDead tree

Pulpwood tree

Sawtimber tree

Q3802 Check

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Varietal Q3802: 36% more Sawtimber Volume than 2nd Gen OP

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MCP® Case Study:Pigeon Pond

Age 16Loblolly Pine

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Why this case study is important


• Age 16: Oldest MCP trial & with relevant genetics• Block plots for operational results• Operationally thinned• Early results are predictive of Age 16

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“Pigeon Pond”A case study for MCP®

• Study Objectives: Compare loblolly MCP®

families to operational OP

• Design: Randomized complete block with five

families (2 MCP®, 3 OP) and four blocks

• MCP: MCP-22, MCP-29

• OP: OP-175, OP-373, OP-769

• 4 Replications: Plot size from 0.1018 to 0.1198 ac,

64 to 72 measurement trees

• Location/Establishment: Berkley County, SC: 1998

Border Rows 4 5 12 13 20 21 28 29 36 37 44 45 52 53 60 61 68 69

3 6 11 14 19 22 27 B4 Plot 32 7 10 15 18 23 26 AGM-221 8 9 16 17 24 25 32 33 40 41 48 49 56 57 MCP

8 9 24 25 40 41 56 57 8 9 24 25 40 41 56 57

7 10 23 26 7 10 23 26

6 11 22 27 B4 Plot 2 6 11 22 27 B4 Plot 45 12 21 28 AGM-29 5 12 21 28 AG-1754 13 20 29 MCP 4 13 20 29 OP3 14 19 30 3 14 19 30

2 15 18 31 2 15 18 31

1 16 17 32 33 48 49 64 1 16 17 32 33 48 49 64

8 9 24 25 40 41 56 57 8 9 24 25 40 41 56 57

7 10 23 26 7 10 23 26

6 11 22 27 B4 Plot 5 6 11 22 27 B4 Plot 15 12 21 28 AG-769 5 12 21 28 AG-3734 13 20 29 OP 4 13 20 29 OP3 14 19 30 3 14 19 30

2 15 18 31 2 15 18 31

1 16 17 32 33 48 49 64 1 16 17 32 33 48 49 64

8 9 24 25 40 41 56 57 8 9 24 25 40 41 56 57

7 10 23 26 7 10 23 26


2 15 18 31 2 15 18 31

1 16 17 32 33 48 49 64 1 16 17 32 33 48 49 64

8 9 24 25 40 41 56 57 8 9 24 25 40 41 56 57

7 10 23 26 7 10 23 26


2 15 18 31 2 15 18 31

1 16 17 32 33 48 49 64 1 16 17 32 33 48 49 64

8 9 24 25 40 41 56 57 8 9 24 25 40 41 56 57

7 10 23 26 7 10 23 26


2 15 18 31 2 15 18 31

1 16 17 32 33 48 49 64 1 16 17 32 33 48 49 64

18 19 54 55 8 9 24 25 40 41 56 57

17 20 7 10 23 26

16 21 6 11 22 27 B2 Plot 315 22 5 12 21 28 AGM-2214 23 4 13 20 29 MCP13 3 14 19 30

12 2 15 18 31

11 B2 Plot 2 1 16 17 32 33 48 49 64

10 AGM-299 MCP8 8 9 24 25 40 41 56 57

7 7 10 23 26

6 6 11 22 27 B2 Plot 55 5 12 21 28 AG-7694 4 13 20 29 OP3 3 14 19 30

2 2 15 18 31

1 36 37 72 1 16 17 32 33 48 49 64

8 9 24 25 40 41 56 57 8 9 24 25 40 41 56 57

7 10 23 26 7 10 23 26


2 15 18 31 2 15 18 31

1 16 17 32 33 48 49 64 1 16 17 32 33 48 49 64

8 9 24 25 40 41 56 57 8 9 24 25 40 41 56 57

7 10 23 26 7 10 23 26

6 11 22 27 B1 Plot 5 6 11 22 27 B1 Plot 25 12 21 28 AG-769 5 12 21 28 AGM-294 13 20 29 OP 4 13 20 29 MCP3 14 19 30 3 14 19 30

2 15 18 31 2 15 18 31

1 16 17 32 33 48 49 64 1 16 17 32 33 48 49 64

8 9 24 25 40 41 56 57 8 9 24 25 40 41 56 57

7 10 23 26 7 10 23 26

6 11 22 27 B1 Plot 3 6 11 22 27 B1 Plot 45 12 21 28 AGM-22 5 12 21 28 AG-1754 13 20 29 MPC 4 13 20 29 OP3 14 19 30 3 14 19 30

2 15 18 31 2 15 18 31

1 16 17 32 33 48 49 64 1 16 17 32 33 48 49 64

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SawTimber Potential (CNS+ST), %Field trials at year 16

GenotypeSTP STP STP

Before Thinning Yr. 12 Yr. 16

AG-373 53% 82% 89%

AG-769 66% 82% 95%

AG-175 58% 72% 94%

AGM-22 80% 91% 93%

AGM-29 83% 93% 93%

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MCP® AGM 22Age 16: 70ft avg. height; 93% STP

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AGM 22 has 52.4% more tons per acre than OP at age 16

Parameter MCP-22 OP-373DBH 11.1 10.5Gain* 5.6% Check

HT 70.5 64.6

Gain* 9.2% CheckBA/ac 85.6 61.8Gain* 38.4% CheckGWob/ac 78.3 51.4

Gain* 52.4% Check

GWob/tree 0.62 0.49

Gain* 26.2% Check

* Genotype gain over the check: OP-373

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MCP Case Study Discounted Cash Flow Analysis


MCP Family Doubles ValueTMS: 1-Year Moving Average

$435/ac

$546/ac

$788/ac $773/ac

$952/ac

0

200

400

600

800

1,000

AG-373 AG-175 AG-769 AGM-29 AGM-22

BLV ($/ac)


MCP: 59% More Revenue ThroughVolume and Quality: Spend $80 to Earn $1,200

$/ac @ Yr. 16

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MCP® & Varietal AdoptionNCSU MCP Survey: 80 Million MCP/CMP in 2014Total Adoption: 405 M seedlings on 800,000 acres; 40% is from ArborGen

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Summary

• Markets are difficult now, but long term trends will improve forestry economics

• That being said, in an increasingly competitive world, quantitative, long term thinking and analysis is becoming key

• Technology has already driven large increases in productivity, genetics is the next major driver

• MCP and varietal products are proven, available and offer step changes in value to the land owner and industry


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Conclusions

• Elite Genetics such as MCP and Varietals are important timberland investment tools

• Trend in U.S. is MCP and Varietals with 1,000,000 acres planted

• Age 16 MCP case study validates yield and financial predictions from young data

• For additional cost of $60 - $80/ac• 50 – 60% more revenue• 100 – 150% more BLV• 14 – 19%IRR


QUESTIONS?

andrew baum - arborgen president and ceo

Environment