Agricultural Commodities as Industrial Raw Materials · agricultural commodities as industrial raw...

Agricultural Commodities as IndustrialRaw Materials

June 1991

OTA-F-476NTIS order #PB91-198093

GPO stock #052-003-01237-5

Recommended Citation:

U.S. Congress, Office of Technology Assessment, Agricultural Commodities as IndustrialRaw Materials, OTA-F-476 (Washington, DC: U.S. Government Printing Office, May 1991).

For sale by the Superintendent of DocumentsU.S. Government Printing Office, Washington, DC 20402-9325

(order form can be found in the back of this report)

Foreword

During the 1980s, American agriculture experienced widely fluctuating farm income,and many rural communities faced declining economies. These financial difficulties have ledCongress to search for solutions to these problems. Because agriculture is a major industry inrural areas, diversifying agricultural markets to include industrial uses in addition totraditional food and feed markets, is viewed as a means of strengthening agricultural and ruraleconomies. Additional concerns that could potentially be addressed by using agriculturalcommodities as industrial raw material sources include environmental pollution and U.S.industrial vulnerability to petroleum and strategic material supply shocks.

Congress requested the Office of Technology Assessment to assess the use of agriculturalcommodities as industrial raw materials. This report examines potential new crops andtraditional crops for industrial uses including replacements for petroleum and importedstrategic materials; replacements for imported newsprint, wood rosins, rubbers, and oils; anddegradable plastics. The analysis includes an assessment of the technical, institutional,economic, and policy constraints to the development of crops for these uses; discussion ofprograms available for assistance; and examination of the potential implications of usingagricultural commodities as industrial raw materials.

This report finds that, in the absence of additional and more comprehensive policies,developing industrial uses for agricultural commodities alone is unlikely to revitalize ruraleconomies and solve the problems of American agriculture. However, it is possible to providedomestic sources for many imported industrial materials, some of which are considered to beof strategic importance, and potentially to replace selected petroleum-derived chemicals. And,some industrial uses of agricultural commodities offer potential to decrease certain types ofenvironmental pollution.

This report was requested as part of a larger study examining emerging agriculturaltechnologies and related issues for the 1990s. The study was requested by the SenateCommittee on Agriculture, Nutrition, and Forestry, the House Committee on Agriculture, andthe House Committee on Government Operations. Two reports issued from this study are:Agricultural Research and Technology Transfer Policies for the 1990s and U.S. DairyIndustry at a Crossroad: Biotechnology and Policy Choices. One additional report is inprogress. Findings of this report are relevant to specific legislation regarding agriculturalresearch and technology transfer that was debated for the 1990 Farm Bill. The informationcontained in this report was made available to Congress for that debate.

In the course of preparing this report, OTA drew on the experience of many individuals.In particular, we appreciate the assistance of all of the workshop participants. We would alsolike to acknowledge the critiques of the reviewers who helped to ensure the accuracy of ouranalysis. It should be understood, however, that OTA assumes full responsibility for thecontent of this report.

u JOHN H.-GIBBONSDirector

. . .111

OTA Project Staff—Agricultural Commodities as Industrial Raw Materials

Roger C. Herdman, Assistant Director, OTAHealth and Life Sciences Division

Walter E. Parham, Food and Renewable Resources Program Manager

Michael J. Phillips, Project Director

Marie Walsh, Study Director

Laura Dye, Research Assistant

Carl-Joseph DeMarco, Research Assistant

Susan Wintsch, Editor

Administrative and Support Staff

Nathaniel Lewis, Office Administrator

Nellie Hammond, Administrative Secretary

Carolyn Swam, PC Specialist

iv

ContentsPage

Chapter 1. Summary .**. ... ... ... * ......**.**.**...***************************""""" 1

MAJOR FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . .Research Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......””””Potential Impacts of Using Agricultural Commodities as Industrial Raw Materials . . .Policy Issues . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

POLICY OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Technology Transfer and Commercialization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Adoption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Legislation Passed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 2. Introduction . . . . . . . . . . . . . . . ..... .. ● ..... . . . . . . . . . . . . . . . . .INDUSTRIAL USES OFAGRICULTURAL COMMODITIES IN THE

UNITED STATES . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Oils and Waxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Resins, Gums, Rubbers, and Latexes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Fibers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Starches and Sugars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Proteins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........ ........ .

NEW INDUSTRIAL CROPS AND USES OF TRADITIONAL CROPS . . . . . . . . . . . . . .PROPOSED BENEFITS OF USING AGRICULTURAL COMMODITIES

AS INDUSTRIAL RAW MATERIALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Diversification of Agricultural Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Underutilization of Land Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Reduction of Commodity Surpluses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Enhanced International Competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Improved Environmental Adaptation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Rural Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Strategic Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........CHAPTER 2 REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 3. Analysis of Potential Impacts of Using Agricultural Commodities asIndustrial Raw Materials ● . . . . 0 . 0 . 0 0 0 0 0 . . . ● . . . . . . . 0 . 0 . . 0 . 0 0 0 . . . . . . . . .

RURAL DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Impacts of Changing Farm Income and Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Rural Employment Potential in Agriculturally Related Industries . . . . . . . . . . . . . . . . . . .Rural Employment Potential in Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2236888889

11

15151516161616

18181818181919191920

1723232426

Potential Rural Employment Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28REGIONAL SPECIALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28AGRICULTURAL SECTOR STABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28INTERNATIONAL IMPLICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29COMPETITION WITH CURRENT CROPS AND INTERREGIONAL IMPACT . . . . . 30SMALL FARM IMPACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30ENVIRONMENTAL IMPACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32COMMODITY SURPLUSES AND GOVERNMENT EXPENDITURES . . . . . . . . . . . . . 33POTENTIAL TO SUPPLY STRATEGIC MATERIALS AND REPLACE

PETROLEUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Detergent Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

v

Rubber Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38Paints and Coatings Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

FULL UTILIZATION OF LAND RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38PREMATURE COMMERCIALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41SUMMARY AND CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41CHAPTER 3 REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43

Chapter 4. Factors That Affect the Research, Development, andCommercialization . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

RESEARCH AND DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41Industrial Use Research Funding and Institutional Involvement . . . . . . . . . . . . . . . . . . . . 42

COMMERCIALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44Industrial Interest in Public-Sector Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44Private-Sector Access to Public-Sector Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46Technology Transfer Mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47Financial Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48

SUMMARY AND CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......50CHAPTER 4 REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50

Chapter 5. Factors Involved in the Adoption of New Technologies byIndustry and Agricultural Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

ADOPTION OF NEW TECHNOLOGIES BY INDUSTRY . . . . . . . . . . . . . . . . . . . . . . . . . . 53Technology Extension and Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54

ADOPTION OF NEW TECHNOLOGIES BY AGRICULTURAL PRODUCERS . . . . . 55Technical Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55Economic Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56Agricultural Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58

POLICY IMPLICATIONS . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58CHAPTER 5 REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59

Chapter 6. Proposed Legislation and Policy Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61PROPOSED LEGISLATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61

Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64Policy Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65

POLICY OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66Commodity Program Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66Research, Development, and Commercialization Proposals . . . . . . . . . . . . . . . . . . . . . . . . 67Options Requiring Further Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

CURRENT LEGISLATIVE ACTIVITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71CHAPTER PREFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Appendix A. Selected New Industrial Crops ..... . . . . . . . . . ● .....0.. . . . . . . . . . . 75

Appendix B. Selected Industrial Uses for Traditional Crops . . . . . . . . . . . . . . . . . . . . . . 90

Appendix C. Selected New Food Crops and Other Industrial Products . . . . . . . . . . . 100

Appendix D. Miscellaneous Commodity Statistics ....00.. . . . . . . . . . . . . . . . . . . . . . . . 102

Appendix E. Workshop Participants and Reviewers ● .0**.00 . . . . . . . . . . . . . . . . . . .0. 105

BoxesBox Page3-A. Social and Market Impacts of Ethanol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304-A. European Research Program To Develop New Industrial Crops and Uses of

Traditional Crops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455-A. Commercialization of Soybeans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 596-A. Alternative Agricultural Products Act of 1990: House Proposal . . . . . . . . . . . . . . . . . 626-B. Alternative Agricultural Research and Commercialization Act of 1990:

Senate Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

TablesTable Page2-1. Industrial Fatty Acids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112-2. Fats and Oils: Use in Selected Industrial Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112-3. Industrial Uses of Selected Oils, April/May 1990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122-4. 1987 U. S. Wax Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122-5. Industrial Uses of Rosin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122-6, Use of Pulp in Paper and Paperboard Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162-7. Potential New Industrial Crops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132-8. Potential Industrial Uses for Traditional Crops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133-1. Farm Family Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173-2. Farm Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183-3. Share of Total Employment in Agriculturally Related Industries, 1984 . . . . . . . . . . 193-4. U.S. Agricultural Acreagea and Production, Selected Years . . . . . . . . . . . . . . . . . . . . 193-5. Employment Changes in 1975-81 and 1981-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193-6. Distribution of Jobs in Agriculturally Related Industries . . . . . . . . . . . . . . . . . . . . . . . 203-7. Nonmetro Share of Manufacturing Jobs by Job Type . . . . . . . . . . . . . . . . . . . . . . . . . . 213-8. Distribution of Manufacturing Jobs, 1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213-9. Manufacturing Employment Trends of Industries Potentially Using

Industrial Agricultural Commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223-10. Likely Production Locations of New Crops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233-11. Participation in Federal Farm Programs by Farm Size, 1987 . . . . . . . . . . . . . . . . . . . 253-12. Participation in Federal Farm Programs by Crop Acres, 1987 . . . . . . . . . . . . . . . . . . 263-13. Income Sources by Sales Category, 1988 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263-14. Commodity Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273-15. Major Primary Feedstocks Derived From Petroleum . . . . . . . . . . . . . . . . . . . . . . . . . . 293-16. Expected Global Production Capacity of Surfactant Alcohols . . . . . . . . . . . . . . . . . . 323-17. Expected World Rubber Demand Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323-18. Estimated Acreage Needed To Supply One Billion Gallons of Fuel . . . . . . . . . . . . 333-19. Estimated Acreage Requirements for Selected New Crops To Replace Imports. . 333-20. Estimated Acreage Needed To Replace World Supplies . . . . . . . . . . . . . . . . . . . . . . . 344-1. USDA Fiscal Year 1989 Expenditures for Selected New Crops . . . . . . . . . . . . . . . . . 434-2. Expenditures for Guayule Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 434-3. Expenditures for Kenaf Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 444-4. 1988 Federal Expenditures for Degradable Plastic Research . . . . . . . . . . . . . . . . . . . . 44

vii

Chapter 1

Summary

Interest in diversifying agriculture has been in-creasing, due to changes affecting the industry.Widely fluctuating farm incomes ($38 billion in1979,$13 billion in 1983, and $34 billion in 1986)1

have led the agricultural community to seek new,high-growth markets. Erosion of the economic baseof rural communities, and the pressures faced bysmall farms, have intensified the search for neweconomic activities. Soil erosion, agrichemicalgroundwater contamination, and other environ-mental problems resulting from modern agriculturehave spurred interest in developing new crops thatmay be better suited to some geoclimatic regionsthan current crops and that provide fanners withmore crop rotation alternatives. Policymakers deal-ing with government budget constraints are seekingways to reduce surpluses and commodity supportpayments. Concerns about the long-term supply ofpetroleum have led to an interest in the potential ofrenewable resources, including agricultural com-modities, to replace petroleum derived products.Development of new industrial crops and uses oftraditional crops is viewed as at least a partialsolution to these pressing problems.

Agricultural commodities traditionally are usedfor food or livestock feed, but potentially couldprovide chemicals for use in a wide range ofindustrial applications. Vegetable oils and plantresins can be used as components of lubricants,paints, detergents, and plastics among others. Starchcan be used to produce biopolymers, or as a foodsource for bacteria that produce commodity chemi-cals. New fibers can replace wood pulp in a varietyof paper and paperboard products. Crops that aretraditionally grown in the United States are used inlimited quantities for industrial purposes. Addition-ally, the United States imports selected agriculturalproducts for industrial use. Uses of traditional cropscan be expanded, and new crops can be adapted toU.S. production to provide many of these products.

Many constraints must be overcome before agri-cultural commodities will become a primary sourceof industrial raw materials. Technical constraints

include agronomic problems such as seed shatteringand dormancy, low yields, insect pollination, andphotoperiodism among others. For some new crops,the lack of germplasm may constrain researchefforts. Utilization research is needed before chemi-cals from crops can be used industrially. And, theefficiency and productivity of new industrial useprocesses must be increased. With sufficient re-search funding and effort, it is likely that many ofthese technical constraints can be overcome.

Economic, rather than technical constraints, willlikely impede the development of new industrialcrops and uses most severely. New industrial usesmust be acceptable to manufacturers and the prod-ucts produced accepted by consumers. For example,several proposed new crops produce chemicals thatare already being used in industrial processes. Thecurrent sources of these chemicals are petroleum andagricultural imports. To be acceptable to manufac-turers, chemicals derived from new crops must becompetitive with current sources in terms of price,quality, and performance. Similarly, many potentialnew uses for agricultural commodities will competewith products already in use.

New crops must also be acceptable to farmers.Adoption of new crops by farmers will dependlargely on their profitability relative to crops thefarmer can grow now. Profitability can be increasedif multiple uses for new crops can be found anddeveloped; many of the chemicals that could bederived from new crops currently have limiteddemand.

Research to develop industrial uses of agriculturalcommodities is diverse and takes place in govern-ment laboratories, universities, and the privatesector. Several Federal programs exist that canfacilitate the development of new industrial cropsand uses, and funding for research and developmentactivities has been an estimated $10 to $15 millionannually. Federal funding has primarily supportedresearch on the new crops guayule, kenaf, Crambe,and rapeseed, and on new uses of cornstarch (e.g., forethanol production). Federal funding sources in-

l~ese n~ers represent net income from fiWmiIl gin 1982-84 dollars. Net income includes cash receipts from farm marketing and governmentpayments, plus non-money and other farm income minus production expenses. Off-farm income is not included. Source: USDA Agricultural Statistics,1988.

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2 ● Agricultural Commodities as Industrial Raw Materials

elude primarily the Department of Defense, theNational Science Foundation, the Department ofEnergy, and the Department of Agriculture. Propo-nents of developing agricultural commodities asindustrial raw materials perceive these programs asbeing inadequate, and have called for new initia-tives. Legislation introduced in the 100th and 101stCongresses, and passed in the 101st Congress,authorizes funding for research, development, andcommercialization of new crops and new uses oftraditional crops. Goals of the legislation includediversifying and stabilizing the agricultural sector,enhancing rural development, and increasing fam-ily-farm incomes. Additionally, proponents hopethat the new crops and uses of traditional crops willbe more environmentally benign than current crops,will improve the U.S. balance of trade, and willdecrease Federal agricultural payments. However,several questions remain concerning the appropriategoals of new crop and use development, and the bestinstitutional arrangements for achieving those goals.

Major FindingsAs with all new technologies, development,

commercialization and adoption of new industrialcrops and uses of traditional crops will have manyimpacts, some positive and some negative. At issueare questions such as:

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What benefits can realistically be achieved?What adverse impacts can be expected?What constraints (policy, institutional, social,economic, environmental, or technical) impededevelopment?How can policy and institutions be structured tobe efficient, cost-effective, maximize benefits,and minimize adverse impacts?

Chemicals derived from agricultural commoditieshave a potentially broad range of industrial applica-tions, and many are technically promising. Techni-cal feasibility, however, will not be sufficient forwidespread adoption. Chemicals derived from agri-cultural commodities must be less expensive thanthose currently available, or provide a superiorproduct in terms of quality, performance, supplyavailability, or environmental benefits among othercriteria. Environmental regulations could have asignificant impact on the development of newindustrial crops and uses of traditional crops. Andeconomic competitiveness will hinge on the ability

to develop markets for processing byproducts. OTAconcludes that:

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Development of new industrial crops and usesof traditional crops offers future flexibility torespond to changing political, economic, andenvironmental conditions in supplying indus-trial materials, although currently, many are noteconomically competitive with alternatives.Commercialization potential will be enhancedif research and development efforts take asystemic approach and are directed towardcreating a package of products rather than asingle product.

takes many years to develop a new use or crop,and during that time political, economic, and envi-ronmental conditions could change. Research anddevelopment of new products and processes lays thegroundwork necessary to respond quickly and effec-tively to these changing conditions. It is unlikely thatindividual firms will be willing to make largeinvestments to develop substitutes for future hypo-thetical changes. Arguments can be made, however,that this may constitute a legitimate public-sectorinvestment.

The economic competitiveness of using agricul-tural commodities for industrial uses hinges on theability to develop markets for the primary productand any processing byproducts. For example, thecost of using corn for ethanol production depends onthe cost of the corn minus any credits received for thegluten meal, distillers grains, and oil produced asbyproducts. The industrial market share of vegetableoil fatty acids will depend on the fatty acids beingcompetitive with petroleum-derived products aswell as the extent to which the glycerin byproductcan compete with petroleum-derived glycerin, andmarkets can be found for the meal. Thus, develop-ment strategies must consider developing a packageof products, rather than a single use only.

Research Needs

At the present time, the information that is neededto make a thorough assessment of the marketpotential, and socioeconomic and environmentalimpacts of developing new technologies usingagricultural commodities is seriously lacking. Aclear need exists for research not only to helpdevelop new crops and uses, but also to helppolicymakers evaluate the potential benefits to begained from these new technologies. Rigorous

Chapter l-Summary ● 3

analysis of the potential magnitude of impacts, whogains and loses and by how much, and whetherbenefits can be achieved in a cost-effective manneris needed. In particular:

Chemical, physical, and biological research isneeded to improve the efficiency of obtainingchemicals from agricultural crops, to improvethe efficiency of their use in industrial proc-esses, to develop new products, and to improvethe agronomic characteristics of agriculturalcrops.Market research is needed to identify commer-cial opportunities and constraints.Social science research is needed to evaluatethe socioeconomic impacts that will result fromtechnical change.Environmental research is needed to evaluatethe potential positive and negative environ-mental impacts of developing new industrialcrops and uses of traditional crops.Germplasm collection and germplasm storageand maintenance research is needed.

Many technical and agronomic improvements arestill needed before new industrial crops and uses oftraditional crops will be commercially viable. Lackof germplasm may constrain research efforts,particularly for new crops. Research to improvetechnical feasibility can improve the economiccompetitiveness of using chemicals derived fromagricultural commodities, but it cannot be assumed,that in all cases, these improvements will besufficient to guarantee success. Market needs mustbe identified and products developed that caneconomically meet those needs. Developing a prod-uct first, and then trying to find a market, is not themost effective approach. Identifying market needswill require an understanding of the short and longterm trends in input supply, product demand, andstructural change occuring within the industriesinvolved. Development of new industrial crops anduses of traditional crops, like any new technology,will benefit some, and harm others. These trade-offshave not been analyzed adequately.

Potential Impacts of Using AgriculturalCommodities as Industrial Raw Materials

Due to the lack of studies needed to evaluate thepotential market and impacts of new industrial cropsand uses of traditional crops, definitive statementsconcerning the potential benefits and cost-effec-

tiveness of development cannot be made at thepresent time. Of the few available studies, mostexamine expanding ethanol production from corn,an industrial use of a traditional crop. While they donot directly analyze new industrial crops or uses oftraditional crops, some studies are available thatexamine issues pertinent to the development of thesenew technologies. For example, research evaluatingfactors that cause instability in the agricultural sectorand new technology adoption by farmers have beenconducted, and can be used to analyze the potentialimpact on small farms and agricultural stability ofnew crops and uses. Additionally, studies on ruralindustrialization and changes in rural employmentduring the 1970s, when demand for agriculturalcommodities grew rapidly, can provide insights onpotential rural employment impacts of expandingindustrial uses of some agricultural commodities.These studies raise serious questions about thepotential benefits and costs of new industrial cropand use development. Based on these studies, OTAconcludes:

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Evaluation of rural employment in the 1970sand 1980s suggests that the rural employmentimpacts of new industrial crops and uses maybe modest, and that most employment increasesare likely to be in metropolitan rather than ruralcommunities. The rural counties likely to bemost affected are the fewer than 25 percent thatare agriculturally dependent.

Development of new industrial crops and usesof traditional crops, without additional policymeasures, is likely to have a modest impact onthe income of small-commercial and part-timefarmers.

New industrial crops and uses of traditionalcrops could potentially provide a domesticsource of strategic and essential chemicalcompounds that are currently imported orderived from petroleum, however, many are notcurrently economically competitive with thesesources.

New industrial crops and uses of traditionalcrops can potentially have positive and nega-tive environmental impacts.

It is not clear that the development of newindustrial crops and uses of traditional cropswill significantly rectify factors that causeinstability in agriculture, and thus stabilize theagricultural sector.


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It cannot be unambiguously stated that newindustrial crops and uses of traditional cropswill improve the U.S. trade deficit or signifi-cantly reduce Federal expenditures.Development of new industrial crops and usesof traditional crops could potentially competefor some of the markets of currently producedcrops.Development of new industrial crops and usesof traditional crops has the potential to providediversification alternatives and new agricul-tural markets.Premature attempts to commercialize the newindustrial crops and uses of traditional cropsmay delay any further efforts to develop theseuses.

Rural development, small farm survival, andagricultural stabilization will require comprehensiveapproaches. Development and commercialization ofnew industrial crops and uses of traditional crops canbe one component of these approaches but, by itself,will not be sufficient to accomplish these goals.Information needed to assess the cost-effectivenessof new crop and use commercialization relative toother strategies is not available. Historically, how-ever, social rates of return to agricultural researchinvestment have been high.

Rural Employment

The structure of rural communities has changedsignificantly over the last 40 years; rural economieshave diversified and are now strongly linked to theU.S. national economy and to global events. Link-ages between agriculture and rural economies haseroded over this time, and rural development policyand agricultural policy are no longer synonymous.Development and commercialization of new indus-trial crops and uses, while containing industrialelements, is still, however, essentially an agricul-tural policy.

Proponents of new industrial crop and use devel-opment feel that these efforts will increase ruralemployment through community multiplier effectsresulting from enhanced farm income and increasedagricultural input use, and by creating new jobsresulting from the full-utilization, expansion, orconstruction of processing and manufacturing facili-ties that use agricultural commodities. The secondhalf of the 1970s was characterized by rapidexpansion of agricultural production and providesinsights on potential employment impacts of in-

creased industrial demand for agricultural commodi-ties. Over this period, rural employment in agricul-turally related industries increased slowly. In gen-eral, the agriculture processing industry is notlabor-intensive, has excess capacity, and has in-creased productivity even as employment levelsdropped. Agriculturally dependent counties (lessthan 25 percent of all rural counties) are those thatwill be most significantly affected.

Agricultural commodity processing facilities arenot always located near the site of production of thecommodity. Indeed, at least half of all jobs inagriculturally related industries are located in metro-politan, rather than rural, areas. Need and availabil-ity of skilled workers, institutions that providemanagerial and vocational education, natural re-sources, and appropriate infrastructure includingtransportation and information technologies will bemajor determinants of manufacturing or processingplant location. These needs will generally favormetropolitan areas, rather than rural communities.However, special storage, processing, or transporta-tion requirements may make construction or expan-sion of processing facilities in crop productionregions desirable.

Aid to Small Farms

One goal of using agricultural commodities asindustrial raw materials is to provide higher incomealternatives to small farms. However, in many cases,the problems faced by small farms are not the lackof available technologies, rather it is the inability oftheir operators to take advantage of new technolo-gies. Small farm operators may lack financialresources or the management skills needed. Adop-tion of new technologies is risky, and operators ofsmall farms may not be willing or able to accept theadded risk. Gains from new technologies accrueprimarily to early adopters; it is unlikely that smallfarms will be the earliest adopters of many of thenew technologies.

Small, part-time farmers receive the majority oftheir income from off-farm activities; changes in themarket prices of commodities may not significantlyincrease their total income. For those that partici-pate, agricultural commodity programs buffer theimpacts of price changes for many traditional crops.These factors limit the income effects for smallfarms that might result from the development of newuses for traditional crops. Commercialization of newindustrial crops and uses of traditional crops—

Chapter I-Summary ● 5

combined with programs to teach operators of smallfarms new management skills, help them obtainfinancing, and provide insurance for the additionalrisks assumed-may help to enhance small farmincomes. Without these additional programs, com-mercialization of new industrial crops and uses oftraditional crops may not significantly enhance theincome of small farms.

Strategic Materials and PetroleumReplacement Potential

Several of the new crops could provide the UnitedStates with a domestic supply of materials that havestrategic and essential industrial uses. The UnitedStates currently imports agricultural commodities oruses petroleum derived chemicals for these pur-poses. Materials of strategic importance are stored ina strategic material reserve. Domestic productionmay be desirable for security reasons.

Agricultural commodities used to produce fueland primary feedstock chemicals have the potentialto replace the largest quantities of petroleum im-ports. Other markets, such as some of the uses forvegetable oils, are much smaller. It is technicallyfeasible to use agriculturally derived chemicals asfuel and industrial feedstocks, but because thepetroleum industry is a highly integrated and flex-ible system that can change the type, amount, andprice of chemicals it produces to respond to marketconditions, the use of agriculturally derived chemi-cals is not currently economically competitive inmost of these markets.

Large-scale development of agricultural com-modities for fuel and chemical uses will likely resultin major changes in land-use patterns, accompaniedby environmental impacts, as well as impacts onfood prices. Additionally, petroleum-derived energyis used to produce agricultural commodities andconvert chemicals derived from these commodities;this usage must be subtracted to determine petro-leum replacement potential.

Environmental Impacts

New industrial crops and uses can potentiallyhave positive and negative environmental impacts.New crops offer additional options for crop rotation,soil erosion control, and other conservation efforts.However, farm commodity programs that discour-age crop rotations, and conservation programs thatprohibit harvesting of crops grown on some landmay inhibit the use of these new crops. Changes in

the 1990 Farm Bill may correct some of theseconstraints. Several new crops are better adapted tosemiarid environments and require less irrigationthan many crops currently grown in those areas.Potential positive environmental impacts could re-sult from new uses of traditional crops such as roadde-icers, and coal desulfurization. Alternative fuelscould potentially improve air quality. Currently,these uses are not economically competitive, in partbecause the prices of alternatives do not reflect thetrue cost of adverse environmental impacts.

Many new crops are not native to the UnitedStates and the introduction of foreign species cansometimes lead to unexpected problems. Somenewly introduced crops (i.e., Johnson grass) havebecome serious weeds, while others could poten-tially serve as a repository for crop diseases. Manycrops may be genetically engineered, and the envi-ronmental release of these crops raises many envi-ronmental questions. Additionally, large changes inland use patterns and inputs could have far-reachingenvironmental impacts, not all of which may bepositive.

Agricultural Stability

Instability in the U.S. agricultural industry resultsprimarily from weather variation, market imperfec-tions (i.e., lack of complete markets and asymetricinformation between buyers and sellers) and macro-economic policy (primarily U.S. Government defi-cits and money supply policies). Globalization of thegoods and financial markets magnifies these im-pacts.

The development of new industrial crops and usesof traditional crops does not address macroeconomicpolicies. In addition to the agricultural sector itself,many industries that will use new crops to producenew products are also highly sensitive to macro-economic conditions. Diversifying into these newmarkets will not shelter the agriculture sector frommacroeconomic impacts. Diversification of cropproduction can moderate adverse weather impacts,but if monoculture increases to meet the demands fornew uses of traditional crops, the opposite effectcould occur. Development of new marketing institu-tions, or greater use of available market instrumentsthat reduce risks (i.e., futures markets, forwardcontracts, crop insurance, etc.) could improve agri-cultural stability. Improvements in market institu-tions and reduction of U.S. deficits are needed tohelp stabilize agriculture.


Diversification

Technological approaches can offer new marketand production opportunities and provide flexibilityto respond to changing economic, political, andenvironmental conditions. Many of the new indus-trial crops and uses of traditional crops are noteconomically and/or technically competitive in theircurrent state of development and under currenteconomic conditions, but conditions can change. Ittakes many years of sustained research to develop anew crop or a new use. Providing research anddevelopment funding and encouraging public sec-tor/private sector interaction now, can greatly reducethe lead time necessary should conditions changeand commercialization becomes attractive.

Premature Commercialization

Premature commercialization attempts could po-tentially halt, or at least delay, the development of anew industrial crop or use. As an example, publicdisillusionment with degradable plastics has re-sulted in lawsuits against companies making de-gradable plastic products, and some demands for theelimination of publicly supported research for theseproducts. Legislation passed in the 101st Congressauthorizes funding to encourage rapid commerciali-zation of industrial uses of agricultural commodities.

Additional Potential Impacts

Current domestic uses for many of the chemicalsderived from new crops are limited, and productionof these crops to meet this demand may not have ahuge impact on U.S. agriculture in the aggregate.Concentrated production in a localized region couldpossibly be significant for that area. Simultaneousdevelopment of several new crops and uses will havelarger impacts. Development of new uses for acurrently grown crop that raises the price of the cropmay have a more significant impact due to thevolumes involved and the impact on commoditysupport payments. The potential for domestic andexport market expansion can only be discussed incrude terms. Good market studies are needed, butunfortunately are lacking.

Impacts of most new crops and uses on Federalfarm expenditures, surpluses, and the trade deficitcannot be determined at the present time. Improvedinformation about market demand and profitabilityis needed to make those assessments. Surpluses andcommodity payment impacts of new crops willdepend on which currently grown crops are replaced

by new crops. For example, corn is a surplus cropand, in 1988, nearly 60 percent of the crop wasenrolled in the commodity support program. On theother hand, production of oats in the United States isin deficit and, in 1988, less than 1 percent of the cropwas enrolled in commodity programs. Shiftingacreage from corn production to new crop produc-tion may result in decreased corn surpluses andreduced Federal commodity expenditures. However,shifting acreage from the production of oats to newcrops will not significantly affect surpluses andcommodity payments.

For new uses of traditional crops, impacts onFederal expenditures will depend in part on whetherthe new use must be subsidized to be economicallycompetitive. Ethanol is an example. Excise taxexemptions potentially could offset most, or all,commodity program savings. The impacts of newindustrial crops and uses of traditional crops on thetrade deficit are similarly ambiguous.

Development and adoption of new crops or newuses could result in some income reallocation. Manynew crops and uses have high protein meal as abyproduct. Significant levels of adoption couldpotentially displace soybean meal in some livestockfeed markets, and lower soybean prices. Byproductsfrom ethanol production will also put pressure onsoybean prices as they compete in the same oil andlivestock feed markets. Soybean farmers in theSoutheast and Delta regions are most likely to beadversely affected, while corn farmers in the Mid-west will be most positively affected.

Many new crops have the potential to substitutefor, and at least partially replace, major agriculturalexports of developing countries, some of which areof strategic importance to the United States. Substi-tutes for coconut oil, palm oil, and rubber areexamples. Attempts to increase exports of corngluten meal, which is a byproduct of ethanolproduction, may meet with resistance from theEuropean Community. An improved understandingof potential international ramifications is needed.

Policy Issues

The lack of research to evaluate market potentialand impact of new industrial crop and use develop-ment, as well as the technical constraints that stillexist suggest several research needs as have alreadybeen discussed. What can be clearly deduced,however, is that commercialization prospects will be

Chapter I-Summary ● 7

improved if a systems approach is taken, and if apackage of technologies and products is developedwith markets identified for all products.

Because legislation has the goal of developingnew products, research will need to be more focusedand directed than would be the case if the goal wereto improve scientific knowledge. To improve thescience base, it is reasonable to focus researchfunding on proposals that are the most scientificallysound and interesting regardless of the topic area.However, taking this approach to the developmentof new products is likely to exclude research neededfor commercialization. Research results are unpre-dictable, so some undirected research is still needed.However, most of the research should be focused onovercoming as many obstacles to commercializationas possible.

While disciplinary research in the physical, bio-logical, and social sciences is needed, multidiscipli-nary research will be essential. Because of thediffuse geographical nature of agricultural produc-tion and industry distribution, multiregional re-search may be needed in some cases. A EuropeanEconomic Community research program (ECLAIR—European Collaborative Linkage of Agricultureand Industry Through Research), established todevelop industrial uses of agricultural commodities,recognizes these needs and explicitly requires mul-tidisciplinary research and the active participation ofat least two countries in all projects. U.S. legislationdoes not require multidisciplinary or multiregionalresearch although this type of research could qualifyfor funding. Ample evidence exists, however, that ifit is not required, it is unlikely to occur.

There must be a mechanism to set researchpriorities. Development of many new crops and useswill be expensive. As an example, between 1978 and1989, Federal expenditures for guayule develop-ment have been nearly $50 million. Estimatedfunding requirements through 1996 are an additional$38 million. Funding is limited, and it must bedecided how to best allocate those resources. Amechanism is needed to assess the benefits, negativeimpacts, timeframe and development costs of newtechnologies, and then to allocate resources to thosethat are most promising.

To achieve technical change, policies must ad-dress constraints and opportunities in the researchand development, commercialization, and adoptionstages. A wide variety of options and flexibility in

their selection will be of paramount importance.Funding for research, public sector/private sectorcooperative agreements, and commercialization isimportant, but not the only issue. Finding ways tohelp industry minimize the search costs of acquiringinformation, providing technical assistance andtraining to aid the adoption of new technologies, andagricultural extension programs to aid farmer adop-tion of new crops also are important.

Additional questions exist as to the most appropri-ate institutional structure for administering policiesand developing new technologies using agriculturalcommodities: is the establishment of a new institu-tion (within but independent of USDA) necessary, ormight a reassessment of how USDA sets prioritiesand allocates resources for research and develop-ment of agricultural technologies achieve similarends? An underlying force driving the call for newlegislation to help develop new industrial crops anduses of traditional crops is the perceived lack ofresponsiveness of the U.S. Department of Agricul-ture. Proponents of new industrial crop and usecommercialization feel that USDA provides inade-quate research funding and insufficient interactionwith the private sector. Similar frustrations are oftenvoiced with respect to other agricultural technolo-gies. In terms of research, development, and com-mercialization, new industrial crops and uses oftraditional crops are no different from other agricul-tural technologies. Thus a critical issue is whether itis best to establish corporations to commercializeeach technology type, or to address fundamentalproblems that exist within USDA.

On the one hand, a new institution could focus itsfull attention on new crops and uses and serve as acentral organization that is easily recognized andaccessible to those interested in commercializingnew agricultural technologies. On the other hand, anew institution may be isolated and unable tocoordinate with other agencies in USDA, develop itsown constituency (making it difficult to terminate)and may develop goals that are in conflict with thoseof the USDA. Historically, the establishment of newinstitutions within USDA has been a serious prob-lem, and has hampered attempts to coordinatepolicies and programs. Addressing fundamentalproblems with USDA priority setting and researchresource allocation mechanisms will improve theresearch and development prospects of a wide rangeof agricultural technologies, not just new industrialcrops and uses of traditional crops.


Policy OptionsTechnical change (i.e., changes in an economy’s

mix of products and processes) involves threestages: research and development (development ofideas or models), commercialization (commercialdevelopment and marketing), and technology adop-tion. 2 To successfully achieve technical change,policies are needed that help overcome constraints inall three phases. Presently, science policy focusesmainly on research, development, and commerciali-zation. Issues of adoption have been given littleattention. OTA has identified several potentialpolicy options to help facilitate the development ofnew industrial crops and uses of traditional crops.

Research and Development

Public-sector research for industrial new cropsand uses requires a sustained allocation of personneland funding. Emphasis should be placed on interdis-ciplinary research. Interregional projects will beneeded in some cases. Research needed to developnew industrial products must include marketing,economic, and social welfare analysis as well asbiological and chemical research. Potential environ-mental impacts must be evaluated; this is particu-larly pertinent for genetically engineered crops, andfor new crop introductions that involve expandingthe range of indigenous species, or the plannedintroduction of non-indigenous species to the UnitedStates. Research to develop new industrial crops anduses could be constrained by the lack of appropriategermplasm needed to improve agronomic character-istics and to screen for useful, and as yet unidenti-fied, chemicals. Collection and research to improvemaintenance and storage of germplasm is needed.

Technology Transfer and Commercialization

The Technology Transfer Act of 1986 and theNational Competitiveness Technology Transfer Actof 1989 removed most major barriers to private-sector cooperative agreements with Federal labora-tories. There is still a need to provide adequatefunding for these activities and to provide profes-sional incentives for public sector participation. Inaddition to cooperative agreements, public sector/private sector interaction can be stimulated by othermeans as well. Other policies might include loansand use of specialized public-sector facilities and

equipment. Programs such as the Small BusinessInnovation Research Program can help the privateand public sectors share the cost of risky research.

Federally supported research is conducted inthousands of Federal, university, and non-profitlaboratories. Learning about and assessing pertinentinformation is still a major problem for private firmsinterested in utilizing publicly funded research.Holding conferences that showcase Federal labora-tory research and improving databases describingfederally funded research are two methods ofproviding information to private fins.

Adoption

Many new products and technologies developedand marketed may be inputs or processes needed toproduce other products. In these cases, the adoptionof these new technologies by firms within anindustry will be needed. As with technology trans-fer, gathering information about new technologies iscostly. Many firms maybe small or lack an in-houseresearch capacity, and may need assistance beforeusing these new technologies. There may be a needfor technical extension programs. Likewise, agricul-tural extension as well as commodity programs willplay major roles in determiningg the extent and speedof farm adoption of new crops.

Legislation Passed

OTA has identified the need for policies toaddress the research and development of newindustrial crops and uses of traditional crops, tech-nology transfer and commercialization issues, andthe issues of the adoption of new technologies.These options are discussed in chapter 6, and weremade available to the House and Senate AgriculturalCommittees during their debate on the Farm Bill. Inthe fall of 1990, the 101st Congress passed the Food,Agriculture, Conservation, and Trade Act of 1990(1990 Farm Bill). The issues of industrial crops anduses of traditional crops, USDA research priorities,and agricultural commodity programs that affectfarmer adoption of new crops were debated andlegislation passed as part of the Farm Bill. Followingis a summary of the main legislation that affects thedevelopment and commercialization of new indus-trial crops and uses of traditional crops.

@or the purposes of this report, commercialization is being defined as the actual production and sale of products. The process leading to that stageis referred to as research and development.

Chapter 1--Summary ● 9

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The Alternative Agricultural Research andCommercialization Act was passed to establisha Center for these actitivities. Establishment ofRegional Centers to assist commercializationwas also authorized.Commodity programs were changed to allowfor greater planting flexibility. A Triple BaseOption was adopted.An Agricultural Science and Technology Re-view Board was created within USDA toreview current and emerging agricultural re-search issues and to provide a technical assess-ment of new technologies.

Alternative Agricultural Research andCommercialization Act

This Act creates an Alternative AgriculturalResearch and Commercialization Center, an inde-pendent entity located within USDA. The Act alsoauthorizes the establishment of two to six regionalcenters to assist in commercializing new industrialcrops and uses of traditional crops. Heavy emphasisis placed on commercialization funding. Funding isalso provided for research and development, andpublic sector/private sector cooperative researchagreements.

Because of incompatible timing of the Farm Billand Appropriations legislation, funding for the newAlternative Agricultural Research and Commercial-ization Center was not provided. Instead, the CriticalAgricultural Materials Act was reauthorized throughFY 1995 and funding appropriated for the Office ofCritical Materials. Congress will likely considerfunding of the Center in 1991.

Commodity Programs

Congress passed a Triple Base Option plan, tobegin in 1992. Under the plan, the base acreage forprogram crops (wheat, corn, grain sorghum, oats,barley, upland cotton, or rice) is established. Acre-age Reduction Programs (ARP) will remove apercentage of that acreage from production. Fifteenpercent of base acreage is excluded from receivingcommodity payments and can be planted to programcrops or other designated crops (i.e., oilseeds andindustrial or experimental crops designated by theSecretary of Agriculture). An additional 10 percentof acreage can be planted to non-program cropswithout the loss of program base acreage. These newflexibility provisions, and removal of acreage that iseligible for support payments will help to remove

some of the disincentives to the planting of newindustrial crops. Additionally, target prices werenominally frozen at 1990 levels, but changes in theway deficiency payments are calculated may effec-tively reduce price levels.

Agricultural Science and TechnologyReview Board

This board consists of 11 representatives fromARS, CSRS, Extension Service, Land Grant Univer-sities, private foundations, and firms involved inagricultural research, technology transfer, or educa-tion. The purpose of the Board is to provide atechnology assessment of current and emergingpublic and private agricultural research and technol-ogy transfer initiatives and to determine theirpotential to foster a variety of environmental, social,economic, and scientific goals. The report of theBoard is to include an assessment of researchactivities conducted, and recommendations on howsuch research could best be directed to achievedesired goals. Establishment of this Board is anattempt to address some of the fundamental prob-lems existing in the USDA research and extensionsystem.

The legislation enacted addresses some research,development, technology transfer, and farm adop-tion issues relevant to new crops and new uses ofindustrial crops. Congress may wish, in the future, toexplore further other issues that could enhance thedevelopment of these crops and uses. These issuesinclude germplasm collection and maintenance, therole of technical assistance and technical extensionprograms, improving equity markets in rural com-munities, and establishing programs to help smallfarm operators adopt and utilize new technologies.

ConclusionsUsing agricultural commodities as industrial raw

materials will not provide a quick and painless fixfor the problems of agriculture and rural economies.They can provide future flexibility to respond tochanging needs and economic environments, butmany technical, economic, and policy constraintsmust be overcome. Many of the new industrial cropsand uses of traditional crops are still in relativelyearly stages of development. Several years ofresearch and development will be necessary beforetheir commercialization will be feasible. The lack ofmarketing strategies and research to assess theimpacts of new technologies complicates decisions


on research priorities and appropriate policies andinstitutions needed to achieve success. Potentialimpacts on income reallocation and the environ-ment, as well as regional effects need further studybefore large-scale funding for commercialization isrequired. Successful commercialization will requirenot just funding assistance, but a systemic policythat articulates clear and achievable goals andprovides the instruments needed to reach thosegoals.

An encompassing research and developmentstrategy is needed and must be designed to meetmarket needs; hence a strategic, multidisciplinary,multiregional approach should be taken with bothpublic and private sector involvement. Changes inagricultural commodity programs, in addition tothose already made, may still be needed to removedisincentives to the adoption of many new crops.Because of research information still needed, and thetime still required to develop many of the new cropsand products, a two-step approach to commerciali-zation might be useful. The European community istaking this approach by first establishing a pre-commercialization program to determine feasibility,and then following up with a later program toencourage commercialization. The U.S. Small Busi-ness Innovation Research Program also takes amultistage approach to the commercialization ofnew technologies.

In the United States, initial primary emphasiscould be given to the basic, applied and precommer-cialization research needed to develop new cropsand uses. A high priority should be an earlytechnology assessment of products and processes toanalyze potential markets, socioeconomic and envi-ronmental impacts, technical constraints, and areasof research needed to address these issues fully. Theestablishment of the USDA Science and TechnologyReview Board should improve the prospects for thistype of assessment. The technology assessmentwould lay the groundwork for development, and

provide the information needed to make intelligentdecisions about commercialization priorities, pos-sible impacts of new technologies, and furtherresearch or policy actions needed.

Interdisciplinary, and in appropriate cases, mul-tiregional research should be given the highestfunding priority. This could include: chemical,physical, and biological research needed to improveproduction yields and chemical conversion efficien-cies, and to establish quality control and perform-ance standards; agronomic research to improvesuitability for agricultural production; germplasmcollection and maintenance research; and socialscience and environmental research. Technologytransfer issues should also be addressed. Theseissues include funding for cooperative agreements,database management, and Federal laboratory-industrial conferences.

Once information is available to identify marketpotential and technical, economic, and institutionalconstraints, the second step to commercializationcan be made. A strategic plan can be developed tocommercialize the most promising technologies.Financial aid for commercialization and the role ofregulations may need to be considered. Industrialadoption and diffusion of new processes may requireadditional technical assistance and technical exten-sion programs. For new industrial crops and uses,additional changes may be needed in agriculturalcommodity programs.

Because many new industrial crops and uses oftraditional crops are still in the early stages ofdevelopment, there is time for a thorough analysis ofthe actual potential of these new products, theconstraints to commercialization, and the potentialimpacts of development. This information, once it isavailable, will permit the design of appropriatepolicy and institutions needed to achieve the benefitsthat can be gained from using agricultural commodi-ties as industrial raw materials.

Chapter 2

Introduction

Industrial Uses of AgriculturalCommodities in the United StatesCurrently, the United States uses chemicals de-

rived from agricultural commodities for a widerange of industrial applications. Industrial uses,however, represent only a small percent of total U.S.production of agricultural commodities. As anexample, industrial uses of vegetable oils use nomore than 2 percent of the total U.S. production ofvegetable oils (12). Industrially useful compoundsderived from renewable resources, including agri-cultural commodities include:

1. oils and waxes;2. resins, gums, rubbers, and latexes;3. fibers;4. starches and sugars; and5. proteins.

Oils and Waxes

Lipids (fats and oils) are water-insoluble com-pounds found in the cells of plants and animals. Theyserve as structural components of membranes, andas metabolic fuel. Lipids are composed of triglyc-erides that can be decomposed into fatty acids andglycerol, a chemical that is used in soaps anddetergents. Fatty acids consist of carbon chains. Thelength of the chain, the number of double bondsbetween the carbons of the chain (the degree ofunsaturation), and the type of reactive groupsattached (e.g., epoxy and hydroxy groups), deter-mine the characteristics and uses of the various fattyacids. Longer chain (12 or more carbons) fatty acidsare used most frequently in detergents. Shorter chain(10 or fewer carbons) fatty acids are used primarilyin plastics (1 1). Oilseed crops are a major source ofoils and fatty acids used for industrial purposes.Table 2-1 lists the fatty acids most commonly usedin industrial applications. Table 2-2 presents totalquantities of fats and oils used for industrialpurposes in 1987 and 1988. Table 2-3 presentsindustrial uses of selected oils for May and April19900

Waxes are similar to oils, but are generally harderand more brittle (more saturated), and contain estersof longer-chain fatty acids and alcohols. Waxes are

Table 2-1—industrial Fatty Acids

MostClass Fatty acid common sources

Saturated . . . . . . . . C1z (Iauric) Coconut oilC16 (palmitric) Palm oilC18 (stearic) Tallow, hydrogenated oil

Monounsaturated. . C18 (oleic) Olive, tall oilsC22 (erucic) Rapeseed oil

Diunsaturated. . . . . Ct8 (Iinoleic) Sunflower, soybean oil

Multiunsaturated . . C18 Linseed, tung, fish oilHydroxy. . . . . . . . . . C18 (ricinoleic) Castor oilSOURCE: L.H. Princen and J.A. Rothus, “Development of New Crops for

Industrial RawMaterials,” Jourrra/oftheArnerimn 0“/Chernists’Society, vol. 61, 1984, pp. 281-289.

Table 2-2—Fats and Oils: Use in Selected IndustrialProducts (million pounds)

1987 1988

Soap . . . . . . . . . . . . . . . . . . . . . 918 807Paints/varnish . . . . . . . . . . . . . 261 176Resins/plastics . . . . . . . . . . . . 199 202Lubricants . . . . . . . . . . . . . . . . 109 111Fatty acids . . . . . . . . . . . . . . . . 2,195 2,181Other . . . . . . . . . . . . . . . . . . . . 597 501

Total . . . . . . . . . . . . . . . . . . 4,279 3,978NOTE: Fats and oils include cottonseed, soybean, corn, peanut, tall,

safflower, palm, coconut, linseed, inedible tallow and grease, tung,castor, palm kernel, rapeseed, edible tallow, lard, sunflower, fish,and other miscellaneous oils.

SOURCE: James Schaub, U.S. Department of Agriculture, EconomicResearch Service, 1990.

used in candles, crayons, and floor polishes amongother uses. The United States imports many of thewaxes used (table 2-4).

Resins, Gums, Rubbers, and Latexes

Resins, usually obtained from plant secretions,are solid or semisolid organic substances (usuallyterpenoids) that are soluble in organic solvents andinsoluble in water. The most commonly used resinsare produced by pine trees. Rosin, a resin mixtureextracted from tall oils (a byproduct of chemicalwood pulp manufacture) or from dead pine stumpshas many uses in the chemical industry (table 2-5).

Many of the gums (e.g., xanthan, dextran, poly-tran, gullan, and pulludan) currently used are derivedfrom seaweeds and kelps or are produced bymicrobial bioprocessing. These polysaccharide bio-polymers are used primarily as viscosifiers (thicken-

–11–

12 . Agricultural Commodities as Industrial Raw Materials

Table 2-5-industrial Uses of RosinTable 2-3-industrial Uses of Selected Oils,

April/May 1990 (thousand pounds) PercentUse total consumption

Oil Industrial use April 1990 May 1990Rubber and chemicals. . . . . . . . . . . . . . . . . . 35.2Paper sizing . . . . . . . . . . . . . . . . . . . . . . . . . 33.5Ester gums and synthetic resins. . . . . . . . . . 22.7Paints, varnishes, and lacquers . . . . . . . . . . 2.2Other uses. . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7SOURCE: Joseph J. Hoffmann and Steven P. Mdaughlin, “Gtindelia

Camporum: Potential Cash Crop for the Arid Southwest,”Economic Bottmy40(2), April-June 1986, pp. 162-169.

Soybean . . . . . Soap . . . . . . . . . . . . .Paints/varnish. . . . . .Resins/plastics . . . . .Fatty acids . . . . . . . .Othera . . . . . . . . . . . .

Total a . . . . . . . . . .Coconut. . . . . . Soap . . . . . . . . . . . . .

Paints/varnish. . . . . .Resins/plastics . . . . .Lubricants. . . . . . . . .Fatty acids . . . . . . . .Othera . . . . . . . . . . . .

Total a . . . . . . . . . .

Castor . . . . . . . Soap . . . . . . . . . . . . .Paints/varnish. . . . . .Resins/plastics . . . . .Lubricants. . . . . . . . .Other . . . . . . . . . . . . .

Total . . . . . . . . . . .Palm . . . . . . . . Total . . . . . . . . . . .Palm kernel . . . . . . . . . . . . . . . . . . . . . .Rapeseed. . . . . . . . . . . . . . . . . . . . . . .

D3,0389,599

D8,020

D3,4429,981

D8,725

22,819 25,320

10,255D

104D

12,112

13,849D

175D

11,642

Table 2-6-Use of Pulp in Paper andPaperboard Production

5,200 5,903 Use Percent total31,224

D831398471

D

28,932

D410501418

D

Newsprint . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.5Tissue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5Printing and writing . . . . . . . . . . . . . . . . . . . . 26.0Packaging and industrial . . . . . . . . . . . . . . . 8.5Paperboard. . . . . . . . . . . . . . . . . . . . . . . . . . . 49.5SOURCE: U.S. Department of Agriculture, Forest Service, “An Analysis of

the Timber Situation of the United States, 1989-2040, Part I: TheCurrent Resource and Use Situation,” 1989.

4,385 4,438

5,600DD

5,573DD Starches and Sugars

KEY: (D) Data withheld to avoid disclosing figures for individual companies.Starch is composed of hundreds of glucose (sugar)

units bound together in branched or unbranchedchains. Starch is the principal carbohydrate storageproduct of higher plants. Current U.S. production ofethanol requires about 400 million bushels of corn.An additional 4.5 billion pounds of cornstarch areused for other industrial purposes. Of that amount,nearly 3.5 billion pounds are used in the paper,paperboard, and related industries (primarily asadhesives). The remainder is used predominantly inthe textile industry (as warp sizers) and as thickenersand stabilizers (3).

aTotal and other industrial uses indudes the addition of oil to livestock feed.

SOURCE: James Schaub, U.S. Department of Agriculture, EconomicResearch Service, 1990.

Table 2-4-1987 U.S. Wax Imports

Beeswax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 832 MTCandelilla wax. . . . . . . . . . . . . . . . . . . . . . . . 352 MTCarnauba wax. . . . . . . . . . . . . . . . . . . . . . . . 4.015 MTSOURCE: U.S. Department of Agriculture, Economic Research Service,

Foreign Agricultural/ Trade of the United States, Calendar Year1987 Su@ement (Washington, DC: U.S. Government PrintingOffice, June 1988).

ers), flocculating agentslubricants (11).

Natural rubber used in

(aggregating agents), andProteins

Industrial uses of proteins include adhesives thathelp bind pigments to paper. However, proteins aremost commonly used for food and feed purposes,rather than as industrial feedstocks.

the United States is Hevearubber imported primarily from Malaysia and Indo-nesia. The United States imports about 800,000metric ton (MT) of Hevea rubber yearly.

Fibers

Fiber can be obtained from trees and other fibrousplants (e.g., hemp, ramie). In the United States, theprimary fiber source is the forestry industry. Woodpulp is used in the making of paper and paperboardproducts (table 2-6).

New Industrial Crops and Uses ofTraditional Crops

Chemicals with industrial uses can be derivedfrom crops that are traditionally grown in the UnitedStates or from new crops, which must be adapted toU.S. production. New crops can be derived from thedomestication of wild species of plants, or intro-duced from other countries. Cuphea, an oilseed that

Chapter 2-Introduction ● 13

could replace coconut oil, is an example of anattempt to domesticate a wild species. Industrialrapeseed, an oilseed that produces a chemical usedas a slip agent in some plastics, is cultivated in manycountries and is now being adapted to U.S. produc-tion.

Research and development of new industrialcrops in the United States is diverse. Table 2-7 listssome potential new crops that could be developedfor U.S. production. The list is not exhaustive, butrather includes new crops that are considered to havehigh commercial potential based on the types ofchemical compounds these plants produce. Fouroilseeds (Crambe, rapeseed, meadowfoam, andjojoba), one new rubber, guayule, and one new fiber,kenaf, are in relatively advanced stages of develop-ment. Each of these potential new industrial crops isdiscussed in greater detail in Appendix A: SelectedNew Industrial Crops.

New industrial use of crops that U.S. farmers arealready producing is also being pursued (table 2-8).Examples include using sunflower seed oil as dieselfuel, or using compounds derived from corn to makea road de-icer that could replace salt. These and anumber of other new uses are discussed in AppendixB: Selected Industrial Uses for Traditional Crops.

Research is also being conducted to develop newfood crops, forage crops, horticultural and ornament-al crops, biomedicinal crops, and crops that producebiopesticides among others. New industrial uses offorestry crops and of ligno-cellulose derived fromplant wastes are also being explored.

Changing demographic patterns in the UnitedStates have led to increased demand for many newfood items. Imports of Latin and Asian fruits, grains,and vegetables have been steadily rising. Many ofthese crops could be grown in the United States.Some of these new food crops, like some of the newindustrial crops, are drought tolerant and could begrown in areas where water shortages are becominga problem. Additionally, some new specialty-foodcrops may face fewer commercialization barriersthan new industrial crops (5). Horticultural crops area rapidly growing, high-value market. Grower cashreceipts for horticultural and ornamental crops grewfrom 5 percent of all crop receipts in 1981 to 11percent in 1987, with estimated receipts in that yearof about $7 billion (10). Examples are discussedbriefly in Appendix C: Selected New Food Cropsand Other Uses. There may also be potential to

Table 2-7—Potential New industrial Crops

CompoundCrop of interest Replacement

OilSeed:Buffalo gourd . . . .Chinese tallow . . .Crambe . . . . . . . . .Cuphea . . . . . . . . .

Honesty . . . . . . . .Jojoba . . . . . . . . . .Lesquerella . . . . . .Meadowfoam . . . .

Rapeseed . . . . . . .Stokes aster . . . . .Vernonia . . . . . . . .

Oleic acidTallowErucic acidLaurie acid,

capric acidErucic acidWax estersHydroxy fatty acidsLong chain fatty

acidsErucic acidEpoxy fatty acidsEpoxy fatty acids

Gums, resins, etc.:Baccharis . . . . . . . ResinsGrindelia . . . . . . . . ResinsGuar . . . . . . . . . . . GumGuayule . . . . . . . . RubberMilkweed . . . . . . . . Latex

Fibers:Kenaf . . . . . . . . . . Pulp similar to

wood

Petroleum/soybean oilImported cocoa butterImported rapeseed oilCoconut oil/palm kernel

oilImported rapeseed oilSperm whale oilCastor oilPetroleum derivatives

Imported rapeseed oilPetroleum/soybean oilPetroleum/soybean oil

Wood rosins, tall oilsWood rosins, tall oilsImported guarImported hevea rubberPetroleum derivatives

Imported newsprint

SOURCE: Office of Technology Assessment, 1991.

Table 2-8-Potential industrial Uses forTraditional Crops

Use Crop

Adhesives, matings . . . . . . . . . . . . . . .Coal *sulfurization . . . . . . . . . . . . . . .Diesel fuel . . . . . . . . . . . . . . . . . . . . . . .Ethanol . . . . . . . . . . . . . . . . . . . . . . . . . .Degradable plastics . . . . . . . . . . . . . . .Ink carrier . . . . . . . . . . . . . . . . . . . . . . . .Road de-icer . . . . . . . . . . . . . . . . . . . . .Super absorbants . . . . . . . . . . . . . . . . .

SoybeansCornSoybeans, sunflowersCornCornSoybeansCornCorn


expand the use of animals and animal products aswell.

This report focuses primarily on the potentialbenefits from, and constraints to, the developmentand commercialization of new industrial crops anduses of traditional crops, rather than on new food,forage, ornamental crops, etc. It also focuses onproduction agriculture, rather than on developingnew products for the forestry industry. The rationalefor focusing on industrial uses and crops is thatsupplying the industrial market will potentially leadto entirely new markets for agricultural products.Additionally, these industrial markets are poten-tially high-volume markets that could use excessagricultural capacity. Development of new edible


crops is considered more likely to result in theredistribution of market share, than to expand thetotal market.

Proposed Benefits of UsingAgricultural Commodities as

Industrial Raw MaterialsProponents of the development of new industrial

crops and uses for traditional crops cite manypotential benefits that can accrue to society (2,9,17).Those most frequently cited include market diversi-fication and increased farm income, improved agri-cultural resource utilization, reduced commoditysurpluses and support payments, enhanced interna-tional competitiveness, reduced negative environ-mental impacts, revitalized rural economies, a do-mestic supply of strategic and essential materials,and decreased dependency on petroleum.

Diversification of Agricultural Markets

Currently, U.S. agriculture relies on the produc-tion of a limited number of crops, many of which arein surplus production, and are used primarily forhuman and livestock food. Depressed prices andprice variability of these commodities results fromdomestic surplus production and global competitionin their production and marketing, and have resultedin low and variable income for U.S. farmers. TheUnited States has lost market share in the export ofmany of its major commodities.

As a result of the severe problems facing agricul-ture in the early 1980s, the Secretary of Agricultureconvened a challenge forum in 1984 to explore newdirections for agricultural products and markets. TheNew Farm and Forest Products Task Force wasestablished as a result of this forum. The task forceconcluded that diversification of agriculture is theonly alternative, and should become a nationalpriority. The task force stated that technologicalinnovation can potentially develop high-value prod-ucts, is key to economic growth, and is necessary toavoid stagnation in mature industries such as agri-culture.

Because the agricultural industry representsapproximately 18 percent of the U.S. Gross NationalProduct, the report concluded that a stronger agricul-tural sector will strengthen the U.S. economy.Additionally, agriculture plays a major role in thebalance of payments, and development of new

products could potentially lead to new exportmarkets and possibly decrease some imports. Be-cause of these possibilities, the task force recom-mended the development of new agricultural prod-ucts that would use the equivalent of 150 millionacres of production capacity, to be achieved within25 years (17).

Underutilization of Land Resources

In 1989, the United States planted approximately341 million acres of land to crops. Another 60million acres were removed from production andenrolled in Federal programs (26 million acres inAcreage Reduction Programs and 34 million acres inConservation Reserve Programs). Additional acre-age that could potentially be used for crop produc-tion was planted to pasture (12,14,18). It has beenproposed that the development of industrial marketsfor agricultural commodities might result in themore productive use of cropland that may currentlybe underutilized.

Reduction of Commodity Surpluses

Reduction of surpluses is expected to occur asnew industrial markets are found for surplus crops,or as farmers shift acreage from the production ofsurplus crops to new crops. In 1989, the U.S.Commodity Credit Corporation had net outlays ofapproximately $10.5 billion to support farmers andoperate Federal commodity programs (13). Accord-ing to proponents, alternative and more profitablemarkets for the crops most heavily supported coulddecrease Federal commodity payments and reducestorage needs.

Enhanced International Competitiveness

In 1989, agricultural exports represented approxi-mately 12 percent of the value of total U.S. exports(13). However, the United States has lost marketshare in the international trade of several commodi-ties, and is no longer the world’s lowest costproducer of many of these commodities. Highcommodity-support levels encourage production inother countries. Protectionist policies restrict trade.Proponents indicate that development of new usesfor traditional crops or new crops could lead to thedevelopment of high-value industrial exports toreplace some of the low-value bulk commoditiesthat are currently the major U.S. exports. Many ofthe new crops potentially could reduce U.S. relianceon petroleum and other imports.

Chapter 2--Introduction ● 15

Improved Environmental Adaptation

Proponents argue that new industrial crops anduses potentially can offer many environmentalbenefits. It maybe feasible to develop new crops thatare better adapted to certain environments than cropsthat are traditionally grown (9). Of the new industrialcrops discussed in this report, many are well adaptedto semiarid climates. These crops have lower waterrequirements than many crops that are presentlybeing grown. Irrigation may still be required toachieve commercial production levels, but probablynot to the extent required for traditional crops. Forregions of the Southwestern United States and thePlains States, where competing demands for wateruse are becoming intense, the need for crops withreduced irrigation needs is becoming more impor-tant. An added advantage of some of these drought-tolerant crops is that they are also relatively tolerantof salt. Saline buildup is a major problem in irrigatedareas. Examples of potential new industrial cropsthat are relatively drought tolerant are bladderpod,buffalo gourd, coyote bush, guar, guayule, gum-weed, and jojoba.

Potential exists to develop other new crops thatare resistant to pests, weeds, and disease; these cropsmay require fewer chemicals than traditional crops.Additionally, development of plants that can fixnitrogen could reduce fertilizer use. Buffalo gourdand honesty are two potential new industrial cropsthat are perennials and provide good ground cover.Crops such as these maybe used to help control soilerosion. New crops may also provide more rotationoptions to farmers, which could potentially decreaseerosion and chemical use. Additionally, proponentsfeel that new uses for traditional crops may offer airquality advantages (less polluting alternative fuels),waste disposal advantages (degradable plastics), andreduce groundwater contamination (chemical deliv-ery systems, road de-icers), among other potentialbenefits.

Rural Development

Proponents of development of industrial users ofagricultural commodities indicate that such develop-ment could help to revitalize rura1 economies in twoways. First, the development of new crops and usescan provide more profitable alternatives to farmers,increasing farm income and land values. Increasedfarm income and land values could improve the taxbase of rural communities, which could lead to

improved schools, hospitals, infrastructure, etc.Services related to agriculture, such as input supplieswill be needed. These services would have amultiplier effect within the economy. Second, thedevelopment of new crops and uses might stimulatethe construction, expansion, or fuller use of process-ing and manufacturing plants. This would also createnew jobs within some communities.

Strategic Materials

A domestic capacity to produce many strategicand essential materials that the United States cur-rently imports, could reduce U.S. vulnerability toforeign events according to proponents. Strategicmaterials are those critical to national defense, andinclude many metals, natural rubber, and castor oil.Essential materials are those required by industry tomanufacture products depended on daily, and in-clude many gums, waxes, oils, and resins. TheDefense Production Act (DPA) of 1950 (amended in1980) requires that sufficient stocks of strategicmaterials be kept for wartime needs; stocks aremanaged by the Department of Defense. The man-dated stockpile level of natural rubber is 850,000short tons and that of castor oil is 5 million pounds.Since the United States is a large consumer, attemptsto purchase the necessary quantities result in largeprice swings and current stocks are less than thelevels mandated (1,8).

U.S. reliance on imports of natural rubber ledCongress to pass the Native Latex Commercializa-tion and Economic Act (Public Law 95-592) in1978. This act was passed with the specific goal todevelop a domestic natural rubber industry. In 1984,Congress amended and renamed this act the CriticalAgricultural Materials Act (Public Law 98-284),which broadened the goal of the Native Latex Act todevelop a domestic capacity to produce critical andessential industrial materials from agricultural com-modities.

SummaryAgricultural commodities yield many chemicals

that have industrial applications. Proponents feelthat commercializing these applications will lead tonumerous benefits for society in general, and for therural economy and agricultural sector in particular.They feel that because of the benefits to be gained,and the lack of USDA responsiveness on this issue,legislation is needed to spur the development ofthese new technologies. The purpose of this report is


to provide information Congress can use to assessthe potential benefits of, and constraints to, develop-ing new industrial crops and uses of traditionalcrops.

The potential benefits of new industrial crops anduse development have not been systematically andrigorously analyzed. This report takes a first step atdoing so, and presents that analysis in chapter 3.Factors involved in the research, development, andcommercialization of these new technologies arediscussed in chapter 4. To realize the benefits of newagricultural technology development, new processesmust be adopted by manufacturers, and new cropsmust be adopted by farmers. Factors involved in theadoption of new technologies are discussed inchapter 5. Understanding of the factors involved inthe research, development, commercialization, andadoption of new industrial crops and uses oftraditional crops can aid in designing policy toachieve maximum benefits. Policy options arepresented in chapter 6.

1.

2.

3.

4.

5.

6.

7

Chapter 2 ReferencesBabey, John, U.S. Department of Defense, personalcommunication, January 1991.Council for Agricultural Science and Technology,Development of New Crops: Needs, Procedures,Strategies, and Options (Ames, IA), Report No. 102,October 1984.Deane, William M., “New Industrial Markets forStarch,” paper presented at The Second NationalCorn Utilization Conference, Columbus, OH, Nov.17-18, 1988.Hoffmann, Joseph J., and McLaughlin, Steven P.,“Grindelia Camporum: Potential Cash Crop for theArid Southwest,” Economic Botany 40(2), April-June 1986, pp. 162-169.Johnson, Duane, “New Grains and Pseudograins,”paper presented at the First National Symposium onNew Crops: Research, Development and Economics,Indianapolis, IN, Oct. 23-26, 1988.Princen, L.H., and Rothus, J.A., “Development ofNew Crops for Industrial Raw Materials,” Journal ofthe American Oil Chemists’ Society, vol. 61, 1984,pp. 281-289.Schaub, James, U.S. Department of Agriculture,Economic Research Service, personal communica-tion, July 1990.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

Tankersley, Howard C., and Wheaton, E. Richard,“Strategic and Essential Industrial Materials FromPlants—Thesis and Uncertainties,” PZants: The Po-tential for Extracting Protein, Medicines, and OtherUse@l Chemicals—Workshop Proceedings, OTA-BP-F-23 (Washington, DC: U.S. Congress, Office ofTechnology Assessment, September 1983), pp. 170-177.Theisen, A. A., Knox, E. G., and Mann, F. L., Feasibil-ity of Introducing Food Crops Better A&zpted toEnvironmental Stress (Washington, DC: U.S. Gov-ernment Printing Office, March 1978).Twner, Steve, and Stegelin, Forrest, Symposia Co-organizers, “Market and Economic Research inOrnamental Horticulture,” American Journal ofAgricultural Economics, vol. 71, No. 5, December1989, p. 1329.U.S. Congress, Office of Technology Assessment,Commercial Biotechnology: An International Analy-sis, OTA-BA-218 (Washington, DC: U.S. Govern-ment Printing Office, January 1984).U.S. Department of Agriculture, Agricultural Statis-tics, 1988 (Washington, DC: U.S. GovernmentPrinting Office, 1988).U.S. Department of Agriculture, Economic ResearchService, Agricultural Outlook, AO-170, December1990.U.S. Department of Agriculture, Economic ResearchService, Agriculutral Resources: Cropland, Water,and Conservation Situation and Outlook Report,AR-19, September 1990.U.S. Department of Agriculture, Economic ResearchService, Foreign Agricultural Trade of the UnitedStates, Calendar Year 1987 Supplement (Washing-ton, DC: U.S. Government Printing Office, June1988).U.S. Department of Agriculture, Forest Service, “AnAnalysis of the Timber Situation of the United States,1989-2040, Part I: The Current Resource and UseSituation,” 1989.U.S. Department of Agriculture, New Farm andForest Products Task Force, “New Farm and ForestProducts: Responses to the Challenges and Opportu-nities Facing American Agriculture, ’ A Report to theSecretary, June 25, 1987.Van Dyne, Donald L., Iannotti, Eugene L., andMitchell, Roger, “A Systems Approach to CornUtilization,’ paper presented at The Second NationalCorn Utilization Conference, Columbus, OH, Nov.17-18, 1988.

Chapter 3

Analysis of Potential Impacts of Using AgriculturalCommodities as Industrial Raw Materials

Despite claims that new industrial crop and usedevelopment will result in many benefits for society,few studies have attempted to examine whether thisis, in fact, the case, and if so, what are the magnitudesof the impacts. Because of the lack of neededinformation, a definitive answer cannot yet be given.However, extrapolations from a few existing studiescan be made, and market size and market trends forsome products can be roughly estimated. Studiesthat examined the rural employment impacts ofexpanding agricultural production in the 1970sprovide a framework to examine the potentialemployment impacts that could result from newindustrial crop and use development. Analysis oftechnology adoption by farmers can yield insightson the potential impacts on different size farms. And,potential environmental impacts can be discussed.An examination of these issues follows.

Rural DevelopmentProponents of the commercialization of new

industrial crops and uses for traditional cropsindicate that these new technologies will revitalizerural1 economies in two major ways: by changingfarm income and number; and by creating jobsrelated to resource use, the processing of the rawcommodities, and the production of new products.Increased farm income can have a multiplier effect,allowing farmers to spend more money in thecommunity. Sustained income increases could alsoincrease farmland prices and hence the tax base ofmany rural communities. Increased levels of produc-tion require increased inputs, transportation, andstorage, and would foster the associated industries.Development of new industrial crops and uses oftraditional crops could also have an impact on jobcreation via the construction, expansion, or fuller

utilization of processing and manufacturing facili-ties.

Impacts of Changing Farm Income andNumbers

The crisis within the agricultural sector in the1980s is a reflection of decreased farm income,declining asset values, and high debt load. Totalfarm-family income in the first half of the 1980sremained relatively stable and did not decline from1970s levels, despite low commodity prices, be-cause increasing off-farm income helped compen-sate for decreased farm income (table 3-1).2 Thevalue of farm assets, however, declined signifi-cantly. Lower land values decrease local govern-ment revenues. Development of new industrialmarkets for commodities might help to increase farmland values since these values depend in large parton future market and income growth expectations(37).

Table 3-l—Farm Family Income (dollars)

Net farm Off-farm Total farmYear income a income family income

1960 . . . . . . . . . . . . . . . 2,7291970 . . . . . . . . . . . . . . . 4,8691975 . . . . . . . . . . . . . . . 8,7851980 . . . . . . . . . . . . . . . 9,2331981 . . . . . . . . . . . . . . . 8,3781982 . . . . . . . . . . . . . . . 9,9971983 . . . . . . . . . . . . . . . 10,0741984 . . . . . . . . . . . . . . . 11,3451985 . . . . . . . . . . . . . . . 13,881

2,1405,9749,481

14,26314,70915,17515,61916,26517,945

4,86910,84318,26623,48623,08725,17225,69327,61031,826

aBefore inventory adjustment.SOURCE: Dorm Reimund and Mindy Petrulis, U.S. Department of

Agriculture, Economic Research Service, “Performance of theAgricultural Sector,” Rural Change and the Rural EconomicPolicy Agenda for the 1980’s: Prospects for the Future,September 1988, pp. 77-102.

IRm~ and ~ome~opli~ me used ~terchangeably throughout the text. Nonmetropolitan counties are defined as those not fi MetropolitanStatistical Areas (MSA), which include core counties containing a city of 50,000 or more people and a total area population of at least 100,000. Additionalcontiguous counties are included in the MSA if they are economically and socially integrated with the core county. Based on the 1980 Census of Housingand Population there are 2,357 nonmetropolitan counties. (Wised on the 1970 Census, them were 2,443 nonmetropolitan counties). Source: Thomas F.Hady and Peggy J. Ross, U.S. Department of Agriculture, Economic Research Service, “An Update: The Diverse Social and Economic Structure ofNonmetropolitan Americ~’ WIT Report No. AGES 9036, May 1990.

2&erage farm-family income did not substantially change, but there were differences in subsectors Of the f-g pqmkition Small,commercial-scale operations with gross sales of $40,000 to $150,000 were most negatively affected.

–17–


While farm-family income remained relativelystable, farm3 numbers continued to decline through-out the 1970s and 1980s (table 3-2). Impacts ofdeclining farm numbers are difficult to ascertain. Ingeneral, the land is bought by other farmers andcontinues to remain in production, so that totalagricultural output does not significantly decline.However, declining farm numbers may negativelyaffect community employment levels. Multipliereffects for agriculture are generally estimated to bebetween 2.5 and 4, but these effects are for the totaleconomy and do not consider location. Studies thathave analyzed local rural area impacts from changesin agriculture estimate multiplier effects of less than2. These estimates imply that in farming dependentcounties,4 for every one farm producer that leavesthe industry, up to one additional job maybe lost inthe community (27).

Impacts resulting from changes in farm number,income, and land values will be highest in areas thatare most dependent on agriculture as a source ofincome and employment (table 3-3). Approximately22 percent of nonmetropolitan counties are farmingdependent, and an additional 23 percent are farmingimportant.5 These counties are concentrated in thePlains Region (North Dakota, South Dakota, Ne-braska, Kansas, western Oklahoma, and northernTexas) with some spillover in neighboring States.Between 1979 and 1985, total employment declinedby 0.3 percent in these counties (6,15,51).

Development of new uses for traditional com-modities would most affect the 17 percent of allnonmetropolitan counties with at least 50 percent offarm sales from corn, soybeans, wheat, cotton, orrice (i.e., agricultural-export-dependent counties).About 7 percent of all nonmetropolitan counties areboth agricultural dependent and agricultural-exportdependent. 6 These counties are concentrated alongthe Canadian border in the Northern Plains Regionand in the Central Corn Belt and Delta Region (16).

Table 3-2—Farm Numbers

Year Number

1960 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,963,0001970 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,949,0001980 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,433,0001981 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,434,0001984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,328,0001986 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,214,0001989 a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,172,920aPreliminary estimation obtained from U.S. Department of Agriculture,

Agricultural Statistic 1989SOURCE: Dorm Reimund and Mindy Petrulis, U.S. Department of Agricul-

ture, Economic Research Service, “Performance of the Agricul-tural Sector,” Rural Change and the Rural Economic PolicyAgenda for the 1980’s: Prospects for the Future, September1988, pp. 77-102.

Development of new uses could result in potentiallypositive or negative impacts in these regions,depending on how the new use development affectsthe price of the traditional crop grown in the region.

Rural Employment Potential in AgriculturallyRelated Industries

Studies that explicitly evaluate the rural employ-ment potential of new industrial crops and uses oftraditional crops are not available. However, manyof the impacts of commercialization of new cropsand uses will result from increased demand foragricultural commodities. During the 1970s, U.S.agricultural production increased rapidly in re-sponse to increased world demand for food andfavorable economic conditions. The effects of in-creased production on rural employment in agri-culturally related industries provides insight into thepotential employment impacts in these industries ofincreased industrial demand for agricultural com-modities.

Between 1974 and 1981, U.S. agricultural pro-duction expanded by 45 million acres of cropsharvested (table 3-4). Employment in rural agricul-turally related industries also increased during this

3A farm is an establishment that sold or would normally have sold $1,000 or more of agricultural products dtig the Y~.4Farming dependent counties are defined as those counties for which farming contributed a weighted annual average of 20 percent or more of total

labor and proprietor income over a 5-year time period. Based on the years 1975 to 1979 and on the 1974 nonmetropolitan county definition (2,443counties), there were 716 farmin g dependent counties. Using income from the years 1981, 1982, 1984, 1985, 1986, and the 1983 definition ofnonmetropolitan counties (2,357 counties) there were512 farming dependent counties. Source: Thomas F. Hady and Peggy J. Ross, U.S. Departmentof Agriculture, Economic Researeh Service, ‘‘An Update: The Diverse Social and Economic Structure of Nonmetropolitan Americ~” Staff Report No.AGES 9036, May 1990.

5Farming important counties are defined as those counties for which farmin g contributed a weighted annual average of 10 to 19 percent of total laborand proprietor income for a 5-year time period. Using income from 1981, 1982, 1984, 1985, 1986, there were 540 farmin g important counties. Source:U.S. Congress, General Accounting Offke, Farming and Farm Programs: Impact on the Rural Economy and on Farmers, GAO/RCED-9CL108BR(Gaithersburg, MD: U.S. General Accounting Office, April 1990).

%ese calculations were based on the deftition of farm dependency using income data from 1975 to 1979 and on 1982 farm export levels.

Chapter 3--Analysis of Potential Impacts of Using Agricultural Commodities as Industrial Raw Materials ● 19

Table 3-3-Share of Total Employment in Agriculturally Related Industries, 1984(in percent)

All Export Export/farm Nonmetrononrnetro dependent dependent employment

Us. counties counties counties (million) a

Total . . . . . . . . . . . . . . . . . . . . . . . 19.5 31.3 32.4 46.0 6.22Farm sector . . . . . . . . . . . . . . . . . . 4.1 13.6 15.8 29.9 2.68Farm inputs . . . . . . . . . . . . . . . . . . 0.4 1.1 1.5 2.7 0.21Processing/marketing . . . . . . . . . 3.2 5.8 4.7 5.2 1.15Wholesale/retail . . . . . . . . . . . . . . 9.5 8.7 8.1 6.7 1.73Indirect . . . . . . . . . . . . . . . . . . . . . 2.2 2.2 2.3 1.6 0.45aObtained from Dorm Reimund and Mindy Petrulis, U.S. Department of Agriculture, Economic Research Service,

“Performance of the Agricultural Sector,” Rural Change and the Rural Economic Policy Agenda for the 1980’s:Prospects for the Future, September 1988, pp. 77-102.

SOURCE: U.S. Department of Agriculture, Agricultural OuIYook, September 1988.

Table 3-4--U.S. Agricultural Acreagea andProduction b, Selected Years

Table 3-5—Employment Changes in 1975-81 and1981-84 (percent change per annum)

1973 1981 1984

Corn:Acreage . . . . . . . . . . . . . . . . . . . 62.1 74.5 71.9Production . . . . . . . . . . . . . . . . . 5.67 8.12 7.67

Wheat:Acreage . . . . . . . . . . . . . . . . . . . 54.1 80.6 66.9Production . . . . . . . . . . . . . . . . . 1.71 2.79 2.59

Soybeans:Acreage . . . . . . . . . . . . . . . . . . . 55.7 66.2 66.1Production . . . . . . . . . . . . . . . . . 1.55 1.99 1.86

Major crops:c

Acreage . . . . . . . . . . . . . . . . . . . 310 354 335aHarvested acreage in million acres.bProduction is in billion bushels.cMajor crops include corn, sorghum, oats, barley, wheat, rice, rye,

soybeans, flaxseed, peanuts, sunflowers (from 1975), cotton, hay, dryedible beans, potatoes, sweet potatoes, tobacco, sugarcane, sugarbeets,popcorn.

SOURCE: U.S. Department of Agriculture, Agnw/tura/ Statistics, 1988(Washington, DC: U.S. Government Printing Office, 1988).

time (table 3-5), but relatively slowly. Between 1975and 1981, rural employment in the agriculturalinput, and marketing and processing industries (foodand textiles), increased by 106,000. Employment inthe farm sector (farm proprietors, agricultural serv-ices, and farm wage and salary workers) actuallydeclined by 158,000 jobs. The one truly bright spotwas the increase in the retail/wholesale industry(groceries, restaurants, clothing stores). Employ-ment in this sector increased by 400,000 jobs.During the early 1980s, demand for U.S. agriculturalproducts and employment in most agriculturallyrelated industries declined; the wholesale/retail in-dustry continued to grow although at a slower rate(37).

These trends suggest that expanding agriculturalproduction will increase rural employment modestlyin the input supply industry. Favorable agricultural

1975-81 a 1981 -84b

Total U.S. employment . . . . . . . . . . +2.9 +1.1Total nonmetro employment . . . . . . +2.9 (1,992) +1.9 (759)Nonmetro agriculturally related

industries (total) . . . . . . . . . . . . +1.2 (414) -0.2 (48)Farm sectorc . . . . . . . . . . . . . . . . . -0.9 (158) –1.3 (107)Input industry . . . . . . . . . . . . . . . . +1.6 (22) -5.8 (45)Processing/marketing d. . . . . . . . . +1.2 (84) -1.5 (53)Retail/wholesalee . . . . . . . . . . . . . +5.7 (400) +3.3 (157)

a,bNumbers in parentheses are the change in total jobs for entire timeperiod (in 1,000’s).

cFarm sector includes agricultural services, farm proprietors, and agricul-ture wage and salary workers.

dprocessing and marketing includes those related to food processing andthe textile industry.

eRetail and wholesale includes restaurants, groceries, dothing stores, etc.

SOURCE: Dorm Reimund and Mindy Petrulis, U.S. Department of Agricul-ture, Economic Research Service, “Performance of the Agricul-tural Sector,” Rural Change and the Rural Economic Po/kyAgenda for the 1980’s: Prospects for the Future, September1988, pp. 77-102.

income conditions did not alter the long-termdecline in farm-sector employment (over 40 percentof total rural agricultural employment), which islargely due to technological change and increasedproductivity. Farm numbers will likely continue todecline if agricultural productivity continues toincrease. Rural employment in the retail/wholesaleindustry appears to be more closely tied to thecondition of the overall economy than to agriculturespecifically.

Rural processing-sector employment increasedslowly from 1975 to 1981, in part because increasedsupplies were primarily exported as raw, rather thanprocessed commodities. Employment expansion po-tential related to new crops and use developmentwill depend on how much new or additionalprocessing capacity will be needed to accommodatethese new crops and uses. Processing capacity has


increased in the 1980s, but the number of mills(wheat and oilseed) has declined. Oil refiningcapacity increased about 17 percent between 1975and 1983. Refiners typically operate at about 75percent of capacity (41).

Recent trends of automation and productivityincreases within the processing sector will limitfuture employment growth potential (37). Econo-mies of scale favor large plants; capacity can beincreased with a less than proportional increase inenergy and equipment costs. The number of laborersneeded in larger and smaller plants is comparablebecause milling and processing is more capital-thanlabor-intensive (7,17,41). Approximately 40 percentof the wet corn, cotton, soybean oil, and flour millsin the United States have fewer than 20 employeesper mill. The total employment (number of produc-tion workers plus management, maintenance work-ers, etc.) in soybean processing facilities is approxi-mately 9,000 to 10,000 (2,41).

A majority of the jobs in several agriculturallyrelated industries are in fact located in metropolitan,rather than rural, areas (table 3-6); expandingemployment in these industries may benefit metro-politan regions more than rural areas. Commodity-processing plants are not always located near the siteof commodity production. Transportation costs ofthe raw commodity relative to the processed productis a major factor in determining plant location.Access to road and rail transportation, and fre-quently to barge transportation, is an importantconsideration. For example, of the wheat grown inKansas and milled into flour, half is milled in Kansas(primarily in mills located in urban areas) and therest is shipped throughout the country for milling.Oilseed refining capacity is located primarily (60percent) in urban areas, although there has been arecent trend for companies with large processingmills to build new refineries near the processingplant (17,26).

The new crops guayule and kenaf might be goodcandidates for new processing plant construction inrural areas and near the site of production. Therubber in guayule is contained in thin-walled cellslocated on the stems and branches of the shrub.Excessive handling and storage decreases rubberquality (28). Kenaf is a bulky product to transport.7

Table 3-6-Distribution of Jobs in AgriculturallyRelated Industries

Metro Nonmetro(percent)

Farm sector . . . . . . . . . . . . . . . . . . . . . 36 64Input supply . . . . . . . . . . . . . . . . . . . . 51 49Processing/marketing . . . . . . . . . . . . 65 35

Food . . . . . . . . . . . . . . . . . . . . . . . . 71 29Textiles . . . . . . . . . . . . . . . . . . . . . . 60 40

Retail/wholesale . . . . . . . . . . . . . . . . . 82 18SOURCE: Dorm Reimund and Mindy Petrulis, U.S. Department of Agricul-

ture, Economic Research Serviee, “Performance of the Agricul-tural Sector,” Rural Change and the Rural Economic PokyAgenda for the 1980’s: Prospects for the Future, September1988, pp. 77-102.

Oilseeds, on the other hand, are generally readilytransportable and storable; some modification ofexisting oilseed mills might suffice to accommodatemany of these new crops. A case by case evaluationof processing needs and constraints is needed toassess the potential of new crops and uses tocontribute to rural processing-sector employment.

Rural Employment Potential inManufacturing

The impacts of increased industrial use of agricul-tural commodities on rural manufacturing employ-ment will depend on the need to expand and modifycapacity, and on the location of the expansion. Inmany cases, major users of chemicals derived fromnew and traditional crops will be firms that alreadyexist. In some cases, substitution of agriculturallyderived chemicals for petroleum-derived chemicalsin production will be relatively easy, and onlymodification of existing plants may be needed. Inother cases, either major production modificationsor increased capacity will be needed; expansion willbe more likely in these circumstances.

The location of new manufacturing facilities willdepend on resource availability, transportationcosts, availability of skilled workers, and easyaccess to information. Industries that are dealingwith volatile or unestablished markets, rapid techni-cal change, or other conditions that require innova-tive responses will generally favor metropolitanlocations where they have access to information,specialized skills, and professional expertise (25).Rural areas generally have a comparative advantageover metropolitan areas in terms of availability of

7A ke~-based new@t mill is sch~~ed to begin operation in 1991, and to provide 160 jobs once full operation begins. The new ~1 is lowtedin Willacy County, Texas.

Chapter 3--Analysis of Potential Impacts of Using Agricultural Commodities as Industrial Raw Materials . 21

natural resources, and in lower tax rates, land andlabor costs.

The importance of resource availability and low-cost labor relative to the need for highly skilled laborwill largely determine the type of personnel em-ployed, and whether a firm locates in a metropolitanor rural area (5). Urban companies have a higherproportion of managerial and professional-technicaljobs than do rural firms (table 3-7). Rural productionjobs are generally lower paying, less technicallyskilled, and the first to be eliminated by unfavorableeconomic conditions (5,25).

Industries characterized by top-of-the-cycle8

products are more concentrated in metropolitanareas, because they require technically skilled labor(table 3-8). High tech companies are an example.These firms employ relatively more scientific andtechnical personnel, have higher levels of researchand development expenditures, manufacture morehighly sophisticated products, and generally haveproven to be more competitive in the world economythan companies characterized as bottom-of-the-cycle. The latter tend to use highly standardizedproduction methods and employ relatively less-skilled labor (5).

Although rural manufacturing is characterized bya higher percentage of bottom-of-the-cycle andnatural resource based industries, some top-of-the-cycle firms do locate in rural areas. In recent years,rural employment in these firms has increased,primarily in the South and West. Rural employmentin top-of-the-cycle industries in the Midwest andNortheast has been declining. The greatest growth,particularly in the West, has been in rural countiesadjacent to urban centers (5).

Many industries that are expected to use chemi-cals derived from agricultural commodities areconsidered to be top-of-the-cycle industries, al-though there are two major exceptions. The rubberand allied products industry is characterized by moreroutine procedures and is generally classified as abottom-of-the-cycle (mature) industry. The paperand allied products industry is heavily reliant onnatural resources. The detergent industry, a high-tech industry that uses agriculturally derived chemi-

Table 3-7—Nonmetro Share of Manufacturing Jobsby Job Type

Metro Nonmetro

Managerial . . . . . . . . . . . . . . . . . . . . . 90 10Professional/technical . . . . . . . . . . . . 90 10Sales/administrative support . . . . . . . 75 25Precision production jobs . . . . . . . . . . 77 23Machine operators . . . . . . . . . . . . . . . 70 30Laborers . . . . . . . . . . . . . . . . . . . . . . . 65 35SOURCE: David A, MeGranahan, “Rural Workers in the National Econ-

omy,” Rural Change and the Rural Economic Policy Agenda forthe 1980’s: Prospects for the Future, September 19SS, pp.29-47.

Table 3-8-Distribution of Manufacturing Jobs, 1984

ProportionMetro Nonmetro of nonmetro

Type of industry (million jobs) employment

Total manufacturing. . . 15.2 4.2 21.7Top of the cycle . . . . . . 7.4 1.2 13.7Bottom of the cycle . . . 5.6 2.0 25.9Resource . . . . . . . . . . . 2.2 1.1 33.3SOURCE: Leonard E. Bloomquist, U.S. Department of Agriculture, Eco-

nomic Researeh Serviee, “Performance of the Rural Manufac-turing Sector,” Rurai Change and the Rural Economic PolicyAgenda for the 1980’s: Prospects for the Future, September19ss, pp. 49-75.

cals, is expanding its capacity to use vegetable oils.New plant construction, however, is in urban ratherthan rural areas (14).

Many of the industries that are likely to useagricultural commodities as a raw material sourceare undergoing worldwide consolidation, and capac-ity is increasing. Employment trends have beenmixed (table 3-9) (9).

It is difficult to determine the multiplier effects ofmanufacturing plants in rural locations. Total 1984U.S. manufacturing employment was 19.4 million.It is estimated that an additional 6.5 million jobswere created supplying input services to thesemanufacturers; an additional 1.8 million jobs in theagricultural, mining and construction industries arealso linked to manufacturing. No estimations weremade of the rural-urban distribution of these jobs(54). Some studies have suggested that in rural areas,one additional community job is created for everythree manufacturing jobs (47). Growth in manufac-turing employment in nonmetropolitan areas aver-

Efioduct &velOprnent g~s through many phases, from conception to routine manufacturing. Products at the top of the cycle are in the eflfierp~esof development. These phases include conception and prototype development, and the establishment of the manufacturing procedures, Products at thetop of the cycle use a high proportion of highly skilled technical labor. Top of the cycle industries are those characterized by having top of the cycleproducts. These fiis are generally the innovative (high-tech) fmns. Bottom of the cycle products are those that are more highly developed and for whichthe manufacturing process is highly standardized and routine. Bottom of the cycle industries use a higher proportion of labor with lesser technical skills.


Table 3-9-Manufacturing Employment Trends ofIndustries Potentially Using Industrial

Agricultural Commodities

Trend1989 (1979-89)

employment percent perlevel annum change

Plastics and synthetic materials. . 187,000 –1Paints and allied products. . . . . . . 63,000 -1Soaps, cleaners, toilet goods . . . . 161,000 +1Rubber and miscellaneous

products . . . . . . . . . . . . . . . . . . . 840,000 +1Petroleum and coal products . . . . 163.000 –3SOURCE: Chemica/ and Engineering News, “Employment in the U.S.

Chemical Industry,” June 18, 1890, p. 60.

aged 1.4 percent per annum between 1982 and 1986,and jumped to 2.6 percent in 1987.

Potential Rural Employment Implications

Agriculturally related industries are a significant,but declining, source of employment in ruralcommunities. Employment trends in the 1970s and1980s suggests that large increases in demand andproduction of agricultural commodities will beneeded to increase employment significantly in ruralagriculturally related industries. Agriculturally de-pendent communities are likely to benefit the most.Significantly, much of the employment growth inagriculturally related industries is likely to occur inmetropolitan, rather than rural, communities. Ruralareas are likely to have a comparative advantagewith firms for which natural resources or low-costlabor are important considerations. As noted, firmsrequiring highly skilled labor, are likely to concen-trate in metropolitan regions. These include severalof the industries that are expected to commercializeproducts derived from agricultural commodities.These studies and industry trends suggest thatcommercialization of industrial uses for agriculturalcommodities may have modest impacts on ruralemployment, and that much of the employmentgrowth may be in metropolitan communities. Fromsociety’s point of view, new job creation may bedesirable regardless of location, but firm location inmetropolitan areas does not revitalize rural econo-mies.

Proponents of industrial crops and use commer-cialization argue that even modest rural employmentincreases are worth pursuing. This is true only ifequivalent benefits cannot be obtained by othermethods at lower cost. The cost-effectiveness of thisstrategy has not been evaluated and conclusions

cannot be made. Historically, however, social re-turns to agricultural research investments have beenhigh, ranging from an estimated 45 to 135 percent(30).

Regional SpecializationMany new crops under development potentially

can be grown in several regions of the United States(table 3-10). However, like traditional crops, someregions may have a production advantage overothers, and regional specialization of productionmay result. Thus, the introduction of new crops oruses of traditional crops may benefit some regions,while having little effect on others.

Two examples illustrate the point. Kenaf can begrown throughout the South, but appears to beparticularly attractive compared to the net returns ofother options in parts of Texas. This area is likely tobe one of the earliest producers of kenaf. Crambeand rapeseed can be grown extensively in the UnitedStates, but Crambe is more tolerant of dry conditionsthan rapeseed. Crambe may have an advantage overrapeseed in the Plains region, whereas rapeseed,particularly the winter varieties, may have advan-tages in the Southeast (20).

Transportation costs could also play a role indetermining production location. Prices received byfarmers reflect transportation costs. Farmers at greatdistances from processing plants receive lowerprices. For example, soybean producers in the Plainsregion receive lower prices than producers in theMidwest, in part due to lower quality (less oil), butlargely due to transportation costs (41). Lower pricesdecrease the attractiveness of a crop to farmers. Anew crop’s competitiveness may be enhanced if it isgrown in an area where it is relatively easy to convertexisting processing facilities to accommodate it.

Agricultural Sector StabilityMarket failure and macroeconomic policy are the

primary factors affecting the stability (extent of farmprice and net return variability over time) ofagriculture (48). Market failure arises from uncer-tainty (e.g., such as weather and assymetric informa-tion between buyers and sellers). Development ofnew marketing institutions, or use of existinginstitutions that reduce marketing uncertainties (e.g.,forward contacting, futures and insurance markets)potentially could reduce inefficiencies in the mar-keting of industrial crops and uses of traditional


Table 3-10—Likely Production Locations ofNew Crops

Crop Location

Oilseeds:Buffalo gourd . . . . . . . . . . . . .Chinese tallow . . . . . . . . . . . .Crambe. . . . . . . . . . . . . . . . . .

Cuphea . . . . . . . . . . . . . . . . .Honesty . . . . . . . . . . . . . . . . .Jojoba . . . . . . . . . . . . . . . . . . .Lesquerella . . . . . . . . . . . . . . .Meadowfoam . . . . . . . . . . . . .Rapeseed . . . . . . . . . . . . . . .

Stokes aster . . . . . . . . . . . . . .Vernonia . . . . . . . . . . . . . . . .

Gums and resins:Baccharis . . . . . . . . . . . . . . . .Grindelia . . . . . . . . . . . . . . . . .Guar . . . . . . . . . . . . . . . . . . . .Guayule . . . . . . . . . . . . . . . . .Milkweed . . . . . . . . . . . . . . . .

Fibers:Kenaf . . . . . . . . . . . . . . . . . . .

SouthwestSoutheastMidwest/Southeast/Plains

StatesNorthwest/MidwestNorthern States/AlaskaSouthwestSouthwestPacific NorthwestNorthwest./Plains States/Midwest/SoutheastMidwest/SoutheastSoutheast

SouthwestSouthwestSouthwestSouthwestPlains/Southwest/West

SouthSOURCE: Office of Technology Assessment, 1991.

crops. Diversifying agricultural production poten-tially could reduce adverse weather impacts.

Macroeconomic policy influences the price ofcommodities and land values in the United States, aswell as exchange rates, interest rates, inflation, andrates of economic growth here and abroad. Duringthe 1970s, attempts to recycle petrodollars sparkedrapid economic growth in developing countries.Coupled with the switch from freed to flexibleexchange rates, this growth led to an export boom forU.S. agricultural commodities. At the same timehowever, inflation in the United States was risingand the Federal deficit was being paid for bymonetary policy. In late 1979, the Federal Reservebegan to disinflate the U.S. economy. This severemonetary action led to high interest rates and valuesof the U.S. dollar as Federal Government deficitswere now being financed by foreign savings. Highdebt loads at high interest rates, coupled with highU.S. dollar values, meant that developing nationscould no longer afford to pay for U.S. agriculturalcommodities and exports plummeted. Becausenearly 1 in every 3 acres planted in the United Statesis destined for the export market, decreasing exportslead to declining U.S. farm income and land prices(42).

The roller-coaster ride that U.S. agriculture hasundergone since 1975 points out the vulnerability of

that segment of the economy to macroeconomicpolicy (3,42). Several industries that would usechemicals derived from agriculture are also suscepti-ble to macroeconomic policies, and display highlyvariable demand for raw commodities. The rubberindustry serves as an example. Nearly 60 percent ofall rubber used in the United States is used to maketires. Tire production is intimately linked to theautomobile industry, which is highly vulnerable tointerest rates. Between 1977 and 1989, U.S. rubberconsumption has fluctuated between 5.3 and 7.4billion pounds (45).

Thus the impact of new crops and uses oftraditional crops on agricultural stability may besmall. While new crops can offer production oppor-tunities that help limit the risk from adverse weather,disease, or insect problems, development of newuses for traditional crops potentially could have theopposite effect by increasing monoculture. Develop-ment of new risk-reducing marketing arrangements,or increased use of those that exist could lead tosome increased stability, as could diversification ofmarkets for agricultural commodities. As noted,however, many industries that are expected to useagricultural commodities fluctuate in their use ofraw materials. Whether these markets will lead toincreased stability has not been adequately analyzed.Macroeconomic policy will continue to be a keyfactor in agricultural stability.

International ImplicationsSome new mops being developed potentially

could replace a significant proportion of majorexports of some developing countries, which couldresult in economic stress for these countries. Cup-hea, for example, could substitute for coconut andpalm kernel oil. Tropical oils represent 11.5,2.5, and7.5 percent of the total 1985 exports of Malaysia,Indonesia, and the Philippines respectively (59).Additionally, Hevea rubber, which potentially couldbe at least partially replaced by guayule, is a majorexport of Malaysia and Indonesia. Some of thesecountries, the Philippines in particular, are consid-ered to be strategically important to the UnitedStates.

In addition to the strategic implications, there arepotential long-term impacts on U.S. export marketsto consider. Studies indicate that the future growthof U.S. exports depends largely on expandingmarkets in developing countries rather than industri-


alized nations (39). Replacing the exports of thesecountries narrows their opportunities for economicdevelopment and for attainment of scarce foreignreserves to purchase U.S. products.

An additional consideration is trade relationshipswith industrialized nations. For example, the exportof corn gluten meal (a byproduct of ethanol produc-tion) to Europe is a contentious issue between theUnited States and the European Community. Theeconomic competitiveness of ethanol productiondepends in part on having markets for corn glutenmeal; being able to export the meal decreases thedownward price pressure that ethanol production hason soybeans. Understanding of potential interna-tional impacts is needed to help anticipate possibletrade disputes.

Competition With Current Crops andInterregional Impacts

A major goal in the development of new industrialcrops and uses is to provide new markets that do notcompete with markets currently supplied by tradi-tional crops. Many primary uses being developedwill not, but there will be some exceptions. Theremay, however, be considerable competition withtraditional crops through competition in the byprod-uct markets. It cannot be unambiguously stated thatnew industrial crops and uses of traditional cropswill not compete for markets currently supplied bytraditional crops.

If new crops compete directly for markets withcrops that are currently being grown, the latter couldfall in price, resulting in decreased income toproducers of that crop. For example, some newoilseed crops could potentially compete with soy-beans. Examples are Vernonia and Stokesia whichproduce oils containing epoxy fatty acids, thatpotentially could replace the approximately 100 to180 million pounds of soybean, linseed, and sun-flower seed oil that are converted to epoxy fattyacids for industrial use each year (the equivalent of8 to 15 million bushels of soybeans) (36). Addition-ally, potential byproducts of glycerol and high-protein meals could compete with soybean oil forindustrial markets and for use as livestock feeds (2).

New uses for traditional crops may also affectdemand for current crops. For example, many newuses being developed for corn only use the starchcomponent of corn. Oil, distillers dried grains, and

corn gluten meal are produced as byproducts. The oilcompetes with oils derived from oilseeds, particu-larly soybeans. The distilled dried grains and glutenmeal compete directly with soybean meal as high-protein livestock feeds. Increased supplies of thesecorn byproducts will decrease the price of soybeans,possibly by up to 4 cents a bushel per 100 millionadditional bushels of corn used (60,61).

Competition with traditional crops would havedifferent regional impacts. For example, soybeanproduction is located primarily in the Corn Belt,Southeast, and Delta regions of the United States.Soybean producers in the Corn Belt can switch to

corn production; producers in the Southeast andDelta regions will have problems. Production costsof soybeans are also higher in the Southeast andDelta regions. The result could be a decrease in farmincome in those regions (41). Finding new uses forsoybean oil or meal may help to alleviate some of thepotential impacts on soybean prices.

Small Farm ImpactsMost new crops can be grown on large and small

farms (defined in this report as those with less than$100,000 in sales), but some advantages may existto their production on large farms. Since many of thecrops are bulk commodities, they may have rela-tively low unit values. Minimizing production costswill be important. Economies of scale, particularlyfor machinery, might help lower production costs forlarge farms. Additionally, farms that have a largerfinancial base may be able to absorb the economicrisk associated with new crops better than smallerfarms. Some new crops, such as jojoba and guayuleare perennials that require several years to reachmaturation. Crops such as this require large upfrontcosts and have long payback times on the invest-ment. This could create serious cash-flow problems,particularly for small farm operators or those withlittle access to financing.

A correlation exists between farm size and speedof adoption, with larger farms adopting technologyfirst (55). Small farm operators may be unwilling orunable to adopt new technologies. For example, astudy of Oklahoma farmers showed that althoughproduction of specialty vegetables could raise farmincome for part- and full-time farmers who operatedsmall enterprises (defined in the Oklahoma study asthose having sales of less than $40,000), fewer than6 percent of the farmers in these categories ex-

Chapter 3-Analysis of Potential Impacts of Using Agricultural Commodities as Industrial Raw Materials ● 25

pressed a willingness to grow specialty vegetables(40). Thus, even if a new crop can be grown onsmall-sized farms, operators of large farms may bethe earliest adopters and, thus, may capture mostbenefits.

The income impacts of new uses for traditionalcrops will be affected by farm commodity programs.For crops covered, commodity programs buffer theeffects of changing market prices on farm income.High market prices are offset by lower deficiencypayments, and low program participation. Whenmarket prices are low, program participation byfarmers is high, and modest changes in market priceshave little impact on total farm income. Impacts ofhigher market prices would be greatest for farmerswho do not participate in commodity programs or forproducers of commodities not covered by commod-ity programs. Participation rates are lowest amongthe smallest and largest farms. Producers whospecialize in the production of cash grains9 have thehighest rates of participation (table 3-11). In 1987,83 percent of all cash grain farmers participated infarm programs, more than 83 percent of thefeedgrain, cotton, wheat, and soybean acreage wasgrown on farms operated by program participants(table 3-12) (32).

Significant changes in aggregate income wouldoccur only if market prices exceed target prices, orif demand is high enough to reduce set-aside acreagerequirements significantly. It is estimated that etha-nol production from corn would need to increasecurrent production levels by a factor of 3 to 4 toapproach that situation10 (60).

Many small farm operators do not rely on farmincome for the majority of family income (table3-13) (57). These statistics suggest that modestchanges in market prices for many of the traditionalcrops that are in surplus may not result in largeincreases in income for small-sized farms, andsmall-farm operators may be unable to adopt newcrops. Policies that help small-farm operators acceptthe added risks of new crops, and programs thatteach new management skills would increase the

Table 3-n-Participation in Federal Farm Programsby Farm Size, 1987a

Percent participating

Harvested acres1 to 99 . . . . . . . . . . . . . . . . . .100 to 199 . . . . . . . . . . . . . . .200 to 499 . . . . . . . . . . . . . . .500 to 999 . . . . . . . . . . . . . . .1,000 to 1,999 . . . . . . . . . . . .Greater than 2,000 . . . . . . . .

Farm sales classLess than $1,000 . . . . . . . . . .$1,000 to $4,999 . . . . . . . . . .$5,000 to $9,999 . . . . . . . . . .$10,000 to $24,999 . . . . . . . .$25,000 to $49,999 . . . . . . . .$50,000 to $99,999 . . . . . . . .$100,000 to $249,999 . . . . . .$250,000 to $499,999 . . . . . .$500,000 to $999,999 . . . . . .Greater than $1,000,000 . . . .

20.659.978.087.087.381.6

6.712.023.338.854.362.265.760.049.734.8

aNote that 1987 was a year characterized by Iow commodity prices, andparticipation rates in agricultural programs were high.

bParticipants are defined as farm operations that receive any cashpayments or payments in kind from Federal farm programs. These includebenefits such as deficiency payments, whole herd dairy buyout, supportprice payments, indemnity programs, disaster payments, paid landdiversion, inventory reduction payments, or payments for approved soiland water conservation projects. Participants also include farmers whoplace any portion of their production in the Commodity Credit Corporationfor nonrecourse loans or have any acreage under the annual commodityacreage adjustment programs or the conservation reserve program.

SOURCE: Merritt Padgitt, U.S. Department of Agriculture, EconomicResearch Service, “Production, Resource Use, and OperatingCharacteristics of Pariticpants and Nonparticipants in FarmPrograrns,’’Agrikultural Resources: Cropiand, Wster, and Con-servation Situation and Out/ook Report September 1990, pp.48-54.

likelihood of new crops and uses benefiting small-farm operators.

The question also arises of who captures the valueadded 11 of new products. For example, in 1987consumers spent $377 billion for foods produced onU.S. farms. About 25 percent ($94 billion) went tofarmers and the remainder went to the food industryfor processing, handling, and retailing. For manyfood crops, such as grains and oilseeds, the farmvalue is a small share of the retail price (13). Studiesthat assess who captures the benefits of the valueadded from industrial uses of agricultural commodi-ties are needed.

?For farms to be clsssifkd as a particular specialty, it must derive 50 percent or more of its sales tiom a special class of products. Cash grain farmsinclude those specializing in the production of wheaL feed grains (corn for grain and silage, sorghum, barley, and oats), soybeans, sunflowers, dry beans,peas, or other grain crops.

10IMS es~tion was made using target prices established in the 1985 Food Security Act. The 1990 Farm Bill Iloze target prices at 1~ levels, sothe general principal still holds.

llv~ue added is the sum of wages, interes~ rent, profiL depreciatio~ and indirect business taxes in the sector or indusn comidemd.

292-865 0 - 91 - 2 QL:3


Table 3-12—Participation in Federal Farm Programsby Crop Acres, 1987a

PercentCrop participating b

Feed grainsc . . . . . . . . . . . . . . . . . . . . . . . . . . 83.0Soybeans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85.8Wheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88.6Cotton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89.5Rice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91.1Peanuts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75.7Tobacco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47.9aNote that l987 was a year characterized by low commodity prices and

participation rates in farm programs were high.bParticipants are defined as farm operations that receive any cash

payments or payments in kind from Federal farm programs. These includebenefits such as deficiency payments, whole herd dairy buyout, supportprice payments, indemnity programs, disaster payments, paid landdiversion, inventory reduction payments, or payments for approved soiland water conservation projects. Participants also include farmers whoplace any portion of their production in the Commodity Credit Corporationfor nonrecourse loans or have any acreage under the annual commodityacreage adjustment programs or the conservation reserve program.

clncludes acres of corn for grain and silage, and sorghum, barley, and oatsfor grain.

SOURCE: Merritt Padgitt, U.S. Department of Agriculture, EconomicResearch Service, “Production, Resource Use, and OperatingCharacteristics of Pariticpants and Nonparticipants in FarmPrograms, ’’Agriwltura/ Resources: Cropiand, Water, and Con-servation Situation and Outlook Report September 1990, pp.48-54.

Environmental ImpactsNew industrial crops and uses of traditional crops

potentially could have positive or negative environ-mental impacts. Replacing salt with calcium magne-sium acetate (a new product) as a road de-icer couldreduce the soil and water contamination problemsassociated with salt. Use of starch, or starch-vegetable oil mixtures as a delivery system forherbicides and pesticides potentially could mitigaterapid leaching of these chemicals. Degradable plas-tics may in the future help alleviate waste disposalproblems, but at the present time, too many ques-tions exist regarding the extent of degradation, thechemicals released, and the impact on plasticrecycling to state that degradable plastics will havea positive effect on the environment. Likewise,using ethanol as a gasoline additive decreasescarbon monoxide emissions, but may increase vola-tile hydrocarbon emissions. Increased uses for corncould increase corn production, which is chemicallyintensive. The implications this might have ongroundwater pollution need further investigation.

Many new crops may be better suited to certainenvironments than crops that are currently beinggrown there. Many new crops are drought tolerantand their water demands are much lower than manytraditional crops. In areas where irrigation is becom-

Table 3-13-Income Sources by Sales Category, 1988

Percent total Percent grossincome from cash farm

off-farm income from Percent ofSales category sourcesa government total farms

Less than $10,000 . . . . 89 4 45$10,000 to $19,999 . . . 74 7 12$20,000 to $39,999 . . . 49 10 11$40,000 to $99,999 . . . 24 11 14$100,000 to $249,999. 13 11 12$250,000 to $499,999, 6 9 4Greater than $500,000. 3 4 2aTotal income is the sum of total off-farm income and total gross cash farm

income.SOURCE: Office of Technology Assessment, 1991. Calculated from data

contained in U.S. Department of Agriculture, Economic Re-search Service, “Financial Characteristics of U.S. Farms,January 1, 1989,” Agriculture Information Bulletin No. 579,December 1989.

ing more expensive, these new crops could beattractive. Additionally, several crops provide goodground cover and possibly could reduce soil erosion.

For many potential new crops, information con-cerning pest, weed, and disease problems is lacking.In the wild, plants maybe relatively free from pestsand disease, but intensive cultivation creates adifferent environment, one that is often favorable forthe development of pest and disease problems. Thisis true with traditional crops and appears to be whatis happening with jojoba, a new crop now beingcultivated in the Southwest. In the wild, jojoba isrelatively free of pests and diseases, but cultivatedstands are beginning to experience problems (29).

The availability of new crops will provide moreoptions to farmers who wish to rotate crops. Croprotation patterns can be used to reduce soil erosionand chemical and fertilizer applications. However,in most cases, crop rotation is limited in U.S.agriculture primarily because of economic disincen-tives, some of which stem from agricultural com-modity programs, rather than, lack of crop options.Development of new crops is unlikely to increasecrop rotation significantly without changes in eco-nomic incentives. Changes in the 1990 Farm Billmay improve this situation.

Several potential new industrial crops are notnative to the United States. Commercialization inthe United States will require the introduction ofalien species. Historically, new crops have beenintroduced without problems; most of the majorcrops produced in the United States today are notnative. However, on occasion, the process does goawry with severe repercussions (34). Johnson grass

Chapter 3-Analysis of Potential Impacts of Using Agricultural Commodites as Industrial Raw Materials ● 27

is an example. Originally and purposely introducedinto U.S. agriculture as a superior forage crop, it istoday a serious weed requiring widespread use ofherbicides. It is also a close relative of sorghum andis able to cross-fertilize with that crop, rendering auseless offspring. Sometimes a newly introducedspecies, while relatively benign itself, may serve asa host for diseases of other plants. A historicalexample is common barberry, which served as a hostfor wheat stem rust, a fungus that debilitates wheat.A national eradication program was needed todestroy this plant (24). Domestication of native wildspecies raises issues of weediness potential andcross-hybridization with wild relatives. These issueshave not been adequately evaluated.

Some new crops and uses will involve biotechnol-ogy; crops may be genetically engineered to havenew characteristics. Many environmental concernshave been raised concerning the release of theseplants. Genetically engineered organisms will needregulatory approval. Well-defined regulations andregulatory agencies operating in a timely andeffective manner will be needed to ensure speedycommercialization of biotechnologically derivednew crops and uses of traditional crops.

The potential environmental impacts of largeincreases inland use for agricultural production havenot been adequately evaluated. Major changes inland use patterns will have implications for erosion,ground and surface water contamination, wildlife,and non-agricultural plants among others.

Commodity Surpluses andGovernment Expenditures

Development of new uses for traditional cropsthat are in surplus could potentially reduce thosesurpluses. Current carryover stocks of some majorcommodities are low due to particularly adverseweather conditions in recent years, but historically,large surpluses of some commodities have existed(table 3-14). Currently, agricultural commodityprograms strongly encourage the planting of somecrops that are in surplus. Farmers will need strongeconomic incentives to decrease production of thesecommodities and begin producing new crops.

Table 3-14-Commodity Stocks(million bushels)

Wheat Corn Soybeans

1985/86 a . . . . . . . . . . . . . . . . . . . . 1,905 4,040 5361986/87 . . . . . . . . . . . . . . . . . . . . . 1,821 4,882 4361987/88 . . . . . . . . . . . . . . . . . . . . . 1,261 4,259 3021988/89 . . . . . . . . . . . . . . . . . . . . . 702 1,930 1821989/90b . . . . . . . . . . . . . . . . . . . . 536 1,344 2391990/91b . . . . . . . . . . . . . . . . . . . . 945 1,236 255

Marketing year beginning June 1 for wheat, and September 1 for corn andsoybeans.

bBased on Nov. 8, 1990 estimates.

SOURCE: U.S. Department of Agriculture, Economic Research Service,Agriwltural Outlook, July 1990.

The development of new crops can reduce sur-pluses if farmers shift acreage from the productionof surplus crops to the new crops. However, thismight not occur, because farmers may produce newcrops on acreage shifted from the production ofminor, non-surplus crops. New crops may be moreeconomically competitive with the latter than theyare with the surplus commodities. If this is the case,then the development of new crops may not result ina significant reduction of surpluses. Not enoughinformation is available to determine the impact ofnew industrial crops on surpluses.

Similarly, it is not possible to state unambigu-ously that new industrial crops or uses of traditionalcrops will reduce Federal expenditures. Currently,for example, ethanol derived from cornstarch iscompetitive as a fuel additive only because it isheavily subsidized via excise tax exemptions. AnEconomic Research Service (ERS) study indicatesthat an expansion of the ethanol industry will reduceagricultural commodity support payments, but thisreduction will be offset by increased subsidiesresulting from lost excise tax revenues (60).12 TheFederal Government still pays, but the program thatprovides the funding has changed. New uses thatutilize commodity program crops, and are competi-tive (without subsidies) with available alternativescould possibly lower Federal expenditures.

An additional consideration is the potential im-pact that new uses of one crop may have on othercrops covered by commodity programs. For exam-ple, increased ethanol production from cornstarch is

12A rewnt GAO study (U.S. Congress, Gene~ Accounting Office, Alcohol Fuels: fmpacts From Increased Use of Ethanol Blended Fuels,GAO/RCED-90156 (Gaithersburg, MD: U.S. General Accounting Office, July 1990) examinin g this issue indicated that there would be a net positiveimpact on government payments for the time period exarnined in their study. The GAO and USDA studies used different econometric models of theagricultural sector and slightly different assumptions. The USDA study used a longer time horizon and different expansion levels than the GAO study.The negative cumulative net effects on government payments mm-red late in the time frame used by the USDA study.


expected to decrease the price of soybeans. Soy-beans are covered by nonrecourse loans. Tradition-ally, the market price of soybeans has been higherthan the loan rate, and support payments have notbeen needed (41). It is not clear whether the price ofsoybeans would drop low enough for high farmerparticipation and defaults on nonrecourse soybeanloans, but this is a possibility. Under these condi-tions, Federal agricultural commodity expendituresfor soybeans would increase. Alternatively, risingcorn prices may cause some livestock producers toswitch to other grains for feed. Increased use ofwheat, for example, could raise wheat prices. Wheatis also supported by commodity programs and theseexpenditures might decrease. The interactions incommodity markets are complex and changing oneaspect on the market will result in many secondaryimpacts. The net effect of these impacts and howthey would affect Federal commodity expendituresare not known.

Potential To Supply StrategicMaterials and Replace PetroleumIt is possible to develop a domestic capability to

produce many strategic and essential industrialmaterials. 13 This capability could lead to an in-creased sense of security and reduce vulnerability toexternal political factors. Many potential new cropsthat could supply strategic and essential materialsare in the early stages of development and numeroustechnical constraints must be overcome. Many newand strategically important crops are not econom-ically competitive with available alternatives. De-velopment takes many years, however, and today’sresearch lays the groundwork necessary for futurecompetitiveness and helps provide flexibility torespond to changing needs and economic environ-ments.

Guayule (rubber) is an example of a new strategiccrop that is technically more developed, but is notyet price-competitive with imported natural Hevearubber. However, because of its strategic impor-tance, the Department of Defense has stated in aMemorandum of Understanding with the Depart-ment of Agriculture that it will seek to ensure that asignificant portion (20 percent) of its annual tirepurchases are tires made from guayule rubber,

provided: that the initial price of guayule rubber isnot over three times that of Hevea rubber; and thatwithin 5 years of initial purchase, the price ofguayule rubber becomes competitive with that ofHevea rubber (31). This arrangement provides amarket pull for the development of guayule in theUnited States despite the fact that it is not currentlyeconomically competitive with Hevea rubber.

The potential to replace petroleum is an importantissue and an extensive and detailed analysis isbeyond the capacity of this study. A few pertinentobservations can be noted however. Petroleum isused to produce many products in the United States,including gasoline, diesel fuel, residual oil (used inboilers), jet fuel, chemical feedstocks, and miscella-neous products (including kerosene, lubricants,etc.). Transportation fuels are by far the largest use,and account for nearly 64 percent of the petroleumused (53). Chemical feedstocks represent another 7to 8 percent of petroleum use (10). Many of the newindustrial crops and uses of traditional crops poten-tially could replace some of these uses.

Development strategies required to significantlyreplace petroleum uses in fuel and the chemicalfeedstocks industries are likely to be different. Thisis because fuels are sold in energy units, whilechemical feedstocks are sold in weight units. Con-version of carbohydrates (sugars and starches) toethanol, for example, conserves energy, but mass islost (CO2 is lost). This puts an additional burden onusing biomass in the chemical feedstock industry(22). Chemical purity is required for the chemicalindustry; fuel uses generally tolerate greater contam-ination. Chemicals obtained from biomass sourcesgeneraIly have a higher level of contamination thanthose derived from petroleum cracking (10).

The potential to replace the largest quantity ofpetroleum is to develop substitutes for transportationfuel. Use of biomass as a fuel source, in general, isimpeded by the size of the United States fuelindustry, low energy content, seasonality, the dis-persed geographic location of supply, and lack ofsupply infrastructure (22,53). Potential fuel replace-ments derived from agricultural commodities in-clude ethanol to replace gasoline and vegetable oilsto replace diesel fuel.

IsStrategic ~te~ me defined as those materials that would be needed to supply the military, industrial, and essenthd civilian needS of tie UtittiStates during a national emergency, and are not found or produced in the United States in stilcient quantities to meet such needs. Castor oil and mturalrubber are strategic materials. Essential materials are those required by industry to manufacture products depended on daily.

Chapter 3--Analysis of Potential Impacts of Using Agricultural Commodites as Industrial Raw Materials ● 29

At this time, corn is the least expensive biomassfeedstock to use for ethanol production. Currentethanol production replaces less than 1 percent oftotal U.S. gasoline consumption (62).14 Significantreplacement of gasoline using ethanol derived fromcorn would require an increase in ethanol productionof several orders of magnitude. This would result inmany energy, environmental, and economic effects,some of which will be positive and some negative(see box 3-A).

A recent OTA study found that these concerns,coupled with the high direct costs of ethanolproduction from corn, imply that the prospects ofsubstantial increases in ethanol use in transportationare not favorable (53). A mitigating factor might bethe recent passage of the Clean Air Bill, whichmandates use of oxygenates (compounds high inoxygen content such as ethanol among others) infuel for some cities that do not meet Clean AirStandards. Additionally, improvements in the con-version of lignocellulose to ethanol, instead of starchto ethanol, might improve the economics of ethanoluse for transportation fuels. These technical ad-vances are not expected to occur prior to the year2000, and the implications of this development forthe farm sector are not clear at this time.

The potential for vegetable oil-based diesel fuel issimilarly difficult to predict. The United Statesconsumes approximately 40 billion gallons of dieselfuel each year, with approximately 10 percent of thistotal used in agriculture (23). Using soybean oil, justfor agricultural uses, would require an additional 15to 20 million acres of production over current levels.This would increase the price of soybean oil for fooduses. The increased meal produced would likelysaturate the soybean meal markets. If the oil isconverted to monoesters for use, then the glycerolbyproduct will also need to be marketed. Usingcrops that produce more oil per acre, such assunflowers and possibly rapeseed, could potentiallyimprove the situation, as could finding uses for themeal other than for livestock feed.

Alternatively, new and traditional crops can beused to produce commodity chemicals, rather thanfuel. Currently, about 7 to 8 percent of the petroleumused in the United States is used to producecommodity chemicals (10). Five compounds de-

Table 3-15-Major Primary Feedstocks DerivedFrom Petroleum

U.S production, 1989Feedstock billion Ibs)

Benzene . . . . . . . . . . . . . . . . . . . . . . . . . . 11.7Ethylene . . . . . . . . . . . . . . . . . . . . . . . . . . 35.0Propylene . . . . . . . . . . . . . . . . . . . . . . . . . 20.0Toluene . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8Xvlene . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8

SOURCE: Chemical and Engineering News, Apr. 9, 1990.

rived from petroleum account for 70 to 75 percent ofall primary feedstocks (table 3-15). These com-pounds and their derivatives represent 50 to 55percent of all organic feedstocks produced by thechemical industry (8).

The extent to which petroleum is replaced bychemicals derived from agricultural commoditieswill depend on economic competitiveness, superiorperformance, availability of other substitutes, and onthe net energy balance of crop production (i.e., theratio of energy output relative to the energy used foragricultural production and processing). Today,economics do not favor using agricultural commodi-ties to derive most commodity chemicals, but risingpetroleum prices and improvements in processingtechnologies could alter that situation (12,22,33).

Replacement of petroleum-derived chemicalswith plant-derived chemicals can be done in twoways: direct or indirect substitution. Direct substitu-tion involves the replacement of a petroleum-derived chemical with an identical biomass-derivedchemical. This strategy has the advantage of havingacceptable products and markets that already exist.The disadvantage is that it is difficult for plant-derived chemicals to compete economically becausethe petroleum chemical industry is highly inte-grated, is flexible in the chemical mix produced, andhas large economies of scale. Additionally, thechemical industry may be able to adjust pricessubstantially in response to threatened competition.

The indirect replacement strategy requires devel-oping plant-derived chemicals that have a slightlydifferent chemical composition, but the same func-tions as petroleum-derived chemicals. In this case,benefits in terms of superior performance, improvedstorage or supply characteristics, or improved envi-

IdOne bushel of corn produces appro xirnately 2.5 gallons of ethanol. U.S. production of ethanol uses appro xirnately 350 to 400 million bushels ofcom (approximately 5 percent of com production).


Box 3-A—Social and Market Impacts of Ethanol

For crops that are in surplus, it is hoped that the development of new uses will increase demand and raise pricesfor the commodity, increase farm income, decrease surpluses, decrease Federal commodity payments, increase jobcreation in rural communities, and in some cases, have positive environmental impacts. An example will help toillustrate some of the complications that might occur. The analysis is taken from a USDA/ERS study on the potentialimpacts of increasing ethanol production from corn (51,52). The analysis assumed that commodity price supportswould remain similar to those in the 1985 Food Security Act, the Federal excise tax exemption would be extended,and continuing export markets for corn gluten meal would exist. Estimation of impacts is based on an expansionof ethanol production to about 2.7 billion gallons of ethanol per year by 1995, which would require an additional800 million bushels of corn annually. Such a scenario is unlikely to occur without changes in economic incentivesof ethanol production or possibly government legislation mandating increased use of ethanol. Additionally, the priceand policy scenarios used in the model may change, resulting in different outcomes than those predicted. However,the analysis is illustrative of the types of impacts that can occur when new uses for traditional mops are developed,and is valuable in showing how complex the interactions in the agricultural commodity markets are.

Commodity Prices—Increasing the production of ethanol using corn as a feedstock will result in higher cornprices. It is estimated that corn prices will increase approximately 2 to 4 cents per bushel, for each additional 100million bushels used to produce ethanol. However, corn is not the only commodity that will be effected Corn isused primarily as a livestock feed. As the price of corn rises, livestock producers may switch to other feed grainssuch as wheat or sorghum. The increase in demand could result in some increase in prices for these grains. Ethanolproduction from corn requires only the starch. Produced as byproducts are corn oil and distillers dried grains (fromdry mill processing) or corn gluten meal and feed (from wet mill processing). Corn oil competes in the edible oilmarket with the oil obtained from oilseed crops such as soybeans and sunflowers. Additionally, distillers driedgrains and corn gluten meal and feed compete with soybean meal as a high-protein livestock feed. Thus the valueof soybeans decreases. In the short run, prices could decrease as much as 20 percent. In the long run, it is expectedthat farmers will shift out of soybean production to the production of other crops, particularly corn, and the decreasedsupply of soybeans will help raise the price again.

Livestock Sector--Changing prices for grains and protein meals could affect livestock production. Ethanolproduction below 3 billion gallons is not expected to significantly affect Livestock production because higher grainprices will likely be offset by lower protein meal prices. The impacts on livestock production will depend on howeasily ethanol byproducts can be substituted for corn in the feed rations. Limited opportunities for substitution couldresult in higher feed prices and lower livestock production. Substitution opportunities are likely to be different forbeef, pork, and poultry. Lower livestock production could result in higher meat prices for consumers. Estimates arethat at 2.7 billion gallon production, food rests may increase an additional $150 million annually (51,52).

Farm Income—Higher corn and grain prices will affect the income of farmers producing those commodities.Fanners who produce corn and who do not participate in commodity programs will benefit the most from highercorn prices. The benefits to corn producers enrolled in the corn commodity program will not be as high because thecommodity program to some extent buffers the effect of higher market prices (i.e., higher market pr.ices result inlower deficiency payments to farmers). In general though, corn producers will experience a higher income from

ronmental conditions, must outweigh any potential potential substitution opportunities lie with chemicost disadvantages (10,22). Indirect substitutionusing primarily oils and resins does occur, but thehigh variability of supply and price has restrictedthese uses.

Technically, starch derived from corn (or othersources) could be used to make several commoditychemicals, many of which are intermediates in theproduction of other chemicals. The markets for someof these chemicals (e.g., ethylene) are large. Somesmaller markets (e.g., ketones and alcohols) mightbe more likely candidates for development. Other

cals with high oxygen ;&tents, since plant-derivedchemicals usually contain oxygen, while petroleum-derived chemicals do not. Examples include sorbitol(food processing), lactic acid (thermoplastics), andcitric acid (detergents) (12). Starch can also be usedto produce polymers used either alone or in com-bination with other compounds such as plastics.Currently, biomass-derived plastics are not econom-ically competitive except in a few specialty high-value markets (e.g., surgical sutures). Major techni-cal advances are still needed (10).

Chapter 3--Analysis of Potential Impacts of Using Agricultural Commodites as Industrial Raw Materials ● 31

Potential candidates (other than those derivedfrom corn starch) for petroleum replacement are thefatty acids and resins discussed in this report.Opportunities for vegetable oils to replace linearalcohols and olefins derived from petrochemicals(e.g., ethylene and propylene) depend on improvedyields of olefins from oils, and the development ofnew products in the detergent (12 to 18 carbonrange) and the plasticizer (6 to 10 carbon) ranges.Also important is the potential of biomass-derivedglycerin to replace petrochemically derived glyc-erin, because the first step in preparation of fattyalcohols and olefins involves the conversion of

triglycerides to methyl ester and glycerin (22). Theextent to which petroleum replacement has alreadyoccurred and the potential for further replacementneeds additional analysis, but industry trends andexpectations can be discussed for some industries.

Detergent Industry

Vegetable oils (coconut and palm kernel) andpetroleum-derived ethylene can be used to producelinear alkylate and alcohol surfactants, chemicalsused in the production of soaps and detergents.Global production and percent of linear alkylate


increased corn prices. Additionally, producers of other grains, for example wheat, may also experience higherincomes if the prices of these grains also increases. Soybean farmers will lose income because of the competitionin the oil and high-protein meal markets. The differential price changes for grains and soybeans could result ininterregional income shifts. Farmers in the Corn Belt can switch soybean acreage to corn. Producers m the SouthernUnited States, particularly the Delta region cannot. It is estimated that farm income in that region could decreaseby 5 to 7 percent. Total gross receipts from crop production are expected to increase $1 to $2 billion if ethanolproduction is increased to 2.7 billion gallons (51,52).

Farm Program Costs—Increases in ethanol production will decrease farm program costs because of theincreases ingrain prices, but will be offset by tax losses resulting from the Federal excise tax exemption for ethanol.Higher grain prices result in fewer participants in the farm commodity programs, decreased deficiency payments,and decreased storage costs. These changes would occur not only in the corn program, but also in the programs forother grains such as wheat, sorghum, oats, and barley. It is estimated that if commodity supports remain at the samelevels established in the 1985 Food Security Act, then ethanol production levels of 2.7 billion gallons by 1995 couldresult in commodity program savings of about $9 billion between 1987 and 1995. However, there is a possibilityfor increases in Commodity Credit Corporation stocks of soybeans if the price of soybeans decreases sufficiently.Soybeans are covered by non-recourse loans, but generally soybean farmers have not enrolled in the programbecause market prices have been higher than the loan rate. Between 1987 and 1995, it is estimated that Federal taxlosses due to the excise tax exemption on a 2.7 billion gallon ethanol industry would be about $5 billion. Thisestimate is for the Federal Government only and does not include the exemptions given by many States. Thus,between 1987 and 1995, the Federal Government could save approximately $4 billion from expanded ethanolproduction. However, if the analysis is continued to the year 20(X), the tax losses from exemption of ethanol exceedthe gains from lower commodity payments, and cumulative tax losses from 1987 to 2000 exceed the cumulativecommodity program gains over that time (51,52).

Rural Development--The ethanol industry will contribute to rural development mainly through theconstruction and operation of ethanol production plants. It is difficult to estimate precisely what the impact will be.Ethanol production is not labor-intensive; large plants employ approximately 50 to 150 permanent workers. It isestimated that expansion of ethanol production to the 3-billion-gallon level could potentially directly employ anadditional 3,000 to 9,000 workers. Additional community jobs to provide services could be of the same magnitude(51,52).

Environmental lmpacts--Using ethanol in fuel blends and as an octane enhancer could help reduce carbonmonoxide (CO) levels in the atmosphere, and potentially increases hydrocarbon emissions (51,52). Additionally,increasing prices for corn will cause farmers in the Corn Belt to switch acreage from soybean production to cornproduction. Corn is a fairly chemical-intensive crop, so there maybe groundwater contamination issues to consider,as well as the impacts from a potential increase in monoculture production in this region.

Due to the complexity and extent of interaction among agricultural commodity markets, developing a new usefor one commodity can have significant, and perhaps unexpected impacts on other commodities. Because differentcrops predominate in different geographical regions of the United States, there could be significant interregionalimpacts.

Potential candidates (other than those derived triglycerides to methyl ester and glycerin (22). Thefrom corn starch) for petroleum replacement are thefatty acids and resins discussed in this report.Opportunities for vegetable oils to replace linearalcohols and olefins derived from petrochemicals(e.g., ethylene and propylene) depend on improvedyields of olefins from oils, and the development ofnew products in the detergent (12 to 18 carbonrange) and the plasticizer (6 to 10 carbon) ranges.Also important is the potential of biomass-derivedglycerin to replace petrochemically derived glyc-erin, because the first step in preparation of fattyalcohols and olefins involves the conversion of

extent to which petroleum replacement has alreadyoccurred and the potential for further replacementneeds additional analysis, but industry trends andexpectations can be discussed for some industries.

Detergent Industry

Vegetable oils (coconut and palm kernel) andpetroleum-derived ethylene can be used to producelinear alkylate and alcohol surfactants, chemicalsused in the production of soaps and detergents.Global production and percent of linear alkylate


potentially cultivate an additional 100 to 140 millionacres. Some of this land is planted to pasture used forlivestock grazing. Some is held in small or frag-mented holdings and faces competition from non-agricultural uses; conversion to crop production willbe relatively expensive and expected returns need tobe high enough to offset the conversion costs (4,44).Additionally, much of the land removed from cropproduction is fragile and subject to soil erosion.Through 1990, 33.9 million acres of land had beenenrolled in the Conservation Reserve Program15

(50,56). If these acres are to be returned to cropproduction, extreme care in crop selection will beneeded.

The acreage requiredl6 to grow crops that wouldsignificantly reduce U.S. petroleum fuel use wouldbe substantial (table 3-18). To replace U.S. petro-leum-derived ethylene with cornstarch-derived eth-ylene, would require production of approximately27 million acres of corn.17 Current U.S. productionlevels of ethanol from cornstarch replace no morethan 1 percent of the gasoline used in the UnitedStates. Using soybeans to replace just the agricul-tural uses of diesel fuel would require increasingsoybean production by nearly 10 million acres overcurrent production levels.18 Using crops such assunflowers or the new crop rapeseed, which producesubstantially higher levels of oil per acre thansoybeans, would decrease the acreage needed, buteven so, a significant portion of U.S. crop acreagewould need to be devoted to fuel production.

Crop acreage needed to supply total demand forcommodities which would substitute for thosecurrently imported (i.e., oils and resins), will bedetermined by domestic demand and export poten-tial. A rough approximation needed to satisfy currentU.S. demand can be made (table 3- 19). Calculationsare based on current imports of oils, resins, and

Table 3-18-Estimated Acreage Needed To SupplyOne Billion Gallons of Fuela

Crop Fuel replaced Acreage

Soybeans . . . . . . . . . . . . . . . Diesel 22 millionSunflowers . . . . . . . . . . . . . . Diesel 16 millionRapeseed . . . . . . . . . . . . . . . Diesel 8 millionEthanol . . . . . . . . . . . . . . . . . Gasoline 3.5 millionaoestimate petroleum replacement, calculations must reestimated on an

energy basis rather than a volume basis (vegetable oils and ethanol havea lower energy content than diesel fuel and gasoline respectively, andwould therefore require a greater volume to achieve the same energycontent) and energy requirements needed to grow and process theagricultural commodities need to be considered. Agricultural commodityyields were assumed to be the U.S. average, 1984-88.


Table 3-19—Estimated Acreage Requirements forSelected New Crops To Replace Importsa

Estimated acreageNew crop Imported crop (million of acres)Cuphea . . . . . . . . . . .Cuphea . . . . . . . . . . .Lesquerella . . . . . . .Stokes aster . . . . . . .Vernonia . . . . . . . . . .Crambe . . . . . . . . . . .Rapeseed. . . . . . . . .Guayule . . . . . . . . . .Kenaf . . . . . . . . . . . .Soybean oil. . . . . . . .

Coconut oil 1.40Palm kernel oil 0.56Castor oil 0.33Converted soybean oil 0.49Converted soybean oil 0.68Rapeseed oil 0.29Rapeseed oil 0.24Hevea rubber 3.60Newsprint 1.00Printing inks 1.01

aEstimations were based on 1987 levels of U.S. imports and yields of newcrops obtained in experimental plots. Calculations involving-oilseeds arebased on fatty acid equivalents.


fibers for which the new crops could substitute, andinclude demand for both food and nonfood uses.19

Hence, some calculations may overestimate theacreage needed to satisfy industrial uses. Acreageneeds may also be overstated because yields of newcrops are based on levels currently obtainable, notnecessarily those that would be needed for economicviability .20 (See app. D, table D-1 for calculationdetails.)

ls~e ComeWation Re~me l?rogram removes highly erodible and/or environmentally sensitive cropland from production for a wriod of 10 Y-.It is authorized to remove 40 to 45 million acres.

16A thorou~ estimation of acreage n~ds to displace petroleum-derived fuels using agricultural products would require calculations breed on ~er8Ycontent (rather than volume), net energy requirements (energy required for production and processing subtracted), and average crop yields that couldbe expected if production signiilcanfly expanded (rather than current U.S. averages). If these factors were includ~ acreage requirements would likelybe greater than those estimated.

17~~ ~c~ation ~sme~ tit 34 ~m~ of ~~ch an & ob~~ from a bu~el of cow ~d 3 pounds of swch me IVX@ed to produce 1 Polmdof ethylene.

lg~e United States annually consumes qprotitely 40 billion gallons of diesel fuel, and about 3 billion gallons are used in the agricultural sector.19c~c~atiom for soyb=n ~ me breed on Cment U.S. use of ~ flion pounds of printing ~ (~&~@ Of Food artd Agn”cu2ture, ‘‘sOybWIl

oil Inks,” vol. 2, No. 2, July 1990).-o be economically competitive, many new crops will require higher yields per acre than are now obtained in experimental plots. Higher yields per

acre mean fewer acres are needed to produce the output. For example, currently obtainable guayule yields (500 lbs/ac) are less than the 1,200 lbs/acestimated to be needed for economic competitiveness.


Rough calculations of U.S. acreage needed toreplace current world production levels for some ofthese imported agricultural commodities can ap-proximate export potential (table 3-20).

These estimates represent upper levels based oncurrent world demand. Total acreage needs woulddepend on the potential to expand demand for thesecommodities beyond current levels, and the abilityof the new crops to capture a significant percentageof the world market share. One would not expectU.S. production of new crops to displace worldproduction completely. New crops will, in manycases, be substitutes for these imported crops and,therefore, they will compete with each other formany of the same markets. Large supply increases(without sufficient demand increases) will decreasethe price of all substitutes and affect the productionlevels and market share of all substitute commodi-ties.

Increasing global capacity to produce, processand manufacture products from agricultural com-modities will affect the potential for U.S. exports ofthese products. Other countries (e.g., Argentina andBrazil for soybeans and Canada and the EuropeanCommunity for edible quality rapeseed) have dem-onstrated a capacity to increase production inresponse to favorable prices. Guayule can readily begrown in Mexico. Supply of lauric acid oils isexpected to increase to 7.1 million tons by the year2000 (i.e., 3.7 million tons of coconut oil and 3.4million tons of palm kernel oil), due primarily to thematuration of high yielding palm trees planted inAsia (1,14). The International Agricultural ResearchSystem and multinational seed companies are in-creasing the ability to rapidly transfer and adapt newseed varieties to many countries in the world (35).

Developing and newly industrialized countriesare increasing their capability to produce productsfrom agricultural commodities for their own domes-tic use, and in some cases are beginning to capturemarket share in world markets. For example, most ofthe new capacity to produce natural oil surfactantshas been built in Third-World or newly industrial-ized nations; the industry has overcapacity, and isstill expanding. Prior to 1986, U.S. producerssupplied the linear alkylate and alcohol surfactantdemand in the United States and Canada. Now, 5 to10 percent is supplied by imports from WesternEurope and Third World nations (14). Analysis ofthe U.S. potential to capture market share for both

Table 3-20-Estimated Acreage Needed To ReplaceWorld Supplies

World production Acres neededImported crop New crop (million Ibs.) (millions)

Coconuta . . . . . Cuphea 2.77 7.6Palm kernela . . Cuphea 1.48 4.5Rubber . . . . . . Guayule 9,250 18.5Castor c . . . . . . . Lesquerella 1,705 1.1Newsprint d . . . . Kenaf 3 3a

4.7aworld production levels are 1989/1990 preliminary estimates of coconut

and palm kernel oil in million metric tons. Acreage calculations based onacres needed to obtain an equivalent amount of Iauric acid as would beobtained from the coconut and palm kernel oil. Source: U.S. Departmentof Agriculture, Foreign Agricultural Service, World Oilseed Situation andOutlook, November 1990.

bWorld production level is in million pounds and is based on 1990 estimatesof world rubber production of 25 billion pounds, 37 percent of which isnatural rubber. Source: Stephen Stinson, “Rubber Chemicals IndustryStrong, Slowly Growing Despitee Changes,” Chemical and EngineeringNews, May 21, 1990, pp. 45-66.

cWorld production level is in million pounds of castor beans, and is basedon 1984 to 1986 production of selected countries (including Brazil andIndia). Calculation is based on pounds of Lesquerella seed needed toreplace castor beans. Source: U.S. Department of Agriculture, EconomicResearch Service, “World Indices of Agricultural and Food Production,1977-86,” March 1988.

dworld production is in million tons and based on U.S. consumption of 12.3million metric tons being 41 percent of world consumption. source: FredD. Iannazzi, ‘The Economics Are Right for U.S. Mills To Recycle OldNewspapers, Resource Recycling, July 1989, p. 34.


raw and processed products derived from agricul-tural commodities is needed.

Future increases in recycling efforts may alsoaffect virgin commodity needs. For example, in1987 the United States consumed approximately12.3 million metric tons of newsprint (41 percent ofworld consumption). Approximately 32 percent isrecycled. Of the newsprint manufactured in theUnited States, 24 percent of the fiber used is fromrecycled newsprint while 76 percent is virgin fiber.Newsprint made from 100 percent recycled news-print is generally of lower quality than that madewith virgin fiber, but room exists for significantincreases in recycled newsprint, which could reducethe use of virgin fibers for this use (18). Some studiesindicate that mixing kenaf with recycled newspaperpulp improves the strength and brightness of therecycled paper; the role that kenaf could play inrecycling needs further study.

Determination of the acreage needed to produceagricultural crops for industrial uses has implica-tions for the U.S. Gross National Product (GNP)which would be affected by additional productionand use of idled resources. Replacing imports withdomestic production could increase U.S. income.

Chapter 3--Analysis of Potential Impacts of Using Agricultural Commodities as industrial Raw Materials ● 35

The average value of U.S. vegetable oil imports21 forthe fiscal years 1986 through 1988, was $591 millionper year. The value of U.S. imports of rubber andgums for the same time period was approximately$759 million per year (58). Annual U.S. imports ofnewsprint are valued at approximately $4.5 billion(11).

Additional impacts could result from value addedin the agricultural sector. The agricultural sectorconsists of the farm sector, upstream activitiesrelated to farming (i.e., firms that supply agriculturalinputs and services) and downstream activities (i.e.,firms engaged in the storage, processing, transport,manufacturing, distribution, retailing, consumption,and export of agricultural products). The food andfiber system accounts for about 18 percent of theU.S. GNP; farming accounts for 2 percent, upstreamactivities account for about 2 percent, and theremaining 14 percent results from the downstreamactivities (16,21). Currently, excess capacity exists inthe farm sector and many of the downstreamactivities. This implies that the impacts of smallchanges in price and production volume would belimited to the farm sector. Changes in upstreamactivities occur at higher prices and volumes than inthe farm sector, and downstream activities requirehighest levels of change.

Ultimately however, it is necessary to decidewhether using all excess capacity is wise or whetherit is better to maintain some excess capacity. Recentdry weather has reduced surplus stocks to minimumlevels. Rebuilding stocks will require plantingadditional acreage. Without some excess capacity,the ability to respond to factors beyond our controlwould be hampered. Maintaining at least someexcess production capacity may provide a measureof food security.

Premature CommercializationPremature commercialization of new industrial

agricultural products can indefinitely delay success-ful marketing. The development of degradableplastics to alleviate solid waste and litter problemsillustrates this point. In the early stages, environ-mentalists supported these products for some spe-cific uses, such as six-pack beverage rings. How-ever, as product types and claims of effectivenessmultiplied, criticism emerged. The products were

marketed without a clear definition of, or standardsfor, degradability. Lawsuits have been filed againstsome manufacturers of these products for false andmisleading advertising. Additionally there havebeen calls for an end of public sector research onthese products, and some states have consideredlegislation banning their use. Potential markets fordegradable plastics are estimated to be declining.Apparently, research for second-generation de-gradable plastics has been continuing, but confusionand doubts about the appropriateness of thesetechnologies remain with the public and environ-mental community. It remains to be seen what effectthese doubts will have on future efforts to marketdegradable plastic products (46,49).

Triticale, a wheat-rye hybrid that is high inprotein, is an example of a new crop that wasintroduced (in the 1950s) without clearly establish-ing its market. From the beginning, triticale wasviewed as another wheat, even though its processingqualities were different from wheat and it could notdirectly substitute for wheat. This problem, com-bined with yields that were lower than wheat, lead tothe foundering of triticale as a new grain crop.Today, triticale is grown in the United States insmall quantities, primarily as a forage crop in theSoutheast, with some use in specialty baking prod-ucts (19).

It is enticing to try to commercialize a product asquickly as possible to obtain any potential benefitsthe product might yield, and unnecessary delaysshould be avoided. However, commercializing anew crop or product prematurely risks destroying thepotential of that new product. A clear marketingstrategy that analyzes potential problems is needed.

Summary and ConclusionsThe lack of studies evaluating the potential

impacts of new industrial crops and uses of tradi-tional crops precludes making definitive statementson what these impacts will be. This chapter is apreliminary attempt to analyze potential impacts,but more detailed analysis is needed. Based on thisinitial analysis, several conclusions are suggested.

Examination of rural employment impacts duringthe 1970s when agricultural production rapidlyexpanded, suggest that development of new cropsand uses may result in modest rural employment

zlvege~ble oiIs fiported include palQ palm kernel, coconuL olive, rapeseed, castor, @g, and b~d oils.


growth in agriculturally related industries. Agricul-turally dependent communities would be mostaffected. However, the majority of the agriculturallyrelated jobs created are likely to be located inmetropolitan, rather than rural communities. Addi-tionally, many of the industries that will usechemicals derived from agricultural commoditiesare already located in metropolitan areas, and inseveral cases, may require highly skilled labor.Location of new manufacturing facilities in manyrural areas will be difficult to achieve.

Development of new industrial crops and uses oftraditional crops does have the potential to providea domestic source of strategic and essential indus-trial materials. Technically, biomass-derived chemi-cals could also potentially replace many petroleum-derived chemicals. The major constraint is econom-ics. The chemical industry is highly integrated,flexible, and has large economies of scale. Penetra-tion of many of these markets is difficult. Addition-ally, some of these markets are large (i.e. fuel andprimary chemical feedstocks) and significant re-placement would use millions of acres of cropland,have far-reaching environmental implications, andcould significantly increase food prices.

The benefits of new technologies are captured bythose who first adopt the technology. A strongcorrelation exists between early adoption and size offarm enterprise. It is likely that operators of largefarms will adopt new crops before operators of smallfarms and, therefore, capture these benefits. Fortraditional crops covered by Federal commodityprograms, market prices must increase enough toexceed price support levels to have a large impact onfarm income. The extent to which small farmoperators are enrolled in commodity programs willdetermine how changing market prices affect theirincome levels. Programs that help small farmoperators become early adopters of new technolo-gies will improve the chances of these farmersbenefiting from new industrial crops and uses oftraditional crops.

The development and production of new indus-trial crops and uses in the United States could, insome cases, replace major exports of some develop-ing nations, some of which are considered to be ofstrategic importance to the United States. Addition-ally, attempts to increase exports of some of the

products has the potential to increase trade frictionsbetween the United States and the European Com-munity.

The United States currently has excess agricul-tural production capacity. Large scale replacementof U.S. fuel use or primary chemical feedstockswould require significant acreage for crop produc-tion, however, economics do not favor these devel-opments at the current time. Use of agriculturallyderived chemicals to replace some of the oils andresins currently imported is not likely to reduceexcess agricultural capacity significantly given cur-rent demand and supply conditions.

The ability of new crops to reduce Federalcommodity payments will depend on whether or notacreage is shifted from production of crops that arefederally supported to those that are not. New usesof traditional crops that are supported, will reducecommodity payments if the new use is not itselfsubsidized.

Development of new industrial crops and uses oftraditional crops will have many environmentalimpacts, some positive, and some negative. Poten-tially, new fuels could improve air quality. Newcrops that are better adapted to their environmentspotentially could reduce erosion and demand forirrigation. However, many new crops are not nativeto the United States and problems can and do arisefrom the introduction of new species. Additionally,many of the crops may be genetically engineered;several environmental issues are raised by thispossibility.

As with any new technology, there will bewinners and losers. Many new industrial crops anduses of traditional crops potentially will competewith traditional crops. Improved understanding ofthese impacts is needed.

The lack of studies evaluating the potentialimpacts of new industrial crops and uses of tradi-tional crops points to the need to fired social scienceresearch in addition to the physical, chemical, andbiological research. Interdisciplinary research canprovide insights into the likely effects that will resultfrom the development of these new technologies, aswell as factors that affect the development of thetechnologies themselves.

Chapter 3--+halysis of Potential Impacts of Using Agricultural Commodities as Industrial Raw Materials ● 37

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Change and the Rural Economic Policy Agendu forthe 1980’s: Prospects for the Future, September1988, pp. 77-102.Reisch, Marc S., “Demand Puts Paint Sales atRecord Levels,” Chemical and Engineering News,Oct. 30, 1989.Rossmiller, George E., and ‘IMwiler, M. Ann,“Agricultural Development and Trade: Broadeningthe Policy Horison,” U.S. Agricultural and ThirdWorld Development, The Critical Linkage, RandallB. Purcell and Elizabeth Morrison (eds.) (Boulder,CO: Lynne Rienner Publishers, 1987).Sanford, Scott, and Tweeten, Luther, “Farm IncomeEnhancement Potential for Small, Part-Time Farmi-ng Operations in East Central Oklahoma, ’ SouthernJournal of Agricultural Economics, December 1988,pp. 153-164.Schaub, James, McArthur, W. C., Hacklander,Duane, Glauber, Joseph, hath, Mack, and Doty,Harry, U.S. Department of Agriculture, EconomicResearch Service, “The U.S. Soybean Industry,”Agricultural Economic Report No. 588, May 1988.Schuh, G. Edward, “Global Factors Affecting U.S.Markets in the Next Decade,” Positioning Agricul-ture for the 1990’s: A New Decade of Change(Washington, DC: National Planning Association,1989), pp. 31-44.Science of Food and Agriculture, “Soybean OilInks,” vol. 2, No. 2, July 1990.Shen, Sinyan, ‘‘Regional Impacts of Herbaceous andWoody Biomass Production on U.S. Agriculture,”Energy From Biomass and Wastes VIZ (Chicago, IL:Institute of Gas Technology, 1983).Stinson, Stephen, “Rubber Chemicals IndustryStrong, Slowly Growing Despite Changes,” Chemi-cal and Engineering News, May 21, 1990, pp. 45-66.Studt, Tim, “Degradable Plastics: New Technologiesfor Waste Management,” R&D, March 1990, pp.52-56.Summers, Gene F., “Industrialization,” Rural Soci-ety in the U. S.: Issues for the 1980’s, Don A. Dillmanand Daryl J. Hobbs (eds.) (Boulder, CO: WestviewhXS, 1982).Sumner, Daniel A. (cd.), Agricultural Stability andFarm Programs: Concepts, Evidence, and Implica-tions (Boulder, CO: Westview Press, 1988).Thayer, Ann M., “Degradable Plastics GenerateControversy in Solid Waste Issues,” Chemical andEngineering News, June 25, 1990, pp. 7-14.U.S. Congress, General Accounting Office, Conser-vation Reserve Program Could Be Less Costly andMore Eflective, GAO/RCED-90-13 (Gaithersburg,MD: November 1989).U.S. Congress, General Accounting Office, Farmingand Farm Programs: Impact on the Rural Economy

Chapter 34nalysis of Potential Impacts of Using Agricultural Commodities as Industrial Raw Materials .39

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and on Farmers, GAO/RCED-90-108BR (Gaithers- 57.burg, MD: April 1990).U.S. Congress, General Accounting Office, AZcohoZFuels: Impacts From Increased Use of EthanolBlended Fuels, GAO/RCED-90-156 (Gaithersburg, 58MD: July 1990).

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U.S. Congress, Office of Technology Assessment,Replacing Gasoline: Alternative Fuels for Light- 59”Duty VehicZes, OTA-E-364 (Washington, DC: U.S.Government Printing Office, September 1990).U .S. Congress, Office of Technology Assessment, 60.Paying the Bill: Manujkacturing andAmerica’s TraakDeficit, OTA-ITE-390 (Washington, DC: U.S. Gov- 61ernment Printing Office, June 1988).U.S. Congress, Office of Technology Assessment,Technology, Public Policy, and the Changing Struc-ture of American Agriculture, OTA-F-285 (Wash-ington, DC: U.S. Government Printing Office, March 62.1986).U.S. Department of Agriculture, Economic ResearchService, Agricultural Resources: Cropland, Water,and Conservation Situation and Outlook Report,September 1990, p. 29.

U.S. Department of Agriculture, Economic ResearchService, “Financial Characteristics of U.S. Farms,January 1, 1989,” Agriculture Information BulletinNo. 579, December 1989.

U.S. Department of Agriculture, Economic ResearchService, “Agricultural Outlook,” August 1989.

U.S. Department of Agriculture, Economic ResearchService, “World Agricultural Trade Shares, 1%2-85,” Statistical Bulletin No. 760, November 1987.

U.S. Department of Agriculture, “Ethanol: Eco-nomic and Policy Tradeoffs,” January 1988.

U.S. Department of Agriculture, Office of Energy,“Fuel Ethanol and Agriculture: An Economic As-sessment,” Agricultural Economic Report No. 562,August 1986.

Walls, Margaret A., Krupnick, Alan J., and Toman,Michael A., Resources for the Future, Energy andNatural Resources Division, “Ethanol Fuel andNon-Market Benefits: Is a Subsidy Justified?”(Washington, DC: Resources for the Future, August1989).

Chapter 4

Factors That Affect Research, Development,and Commercialization

While the development of new industrial cropsand uses of traditional crops potentially couldbenefit society, such development is not a simplematter. It involves technical change, the complexprocess by which economies change over time withrespect to the products produced, and the processesused to produce them (22). New ideas, models,products, and processes must be conceptualized andresearch conducted to develop promising productsand processes for commercial use. New processesand products must be adopted by firms and spreadthroughout an industry to achieve maximum im-pacts. Governments can affect the rate of technicalchange by influencing the general economic envi-ronment (fiscal and monetary policy as well asregulatory policy can enhance or inhibit technicalchange), and by specific policies designed to encour-age technical change.

U.S. technical policy focuses predominantly onthe research to develop new ideas. Federal and Stategovernments, and the private sector, have numerousprograms and provide billions of dollars to supportsuch research. Commercialization is generally theresponsibility of the private sector, although theFederal and State Governments have passed legisla-tion and developed some programs to encouragetechnology transfer from public-sector research tothe private sector. Many of these programs are ofrecent origin and have limited funding. The processof adoption of new technologies, with a few notableexceptions, receives little public-sector attention.

For new industrial crops and uses of traditionalcrops to be commercialized, many technical andeconomic constraints must be overcome. Involve-ment of the public and private sectors is needed. Theextent of this involvement, and the speed at whichnew technologies will be developed and commer-cialized will be influenced by many factors. Thischapter analyzes many of these factors, and de-scribes some Federal and State programs availableto encourage the research, development, and com-mercialization of new technologies. Chapter 5 willdiscuss important factors involved in the adoption ofnew technologies.

Research and Development

It is one of the myths of technical change that theprocess proceeds in a linear manner from basic toapplied research, to development, to marketing, andto dissemination. In fact, a more accurate descriptionmight be one where science- and technology-oriented research follow two parallel but interactingpaths. The two paths are connected by a commonpool of scientific knowledge that feeds and drawsfrom each research path. While personal insight,professional curiosity, and the state of the science allplay a role, the speed and direction of technicalchange is highly influenced by the interaction ofeconomic and institutional factors.

Private-sector research and development is moti-vated by profit-seeking and will tend to occurwhenever profit and risk conditions create compara-tively attractive investment opportunities. Firmsundertake research and development to reduce theunit costs of production (generally through processdevelopment), and/or to stimulate demand for out-puts (new product development). Firms develop newprocesses to reduce the use of production inputs thatare, in the future, expected to become relativelymore expensive than other inputs (i.e., firms mini-mize the present discounted value of expected futurecosts). The resources allocated to a particular line ofresearch will also be influenced by the cost andproductivity of the research. New product researchresources are usually concentrated on products thatare expected to have the highest prices and largestmarkets, and development efforts are accelerated forsuch new products. Development activities areslower for new products that substitute for existing,profitable products (2,10,22,24).

Public-sector research can be active or passive.The public sector, in response to actual, anticipated,or perceived needs, can take an active stance bysetting its own research priorities and providingadequate resources to meet established goals. Thepublic sector can take a passive approach byfollowing the research priority agenda determinedby interest groups. Interest groups demand public-sector funding for research that they believe will

-41–


bring a payoff to themselves. They commit their ownresources in a similar fashion. Federal fiscal con-straints tend to reinforce the passive approach topublic research by intensifying the search by scien-tists and research administrators for private researchmonies and competitive grants (16).

With the possible exceptions of guayule andethanol derived from cornstarch, Federal policyconcerning new industrial crop and use developmenthas been relatively passive. Interest groups, for themost part, have not demanded this type of public-sector research, and the private sector has notinvested in public-sector research of this type. Theprivate sector has shown interest in new industrialcrops and uses that have relatively clear potential tosubstitute for inputs whose cost is increasing (rela-tive to the cost of other inputs), or whose market isaffected by regulation. Situations where these fac-tors are not so obvious have not elicited substantialprivate-sector interest.

The new industrial crops Vernonia and Cupheaillustrate these points. Lauric-acid containing oils(coconut and palm kernel oil) and petroleum-derivedethylene can be used to produced surfactants for usein detergents, emulsifiers, and wetting agents. Thenew crop Cuphea also produces oil containing lauricacid, and could be used in place of coconut and palmkernel oil or ethylene in many detergents. Rawmaterial costs in the detergent industry are a smallportion of total product cost and have little impact onprofitability. Additionally, supplies of coconut andpalm kernel oil are expected to at least double withinthe next decade as recently planted, high-yieldingpalms begin to mature (1,7). The detergent industryprovides limited funding for Cuphea. Industryinterest in developing Vernonia is increasing.Stricter volatile organic emission standards areforcing the reformulation of many paints and coat-ings. Preliminary results show that use of Vernoniaoil as a diluent in place of organic solvents canreduce volatile emissions. The paint and coatingsindustry is increasing its support for research onVernonia (19).

Industrial Use Research Funding andInstitutional Involvement

The Federal institution most involved in agricul-tural research is the U.S. Department of Agriculture(USDA). Research funds are allocated through theCooperative State Research Service (CSRS) and the

Agricultural Research Service (ARS). Researchfunds awarded to the State Agricultural ExperimentStations located within the Land Grant Universitiesare administered through CSRS. Funding includesformula funds (Hatch, Evans-Allen, McIntyre-Stennis, Animal Health, etc.), special grants, educa-tion and facilities grants, and competitive grants.Total CSRS funding to the State Experiment Sta-tions for fiscal year 1990 was approximately $344million. It is estimated that approximately $5 millionis allocated to research and development of newcrops and uses of traditional crops ($2 million fornew crop research and $3 million for new useresearch) (12). Universities have performed most ofthe agronomic research and some utilization re-search on new crops and industrial uses.

The fiscal year 1990 budget for the ARS wasapproximately $609 million. Of this amount, it isestimated that expenditures for industrial-use re-search were $15.5 million. Much of this funding,however, focused on more traditional uses of cottonfibers and not new uses. An estimated $2.7 millionwas allocated to new crop research. Additionally,another $6.7 million was spent on research thatcould indirectly enhance industrial uses (12, 17). Theprimary ARS center for research on new crops andindustrial uses is the Northern Regional ResearchCenter in Peoria, Illinois, which focuses primarilyon utilization research.

The Critical Agricultural Materials Act estab-lished the Office of Critical Materials (OCM)located within USDA. This office serves as ‘‘acentral location where USDA can address researchand development with respect to agricultural cropsthat have the potential of producing critical materialsfor strategic and industrial purposes.” A JointCommission on Research and Development ofCritical Agricultural Materials, which includes rep-resentatives from the Department of Agriculture, theDepartment of Commerce, the Bureau of IndianAffairs, the National Science Foundation, the De-partment of State, the Department of Defense, andthe Federal Emergency Management Agency, over-sees the activities of the Office of Critical Materials.This office is trying to commercialize many of thenew industrial crops discussed in this report. Com-mercialization efforts have been greatest forguayule, kenaf, jojoba, Crambe, and industrialrapeseed. Some efforts have been made to commer-cialize meadowfoam and Lesquerella. The 1990Farm Bill reauthorized the Critical Agricultural

Chapter 4--Factors That Affect Research, Development, and Commercialization . 43

Materials Act through FY 1995, and Congressappropriated $1,968,000 for FY 1991 to fundresearch on guayule ($668,000), Crambe and rape-seed ($500,000), and other unspecified research($800,000).

In addition to ARS and CSRS activities, otherUSDA agencies such as the Forest Service alsosupport research on industrial uses of forest prod-ucts. Other Federal agencies such as the Departmentof Defense (DoD), the Department of Commerce,the Department of Energy, the National ScienceFoundation, and the Agency for International Devel-opment provide some funding for industrial uses ofagricultural commodities. The States, as well as theprivate sector also provide some funding, as docommodity organizations, such as the National andState Corn Growers Associations.

Funding Levels for Specific New Crops andIndustrial Uses

USDA expenditures for selected new crops forfiscal year 1989 are summarized in table 4-1. To putthese funding levels in perspective, USDA and theState Agricultural Experiment stations annuallyspend, on average, an estimated $120 million forcorn, wheat, and soybean research.

The $325,000 being spent by USDA on Crambeand winter rapeseed supports an eight State consor-tium that is attempting to commercialize these twocrops. The eight States involved are Missouri,Kansas, New Mexico, Idaho, Iowa, Nebraska, NorthDakota, and Illinois. It is estimated that these Statesare receiving an additional $2 in State support forevery $1 of Federal support (12).

Guayule is the new crop most heavily supported,as mandated by the Native Latex Act and later theCritical Agricultural Materials Act. Much of thefunding has come from DoD and USDA. Table 4-2summarizes known expenditures for guayule devel-opment. Private-sector expenditures on guayuleresearch are estimated to be three to four timesUSDA levels (12).

Kenaf is also receiving public- and private-sectorattention. The Joint Kenaf Task Force (JKTF)composed of Kenaf International, CIP Inc., andCombustion Engineering’s Sprout-Bauer Division,in cooperation with USDA, is attempting to com-mercialize kenaf. The program consists of threephases. Phase I, begun in 1986, involved agronomicand papermaking research. Phase II, begun in 1987,

Table 4-l—USDA Fiscal Year 1989 Expenditures forSelected New Crops (dollars)

Crop Amount

Cuphea . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100,000Meadowfoam . . . . . . . . . . . . . . . . . . . . . . 350,000Lesquerella . . . . . . . . . . . . . . . . . . . . . . . 20,000Crambe/rapeseed . . . . . . . . . . . . . . . . . . 325,000Guayule . . . . . . . . . . . . . . . . . . . . . . . . . . 1,168,000Kenaf . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.638,000SOURCE: Office of Critical Materials, U.S. Department of Agriculture

Cooperative State Research Service, 1990.

Table 4-2—Expenditures for Guayule Research(millions of dollars)

Year Amount Agency

1978-86 . . . . . . . . . . $13.1 Department of Defense13.2 U.S. Department of Agriculture2.9 Other Federal2.7 Firestone Tire & Rubber

1987-88 . . . . . . . . . . 15.0 Department of Defense4.3 U.S. Department of Agriculture

1989 . . . . . . . . . . . . . 1.168 U.S. Departrnent of Agriculture1989-96 estimated . . 38.0SOURCE: Office of Critical Materials, U.S. Department of Agriculture


focused on commercial trials. Phase III, currently inprogress, is focusing on agronomic and utilizationresearch. Table 4-3 summarizes expenditures forkenaf research. It is estimated that private-sectorsupport is three to four times the USDA expendi-tures (3,1 1,12).

The California South Coast Air Quality Manage-ment District, the State of Michigan, the U.S.Agency for International Development, and PaintResearch Associates (an industry-financed researchgroup) have committed $425,000 for Vernoniaresearch (19). The Tennessee Valley Authority, incooperation with the Department of Energy, con-ducts research on the conversion of lignocellulose tochemicals. Funding levels for other crops are una-vailable, but the amounts seem to be small. (SeeAppendix A: Selected New Industrial Crops for morespecific information concerning each individualcrop.)

Research and development of new uses fortraditional crops is also conducted by the public andprivate sectors. The General Accounting Office hasevaluated the extent of Federal support for degrad-able plastic research (28). Their findings for fiscalyear 1988 are summarized in table 4-4. Severalprivate firms are also interested in degradable


Table 4-3—Expenditures for Kenaf Research(dollars)

Research Amount Agency

Phase I 141,000 U.S. Department of Agriculture263,000 Joint Kenaf Task Force

Phase II 300,000 U.S. Department of Agriculture644,000 Joint Kenaf Task Force

Phase III 675,000 U.S. Department of AgricultureSOURCE: Office of Critical Materials, U.S. Department of Agriculture


Table 4-4-1988 Federal Expenditures forDegradable Plastic Research

Agency No. of projects Funding

U.S. Department of Agriculture . . 4 $ 941,000Department of Defense . . . . . . . . 4 575,000Department of Energy . . . . . . . . . 3 150,000National Science Foundation . . . . 1 63,000

Total . . . . . . . . . . . . . . . . . . . . . 12 $1,729,000SOURCE: U.S. Congress, General Accounting Office, “Degradable Plas-

tics: Standards, Research and Development,” RCED-88-208(Gaithersburg, MD: September 1988).

plastics, and have products on the market, many ofwhich use cornstarch.

Funding for ethanol desulfurization of coal hasbeen provided by the Illinois State GeologicalSociety, Southern Illinois University-Carbondale,Illinois Department of Energy and Natural Re-sources, the Illinois and Ohio Corn MarketingBoards, and the U.S. Department of Energy. Ex-penditures of approximately $2.85 million havebeen allocated for 1987 through 1991 (33).

Funding levels for other uses are unavailable. (SeeAppendix B: Selected New Industrial Uses forTraditional Crops for more specific information oneach use.) In addition to the United States, othercountries have expressed interest in developing newindustrial crops and uses for traditional crops. Forexample, Japan is currently in the second year of a7-year, $100 million program to develop degradableplastics (21). The European Community has alsobegun funding a program to develop new industrialcrops and uses of traditional crops (box 4-A).

CommercializationNew products and processes developed in Federal

laboratories or universities will not be in the form ofa fully developed, marketable product. Commercial-ization will require considerable research and devel-opment effort on the part of companies. For newcrops and uses, commercial-scale extraction, separa-

tion, purification, and chemical transformationmechanisms that are economically competitive willneed to be developed. For chemicals used instrategic applications, reliability and performancecharacteristics will be of paramount importance.Consistent quality control procedures must be devel-oped, and for many uses, performance standardsmust be established. In some situations, wastedisposal procedures must be developed. Commer-cialization efforts by private firms will follow theirresearch and development efforts and will be drivenby the same economic factors.

Cooperation and technology transfer between thepublic and private sectors will be a key componentof the commercialization effort. Technology transferis the process by which technology, knowledge,and/or information developed in one organization, inone area, or for one purpose is applied and used inanother organization, in another area, or for anotherpurpose. Technology transfer can include the trans-fer of legal rights and the informal movement ofinformation, knowledge, and skills. Private-sectorawareness, interest, and capacity to utilize public-sector research effectively will be critical to thesuccessful commercialization of new uses of agri-cultural commodities.

Industrial Interest in Public-Sector Research

A critical component of technology transfer is theinterest of industry, without which institutions totransfer technology will be ineffective. Industrialinterest has frequently been lacking in the past;industries have not wanted to use technologies notdeveloped in their own laboratories (29). Industryhas felt that it can get little value from cooperativeagreements and has not encouraged them. Smallfirms have often felt that this is a big company gamethat they are ill-equipped to play (13). Theseattitudes may be changing, primarily because ofindustry’s need to respond to rapidly changingmarkets, and because of legislation that has madelicensing and collaborative R&D with Federallaboratories easier (23).

Economics will play a major role in the private-sector demand for technology developed in thepublic sector. Many new crops being developed areintended to substitute for chemicals that are cur-rently either imported or derived from petroleum,and which may be widely accepted and available. Itis unlikely that any single company will commit

Chapter 4--Factors That Affect Research, Development, and Commercialization ● 45

Box 4-A—European Research Program To Develop New Industrial Crops andUses of Traditional Crops

In addition to the United States, the European Community (EC) is exploring alternative crops and uses as ameans of alleviating their agricultural problems. The EC has initiated a program called the European CollaborativeLinkage of Agriculture and Industry Through Research (ECLAIR), to improve the interface between industry andagriculture. ECLAIR is being administered through the Science, Research and Development Directorate. ECLAIRhas been funded for $80 million over 3 years. All grants require matching finds from an industrial partner. Awardsare decided on a peer-reviewed basis. The program is divided into four sectors:

1. Production of Biological Resources, which includes many agronomic features;2. Harvesting and Conditioning, which includes transportation, classification, and storage;3. Fractionation and/or Extraction; and4. Methods of Transformation and their control.

Preference will be given to large, interdisciplinary projects, to proposals utilizing advanced technologies suchas biotechnology, to projects that potentially can improve the competitiveness of European agriculture and/or havepositive environmental impacts (Other social goals are not explicitly considered, unlike U.S. proposals that placeheavy emphasis on technology applicability to small-scale farms and potential rural job creation) (5). The ECLAIRprogram requires projects to involve participants from at least two member countries. U.S. proposals canaccommodate multidisciplinary, regional projects, but these are not explicit requirements. Like the U.S. proposals,the ECLAIR program requires matching funds from the industrial partner, and is peer-reviewed.

The ECLAIR program, unlike U.S. proposals, does not attempt to commercialize products. It is designed tocarry out research necessary before commercialization can be contemplated, and focuses strictly on precompetitiveresearch and development. Precompetitive research is considered to be beyond the stage of basic research, but theresults of the research will still require further development to be marketable.

Commercialization will be attempted in another program currently in the planning stages. Current projectionsfor this commercialization program are about $160 million for 3 to 4 years. Additionally, each member country ofthe EC carries out its own agricultural research and some funds maybe available for alternative crops through eachcountry’s research (15).

Interest has been shown in Europe for utilizing crops for fuel production and for industrial uses. Crops forwhich some interest has been expressed include jojoba, Crambe, Lesquerella, Cuphea, Euphorbia, sunflowers,Vernonia, and Stokesia (18). A sister program called FLAIR (Food-Linked Agro-Industrial Research) focuses onfood technologies; there are no U.S. proposals to develop new food uses.

resources to develop new alternative supplies in quality, price, and quantity of the resources (primar-anticipation of future hypothetical shortages (30).This may be particularly true for development ofrenewable resources, which vary frequently andwidely in price and supply.

Economic factors that will affect private-sectorinterest in using agricultural commodities as inputsinclude price, quality, performance, and reliabilityof supply. Price is determined largely by the currentand expected trends in supply and demand, thenumber of substitutes available, transportation,processing, and storage costs, and exchange rates forinternationally traded products. Short-run suppliesare most affected by environmental or politicalfactors, such as adverse weather, embargoes andcommodity cartels. Long-run supply trends areaffected by technological change and institutionalfactors (e.g., Federal agricultural programs), and the

ily land and labor) needed to produce the commodi-ties (27).

Demand for agricultural products results fromfood and feed, industrial, and on-farm uses. Cropsthat have multiple uses for primary products andbyproducts will have more marketing options. De-mand for commodities will be highly price sensitiveif numerous substitutes are available. Proximity ofcrop production locations to processing plants,distance of processing plants to markets, method oftransport (i.e., air, land, or water), and specialtransport requirements will affect transportationcosts. Processing costs will be affected by tech-niques used, purification requirements, waste dis-posal, and volume. Frequently there are returns toscale in the processing of agricultural commodities,which leads to lower per-unit processing costs for


high-volume commodities. Fiscal and monetarypolicies will affect exchange rates, which in turn,affect the price of imported and exported commodi-ties.

The major production cost for many new uses isthe price of the commodity itself. The net cost ofusing a commodity for industrial uses is the pricepaid for the commodity minus any credits receivedfor the sale of byproducts. In many cases, increasingthe use of an agricultural commodity will increasethe price of the raw commodity and decrease theprice of the byproducts, effectively raising the costof using the agricultural commodity (25,31). De-mand for food and livestock feed exerts pressure onthe price of many commodities, and variability in thecommodity and byproduct markets leads to wideprice fluctuations. These factors make it difficult foragricultural commodities to be price competitive inmany uses. Ethanol derived from cornstarch illus-trates these points. In recent years, the net cost ofcorn (price of corn minus credit for byproducts) hasranged from 10 to 79 cents per gallon of ethanolproduced. Additionally, as ethanol production in-creases, the price of corn increases and the value ofthe byproducts decreases (oil, protein meals), effec-tively raising the net cost of using corn for ethanolproduction (31).

In addition to price, the quality of a commoditywill affect its competitiveness. A premium can beexpected to be paid for crops that have many usefulcompounds, or compounds whose chemical struc-ture is such that they yield superior performancerelative to chemicals they could replace. Superiorperformance will be important if costly product orprocess reformulations are needed to use the newcrop, and could improve the attractiveness of a newuse, even if it is more expensive. As an example,soybean oil-based printing inks are more expensivethan petroleum-based inks but are beginning tocapture part of the market, particularly in colorprinting, because they give better colors and resistrub-off (20).

Reliability of supply is an important considerationfor manufacturers. Crops that have few producers, orthat are produced in few geographical regions, aremore susceptible to supply shocks from weather orpolitical factors. Development of alternative sup-plies might help to ensure supply availability andreduce price variability. Given a more reliablesupply and less price variability, manufacturers may

be more willing to increase their use of agriculturalcommodities as a source of chemicals. An examplethat illustrates this concept is the use of lauricacid-containing vegetable oils in the detergentindustry. Coconut oil and petroleum-derived com-pounds can be used to manufacture detergents, butbecause of the high price variability and unreliabilityof supply of coconut oil, petroleum-derived productshave been preferred. The maturation of high-yielding palms that produce palm and palm kerneloil is expected to double world supply of lauric acidoils by 1995. The prospect of a larger and morediversified source of supply and less price variabil-ity, has stimulated the detergent industry to increasecapacity to utilize natural oils (7). Although, manytraditional crops are in surplus and supplies forindustrial use are available, supply fluctuationsaffect the cost of using these crops in industrialapplications.

An understanding of these economic factors isessential to any market strategy for new industrialcrops and uses of traditional crops. Factors withinthe production process that are now expensive orthat are expected to become expensive relative toother production factors are good candidates forsubstitution through the development of new proc-esses or products. Other good candidates includeproduction inputs whose supply is highly variable,and products or processes that meet only minimalperformance standards. Convenience and qualityconsiderations are particularly pertinent to the de-velopment of consumer products. New industrialcrops and uses of traditional crops that fill well-defined market needs are those most likely tosucceed.

Private-Sector Access to Public-SectorInformation

A major obstacle to the transfer of technology isthe difficulty of learning about or accessing perti-nent information (23). Research that might be ofvalue to industry is conducted in numerous Federaland university laboratories in the United States andin other countries. Keeping up to date on thisresearch is a massive undertaking even for largecompanies with substantial research budgets. Forsmall fins, it is nearly impossible. Industry abilityto access research data on new industrial crops anduses of traditional crops may be a serious constraintbecause firms that are likely to commercialize thenew technologies may not historically have had


extensive dealings with the Agricultural ResearchService or with university Colleges of Agriculture.Mechanisms that aid in the exchange of informationand reduce the time and cost involved in searchingfor information will enhance the opportunity fortechnology transfer.

The Federal Laboratory Consortium (FLC), con-sisting of a small central staff and volunteer repre-sentatives from at least 300 Federal labs, functionsas a single source of entry for firms into the Federallaboratory system. It promotes communication withindustry and shows firms where to go for help on aparticular problem within the Federal laboratorysystem. The FLC also maintains computerizedgeneral-purpose databases on technologies of possi-ble interest to industry.1 In conjunction with groupssuch as the Industrial Research Institute, the FLCholds Federal laboratory-industry conferences toidentify possible areas of collaboration. The numberof industry participants has been growing. Theseconferences, which bring industry and Federallaboratory representatives together, provide eco-nomical means for companies to search for technolo-gies that fit their needs. This program is clearly notdevoted strictly to the development of industrialcrops and uses. However, USDA is a member of theconsortium, and this link can serve as a mechanismfor firms to find out about ARS research activities(29). The FLC currently receives about $1 millionper year, with funding due to expire in fiscal year1991. 2

In addition to establishing the Office of CriticalMaterials, the Critical Agricultural Materials Actalso provided for the establishment of a database onindustrial crops to be housed in the NationalAgricultural Library (NAL). The NAL, in coopera-tion with the Arid Lands Information Center at theUniversity of Arizona, collects published materialon industrial crops. Bibliographies of several cropsare available. The information is also availablethrough AGRICOLA, the Library’s computerizeddatabase system relating to agricultural research.The CRIS and TEKTRAN databases also containinformation about ARS and university agriculturalresearch (32).

Many universities also have established officesthat aid in disseminating research information to

industry. These university offices are not devotedexclusively to developing new industrial crops anduses, but can direct interested firms to researchersperforming this type of research within the univer-sity.

Technology Transfer Mechanisms

Technology transfer between Federal and univer-sity laboratories and industry can be facilitated inmany ways, including personnel exchange betweenlaboratories and industry, private-firm use of spe-cialized laboratory facilities, and the granting oflicenses to firms to commercialize technologiespatented by the public sector.

Cooperative agreements between industry andpublic-sector research institutions are designed tocreate new technology that the firm can thencommercialize, rather than to transfer preexistingtechnologies. With risk and expense sharing, indus-try is better able to take on large and long-termprojects with uncertain payoffs. These types ofarrangements can be difficult because they mayrequire a fundamental reorientation on both sides.Issues of conflicts of interest, fairness to fins,national security, and proprietary information cancreate obstacles. Nonetheless, collaborative agree-ments exist between Federal laboratories and indus-try, and between universities and industry. Thecooperative agreements that seem to be most effec-tive are those made at a scientist-to-scientist level,rather than at the administrative level (13).

Incentives for collaboration in Federal laborato-ries are sometimes weak or even negative. Technol-ogy-transfer activities sometimes do not count in aresearcher’s performance evaluation even thoughthe law specifies that it should. Researchers mayview collaborative agreements unattractive if thework is proprietary and cannot be published as theresearcher’s own. Sabbaticals in industry are oftennot counted as pensionable. Only recently haveresearchers and their laboratories been permitted tokeep portions of patent royalties for their inventions.It is not possible to copyright material developed inwhole or part by government employees (29).

Slow negotiations and delays can cause deals tocollapse as a fro’s strategic situation changes.Startups are especially vulnerable. Many delays

l~e J+&@ Rese~h in progress Database (FEDRIP) contains information on federally funded research Projwts.

%e Consortium is funded by a set-aside of 0.005 percent of the R&D budgets of the Federal laboratories.


revolve around a company’s desire for exclusiverights to help recover the cost of expensive R&Defforts, which may require the Federal laboratory towaive its patent rights. Until recently, industrycollaboration has been impeded by the possibility ofdata and information release under the Freedom ofInformation Act (FOIA). The National Competitive-ness Technology Transfer Act of 1989 largelyremoved this obstacle by exempting the results ofcollaborative R&D from release under FOIA for 5years (29).

Personnel exchange between private- and public-sector researchers is possible; however, it is uncom-mon for industry researchers to take visiting posi-tions, particularly at Federal laboratories. The re-verse is also quite rare. In the place of formalpersonnel exchange, visitor programs of just a fewhours or days can provide an informal technology-transfer mechanism. Such programs provide oppor-tunities for firms to stay in touch with the latestdevelopments, particularly those in the governmentlaboratories (29).

Startup firms are new firms established specifi-cally to commercialize new technologies. The proc-ess can be aided by having the parent laboratorygrant scientists entrepreneurial leave, with the rightto return to old jobs within a stated time. However,this option does have problems, foremost amongthem the potential for conflicts of interest and braindrain. Some laboratories have established their owncorporations to encourage startups, and provideservices to entrepreneurs including office and labo-ratory space and help in forming business plans andincorporation. They also contribute capital in returnfor a minority interest in the firm (29). Othermethods of technology transfer include allowingfirms to use a Federal laboratory’s specializedfacilities and publication of semitechnical brochuresto acquaint industry with technologies that may beof interest.

The Stevenson-Wydler Technology InnovationAct of 1980 (Public Law 96-480) and the FederalTechnology Transfer Act of 1986 (Public Law99-502) were enacted to facilitate technology trans-fer between Federal laboratories and industry. TheStevenson-Wydler Act provided Federal laborato-ries with a mandate to undertake technology transferactivities, while the Technology Transfer Act cre-ated an organizational structure to meet this man-date.

Federal laboratories are allowed to participate incooperative R&D agreements and to grant exclusivelicenses for resulting patents to the private busi-nesses with which they cooperate. Each Federaldepartment with one or more laboratories mustallocate at least 0.5 percent of its existing researchbudget for technology transfer activities; additionalfunding for these activities was not provided.Identifying technologies with commercial possibili-ties, patenting, finding firms that might be inter-ested, and exchanging information with those firmstakes time, effort, and substantial funding. In somecases, startup firms will require support in the formof office space, help in writing a business plan,access to venture capital, etc.

Successful technology transfer requires a full-time staff, and a sustained financial commitment.Firms may hesitate to pledge themselves to multi-year projects when the government will commitfunds only year by year. Given the financialconstraints that already exist in many Federalresearch laboratories, it is perhaps not surprising thatprogress has been slow (29). However, cooperativeagreements between industries and Federal laborato-ries are occurring. According to the USDA, theAgricultural Research Service has entered into 127cooperative research and development agreementswith industrial firms since 1986, and is in the processof negotiating 34 more agreements (32). Several ofthese agreements are for the purpose of commercial-izing new crops or uses of traditional crops.

Financial Assistance

Sometimes firms are interested in developing anew technology or product but the cost of theresearch and development needed to commercializethe technology exceeds the budget of the firm. Thisis a particular problem for small firms or startups.Federal and State programs are available to providefinancial assistance to small firms.

Small Business Innovation Research Program

The Small Business Development Act was passedin 1982. Part of the Act required all Federal agenciesthat provide external research funds to establish aSmall Business Innovation Research (SBIR) pro-gram modeled after a National Science Foundationprogram begun in 1977. Funding for each agency’sSBIR program is equal to 1.25 percent of theagency’s total external research funding budget. Thetotal annual SBIR budget is approximately $350


million. Eligibility is restricted to small firms offewer than 500 employees.

Grants provide finding for research from an ideato a prototype in three phases. Phase I grants are for$50,000 for 6 months and are used to determinetechnical feasibility, determine that sufficient prog-ress has been made before larger funding takes place,and determine whether the firm can do high-qualityresearch. Phase II involves the principal research.Grants last 1 to 2 years at levels up to $500,000depending on the agency. Phase I studies accountedfor about $109 million in 1987, and phase IIaccounted for $241 million. Phase III involvesfinding follow-on private funding to pursue com-mercial application (SBIR does not fund the finalstages of bringing a product to market, but the SmallBusiness Administration does help firms find pri-vate financing for commercialization).

USDA is one of the Federal agencies that has anSBIR program. The budget for USDA-SBIR forfiscal year 1989 was approximately $4 million. TheUSDA-SBIR program is divided into eight topicareas. New crop proposals generally fit into the PlantProduction and Protection section. A new section onIndustrial Applications has been established forfiscal year 1991. USDA-SBIR has received a smallnumber of grant applications for new industrial cropprojects, but they were not funded.

In addition to the USDA-SBIR program, fundingfor industrial uses of agricultural commodities isprovided by the SBIR programs of other Federalagencies. One of the original projects funded by theNational Science Foundation SBIR program in1977, was a project to study the Feasibility ofIntroducing Food Crops Better Adapted to Environ-mental Stress. Emphasis was placed on food crops,but some new industrial crops, including many ofthose discussed in this report, were also evaluated.This study played a role in the establishment ofKenaf International, a private company workingwith the USDA Office of Critical Materials tocommercialize kenaf. NSF-SBIR has funded re-search on milkweed among other crops, althoughthis crop has not been successfully commercialized(4,26).

College and University Innovation Research(CUIR) Program

This program is being proposed by the NationalScience Foundation. It would function in a reamer

similar to the SBIR program, but applications forfunding would come from universities, not industry.The intention of the program is to allow universityresearchers to pursue commercialization of theirresearch results without having to leave their univer-sity positions as has happened in many cases. Initialfunding requests for fiscal year 1991 are $420,000(8).

State Programs

Fourteen States (California, Connecticut, Indiana,Louisiana, Maine, Maryland, Michigan, Minnesota,Mississippi, Missouri, Montana, New Jersey, Ver-mont, and Virginia) have loan guarantee programsthat are intended to stimulate business activity. Loanguarantee programs are more attractive than loanprograms because they are lower cost and share therisk between the public and private sector. The Stateprograms are generally aimed at manufacturingfirms and are open to rural and urban businesses. Atleast 10 States (Connecticut, Indiana, Kansas,Maine, Massachusetts, Michigan, Minnesota, Mon-tana, New York, and Wisconsin) have venturecapital programs although none are aimed specifi-cally at rural businesses. The Minnesota program(Greater Minnesota Corp.) may have the strongestrural component (6, 9).

Other Federal Programs

The Small Business Administration (SBA) makesdirect and guaranteed loans to small businesses. It isnot aimed at rural businesses, but because of the sizeof the program, it is a significant financial resourcefor rural businesses. In addition to the loan pro-grams, SBA also supports small businesses throughprograms that support small business developmentcorporations (SBDC) and small business investmentcorporations (SBIC). The SBDC program makeslong-term capital available to emerging small busi-nesses. The SBIC program encourages investors tomake equity capital available to eligible smallbusinesses (14).

The USDA Farmers Home Administration(FmHA) also operates a business and industrial loanprogram, which provides loan guarantees aimed atrural businesses. Eligible firms can be of any sizeand as a result loans made under this program tendto be large (14). Additionally, rural developmentprograms provide funding for firms located in ruralareas. None of these programs is geared towardcommercializing new crops or uses of traditional


crops, but firms involved in these activities may beeligible for these programs.

Summary and ConclusionsThe foregoing analysis has several implications

for development of policies to encourage technicalchange. Technical change involves research anddevelopment, commercialization, and adoption ofnew products and processes. Constraints, impedi-ments, and opportunities in all three componentsmust be addressed. This chapter has focused onresearch and development, and commercialization.The factors involved in the adoption of new technol-ogies will be discussed in chapter 5.

The United States has several policies and pro-grams to encourage research and development.Currently, public- and private-sector funding andresearch for new industrial crops and uses oftraditional crops is limited. If new crops and uses areto be commercialized, adequate resources over asustained period of time will be needed. A newindustrial crops and use research and developmentpolicy must recognize the role that institutions andeconomics will play. It is clear that chemicalsderived from agricultural commodities can be usedfor a broad range of industrial applications, andmany are technically promising. Technical feasibil-ity, however, will not be sufficient. Chemicalsderived from agricultural commodities must be lessexpensive than those currently available, or providea superior product in terms of quality, performance,supply reliability, or environmental benefits. Prod-ucts and processes that fill specific market needs andprovide superior quality and performance, and/orlower costs will be more attractive to industry, andit is in those technologies that industry interest willbe highest. Research needs for technology develop-ment are generally framed within the context of thechemical, physical, or biological sciences. Attentionto institutional structure and economic and socialanalysis is often lacking. This lack of market andeconomic analysis is a glaring deficiency and asevere constraint to the intelligent allocation ofresearch funding for new crop and new use develop-ment. Research policy should include research forsocial science research as well as for chemical andbiological research.

There has been a recent increase in attention to theproblems of commercialization. Several programs,although not specific to new industrial crops and

uses of traditional crops, are available to aidtechnology transfer from Federal laboratories to theprivate sector. However, these programs tend to treatfirms homogeneously. Policy must be flexibleenough to be able to offer a wide range of assistanceoptions. Research, development, and commerciali-zation efforts face different constraints and proceedin different ways in response to industry structure.Industries characterized by many small, highlyinnovative firms will have different needs thanindustries composed of very large fins, or small tomedium-size firms lacking research capacity. Forexample, small, innovative firms may need financialhelp. Lack of information and inexperience withtechnology transfer from Federal laboratories maybe a more serious constraint for large firms that havelarge research budgets. Finding additional ways tohelp industry minimize the search costs for informa-tion could prove quite beneficial. A successfulpolicy must be able to address these differing needs.

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Chapter 4 ReferencesArkcoll, David, “Laurie Oil Resources,” EconomicBotany, vol. 42, No. 2, April-June 1988, pp. 195-205.Binswanger, Hans, and Ruttan, Vernon W. (eds.),Induced Innovation: Technology, Institutions, andDevelopment (Baltimore, MD: John HopkinsUniversity Press, 1978).Bosisio, Matt, U.S. Department of Agriculture,“Kenaf Paper: A Forest Saving Alternative,” Agri-cultural Research, October 1988.Cleland, Charles, U.S. Department of Agriculture,Small Business Innovation Research Program, per-sonal communication, February 1990.Commission of the European Communities, Direc-torate General for Science Research and Develop-ment, ECLAIR Information Package, 1989.Drabenstott, Mark, and Moore, Charles, “NewSource of Financing for Rural Development,” Amer-ican Journal of Agricultural Economics, vol. 71, No.5, December 1989, pp. 1315-1328.Greek, Bruce F., “Detergent Industry Ponders Prod-ucts for New Decade,’ Chemical and EngineeringNews, Jan. 29, 1990, pp. 37-60.Hauer, Charles, National Science Foundation, Coop-erative University Innovative Research Program,personal communication, April 1990.Johnson, Thomas G., ‘‘Entrepreneurship and Devel-opment Finance: Keys to Rural Revitalization: Dis-cussion, ’ American Journal of Agricultural Eco-nomics, vol. 71, No. 5, December 1989, pp. 1324-1326.Kamien, Morton I. and Schwartz, Nancy L., “MarketStructure and Innovation: A Survey,” Journal of

Chapter 4-Factors That Affect Research, Development, and Commercialization ● 51

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Economic Literature, vol. 13, March 1975, pp. 1-37.Kugler, Daniel E., U.S. Department of Agriculture,Cooperative State Research Service, Special Projectsand Program Systems, “KenafNewsprint: RealizingCommercialization of a New Crop After FourDecades of Research and Development, A Report onthe Kenaf Demonstration Project,” June 1988.Kugler, Daniel E., U.S. Department of Agriculture,Cooperative State Research Service, Special Projectsand Program Systems, Office of Critical Materials,personal communication, June 1989.McHenry, Keith W., “Five Myths of Industry/University Cooperative Research-and the Reali-ties, ’ Research-Technology Management, May-June 1990, pp. 4042.Milkove, Daniel L., and Sullivan, Patrick J., U.S.Department of Agriculture, Economic ResearchService, “Financial Aid Programs as a Component ofEconomic Development Strategy,’ Rural EconomicDevelopment in the 1980’s: Prospects for the Future,Rural Research Development Report No. 69, Sep-tember 1988, pp. 307-331.O’Connell, Paul, U.S. Department of Agriculture,Cooperative State Research Service, Special ProjectsDirector, personal communication, June, 1989.Rausser, Gordon C., de Janvry, Alain, Schrnitz,Andrew, and Zilberman, David, California Agricul-tural Experiment Station, Giannini Foundation ofAgricultural Economics, “Principal Issues in theEvaluation of Publish Research in Agriculture,’ May1980.Rawson, Jean M., U.S. Congress, CongressionalResearch Service, “New Crops and New FarmProducts: A Briefing, ” 88-771 ENR, December1988.Raymond, W. F., and Larvar, P. (eds.), AlternativeUses for Agricultural Surpluses (Ixmdon, Englandand New York, NY: Elsevier Applied Science, 1986).Reisch, Marc S., “Demand Puts Paint Sales atRecord Levels,” Chemical and Engineering News,vol. 67, No. 44, Oct. 30, 1989, pp. 29-56.Science of Food and Agriculture, “Soybean OilInks,” vol. 2, No. 2, July 1990.Studt, Tim, “Degradable Plastics: New Technologiesfor Waste Management,” R & D Magazine, March1990.

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Stoneman, Paul, The Economic Analysis of TechnicalChange (NewYork, NY: Oxford University Press,1983).Thayer, Ann, “Industry, Federal Lab TechnologyTransfer On Rise,” Chemical and EngineeringNews, Jan. 1, 1990, p. 13.Thirtle, Colin G., and Ruttan, Vernon W., EconomicDevelopment Center, Departments of Economicsand Agricultural and Applied Economics, Universityof Minnesota, “The Role of Demand and Supply inthe Generation and Diffusion of Technical Change,”Bulletin No. 86-5, September 1986.Thompson, James, and Smith, Keith, “History ofIndustrial Use of Soybeans,” paper presented atSymposium on Value-Added Products from Proteinsand Coproducts, American Oil Chemists SocietyAnnual Meeting, May 1989.Tibbetts, Roland, National Science Foundation,Small Business Innovation Research Program, per-sonal communication, February 1990.Tomek, WilLiam G,, and Robinson, Kenneth L.,AgricuZturaZ Product Prices (Ithaca, NY and I.mn-don, England: Cornell University Press, 1981).U.S. Congress, General Accounting Office, Re-sources, Community, and Economic DevelopmentDivision, Degradable Plastics: Standards, Researchand Development, RCED-88-208 (Gaithersburg,MD: U.S. Government Printing Office, September1988).U.S. Congress, Office of Technology Assessment,Making Things Better: Competing in A4anufacturing,OTA-JTE-443 (Washington, DC: U.S. GovernmentPrinting Office, February 1990).U.S. Congress, Office of Technology Assessment,Strategic Materials: Technologies To Reduce U.S.Import Vulnerability, OTA-IT’E-248 (Washington,DC: U.S Government Printing Office, May 1985).U.S. Department of Agriculture, Economic ResearchService, “Ethanol: Economic and Policy Tradeoffs,”January 1988.U.S. Department of Agriculture, Office of Agricul-tural Biotechnology, Biotechnology Notes, vol. 3,No. 7, August 1990.Wu, Lawrence, Illinois State Geological Survey,“Ethanol Desulfurization Project,” July 1990.

Chapter 5

Factors Involved in the Adoption of New Technologiesby Industry and Agricultural Producers

Many new technologies involving agriculturalcommodities will not be final consumer products,rather they will be inputs into the manufacture ofother products. The new technologies may be newmanufacturing processes (to accommodate a newraw material), or intermediate products that will beused in the production of other products (e.g.,plastics are used to manufacture final consumerproducts). Adoption and incorporation of new ma-terials, processes, and technologies into the manu-facturing procedures of firms is a key component tothe success of newly developed and commercializedtechnologies that use agricultural commodities.

Economic factors play a major role in industryadoption of new technologies. Industrial use of anew material or technology may require new equip-ment, design, manufacturing, and operatingchanges, and worker training. New materials andtechnologies are unlikely to be adopted unless theyprovide cost and/or performance advantages relativeto technologies already in use. Many of the eco-nomic considerations that influence a firm to allo-cate resources to the research and development of anew product, will influence the adoption of newtechnologies by firms (see ch. 4).

The adoption of new agricultural technologies byfarmers, in addition to manufacturers, must also beconsidered, because in some cases, new industrialuses will involve crops not currently grown in theUnited States. Again, economic considerations willplay a key role. This chapter examines factorsinvolved in adoption of new technologies and cropsby manufacturers and farmers, as well as programsto assist technology adoption.

Adoption of New Technologiesby Industry

Industrial adoption of new technology will de-pend on industry’s interest in, knowledge of, andability to use effectively the new technology. Thecost and effectiveness of the search for informationabout new technologies will influence the speed ofadoption. In general, industries characterized byhigh labor intensity, rapid growth, and competitionwithin the industry, and industries composed of

firms of similar size and profitability are more rapidadopters of new technologies (15).

Firms will consider the profitability, the risk anduncertainty of use, and the cost of any necessarymanagement and production changes when evaluat-ing the possible adoption of a new technology (11).New technologies must be cost competitive withcurrent technologies, or offer clear performanceadvantages. Sometimes, the price of an intermediatematerial, even if expensive, represents a srnallpercentage of the total cost of the final product, andthus even large price increases for intermediatematerials may not be sufficient to encourage theadoption of a substitute material. Use of a newprocess or intermediate material may require thepurchase of new equipment or new worker skills thatrequire additional training. Product design, operat-ing procedures, and manufacturing processes may beneeded to use a new technology. The expense ofmaking these changes is an integral part of thedecision to adopt a new technology.

Confidence in the performance characteristics ofa new material or process is critical to new technol-ogy use in strategic applications where acceptableperformance variation is narrowly limited. Inter-mediate materials containing agriculturally derivedrather than petroleum-derived chemicals, for exam-ple, may have slightly altered chemical characteris-tics and behave differently in the same manufactur-ing procedure. Lack of familiarity with this variationis a significant constraint to use in strategic applica-tions, and new materials and processes may first beadopted by firms for use in non-strategic applica-tions. Confidence for strategic applications may beincreased if new intermediate material and processstandards are developed. However, testing andstandard-setting are often done on a volunteer basisby professional societies who have neither the timeor resources to make this a priority, or are undertakenby individual firms and are proprietary (18).

The commercialization of biodegradable plasticsdemonstrates some of these points. The plasticsindustry is composed of a few major resin producersand several small and medium-sized companies thatmake plastic products. A few major producers make

–53–


biodegradable starch-based masterbatch (primarilyfirms whose major businesses involve corn orstarch) and several small to medium-sized firmsmake biodegradable products such as grocery andtrash bags. However, most of the large resinmanufacturers who produce degradable resins, pro-duce photodegradable rather than biodegradableplasticsl (13). This is because of cost considerationsassociated with methods of production: photode-gradable materials can be made by simply addingphotosensitive agents or forming copolymers withphotosynthetic groups. The characteristics of thematerials do not change substantially, so they caneasily be processed with existing equipment. Starch-based materials on the other hand, can cost about 25percent more to produce than photodegradablematerials, in large part because high levels of starchrequire new equipment and processing procedures(13). This cost differential explains why the frostcommercially available biodegradable plastic prod-ucts contained 6 to 7 percent starch; that amount ofstarch can be incorporated into plastics withoutsignificant processing and equipment changes (12).Thus, even firms that adopted the starch-basedmaster batch to produce biodegradable plastic prod-ucts, did so in a way that did not substantially altertheir production methods.

Products using agricultural commodities that caneasily and cost-effectively fit into existing produc-tion procedures are those that will be adopted frost.Products that have clear cost or quality advantages,even if new procedures are needed, may also beadopted relatively quickly. Products or processes forwhich the advantages are not as obvious, will bemore slowly adopted if at all. However, even if a newprocess or product has clear economic benefits, itmay still be adopted slowly because firms that coulduse these new technologies are either not aware ofthem, or unsure of the type of equipment or trainingneeded to utilize the new products and processes.For these firms, access to accurate information thatis specific to their needs can determine whether ornot they adopt a new technology. A good technicalassistance program could be invaluable in suchcases.

Federal technology policy has, for the most part,focused on the research, development, and commer-cialization of new technologies; technology adop-tion is generally not given high priority. Federalprograms generally encourage the development ofcutting-edge technologies and the establishment ofnew innovative firms to commercialize these tech-nologies. Only limited attention is paid to upgradingthe technology and skill levels in existing fins,particularly those lacking research capacity. Thepotential users of new agricultural commodity-based technologies in many cases will be firms thatalready exist; some of which may need assistance inlearning about and adopting these new technologies.Technology extension programs may be able to offerthis assistance.

Technology Extension and Assistance

Technical extension programs generally consistof an accessible office staffed with engineers orexperienced industrial personnel who can providehelp in solving problems for manufacturing fins.Effective programs make on-site diagnoses, providecustomized client reports, and work one-on-one withfirms to implement recommendations made by theservice and accepted by the fro’s manager. Theseprograms help fins, particularly small manufactur-ers, choose and manage new technologies andequipment, and provide advice on training require-ments. Industrial extension services do not providefunds for capital investment or operating expenses;they give technical, not financial assistance. Theycan, however, financially help small firms via theirdiagnoses, which may reveal that the problem is oneof management, not funding. They can also directfirms to sources of funds, such as State and Federalloan programs for small businesses, and can supportfirms in their dealings with banks (17).

The Omnibus Trade and Competitiveness Act of1988 gave the Bureau of Standards (now theNational Institute of Standards and Technology,NIST) new responsibilities for technology transferto manufacturing. The Act directed NIST to createand support non-profit regional centers for thetransfer of manufacturing technology, especially tosmall and medium-size firms. The tasks of the

IPhotodegra&b]e plastics are those that have organometallic or metaI compounds added, or that have photosensitive fUn@Ond groups incorpomttiwithin thepolymerchains so that the plastics degrade in response to ultra-violet light. An example of a photodegradable plastic product is most degradablesix-pack beverage rings. Biodegradable plastics are those that have been modified to disintegrate under biological actions. The most common approachhas been to blend the plastic polymer with starch so that under the appropriate environmental conditions, microorganisms will digest the starch breakingthe plastic into small pieces.

Chapter 5--Factors Involved in the Adoption of New Technologies by Industry and Agricultural Producers . 55

Manufacturing Technology Centers are to transfertechnologies developed at NIST to manufacturingcompanies, make new manufacturing technologiesusable to smaller firms, actively provide technicaland management information to these firms, demon-strate advanced production technologies, and makeshort-term loans of advanced manufacturing equip-ment to firms with fewer than 100 employees. Threesuch centers currently exist (funded at $4.5 million)and three more are planned. The Centers expect toconcentrate more on off-the-shelf, best-practicetechnologies than on high-technology, cutting-edgesystems. The primary service offered will be mod-ernization plans customized to fit the needs ofindividual fins. The Act also authorized $1.3million for fiscal year 1990 to expand State technol-ogy extension programs (17).

The Small Business Administration, primarilythrough the Small Business Development Centerslocated mostly on university campuses, use facultyand students to provide business management andmarketing advice, and to advise on particular prob-lems, some of which maybe technical. There are 53such centers nationwide in all but four States, fundedby State and Federal Governments and universities(17).

At least 40 States have programs to promotetechnology, but most of their effort and funding goesfor research and development in universities andhigh-technology startup ventures, not to help exist-ing firms adopt best-practice technology. Only 14programs in 10 States have technology extensionprograms whose main purpose is direct consultationwith manufacturers on the use of technology. In1988, States spent approximately $57 million fortechnology transfer and technology managerial as-sistance (17). Specialists in rural development rec-ognize the importance of technical assistance, andsome studies even suggest that lack of appropriatetechnical assistance is at least as significant aproblem for rural firms as finance availability(2,4,9).

Neither the State extension programs nor theNIST programs are specific for industrial crops oruses of traditional crops. However, for small firms touse new crops in their manufacturing processes, orto develop new products using agricultural com-modities, the purchase of new equipment anddevelopment of new operating procedures may be

required. Technology extension programs may beable to provide some assistance in these areas.

Adoption of New Technologies byAgricultural Producers

In addition to industry adoption of new technolo-gies using agricultural commodities, farmers mustgrow the commodities to provide the raw materials.The adoption of new industrial crops by farmers willbe more problematic than the development of newuses of traditional crops. Farmers have accepted andare growing traditional crops. New crops, however,will be riskier for farmers to grow because they lackexperience producing these new crops. Factors thataffect farmer adoption of new crops will be signifi-cant in terms of the overall success of developingnew industrial uses for these crops. Economicfactors and agricultural commodity programs willinfluence the attractiveness of new crops relative totraditional crops. Many technical, economic, andinstitutional constraints need to be resolved beforenew crops are ready to be commercially grown.

Technical Considerations

Many of the new industrial crops are in the earlystages of development and agronomic research isneeded before they can be produced. Some problemsyet to be overcome for one or more of the new cropsinclude low germination rates and seedling vigor,asynchronous flowering, seed shattering, self-pollination, low yields, and photoperiodism (5,7).Seed dormancy (lack of germination) and poorseedling vigor not only are undesirable agriculturalqualities, but diminish the opportunities for scien-tists to continue research on that species. Asynchro-nous flowering (flowering of individual plants atdifferent times) allows a wild plant species tosurvive periods of adverse weather, but in commer-cial crops may necessitate multiple harvesting,which greatly increases cost. Seed shattering (theinability of a plant to retain its seed after maturation)is also a useful survival tactic in the wild, but greatlydecreases the ability to capture the yield from acommercialized plant. Self-pollinating plants aregenerally preferred to cross-pollinating plants be-cause of improved control. Photoperiodism is im-portant in determining the length of the growingseason and will affect the potential for doublecropping and the geographic regions where the cropcan be grown. Examples of potential new crops thatmust overcome one or more of these constraints


include meadowfoam (insect pollination), Cuphea(seed shattering, seed dormancy), Vernonia (photo-periodism), and Lesquerella (seed dormancy, seedshattering). Sufficient time and resources devoted toresearch will likely overcome these problems, butlack of germplasm could slow progress.

New crops will be more readily adopted if they donot require large capital investments or majoradjustments in the management style of the farm.New crops that do not require purchase of newmachinery or equipment, and which complementtraditional crops in terms of planting and harvestingtime, are likely to be more attractive than new cropsthat cannot be so readily incorporated into existingfarm procedures. Major changes in the plant’sphysical structure, such as altering plant height,density and degree of branching, and changing theposition and structure of the ovule containing theseeds, may be needed to allow use of farm equip-ment. Additionally, new crops that can play severalon-farm roles and present multiple managementoptions may be more attractive. Oats, for example,are still planted in significant quantities because inaddition to providing positive net returns, oats useexisting farm equipment, are used in crop rotationschemes, provide good ground cover for erosioncontrol, and can be grown for forage and livestockfeed.

Economic Considerations

Farmer decisions involving crop mix are based onmany factors, including income-leisure tradeoffs,food and occupational safety, and environmentalquality. However, a major driving force is the desireto achieve highest expected net returns for the farmenterprise (21 ). To be accepted by farmers, a newcrop must be competitive with other crops that afarmer can produce with the same resources. Cropscompete for the same acreage and productionresources; the types and quantities chosen forproduction will be those for which farm profits aregreatest. The expected net returns will be influencedby market conditions and agricultural programs.

Role of Net Returns

Production costs include fried and variable costs.Fixed costs must be paid regardless of whetherproduction occurs, and in the short run, are not themajor determinant of crop mix. Variable costs differdepending on what crop is grown, and play animportant role in crop-choice decisions. Variable

costs include the costs of labor, machinery and fuel,chemicals, seeds, irrigation, etc. Production costs forthe same crops can vary widely among geographicregions, leading to geographical specialization in theproduction of certain crops (21).

Low production costs and positive net returns arenot always sufficient to guarantee widespread adop-tion of a new crop. The net returns of one croprelative to those of another crop will, in large part,determine the extent of adoption. For example,average variable costs of oats in the Corn Belt areabout $50 per acre, with receipts of about $102 peracre, yielding a net return of about $52 per acre. Netreturns for corn are approximately $227 per acre(receipts of $363 and costs of $136) and are about$162 per acre for soybeans (receipts of $216 andcosts of $54). Oats have lower production costs thancorn or soybeans, and are profitable, but in 1987,6.9million acres of oats were planted in Illinois,Indiana, and Iowa, whereas 24.4 million acres ofcorn and 20.9 million acres of soybeans wereplanted. The most acreage was planted to the cropswith the highest net returns (3,19,21).

Risk will play a role in a farmer’s perception of netreturns. A great deal of uncertainty exists surround-ing the production of a new crop. Culturing andharvesting practices, handling procedures, marketsetc. are not well-established. This uncertainty in-creases a farmer’s risk, making it likely that farmerswill discount the expected price of a new crop. Evenif the expected net returns of a new crop arecomparable to those of a traditional crop, the farmermay not plant the new crop. Because of thediscounting for the added risk, anew crop may needto have higher expected net returns than traditionalcrops to be attractive to farmers.

Role of Agricultural Commodity Programs

Agricultural commodity programs will also affectthe potential adoption of new crops. A loan rate isestablished for crops covered by commodity pro-grams. At harvest time, farmers enrolled in com-modity programs have the option of selling the cropon the market and paying back the loan rate (if themarket price is greater than the loan rate), or ofaccepting the loan rate and forfeiting the crop aspayment (if the market price is lower than the loanrate). Some commodities (i.e., corn, wheat, cotton,rice, barley, sorghum, and oats) have target prices inaddition to the loan rate. The difference between thetarget price and the market price or loan rate

Chapter 5--Factors Involved in the Adoption of New Technologies by Industry and Agricultural Producers ● 57

(whichever is higher) is called the deficiency pay-ment. Deficiency payments are made on a certainpercent of the base acres and yields of the eligiblecommodities. Because some of the eligible com-modities are in surplus, receipt of the deficiencypayments requires a mandatory set-aside of baseacres (Acreage Reduction Program and Paid LandDiversion). No crops can be grown for market onset-aside acres (l).

Acreage Reduction Programs have a large impacton crop-mix decisions. Two examples illustrate thispoint. In some areas of the Southeast,. Delta, andSouthern Corn Belt regions, double-cropping ofsoybeans after harvesting winter wheat is a commonpractice. If a farmer participates in the wheatprogram, the farmer can plant soybeans only on thatacreage previously planted to wheat. If a largeacreage reduction requirement is in effect, theamount of land eligible for double cropping soy-beans is significantly reduced (20). In the Corn Belt,the two major crops grown are corn and soybeans.An acreage reduction requirement for corn has asubstantial impact on soybean acreage. In thepresence of an acreage reduction program, cornacreage changes more in response to a price changethan it does under free market conditions. However,in the presence of an acreage reduction program forcorn, changes in soybean acreage (in response to achange in the price of soybeans) are lower thanwould occur under free market conditions. Addition-ally, changes in soybean acreage in response to achange in the price of corn are higher in the presenceof a corn acreage reduction program relative to freemarket conditions. Thus, the effect of acreagereduction programs on farmer response to therelative prices of crops leads to a different allocationof farm acreage than would occur under free marketconditions. Specifically, the presence of corn acre-age reduction programs magnifies the impact of cornprices, and diminishes the impact of soybean priceson a farmer’s decisions regarding the number ofsoybean acres to plant (8,21). It is reasonable toassume that new crops competing for acreage withcrops that are subject to acreage reduction programswill experience similar impacts. This has significantimplications for the adoption of new crops.

Commodity program restrictions that prohibitgrowing crops other than program crops on base

acreage, inhibit crop diversification. However, evenif this constraint is relaxed somewhat, acreage ofother crops may not increase significantly because ofthe loss of deficiency payments. Under the FoodSecurity Act of 1985, and the Food SecurityImprovement Act of 1986, soybeans and sunflowerscannot be planted on underplanted base acreage ofcommodity program crops without losing those baseacres. The Disaster Assistance Act of 1988 relaxesthis provision and allows plantings of sunflowersand soybeans on 10 to 25 percent of permittedacreage for major program crops without loss of baseacreage, provided that the increased planting doesnot depress the expected soybean prices below 115percent of the loan rate for the previous year. Usingnet returns, and including the deficiency paymentsreceived for corn, cotton, spring wheat, and barley,the impact of the program on soybean acres andsunflower acres was estimated. The results indicatethat even though base acreage is not lost, the loss ofdeficiency payments is sufficient to require higher-than-expected soybean prices to encourage farmersto plant soybeans on base acreage instead of corn inthe Corn Belt, and instead of cotton in the Deltaregion. Likewise, it is estimated that there will not bemuch of an increase in sunflower production relativeto spring wheat or barley production in the PlainsStates. Hence, even if alternative crops are allowedto be planted on base acres of commodity programcrops without loss of the base acreage, the expectedprice of the alternate crop must be high to offset thedeficiency payment (21).

As this report was going to press, Congress passedthe 1990 Farm Bill. The Bill addressed some of theseissues by adopting a Triple Base Option, to begin in1992. Under this option, base acreage is divided intothree categories: acreage reduction program (ARP),program acreage (permitted acres), and flexibleacreage. The ARP acres and 15 percent of the baseacres are ineligible for deficiency payments. Desig-nated crops may be planted on up to 25 percent of thebase (flexible acres).2

To demonstrate how the program works, assumethat a farmer has a 100-acre corn base and a 10percent ARP is in effect. Under these conditions, 10acres (ARP) are idled, leaving 90 acres on whichcrops can be grown. Any designated crop can begrown on 15 acres but will receive market prices

~esignated crops include grains covered by commodity programs, oilseeds, and other crops designated by the Secretary of Agriculture, possiblyincluding many of the industrial crops discussed in this report. Fruits, vegetables, and dry edible beans are excluded.

292-865 0 - 91 - 3 QL:3


only (i.e., no deficiency payments).3 The remaining75 acres (permitted acres) can be planted to corn andare eligible for deficiency payments. An additionaloption offered to farmers is that 10 of these 75 acrescan be planted to designated crops other than cornwithout a loss of base acres. Thus a total of 25 acres(25 percent of base) could potentially be planted tocrops other than corn and still maintain the 100 acrecorn base (flexible acres), but only a maximum of 75acres will be eligible for deficiency payments.

Additionally, target prices have been nominallyfrozen at 1990 levels, but changes in the waydeficiency payments are calculated may effectivelyreduce target prices. These changes are expected toincrease planting flexibility and to remove some ofthe institutional constraints to the adoption of newindustrial crops. New industrial crops will still needto compete with traditional crops in terms ofprofitability on the flexible acreage, but profitabilitywill be based more on market prices than oncommodity program prices.

Role of Multiple Uses

Multiple uses of primary products and byproductsderived from new crops will improve their commer-cial prospects. Soybeans illustrate this point. Twomajor products are derived from soybeans: oil and ahigh protein meal that remains after oil extraction.Soybean oil is used primarily for edible purposes (70to 75 percent of the U.S. edible oil use), but also hasindustrial uses. The meal is used primarily aslivestock feed. On average, the price of a pound ofsoybean oil is about three times the price of a poundof meal. However, the value of the meal accounts for60 to 65 percent of the value of a bushel of soybeansbecause soybeans are only 18 percent oil (10).Production of soybeans solely for oil appearsunlikely to result in a farm price high enough tomake soybeans an attractive crop. Many new cropsbeing developed for the industrial use of one primaryproduct (i.e., the oil from oilseed crops, rubber fromguayule, etc.) will likely face a similar situation.Combined food and nonfood uses of the primaryproduct may not result in prices that are favorable forthe new crops. Markets for byproducts will need tobe developed. Simultaneous development of multi-ple markets for new crop products is imperative.

Use of Existing Infrastructure

Adoption of new industrial crops will be facili-tated if the new crop can readily be accommodated,with minor adjustment, by existing transportation,storage, processing, and marketing infrastructure.Individuals or firms maybe unwilling to make largecapital investments for a crop that may be lowvolume (at least initially) and for which the marketis not secure. The commercial development ofsoybeans illustrates many of the concepts discussedin this chapter (see box 5-A).

Agricultural Extension

The largest Federal program to aid in the adoptionof new technologies is the Agricultural ExtensionService (AES). Funding is approximately $1.2billion (31 percent Federal) per year. There areoffices in nearly every county in all 50 States, witha staff of 9,650 county agents and 4,650 scientificand technical specialists. The AES conducts educa-tional programs to help farmers and agribusinessfirms use the results of agricultural research. Histor-ically, it has been successful in helping farmersadopt new technologies, and will continue to play asubstantial role in educating farmers about newindustrial crops. Recently, the AES has identified ashigh priority, the development of strategic market-ing approaches to market agricultural commodities.This approach is needed to aid development of newindustrial crops and uses of traditional crops. It is tooearly to judge how successful the AES will be inestablishing this approach (16).

Policy ImplicationsPolicy to develop a reliable supply of new

industrial crops and uses of traditional crops mustconsider constraints and opportunities in all phasesof technical change. In addition to policies thatencourage research, development, and commerciali-zation, there must also be policies that address theadoption of new technologies by industry andfarmers (see ch. 6).

A strategic approach is needed to develop newindustrial crops and uses of traditional crops. Sub-sector constraints must be identified and linkagesestablished between the producers of the crops, andthe manufacturers and consumers who will use thecrops (14). A framework to aid in the identification

s~e~e crops my be eligible for nonrecourse and mmkefig loam.

Chapter 5--Factors Involved in the Adoption of New Technologies by Industry and Agricultural Producers ● 59

Box 5-A-Commercialization of Soybeans

Soybeans are frequently cited as an example of the successful commercialization of a new crop. The historyof soybean commercialization shows that considerable time may be required for widespread adoption and use ofnew crops. Soybeans were introduced into the United States in the early 1800s but were grown primarily for hayand had little economic importance for decades. Imported soybeans were not processed in the United States untilaround 1910; U.S.-produced beans were first processed in 1914, but commercial processing did not begin until1922. Processing of soybeans occurred in cottonseed mills that had been adapted to accommodate soybeans, andearly production was in areas where processing facilities already existed. Thus soybean production and processingadjusted to existing industry structure; new industries were not created to accommodate soybeans. Once soybeansbecame firmly established as an important crop, new processing and poultry production facilities located in soybeanproduction regions (10).

Prior to World War II, U.S. production of soybeans was insufficient to meet demand, and the United Statesimported 40 percent of the fats and oils it used. Soybean production increased following World War II in responseto several simultaneous events. First, demand for meat products increased, which placed a premium on high-qualitylivestock feeds; soybean meal was uniquely suited (because of its high protein and lysine content) to fill thatdemand Second, tractors continued to replace horses (decreasing the demand for oats) and new synthetic fibersbegan to replace cotton, resulting in decreased prices for these commodities. Increasing soybean prices coupled withdecreasing oats and cotton prices made soybeans relatively more attractive than these crops and acreage was shiftedfrom producing cotton and oats to soybean production. Third, the Federal Government not only supported researchto develop and improve soybeans and processing technologies, but offered production supports as well. Programsfor feed grains, cotton, and wheat have often allowed soybeans to be substituted without loss of allotted acreage,and at times, grain farmers have been paid to plant soybeans on that acreage. With the exception of 1975, soybeanshave been covered by commodity-loan programs every year since 1941. Historically, large amounts of soybeanshave often been placed under price supports, but acquisitions by the Commodity Credit Corporation have beenrelatively small. Soybean producers use the loan program as a financial mechanism to obtain cash, and then redeemthe loans prior to maturity to take advantage of higher market prices (10).

By 1950, the United States was planting 15.6 million acres to soybeans. In 1987, about 57.4 million acres wereplanted. Highest acreage planted was 71.4 million acres in 1979. Between 1%7 and 1%9 the United States produced74 percent of the world’s soybeans. By 1984 to 1986, that level had dropped to 56 percent. Nations other than theUnited States responded to favorable soybean prices and their production increased. Other countries also increasedtheir processing and refining capacity, which helps to constrain U.S. exports of oil and meal compared to beans.In the 1980s, the United States exported 42 percent of the beans, 25 percent of the meal, and 15 percent of the oilit produced (10,18).

Soybeans have never been widely used for industrial purposes. In 1%0, about 6 percent of the oil producedwas used industrially, while today’s level is about 2 percent (10). From a farmer’s point of view, soybean pricesmay be low, but from a manufacturing point of view, soybeans are expensive because of their food and feed uses.Also, higher quality, less expensive alternatives are available. Some new crops and uses of traditional crops mayalso face this situation (6).

of subsector constraints is the Production-Maket- remove some of the disincentives to new industrialing-Consumption (PMC) system developed by the crops.University of Missouri.4

The long history and extensive influence of 1.agricultural commodity programs significantly affects the competitiveness of new industrial crops,and possibly new uses of traditional crops. Changes 2.in agricultural commodity programs may help to

Chapter 5 ReferencesBecker, Geoffrey S., U.S. Congress, CongressionalResearch Service, “Fundamentals of Domestic FarmPrograms, “ 88-311 ENR, Mar. 31, 1988.Drabenstott, Mark, and Moore, Charles, “NewSource of Financing for Rural Development,’ Amer-

4Some of the subsectors identified in this framework include the agricultural research and extension system; the production input supply system;systems that affect resource allocation, such as Federal or State programs that affect land and water use; the credit system, and the marketing system,which includes the collection, transportation, storage and processing of the commodity, and the distribution and promotion of the products made fromthe commodity.


3.

4.

5.

6.

7.

8.

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ican Journal of Agricultural Economics, vol. 71, No.5, December 1989, pp. 1315-1328.Hoffman, Linwood A., and Livezey, Janet, U.S.Department of Agriculture, Economic ResearchService, “The U.S. Oats Industry,” AgriculturalEconomic Report No. 573, July 1987.Johnson, Thomas G., ‘‘Entrepreneurship and Devel-opment Finance: Keys to Rural Revitalization: Dis-cussion, American Journal of Agricultural Eco-nomics, vol. 71, No. 5, December 1989, pp. 1324-1326.Kaplin, Kim, U.S. Department of Agriculture, Agri-cultural Research Service, “Vernonia, New Indus-trial Oil Crop,” Agricultural Research, April 1989,pp. 10-11.Keith, David, American Soybean Association, per-sonal communication, July 1989.Knapp, Steven J., “New Temperate IndustrialOilseed Crops,” paper presented at the First NationalNew Crops Symposium, Indianapolis, IN, October1988.he, David R., and Helrnberger, Peter G., “Estimat-ing Supply Response in the Presence of FarmPrograms,” American Journal of Agricultural Eco-nomics, vol. 67, May 1985, pp. 193-203.Milkove, Daniel L., and Sullivan, Patrick J., U.S.Department of Agriculture, Economic ResearchService, “Financial Aid Programs as a Component ofEconomic Development Strategy,’ Rural EconomicDevelopment in the 1980’s: Prospects for the Future,Rural Research Development Report No. 69, Sep-tember 1988, pp. 307-331.Schaub, James, McArthur, W. C., Hacklander,Duane, Glauber, Joseph, Leath, Mack, and Doty,Harry, U.S. Department of Agriculture, EconomicResearch Service, “The U.S. Soybean Industry,”Agricultural Economic Report No. 588, May 1988.Stoneman, Paul, The Economic Analysis of TechnicalChange (New York NY: Oxford University Press,1983).Studt, Tim, “Degradable Plastics: New Technologiesfor Waste Management,” R & D, March 1990, pp.51-56.

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Thayer, Ann, “Degradable Plastics Generate Contro-versy in Solid Waste Issues, ’ Chemical and Engi-neering News, June 25, 1990, pp. 7-14.

Theisen, A.A., Knox, E. G., and Mann, F. L., Feasibil-ity of Introducing Food Crops Better Adapted toEnvironmental Stress (Washington, DC: U.S. Gov-ernment Printing Office, March 1978).

Thirtle, Colin G., and Ruttan, Vernon W., EconomicDevelopment Center, Departments of Economicsand Agricultural and Applied Economics, Universityof Minnesota, “The Role of Demand and Supply inthe Generation and Diffusion of Technical Change,”Bulletin No. 86-5, September 1986.

U.S. Congress, General Accofiting Office, “U.S.Department of Agriculture: Interim Report on WaysTo Enhance Management,” GAO/RCED-90-19(Gaithersburg, MD: U.S. General Accounting Office,October 1989).

U.S. Congress, Office of Technology Assessment,Making Things Better: Competing in Manufacturing,OTA-ITE-443 (Washington, DC: U.S. GovernmentPrinting Office, February 1990).

U.S. Congress, Office of Technology Assessment,Strategic Materials: Technologies To Reduce U.S.Import Vulnerability, OTA-ITE-248 (Washington,DC: U.S. Government Printing Office, May 1985).

U.S. Department of Agriculture, AgricuZturaZ Statis-tics, 1988 (Washington, DC: U.S. GovernmentPrinting Office, 1988).

Westcott, Paul C., U.S. Department of Agriculture,Economic Research Service, “Winter Wheat Plant-ings and Soybean Double Cropping, ’ Oil Crops,Situation and Outlook Report, OCS-20, January1989.

Westcott, Paul C., and Glauber, Joseph W., U.S.Department of Agriculture, Economic ResearchService, “A Net Returns Analysis of the FlexiblePlantings Provision for Soybeans and Sunflowers,”Oil Crops, Situation and Outlook Report, OCS-20,January 1989.

Chapter 6

Proposed Legislation and Policy Options

During the first half of the 1980s, U.S. agricultureunderwent a difficult period of adjustment. TheSecretary of Agriculture convened a ChallengeForum in 1984 to explore ways to alleviate theseproblems. The New Farm and Forest Products TaskForce was created as a result of those discussions.The Task Force issued its findings in 1987, andconcluded that agriculture must diversify (6).

This study, and continuing problems in theagricultural sector, have lead to interest in usingagricultural commodities as industrial raw materials.Congress wants to help rural economies and smallfarmers to recover from difficult times, and newcrops and uses are viewed as a potential mechanismto accomplish these goals. To increase competitive-ness, Congress wishes to accelerate cooperationbetween the public and private sector to commercial-ize new agricultural technologies. The perceivedlack of interest by the U.S. Department of Agricul-ture (USDA) in developing new industrial crops anduses spawned the introduction of legislation in the100th and 101st Congresses. Several policy recom-mendations proposed by the Task Force have beenincorporated in the legislation. The House of Repre-sentatives bill is titled the Alternative AgriculturalProducts Act of 1990. The Senate bill is titled theAlternative Agricultural Research and Commercial-ization Act of 1990. Boxes 6-A and 6-B provide asummary of the main provisions of these bills.

The Task Force reached its conclusion largely onthe assumption that “the world now has in place anenormous and steadily increasing capacity to pro-duce basic agricultural commodities in quantitieswhich well exceed demand. ” It should be noted thatthis assumption is not universally accepted. In manyparts of the world, available arable land is alreadyunder cultivation and the potential for increasedirrigation is limited. Increases in supply will comefrom improved productivity. Evidence exists thatincreases in agricultural productivity are slowingworldwide. In the United States, it is estimated thatby the end of this century, barring major technologi-cal change, increases in productivity will be lowerthan increases in demand, which is assumed toincrease as a linear extension of past trends (7). It ishoped that advances in biotechnology and informa-tion technology will increase productivity, but at the

present time it is not clear when, and to what extent,these increases can be expected. Thus, althoughthere are potential benefits to diversification, furtherdiscussion of the urgency and extent of diversifica-tion needed is reasonable.

Proposed Legislation

Goals

Effective policy must articulate clear and achiev-able goals, and provide the necessary mechanisms toattain the goals. The purpose of developing newcrops and uses of traditional crops is to bring abouttechnical change in agriculture. In support of thisgoal, proposed legislation seeks to provide increasedfunding for research, improve cooperation betweenpublic- and private-sector research, and help sharethe financial risk of commercializing new technolo-gies. It is hoped that these new technologies, whilebenefiting society as a whole, will specificallyimprove economic conditions in rural communitiesand agriculture, particularly for small farms.

An immediate question that arises in developingpolicy to stimulate new crop and use development iswhether policy should be restricted to nonfood,nonfeed uses of agricultural commodities, orwhether new food crops should also be considered.Proponents of the nonfood, nonfeed approach arguethat industrial uses are more likely to have larger,faster growing, and higher priced markets than fooduses. They feel that larger benefits can be achievedif scarce funds are concentrated on new industrialcrops and uses of traditional crops. Proponents ofincluding new food crops argue that these new cropsdiversify agricultural production, increase farm in-come, and can have positive environmental impactssimilar to those of industrial crops. Furthermore,new food crops may be easier to market thanindustrial crops. In addition to the arguments overwhat plant types should be included, there is thequestion of whether animal products should also beconsidered.

Previous legislation to encourage new uses foragricultural commodities has focused on nonfood,nonfeed uses. The goal of the Native Latex Act wasspecifically to develop a domestic rubber industry.That goal was later broadened with the passage of

-61–


Box 6-A—Alternative Agricultural Products Act of 1990: House ProposalPurpose

● To increase the commercial use of agricultural commodities produced in the United States.. To mobilize private-sector initiatives to improve the competitiveness of U.S. agricultural producers and

processors.. To foster economic development in rural areas. To establish markets for new nonfood, nonfeed uses of traditional and new agricultural commodities.● To encourage cooperative development and marketing efforts among the public and private sectors.. To direct, where possible, commercializationl efforts toward the development of new products from

commodities that can be raised by family farmers.Institutional Structure-proposes the establishment of a National Institute for Alternative Agricultural

Products, an independent entity within the U.S. Department of Agriculture. The Institute will be directed by a12-member National Alternative Agricultural Products Board, appointed by the Secretary of Agriculture, andcomprised of individuals from the private sector. The Board is authorized to appoint an Advisory Council to helpreview and recommend applications, monitor research progress, monitor operation of the Regional Centers, andprovide technical assistance.

The Board is authorized to establish two to five regional centers. Each center must match the funding providedby the Federal Government. Each center is headed by a full-time director, appointed by the Board.

Activities--The Institute can provide financial assistance via grants, loans, interest subsidy payments, andventure capital. It can enter into cooperative agreements. The Director of the Institute is appointed by the Board,and provides for peer review of applications, research and research findings; requires licensing fees, etc. whereappropriate; and disseminates information.

Regional Centers encourage interaction among the public and private sector, identify areas where new productsand processes can contribute to economic growth; provide technical assistance and business counseling to smallbusinesses to commercialize new uses; identify projects worthy of assistance; make use of existing programs toaccelerate commercialization; advise the Institute Director of proposal viability; and coordinate with Small BusinessDevelopment Centers and the Institute.

Financial Eligibility CriteriaResearch and Development Grants-Applications may be made by public and private educational institutions,

public and private research institutions, Federal agencies, and individuals. Applications are peer-reviewed.Commercialization Assistance—Loans, interest subsidies, venture capital, and repayable grants may be made.

Applicants must show that the product is scientifically sound, technologically feasible, and marketable. Eligibleapplicants include universities or educational institutions, non-profit organizations, and businesses.

Selection CriteriaResearch and Development Grants--Selected on the basis of the likelihood of creating or improving

economically viable commercial products and processes using agricultural commodities. Criteria shall includepotential to reduce costs of Federal agricultural assistance programs; unavailability of other adequate fundingsources; potential positive impacts on resource conservation, public health and safety, and the environment; andability to produce the product near the area where the agricultural commodity is grown.

Commercialization Assistance—Priority is given to applications that create jobs in economically distressed ruralareas; and that have State, local, or private financial participation.

Funding-At least 85 percent of the authorized funding shall be for Research and Development Grants, and forCommercialization Assistance. Of the Research and Development Grants, at least two-thirds of the funding will beallocated to projects that have substantial funding from their own resources, and that have entered into contratualarrangements with commercial companies that provide at least 20 percent of the total funding for the project. Atleast 5 percent of the funding is reserved for 1890 institutions. Funds committed by the Institute for any projectsshall not exceed 50 percent of the total cost of the project.

Funding is via a revolving fund of unspecified level. Authorization of appropriations are for fiscal year 1991 tofiscal year 1995.

1In both the House and Senate bills, commercialization is defined as activities associated with the development of prototype products ormanufacturing plants, the application of technology and techniques to the development of industrial production and the market developmentof new industrial uses of new and traditional agricultural and forestry products and processes that will lead to the creation of marketable goodsand services.

Chapter 6--Proposed Legislation and Policy Options ● 63

Box 6-B—Alternative Agricultural Research and Commercialization Act of 1990: Senate Proposal

Purpose● To authorize plant research in order to develop and produce marketable products other than food, feed, or

traditional forest or fiber products.● To commercialize such new uses in order to create jobs, enhance rural economic development, and diversify

markets for agricultural raw materials.. To encourage cooperative public/private development and marketing efforts and thus accelerate

commercialization.. To direct commercialization efforts toward products from crops that can be raised by family-sized producers.

Institutional Structure-Proposes the creation of the Alternative Agricultural Research and Commercializa-tion Corporation, an independent, nonprofit entity within USDA, and headed by a nine-member board, composedof members from the public and private sectors. It will have four to nine regional centers overseen by an advisorycouncil and located in institutions of higher education, ARS laboratories, State agricultural experiment stations,extension service facilities, and other organizations involved in the development and commercialization of newproducts.

The Board oversees the Corporation and advises on research projects to be funded. The regional center advisoryboards review applications, monitor ongoing projects, and provide technical and business counseling to entities notseeking financial assistance.

USDA’s Assistant Secretary for Science and Education has final veto power over the decisions of the board.Activities-The Corporation may provide grants for research to develop and produce new industrial products.

For commercialization projects, the Corporation may provide financial assistance in the form of direct loans; interestsubsidy payments to commercial lenders; venture capital investments; repayable grants matched by private, State,or local funds; and umbrella trending.

Through the regional centers, the Corporation is to encourage interaction among public and private entities in newproduct development; identify areas where commercialization could foster rural economic growth; providetechnical assistance and counsel to small businesses interested in commercialization; identify new farm and forestproducts and processes worthy of financial assistance; use existing scientific, engineering, technical, andmanagement education programs to accelerate commercialization efforts; review proposals for financial assistance;and coordinate activities with Small Business Development Centers.

Financial Eligibility CriteriaCommercialization Assistance—Applications may be made by a university or other higher education institution,

nonprofit organization, cooperative, or small business concern that is capable of legally complying with the termsand conditions of assistance. Applications are filed with the director of the regional center and must document thatthe proposal is scientifically sound and technologically feasible, and marketable.

Research and Development Grants—No eligibility criteria are specified

Selection CriteriaResearch and Development Grants—Projects selected must show promise to develop new technologies that use

or modify existing plants or plant products to provide an economically viable quantity of new industrial products;show potential market demand, reasonable commercialization time frame, and the ability to grow the raw materialat a profit; create jobs in economically distressed areas; have State or local government and private financialparticipation; be likely to reduce Federal commodity program costs; be unlikely to obtain adequate non-Federalfunding; be likely to have a positive impact on resource conservation and the environment; and be likely to helpfamily-sized farms and adjacent communities.

Commercialization Assistance—Projects selected must create jobs in economically distressed areas; have Stateor local government and private financial participation; have good management qualifications; show strong marketdemand for the potential product; and show potential for repayment to the revolving fund.

Funding-Funding is to be by a revolving fund. Appropriated funds for fiscal years 1990 to 1993 are to be $10million, $20 million, $30 million, and $50 million respectively, and $75 million per year for fiscal years 1994 to1999.


the Critical Agricultural Materials Act to develop adomestic capacity to produce critical and essentialindustrial materials. New legislation also focuses onthe development of new industrial crops and uses oftraditional crops rather than on food crops.

It is not clear that developing agricultural com-modities as an industrial raw material source willhave a significant impact on rural economic devel-opment. Clearly, developing new crops and uses oftraditional crops can be a component of a compre-hensive rural policy, but as a policy in itself, it isunlikely to revitalize rural economies. Furthermore,in the absence of additional programs (e.g., teachingnew management skills to fanners, and helping themshare the additional risks of new technologies),potential benefits from the development of newcrops and uses may accrue primarily to large-scalefarms rather than to small farms.

Proposed legislation limits private-sector partici-pation to small firms (for research and cooperativeagreements) and to firms that will locate manufac-turing facilities in rural areas (for commercializationfunding). There are many good reasons for limitingassistance to small firms. These firms are ofteninnovative, but due to lack of resources, are unableto pursue long-term, risky projects. Additionally, itis feared that providing funding to large firms simplydisplaces private funds that would have been in-vested anyway.

Limiting commercialization funding to firms thatwill locate in rural communities is an attempt toachieve the goal of revitalizing rural economies.These goals are laudable, but may be inconsistentwith the other goals of the proposed legislation. Asalready discussed, the goal of rural revitalizationmay not be achievable by this policy. In addition,many firms that are likely to be involved in thecommercialization of these new products and proc-esses, are large rather than small firms. The eligibil-ity restrictions in the legislation are such that in theattempt to achieve one goal (that of rural develop-ment), serious constraints to achieving other goals(development of new agricultural markets) maybeintroduced. Potentially, there are products where thetwo goals will be compatible, but it is likely to be asubset of the total products that could be developed.This raises the question of whether all goals are andshould be equal, or whether some should have higherpriority than others.

Institutions

in addition to having clear goals, effective policymust be flexible and offer a range of mechanisms toachieve stated goals. Policies to achieve technicalchange will need to address opportunities andconstraints in the research and development, com-mercialization, and adoption stages. As a means ofadministering the new policy, legislation proposesthe establishment of an independent corporationhoused within USDA. However, it is not clear thatindustrial uses of agricultural commodities are suchunique agricultural technologies that their develop-ment can only be accomplished with the establish-ment of a new corporation. Rather, the impetus foran independent institution arises because of percep-tions that USDA is not interested in, nor has beenresponsive to constituent requests for new industrialcrop and use research. Critics point to the lack offunding for new industrial use and crop research asevidence that this is not a USDA priority. The issueraised is one of how the USDA establishes itspriorities and allocates its resources to meet thosepriorities.

The OTA report Agricultural Research and Tech-nology Transfer Policies for the 1990s finds that theissues of priority-setting, planning, and resourceallocation for agricultural research is a generalproblem within USDA, and not one limited to newcrop and new use research (9). The existence of anagricultural research and extension system that isresponsive to user needs, sets research priorities andmeasurable goals, allocates resources in a mannernecessary to achieve those goals, and develops amore effective technology-transfer componentcould eliminate the need to develop entities withnarrow authorities. Arguments can be made that thecreation of new programs to address individualresearch issues is merely a band-aid approach thatcreates a new level of bureaucracy without signifi-cantly affecting the fundamental problems withinthe agricultural research and extension system. AGeneral Accounting Office review of managementprocedures in USDA indicates that one major reasonwhy USDA has difficulty in managing initiativesthat cut across agencies and programs is becausehistorically, as new needs arose, new agencies werecreated within USDA to handle these needs. Theseagencies, over time, develop policies consistent withtheir perceived goals (but not necessarily withUSDA goals), and attract constituencies that support

Chapter 6-Proposed Legislation and Policy Options ● 65

each agency’s continuance (8). It could be arguedthat creation of an agricultural corporation to com-mercialize new crops and uses continues this trend.

Reauthorization of the Office of Critical Materials(OCM) is an alternative to making fundamentalchanges in the USDA research and extension systemor to establishing a new corporation for developingindustrial uses for agricultural commodities. Thegoals of the Critical Materials Act, which estab-lished this office, are more modest than those ofcurrent legislation. However, OCM is activelyinvolved in the commercialization of new industrialcrops; it has cooperative agreements with the privatesector and is engaged in projects with industry todemonstrate the commercial feasibility of some ofthe new crops. Expansion of the mandate of thisoffice to include new uses of traditional crops, andbetter coordination with the Small Business Innova-tion Research Programs, could achieve several of thesame goals of the current legislation.

Policy Instruments

The new legislation offers several mechanisms toencourage the development of new industrial cropsand uses for traditional crops including funding forresearch and development, in addition to thatprovided in other categories of the USDA researchtitle. The new legislation strongly emphasizes andfunds technology transfer of research from thepublic sector to the private sector by fundingcooperative research agreements.

Proposed legislation does contain some provisionfor technical assistance, but it is limited. Staff atregional centers, as well as advisory boards are toprovide technical and business counseling to firmsthat are engaged in commercializing new industrialcrops and products. They are to coordinate with theSmall Business Development Centers (SBDC) andother regional and local agencies or groups involvedin development. Some studies have suggested thatlack of technical assistance is at least as important aconstraint to rural firms as are financial constraints(1,5). Small rural firms most frequently use localbankers, accountants, and lawyers for technical andbusiness counseling, rather than the SBDC, eventhough there are 53 such centers in all but four Stateswith a budget of nearly $90 million (4,10). Workingclosely with, and providing educational classes forlocal bankers, accountants and lawyers may be aneffective way for the regional centers to provide

some technical assistance. Additionally, the role ofthe Agricultural Extension Service might be ex-panded. Historically, the Extension Service hastransferred information about new production tech-nologies to farmers. Recently, the Extension Servicehas begun to develop a strategic marketing orienta-tion to help farmers and agribusiness focus onmarket potential.

Technical and business counseling provided bythe programs described above will be useful, but inmany cases may be inadequate. To use new proc-esses, many small firms may need a detailedevaluation of their management and productionstrategies. Effective State technical assistance pro-grams frequently make site visits and providecustomized reports to clients. These evaluationsaverage 5 to 6 days of service at a cost ranging from$1,000 to $20,000 per client (10). This type oftechnical assistance will not be provided for in theproposed legislation. Given the potential importanceof rural technical assistance to help produce newproducts from agricultural commodities, Congressmay need to consider putting more effort into thisaspect of commercialization than is currently avail-able in the proposed legislation. One possibilitymight be to provide block grants to effective Stateprograms.

Proposed legislation provides funding for com-mercialization. The legislation defines commerciali-zation as activities associated with the developmentof new products and processes, the application oftechnology and techniques to the development ofnew products and processes, and the market devel-opment of new products or processes. Fundingtargeted for the development of new products andprocesses would be awarded to innovative firms ina reamer similar to the SBIR programs. Funding andadequate technical assistance needed to help themajority of firms lacking research capacity to adoptthe newly developed processes, is lacking. Proposedlegislation is thus similar to most U.S. technologypolicy in that it only addresses the issues of newtechnology research, development, and commercial-ization, and not the problems of industrial technol-ogy adoption.

In addition to commercialization funding andtechnical assistance, there may also be a need forassistance in financing capital investment and oper-ating expenses, particularly in rural areas. Somestudies indicate that debt financing markets in rural


communities operate efficiently, and that operatingcapital is available for rural firms (1,5). However,equity markets in rural areas are generally not sowell developed as in urban areas. Congress maywish to explore options that generally improve theeffectiveness of equity markets in rural areas.Improving the SBIC programs supported by theSmall Business Administration and developing sec-ondary financial markets to help rural lendinginstitutions share risk are two possible avenues toexplore.

One function of the Alternative AgriculturalResearch and Commercialization Board, proposedin the legislation, is to disseminate informationabout commercialization projects. However littlefunding is provided for this function. Informingindustry of potential research and commercializa-tion opportunities is an important component ofgenerating industrial interest in developing newproducts using agricultural commodities. There isgrowing participation of industry in Federal labora-tory and industry fairs; this could be a potentialavenue for informing industry about publicly fundedresearch on new industrial crops and uses oftraditional crops. Additionally, the Critical Agricul-tural Materials Act specifically provided for theestablishment of a database regarding new industrialcrops and use development at the National Agricul-tural Library. New legislation does not explicitlyprovide for this function. Research conducted atnon-land grant universities, and that conducted atState Experiment Stations but without CooperativeState Research Service (CSRS) funding may notnecessarily be included in USDA databases. Con-gress may wish to consider provisions for databasemaintenance.

A strategic approach is needed for the develop-ment of industrial products from agricultural com-modities. A first priority is an understanding of themarket potential for new industrial crops and uses.Appraisal is needed of the structure of the industriesthat will use the new agricultural commodities andof competing technologies currently used and beingdeveloped. It is impossible to identify all contingen-cies that might occur, and funding generic researchcan lead to new insights. However, a shotgunapproach to new crop and use development is notlikely to be effective, particularly if a short develop-ment time frame is desired; some research mustfocused. A priority of new crop and use commercial-ization should be the development of a marketing

and research and development strategy; social-science research will play a fundamental role.Conceivably this approach could be undertaken inthe proposed legislation, but social science researchis not explicitly discussed. It is the current lack ofresearch in these areas that makes it difficult toevaluate the commercialization potential of indus-trial uses of agricultural commodities.

Policy OptionsPolicy options presented are in three categories:

1.2.

3.

commodity programs options;research, development, and commercializationproposals; andadditional options that require further study.

Commodity Program Options

Agricultural commodity programs, as they cur-rently exist, provide substantial barriers to theadoption of new crops by farmers. Additionally,these programs skew farmer production decisions sothat a few crops are produced in surplus (e.g., corn)while other crops are not produced in quantitiessufficient to meet domestic demand (e.g., oats).Agricultural commodity programs have three maincomponents: non-recourse loans, target prices (defi-ciency payments), and supply-control programs.Simultaneous adjustments in at least two, andpossibly all three of these components will beneeded to remove barriers to diversification.

Agricultural commodity programs have a majorimpact on farmer planting decisions. The risk oflosing future base acreage if crops other than thoseenrolled in commodity programs are planted, is asignificant impediment to the planting of any cropsother than specified commodity program crops.Farmers continue to plant acreage to certain cropseven when these crops are in surplus and marketsignals indicate other crops might be more profitableto grow. Planting disincentives exist not only fornew crops, but for many traditional crops as well.Because of surplus production, Acreage ReductionPrograms (supply control) are implemented.

OTA proposes four options for commodity pro-grams:

. changes in the commodity base acreage for-mula to increase planting flexibility, referred tohereafter as “Normal Crop Acreage”;

Chapter 6--Proposed Legislation and Policy Options . 67

●

●

●

changes in the commodity base acreage for-mula to increase planting flexibility, referred tohereafter as “Triple Base Option”;changes in the target prices, referred to here-after as ‘‘Target Prices”; andcontinuation of commodity programs similar tothose contained in the 1985 Food Security Act,referred to hereafter as ‘‘Status Quo.

Normal Crop Acreage

Normal crop acreage (NCA) was the system usedin 1978 and 1979 for wheat, feed grains, uplandcotton, and rice, and was based on the number offarm acres that had been planted to specified cropsin 1977. Which crops should be included in normalacreage is subject to debate. Base acreage isestablished for the whole farm, rather than forindividual crops. Within the NCA concept, farmerscan allocate acreage to any crop they chose, so longas the total program crops plus set-aside acres do notexceed the NCA. This program allows increasedplanting flexibility for the farmer, but decreases theability of the USDA to control supply, Supplycontrol is particularly difficult if target prices forselected commodities are high relative to marketprices of other commodities. Farmers will opt toplant the crop with the high target price. Thus, eventhough they can plant any crop they chose withoutlosing base acreage, they may still choose to producecertain crops in surplus because of the strong pricesignal sent by the target prices. Passage of thisoption, without changes in target prices, will noteliminate many of the disincentives to the adoptionof new crops (3). Normal crop acreage is theproposal recommended by the administration.

Triple Base Option

The triple base option is also intended to provideplanting flexibility. This option divides base acreageinto three categories: land taken out of production;land planted for which deficiency payments aremade; and land planted for which no deficiencypayments are made but where market crops could begrown. The plan provides planting flexibility on thepermitted acreage without risk of losing base acre-age. Because the planting decisions made for thethird base (that which receives no deficiency pay-ments) are based more on market price signals thanon target prices, this option presumably wouldremove some disincentives to planting new crops,assuming that these new crops are permitted underthe terms of the commodity program. However, farm

groups generally oppose this option because theyfeel it is motivated not by a desire to provideflexibility, but rather to reduce payments to farmersbecause of budget constraints. It is also argued thatthis plan is inequitable because not all farmers cangrow more than one crop profitably due to weatherand soil constraints (2).

Target Prices

This option would either change the target priceitself, or change the acreage and yields of programcrops eligible to receive deficiency payments, whichwould effectively change the target price. Changesin the base acreage formula only, without changes intarget prices, may be insufficient to remove barriersto the adoption of new crops, or to reduce commod-ity surpluses significantly. These outcomes seem tobe likelier with the Normal Crop Acreage than withTriple Base Option, because the Triple Base Optioneffectively reduces target prices by decreasing theacreage eligible for coverage. Reduction in targetprices are expected to result in a dollar-for-dollarreduction in farm income. The Triple Base Optionwould reduce farm income less significantly. De-creasing target prices combined with the NormalCrop Acreage could result in greater crop diversity.Some concern exists that increased planting ofnon-program crops by farmers participating incommodity programs would negatively affect pricesof those crops and hence, the income of farmers whogrow non-program crops without participating in thecommodity programs.

Status Quo

Maintainin g commodity programs similar tothose in the 1985 Food Security Act is unlikely toremove disincentives to the production of new cropsby farmers.

Research, Development, andCommercialization Proposals

OTA proposes three alternatives for the researchand development of new crops and new uses oftraditional crops:

●

●

continuation of the current policy includingappropriations for the Office of Critical Materi-als, referred to hereafter as the “Status Quo”;establishment of institutions outlined in theHouse and Senate bills referred to hereafter asthe “Agricultural Corporation Alternative”;and


● reorganization of the agricultural research andextension system to be more responsive toend-user needs, referred to hereafter as the“National Research and Extension Policy Al-ternative. ’

Status Quo

The status quo option calls for maintaining theOffice of Critical Materials as the main office tocoordinate the research, development, and commer-cialization of industrial materials from agriculturalcommodities. New-use research and developmentwill continue to be mainly the responsibility of theARS. The SBIR programs will play a small role, andStates will develop their own programs. Featuresand likely consequences of the status quo include thefollowing:

1.

2.

3.

4.

The Office of Critical Materials and the SBIRprograms are small and relatively isolatedprograms within USDA. The role of theFederal Government in the development ofnew crops and new uses of traditional crops islikely to remain modest in size. The Office ofCritical Materials is mainly involved in thedevelopment of new industrial crops, ratherthan new uses of traditional crops. New uses oftraditional crops will remain the responsibilityof primarily ARS and CSRS research. Newfood crops are not part of the program.Continuation of the Office of Critical Materi-als will not address the underlying problems ofpriority setting, planning, and resource alloca-tion within USDA.Coordination of USDA programs will be byinformal mechanisms rather than an integralpart of the program itself; the Office of CriticalMaterials (OCM) has no authority over, orinput into, the policies of other programswithin USDA. The OCM does works closelywith individual researchers at the NorthernRegional Research Center (ARS) and in land-grant universities to develop the new cropsthey have identified as potential candidates forcommercialization. Coordination betweenOCM and the USDA Small Business Innova-tion Program, however, is informal.The goals of the Critical Agricultural MaterialAct are more modest than proposed legisla-tion. The focus is on the development of adomestic capacity to supply industrial materi-als that the United States uses on a daily basis

5.

6.

7.

8.

9.

and that are currently obtained via imports orfrom petroleum. The emphasis is on supplyinga relatively well-defined market rather than onachieving broad social goals, although onecould argue that the security gained by havinga domestic source of strategic and essentialmaterials is a worthwhile social goal.Financial selection criteria is not limited tosmall firms only. The broader range of poten-tial participants, compared to proposed legisla-tion, may increase the commercialization pros-pects for some products.Small business technical assistance and com-mercialization loans are not part of the pro-gram. However, there is a strong technology-transfer component in the form of demonstra-tion programs with industry, and provision ofagronomic data about new crops to farmersand extension personnel.Unlike the legislative proposals, the CriticalMaterial Act contains an explicit provision forgermplasm collection. Lack of germplasm is aserious constraint for the development of somenew crops.There is currently no long-term commitmentof funds to the Critical Materials Office.Development of new uses and new crops willrequire a sustained and adequate commitmentof resources.There will be no explicit funding for generictechnology-transfer programs for ARS; tech-nology-transfer finding is strictly for indus-trial uses of new and traditional crops.

Agricultural Corporation Alternative

This alternative involves the passage of a compro-mise version of the House and Senate bills. Itsfeatures and likely consequences include the follow-ing:

1.

2.

There will be a significant expansion of theFederal role in research, development, andcommercialization of new industrial cropsand uses of traditional crops.There will be an additional administrativelayer added to USDA, but Department prob-lems of priority setting, research planning,and resource allocation will not be addressed.Furthermore, a new administrative compo-nent could potentially add to the difficultiesalready facing USDA in its efforts to coordi-


3.

4.

5.

6.

7.

8.

9.

10,

nate cross-cutting problems across multipleagencies.No explicit provision exists for the develop-ment of a strategic plan to develop new cropsand uses of traditional crops. The House billdoes provide for hearings to establish goalsand priorities; it may be possible to incorpo-rate strategic planning within this framework,but it is not guaranteed. Furthermore, nomention is made of social-science research inany of the proposals. This research, though anintegral part of developing new products, iscurrently lacking.Development of regional centers leads to amore decentralized approach to new crop andnew use development. Decentralized ap-proaches increase the likelihood of duplica-tion and neglect of important elements. How-ever, regional centers are closer to problemareas and are likely to have more localcontacts than centralized offices.Goals of the legislation may be difficult toachieve without additional policy. Agricul-tural policy and rural policy are not synony-mous, and aiming production at small farmswill be difficult to achieve.Financial selection criteria may be too restric-tive and diminish opportunities for commer-cialization. It may be difficult for anew cropor new use proposal to satisfy all, or even amajority of the criteria stated in these bills.Flexibility in the interpretation of the criteriawill be needed.Venture capital will be provided under theproposed legislation. Equity capital may belimited in rural areas and this provision couldbe beneficial. However, other approachessuch as expanding equity funding to all ruralfirms, and improvements in rural equity-capital markets might lead to increased ruraldevelopment impacts.There is no explicit provision of funds forgermplasm collection. It is not clear thatproposed legislation considered this as re-search needed for development of new cropsand uses of traditional crops.Some duplication of SBIR program activitiesmay exist.There will be no explicit funding for generictechnology transfer programs at ARS; fund-ing is strictly for new industrial crops anduses of traditional crops.

11.

12.

13.

14.

There will be no funding for new food crops;this potential avenue for diversification isexcluded.No explicit consideration exists for databaseneeds. Some projects may automatically becovered by USDA research databases, butothers will not. This could potentially in-crease the difficulty of information dissemi-nation.Technical assistance provided will be smalland in many cases, insufficient. Additionalconsideration needs to be given to thiscomponent of new crop and use developmentand commercialization.No provision is made for adoption of newprocesses and technology across industry.

National Research and Extension PolicyAlternative

This proposal is based on the assumption that noreason exists to treat new crop and new use researchand development differently from other agriculturaltechnologies. The impetus to establish a new corpo-ration to promote the research, development, andcommercialization of new crops and uses arises fromperceptions that USDA has been unresponsive tothis type of research. The perceived lack of respon-siveness of the USDA to changing needs andpriorities is not limited to new crops and uses oftraditional crops. Because of the agency’s apparentintransigence, a reevaluation of the agriculturalresearch and extension system is warranted. In theOTA study Agricultural Research and TechnologyTransfer Policies for the 1990s, this alternative isexplained in detail.

Essential elements of the proposal include a UserAdvisory Council composed of elected representa-tives from farmer organizations, agribusiness orga-nizations, public interest organizations, foundations,and government action agencies. The council identi-fies problems, recommends goals and funding lev-els, coordinates industry support, and evaluatesprogress. The council works closely with the Agri-cultural Science and Education Policy Board(ASEPB), which will be the research and technol-ogy-transfer planning center for USDA. The boardis headed by the Assistant Secretary for Science andEducation, and will include the Assistant Secretaryfor Economics, the Administrator of each USDAresearch and technology transfer agency, chairmenof the committees on policy, and representatives


from NIH, NSF, non-land grant universities, and1890 universities. The board, with the active in-volvement of the User Advisory Council, sets goals,establishes priorities, assigns agency research re-sponsibilities, and evaluates results, among otherduties.

Technical panels are created for each majorresearch and technology-transfer priority. Thesepanels work with the board and provide scientificexpertise in the planning process. This proposalprovides a basis for effective agricultural researchand extension planning in a mission-oriented con-text. User input is an integral component of theproposal. Allocation of funding is to priority pro-grams rather than agencies. Features and likelyimpacts of this proposal include the following:

1.

2.

3.

4.

5.

USDA’s fundamental problems with prioritysetting, planning, resource allocation, andtechnology transfer will be addressed.New crop and new use research and develop-ment may not necessarily be designated apriority area by the User Advisory Council.Proponents argue that because new crops anduses do not have a constituency, they will notreceive attention; however, this research hasbeen given attention by the Secretary ofAgriculture, and has been designated as prior-ity area by the current User’s Advisory Board.Funding will depend on whether new indus-trial crop and use development is consideredessential to the health of agriculture. If so, newcrop and new use research will be a priorityand a sustained level of funding will occur.However, there is flexibility to reduce oreliminate this funding if priorities change.Because the technical panels help to identifyall areas of research that will be necessary toachieve stated goals, a flexible and multidisci-plinary systems approach to agricultural re-search, development, and extension that cutsacross USDA agencies, will be established.This approach would allow, for instance, forthe collection of germplasm and for social-science research. This approach also allows forthe development of some types of informationnecessary for technical assistance. It wouldalso encourage the development of a market-ing strategy and provide for the assessment oflikely impacts of the new technology.This proposal is a research and technology-transfer proposal and would not provide fund-

6.

7.

8.

ing for commercialization or prototype plantdevelopment.Explicit funding for technology transfer pro-grams at ARS is possible but not guaranteedunder this proposal, Technology transfer fromFederal labs other than USDA might not beincluded, but representatives from other agen-cies sit on the Board.Increased funding for new food crops ispossible but not guaranteed.The role of the Agricultural Extension Servicewill be an important part of the program.

Options Requiring Further Study

Following is a list of options which Congress maywant to explore further to enhance the potential ofnew industrial crop and use of traditional cropcommercialization.

Financial Options

Rural debt markets seem to be working effi-ciently, but equity markets are not as well developedin rural areas. Congress might want to engage astudy to explore possibilities to improve rural equitymarkets. This might include development and im-provement of secondary financial markets as onepossibility. For rural development to occur, a widediversity of employment opportunities must bemade available. Venture capital for more than justplants to produce products using agricultural com-modities is needed.

Technical Assistance

Technical assistance, particularly in rural commu-nities is a serious constraint for firms. Technicalassistance, as well as improved access to funds forcapital investment and operating expenses is neededto enhance the potential of adoption of new technol-ogies and processes by firms. Improved access totraining will also be needed. Programs to improvethe delivery of technical assistance should beexamined. One possibility might be to provide blockgrants to State programs that are effective atdelivering technical assistance to rural fins.

Germplasm Collection

To develop new crops and improve traditionalcrops, availability of appropriate germplasm will beneeded. Germplasm collection, improvement offacilities, and research on new storage and mainte-nance technologies is needed.

Chapter -reposed Legislation and Policy Options ● 71

Small Farm Programs

Small farm operators may need to learn newmanagement skills to use new technologies and facedifficulties managing the risk associated with newtechnologies. Programs that aid farmers in theseendeavors may help facilitate new technology bene-fiting small farms.

Macroeconomic Policy

The U.S. Government now has large and growingdebts. Numerous studies have demonstrated theadverse impacts this has had on agriculture and ruraleconomies. Finding solutions to the Federal deficitwill be important to improving the agriculturalsector and rural economies. In addition, tax policycan be used to improve the general economic climatefor research, development, and commercializationof new technologies.

Current Legislative ActivityCongress passed a Farm Bill in the fall of 1990,

just as this report was going to press. The report, indraft, was made available to the Senate and HouseAgricultural Committees prior to passage of theFarm Bill. A compromise version of the House andSenate Alternative Agricultural bills was passed aspart of Title XVI, the research title of the Farm Bill.The final bill (the Alternative Agricultural Researchand Commercialization Act) is similar to the Senateproposal with minor changes. There are provisionsfor two to six regional centers rather than up to nineas was previously proposed. Additionally an explicitcategory of finding exists for new animal products.And, eligibility for commercialization funds is nolonger restricted to small fins.

Because of incompatible timing of the Farm Billand Appropriations legislation, funding for the newAlternative Agricultural Research and Com-mercialization Center was not provided. Instead, theCritical Agricultural Materials Act was reauthorizedthrough FY 1995 and the 1991 funding for the Officeof Critical Materials is $800,000. Other fundingprovided for new crops and uses of traditional cropsinclude $668,000 for guayule research and $500,000for Crambe and rapeseed research. Research fundsfor kenaf ($1,106,000), meadowfoam, jojoba, milk-weed, soybean oil inks, and plastics from cornstarchare also provided for in the ARS budget and specialgrants. Additionally, there is a grant program forresearch on the production and marketing of ethanol

and industrial hydrocarbons from agricultural com-modities and forest products authorized a t$20,000,000 per year for fiscal years 1991 through1995. It is likely that Congress will take up the issueof funding the new programs authorized in the FarmBill in 1991.

Changes were also made in the agriculturalcommodity programs. Congress passed a TripleBase Option plan, to begin in 1992. Under the plan,the base acreage for program crops (wheat, corn,grain sorghum, oats, barley, upland cotton, or rice)is established. Acreage Reduction programs (ARP)will remove a percentage of that acreage f romproduction. Program crops or other designated crops(i.e., oilseeds and industrial or experimental cropsdesignated by the Secretary of Agriculture), can beplanted on 15 percent of the base acreage, but are noteligible for commodity support payments. An addi-tional 10 percent of the base acreage can be plantedto designated crops without loss of program base.This new flexibility provision, and removal ofacreage that is eligible for support payments willhelp to remove some of the disincentives to theplanting of new industrial crops. Additionally, targetprices were nominally frozen at 1990 levels, butchanges in the method of calculating deficiencypayments may effectively lower target price levels.

In addition, Congress created a new AgriculturalScience and Technology Review Board consistingof 11 representatives from ARS, CSRS, ExtensionService, Land Grant Universities, private founda-tions and firms involved in agricultural research,technology transfer, or education. The purpose of theBoard is to provide a technology assessment ofcurrent and emerging public and private agriculturalresearch and technology-transfer initiatives, anddetermin e their potential to foster a variety ofenvironmental, social, economic, and scientificgoals. The report of the Board is to include anassessment of research activities conducted, andrecommendations on how such research could bestbe directed to achieve the desired goals. Establish-ment of this Board is an attempt to address some ofthe fundamental problems existing in the USDAresearch and extension system.

ConclusionUsing agricultural commodities as industrial raw

materials will not provide a quick and painless fixfor the problems of agriculture and rural economies.


They can provide future flexibility to respond tochanging needs and economic environments, butmany technical, economic, and policy constraintsmust be overcome. Many of the new industrial cropsand uses of traditional crops are still in relativelyearly stages of development. Several years ofresearch and development will be necessary beforetheir commercialization will be feasible. The lack ofmarketing strategies and research to assess theimpacts of new technologies complicates decisionson research priorities and appropriate policies andinstitutions needed to achieve success. Potentialimpacts on income reallocation and the environ-ment, as well as regional effects need further studybefore large-scale funding for commercialization isrequired. Successful commercialization will requirenot just funding assistance, but a systemic policythat articulates clear and achievable goals andprovides the instruments needed to reach thosegoals.

An encompassing research and developmentstrategy is needed and must be designed to meetmarket needs; hence a strategic, multidisciplinary,multiregional approach should be taken with bothpublic and private sector involvement. Changes inagricultural commodity programs, in addition tothose already made, may still be needed to removedisincentives to the adoption of many new crops.Because of research information still needed, and thetime still required to develop many of the new cropsand products, a two-step approach to commerciali-zation might be useful. The European community istaking this approach by first establishing a pre-commercialization program to determine feasibility,and then following up with a later program toencourage commercialization. The U.S. Small Busi-ness Innovation Research Program also takes amultistage approach to the commercialization ofnew technologies. In the United States, initialprimary emphasis could be given to the basic,applied and precommercialization research neededto develop new crops and uses. A high priorityshould be an early technology assessment of prod-ucts and processes to analyze potential markets,socioeconomic and environmental impacts, techni-cal constraints, and areas of research needed toaddress these issues fully. The establishment of theUSDA Science and Technology Review Boardshould improve the prospects for this type ofassessment. The technology assessment would laythe groundwork for development, and provide the

information needed to make intelligent decisionsabout commercialization priorities, possible impactsof new technologies, and further research or policyactions needed.

Interdisciplinary, and in appropriate cases, mul-tiregional research should be given the highestfunding priority. This could include: chemical,physical, and biological research needed to improveproduction yields and chemical conversion efficien-cies, and to establish quality control and perform-ance standards; agronomic research to improvesuitability for agricultural production; germplasmcollection and maintenance research; and socialscience and environmental research. Technologytransfer issues should also be addressed. Theseissues include funding for cooperative agreements,database management, and Federal laboratory-industrial conferences.

Once information is available to identify marketpotential and technical, economic, and institutionalconstraints, the second step to commercializationcan be made. A strategic plan can be developed tocommercialize the most promising technologies.Financial aid for commercialization and the role ofregulations may need to be considered. Industrialadoption and diffusion of new processes may requireadditional technical assistance and technical exten-sion programs. For new industrial crops and uses,additional changes may be needed in agriculturalcommodity programs.

Because many new industrial crops and uses oftraditional crops are still in the early stages ofdevelopment, there is time for a thorough analysis ofthe actual potential of these new products, theconstraints to commercialization, and the potentialimpacts of development. This information, once it isavailable, will permit the design of appropriatepolicy and institutions needed to achieve the benefitsthat may exist.

1.

2.

3.

Chapter 6 ReferencesDrabenstott, Mark and Morris, Charles, “NewSources of Financing for Rural Development,”American Journal of Agricultural Economics, vol.71, No. 5, December 1989, pp. 1315-1323.Ek, Carl, U.S. Congress, Congressional ResearchService, “The Triple Base Plan,” 89-381 ENR, June1989.Ek, Carl, U.S. Congress, Congressional ResearchService, “Normal Crop Acreage,” 89-467 ENR,August 1989.


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5.

6.

7.

Gladwin, C. H.; Lxmg, B.F.; Babb, E. M.; Beaulieu,L.J.; Moseley, A.; Mulkey, D.; and Zirnet, D. J.;“Rural Entrepreneurship: One Key to Rural Revital- 8.ization, ’ American Journal of Agricultural Eco-nomics, vol. 71, No. 5, December 1989, pp. 1305-1323.John, DeWitt, “Keys to Rural Revitalization in the1990’s: Discussion, ’’American Journal of Agricul- 9.turaZ Economics, vol. 71, No. 5, December 1989, pp.1327-1328.New Farm and Forest Products Task Force, “NewFarm and Forest Products-Responses to the Chal-lenges and Opportunities Facing American Agricul-ture,’ A Report to the Secretary of Agriculture, 10.Washington, DC, June 25, 1987.Tweeten, Luther, ‘‘The Competitive Environment forAgricultural Research and Technology Transfer,”

contractor report prepared for the Office of Technol-ogy Assessment, September 1989.U.S. Congress, General Accounting Office, U.S.Department of Agriculture: Interim Report on WaysTo Enhance Management, GAOIRCED-90-19(Gaithersburg, MD: U.S. General Accounting Office,October 1989).U.S. Congress, Office of Technology Assessment,Agricultural Research and Technology TransferPolicies for the 1990s: A Special Report of OTA’sAssessment on Emerging Agricultural Technology-Issues for the 1990s, OTA-F-448 (Washington, DC:U.S. Government Printing Office, March 1990).U.S. Congress, Office of Technology Assessment,Makhg Things Better: Competing in Manufacturing,OTA-ITE-443 (Washington, DC: U.S. GovernmentPrinting Office, February 1990).

Appendix A

Selected New Industrial Crops

Bladderpod

Scientific name: Lesquerella speciesMajor compounds produced: The seeds contain 11 to 39

percent oil of which 50 to 74 percent are fatty acidscontaining hydroxy groups. The predominant hydroxyfatty acids produced are lesquerolic acid, densipolicacid, and auricolic acid. Individual species of Lesquer-ella tend to specialize in the production of one of thethree hydroxy fatty acids to the exclusion of the othertwo. After oil extraction, a high-protein meal that isrelatively high in lysine remains.

Replacement: Imported castor oil (mainly the hydroxyfatty acid ricinoleic acid).

Major uses: Hydroxy fatty acids are used primarily inplastics. The oil from Lesquerella can be used toproduce a plastic that is tougher than those currentlyavailable.

Agronomic characteristics: Lesquerella, a member ofthe Cruciferae family, contains about 70 species and isnative to dry areas from Oklahoma to Mexico. Itproduces thick stands in the wild, is relatively tolerantof cold, and can survive with annual rainfall of 10 to 16inches (25 to 40 cm). Observed yields of species in thewild have ranged from about 979 lb/acre of seed (1 ,100kg/ha) to 2,000 lb/acre.

Technical considerations: The chemical structures of thehydroxy fatty acids produced by Lesquerella aresimilar, but not identical, to that of ricinoleic acid(castor oil). Extensive testing and evaluative studieswill need to be conducted to determine if these hydroxyacids can substitute for ricinoleic acid. About 20species of Lesquerella have been field tested inArizona. L. fendleri appears to be the most promisingfor domestication. It displays significant genetic varia-tion leading to easier selection for agronomic charac-teristics. However, L. fendleri suffers from seed dor-mancy and seed shattering, which increases researchand commercialization difficulties. The meal containsglucosinolates.

Economic considerations: Brazil and India are the majorproducers of castor beans. Between 1983 to 1986,production in those two countries has ranged from524,000 metric tons (MT) to 886,000 MT, with 1986output of 586,000 MT. This erratic production hascontributed to highly variable prices for castor oil. U.S.imports of castor oil have increased somewhat, butbecause the United States is a major purchaser, toolarge an increase in imports would significantly raisethe price. Castor oil is classified as a strategic oil andis stockpiled.

Social considerations: It is possible to grow castor beansin the United States but because of the high toxicity andallergic reactions experienced by field workers, it is notdone. No other plant tested has been found to producehigh levels of ricinoleic acid. Lesquerella is adapted todry climates and requires fertilizer levels equivalent toother alternatives that could be grown in the same area.

Extent of research conducted: Lesquerella was identi-fied early as a high producer of hydroxy fatty acids inthe Northern Regional Research Center (NRRC)screening of potential industrial plants, but onlyrecently has research interest been shown. The Agri-cultural Research Service of the U.S. Department ofAgriculture and the United States Water ConservationLaboratory in Phoenix, Arizona, have collectedgermplasm. Plant breeding to improve yields, andwater management studies are being conducted atPhoenix. Much of the research to date has beenevaluating the seeds for oil content and concentration.Some utilization research is being conducted at theNRRC in Peoria (substituting Lesquerella for ricinoleicacid). The Cooperative State Research Service (CSRS)through the Office of Critical Materials is spending$20,000 on crushing and assessment work at theNRRC.

SOURCES: 36,43,44,46

Buffalo Gourd

Scientific name: Cucurbita foetidissimaMajor compounds produced: Seeds of wild species are

21 to 43 percent oil by weight with a mean of 33percent. Some hybrids that have been developed haveseeds that are 38 to 41 percent oil with a mean of 39percent. Among the hybrids analyzed, the fatty aciddistribution was palmitic-7.8 percent, stearic-3.6 per-cent, oleic-27.l percent, and linoleic-61.5 percent.Among wild species, there is an inverse relationshipbetween linoleic and oleic acid concentration. The mealthat remains after oil extraction is about 30 percentprotein by weight. It is relatively low in lysine. Theroots contain high levels of starch. By dry weight,first-year roots are 47 to 64 percent starch, andsecond-year roots are 50 to 65 percent starch.

Replacement: Epoxy fatty acids derived from sunfloweroil, soybean oil, and petroleum. The root could be usedas a feedstock for ethanol production.

Major uses: The fatty acid distribution of the oil is verysimilar to that of sunflowers. Buffalo gourd oil could beused for the same industrial uses as sunflower andsoybean oil; it could be converted to epoxy fatty acids

–75–

76 • Agricultural Commodities as Industrial Raw Materials

and used in the plastics and coatings industry. The mealcould be used as livestock feed. The starch could beused as a feedstock for ethanol production.

Agronomic characteristics: Buffalo gourd is a wildmember of the squash and pumpkin family. It is nativeto the arid and semiarid regions of North America andcould be grown in the Ogallala aquifer region. It cansurvive in regions with as little as 6 inches (150 mm)of rain, but probably will require at least 10 inches (250mm) of water to achieve economical yield levels. It isrelatively intolerant of cold temperatures, and cannottolerate poorly drained soils. Buffalo gourd can begrown either as an annual or a perennial. Utilizing aperennial cultural system optimizes seed yield (oilproduction) and limits root (starch) yield. The annualmode of production optimizes root yield. Conservativeestimates of seed yield are 1,780 lb/acre (2,000 kg/ha).Some experimental plots using hybrids have averaged2,760 lb/acre (3,000 kg/ha) with one plot producing2,914 lb/acre (3,274 kg/ha). Starch yields of 6,061lb/acre (6,810 kg/ha) have been achieved experimen-tally.

Technical considerations: Increased yields, efficientharvesting techniques, and improved disease resistanceare needed.

Economic considerations: Fatty acids derived from theoil of buffalo gourd, like sunflowers and soybeans,must be chemically converted to epoxy fatty acids. It isthe cost of this conversion, more than the cost of the rawoil, which limits the use of natural oils to provide epoxyfatty acids. Buffalo gourd may not have an advantageover sunflower or soybean oil for these uses. As afeedstock for ethanol production, buffalo gourd mighthave potential. It takes approximately 1.8 to 1.9kilograms of starch to produce one Liter of ethanol.Therefore, it is possible to produce approximately 404gal/acre (3780 l/ha) of ethanol from the roots. It isestimated that buffalo gourd priced at about $25 per tonwould be competitive with grains for ethanol produc-tion.

Social considerations: Buffalo gourd is adapted to aridclimates and irrigation requirements are lower thanthose of many other crops which could be grown inthose regions. It provides extensive ground cover and,particularly if grown as a perennial, could reduceerosion on susceptible soils. Buffalo gourd is a plantthat might have more uses in developing countries thanin the United States. The starchy root can be dried andused as cooking fuel rather than wood, and the oil fromthe seed is edible.

Extent of research conducted: Buffalo gourd research isconducted at the University of Arizona.

SOURCES: 10,13,15,43,44

Chinese Tallow

Scientific name: Sapium sebiferumMajor compounds produced: The seeds are 25 to 30

percent hard vegetable tallow and 15 to 20 percent oil.The tallow is a single triglyceride containing palmiticand oleic acids. The oil contains oleic, linoleic, andlinolenic acids.

Replacement: Imported cocoa butterMajor uses: Potentially the tallow could be used as a

substitute for cocoa butter and the oil could possibly beused as a drying oil for paints and varnishes.

Agronomic characteristics: The Chinese tallow tree is amember of the Euphorbiaceae family and is native tosubtropical China. It currently is grown in the SouthAtlantic and Gulf Coastal Plains and in some areas ofsouthern California as an ornamental. It is best adaptedto semitropical climates. Chinese tallow is tolerant ofsalinity and can be grown on poorly draining soils.Seed production can begin in the third season of growthand yields up to 10,000 lb/acre can be achieved. Theseeds ripen in the fall. The tree can live 50 years.

Technical considerations: Need to increase yields, andutilization research.

Economic considerations: The United States imports70,000 to 80,000 metric tons of cocoa butter each year,valued at about $348 million. One study estimates apossible net return of $3,200 per hectare per year after5 years.

Social considerations: Chinese tallow will grow on moremarginal lands. Since it is a perennial and requires along time to yield, it may be more suitable to plantationtype of growth.

Extent of research conducted: The Small BusinessInnovation Research program of the National ScienceFoundation (flowering, biology, ecology, and genet-ics), the NRRC (oil characterization), and the ShortRotation Woody Crops Program of the Department ofEnergy (agronomic) have provided research

SOURCES: 29,39,46

funding.

Coyote Bush/Desert Broom

Scientific name: Baccharis pilularis (coyote bush),Baccharis sarothroides (desert broom).

Major compounds produced: Approximately 10 per-cent of the dry weight of the plant are resins.

Replacement: Wood rosinsMajor uses: Could be used in rubbers and chemicals.Agronomic characteristics: Baccharis is a member of

the Composite family. The genus consists of over 300species of dioecious, sometimes evergreen shrubs,which are native to North and South America. Thegenus contains arid-adapted species. Baccharis pilu-laris is native to Baja and southern California, where it

Appendix A--Selected New Industrial Crops ● 77

is often grown as a landscape plant. Attempts to growit in Tucson, Arizona, were unsuccessful due appar-ently to a sensitivity to high temperatures and lowhumidity in combination with overwatering. Baccharissarothroides is better adapted to the drought, heat, cold,and high salinity of its native Sonoran Desert environ-ment.

Technical considerations: Hybrids of B. pilularis and B.sarothroides have been achieved. All of the hybridplants obtained displayed pistillate (female) sexualexpression. Excess production of pappus on femaleplants is a nuisance and a fire hazard, and staminate(male) sexual expression is preferred. Research isneeded in this area as well as in the production yieldsof resins.

Economic considerations: Currently, annual U.S. pro-duction of rosin, is about 600 million pounds. Highquality wood rosin comes from aged pine stumps, butthis supply is diminishing. Tapping of live trees toobtain gum rosins is very labor intensive and expen-sive, and production from this source is also declining.Currently, U.S. production of rosins comes mainlyfrom recovery of tall oils, byproducts obtained from themanufacture of chemical wood pulp. It is estimated thatthe United States consumption of resin will be 781million pounds (355 million kilograms) by the year1990.

Social considerations: Baccharis tolerates arid condi-tions and requires less irrigation than crops that arecurrently grown in the Southwest.

Extent of research conducted: In 1975, at the Universityof Arizona, Tucson, B. pilularis and B. sarothroideswere crossed to achieve an interspecific hybrid, whichcombined the arid land adaptability of B. sarothroideswith the compact growth of B. pihdaris. The hybrid wasreleased by the University of Arizona ExperimentStation as an ornamental shrub, under the name ofCentennial.

SOURCES: 43

Crambe

Scientific name: Crambe abyssinicaMajor compounds produced: The seeds are 30 to 45

percent oil, 50 to 60 percent of which is erucic acid, aC22 monounsaturated fatty acid. After oil extraction,there remains a meal that is about 28 percent protein.

Replacement: Imported high erucic acid rapeseed.Major uses: Currently, erucic acid and its derivatives

erucamide and behenylamine are used in plastics, foamsuppressants, and lubricants. Potentially, the oil couldbe hydrogenated to yield a hard wax that could be usedin cosmetics and candles. Oxidative ozonolysis oferucic acid yields brassylic acid and pelargonic acid.Brassylic acid can be transformed into a liquid wax foruse in high-pressure lubricants and industrial paints

and, to make industrial nylons, such as nylon 1313, foruse in electrical insulation, automobile parts, and otherhigh-temperature applications. Pelargonic acid can beused in lacquers and plastics. The protein meal could beused as a livestock feed or as an adhesive for plywood.

Agronomic characteristics: Crambe is a member of theCruciferae family and is native to the Mediterraneanregion. It is planted in the spring, has a short growingseason of 90 to 100 days, and can be grown in all of the48 lower states of the United States. Crambe toleratesdry conditions well but will not tolerate heavy, wetsoils. Seed yields in experimental plots have rangedbetween 1,000 to 2,500 lb/acre, with the Meyer cultivaryielding 2,163 lb/acre. Commercial yields are expectedto be about 1,500 lb/acre. Delayed harvest can lead toseed shattering.

Technical considerations: There appears to be notechnical barriers to the direct substitution of Crambeoil for high erucic acid rapeseed oil. Crambe issusceptible to the fungus Alternaria brassicicola andturnip mosaic virus, and broadleaf weeds can be aproblem. Currently there are no herbicides approvedfor use on Crambe; approval for Treflan is beingsought. The seeds are very small and very lightweight,placing a premium on proper seed handling. Leak-proof equipment may be needed. The seeds are coveredby a hull which must be removed prior to processing.Dehulling equipment similar to that used for sunflowerseeds is needed. A lack of cold-tolerant varietiesdiminishes the opportunity to plant Crambe as a wintercrop in the Southeast. Crambe seeds can contain up to8 percent glucosinolates, sulfur-containing compoundsattached to glucose molecules, which have been linkedto thyroid disturbances, liver damage, throat abscesses,appetite depression, tongue swelling, and abortion.Meal with high levels of glucosinolates can generallybe fed to beef cattle (ruminants), but not to swine andpoultry. The U.S. Food and Drug Administration hasapproved crambe meal (obtained by solvent extraction)use in beef finishing ratios at concentrations of less than4.2 percent of the total weight of the ration.

Economic considerations: World production of rapeseedoil has increased nearly 35 percent since 1984, althoughmuch of that increase is due to canola (edible) qualityoil, and not industrial-quality oil. The current U.S.market for high erucic acid oil is approximately 40million pounds per year. Most of this oil is used toproduce erucamide, used as an antislip agent in plastics.An estimated 65,000 to 85,000 acres of Crambe isneeded to supply this market. Development of a marketfor industrial nylons made from brassylic acid isestimated to require planting of nearly 300,000 acres.

The estimated production costs per acre, in theMidwest (including land, but excluding transportationcosts beyond the farm gate and farm management andrisk charges), are $147, Crambe/winter rapeseed will


compete with winter wheat in the Plains Region. Netearnings of wheat, deficiency payments included, areabout $200 per acre. Estimated processing costs forrapeseed oil range between $0.16 and $0.31 per gallonof oil depending on seed volume and oil content,processing plant size, extraction method used, andwhether the plant was newly constructed or retrofittedto process rapeseed. Because Crambe oil content is lessthan rapeseed, and the seeds must be dehulled beforeprocessing, it is expected that processing costs forCrambe will be slightly higher than for rapeseed.

Social considerations: Crambe will grow in drier areasthan rapeseed and may therefore be more suitable forgrowth in the Plains Region of the United States.Fertilizer needs are comparable to wheat.

Extent of research conducted: Both Crambe and winterrapeseed are crops that the Office of Critical Materials(OCM) is actively trying to commercialize. Congresshas appropriated $325,000 for fiscal year 1989 to beused for this purpose. Eight States (Missouri, Kansas,New Mexico, Idaho, Iowa, Nebraska, North Dakota,and Illinois) have formed a consortium in cooperationwith the OCM to perform research necessary to lead tocommercialization. Funding by these States is esti-mated to be $2 for every $1 of Federal support.

SOURCES: 15,20,35,36,42,46,49,51,53

Cuphea

Scientific name: Cuphea speciesMajor compounds produced: The seeds are from 25 to

as much as 40 percent oil. Some species have oil thatcontains up to 80 percent lauric acid, a C 12 saturatedfatty acid. Other species contain high levels of CIO fattyacids such as capric acid. The meal is high protein.

Replacement: Imported coconut oil (lauric acid, capricacid) and imported palm kernel oil (lauric acid).

Major uses: Currently, palm oil and coconut oil are usedboth as edible oils and for industrial purposes, primar-ily in soaps and detergents (as surfactants) and inlubricants.

Agronomic characteristics: The Cuphea genus is amember of the Lythraceae family and consists ofapproximately 250 species native to Mexico andCentral and South America. One species, Cupheaviscosissima, is native to the United States. Severalspecies are adapted to temperate climates. Experimen-tal plots have yielded 250 to 2,000 lb/acre of seed (280to 2,240 kg/ha). There are both insect and self-pollinated species.

Technical considerations: The major problems are seedshattering and seed dormancy. Seed yield per se doesnot appear to be a significant problem, but because ofthe inability to retain the seeds, harvesting is difficultand yields diminished. Hundreds of populations inseveral species of Cuphea have been sampled, but so

far none have demonstrated genetic variability for seedretention. Chemical mutagenesis of seeds to inducegenetic variation for seed shattering has been at-tempted. The results have been disappointing thus far.Seed dormancy in some species has made it difficult togrow populations large enough to continue furtherevaluations. Species that are insect pollinated have longfloral tubes, which preclude access by honeybees to thenectar. Suitable insect pollinators have not been found,causing the discontinuation of research on most of theinsect-pollinated species of Cuphea. Cuphea oil iscolored, but this appears to be a minor problem that canbe alleviated during processing, if required. It is notknown whether the meal contains any antinutritionalelements that would prevent its use as a livestock feed.Because Cuphea is projected as a domestic source oflauric acid (a very well-established market), extensiveutilization research may not be necessary. If theproblem of seed shattering cannot be overcome, it isunlikely that Cuphea could be commercialized.

Economic considerations: Coconut oil is the majorsource of lauric acid, but over time, it has been losingmarket share due to erratic supplies caused by adverseweather conditions and declining productivity of agingcoconut plantations in the Philippines. Some new,higher yielding varieties of coconut palms have beendeveloped and are beginning to be planted. It isexpected that when these trees mature, coconut oilproduction will increase. An alternative source of lauricacid is palm kernel oil from Malaysia and Indonesia.Production of both palm oil and palm kernel oil isincreasing and potentially could increase significantlymore, largely due to increased planting of new varietiesof the African palm, which produce high yields of oil,can be grown in marginal lands, and are highly resistantto pests and diseases. It is expected that supplies ofpalm oil and palm kernel oil will increase substantiallywhen these new varieties mature. The increased pro-duction of palm kernel oil coupled with coconut oil isexpected to double the supply of lauric acid oils by1995.

Currently the United States uses about 650 millionpounds of tropical (palm, palm kernel, and coconut)oils for food uses (about 5 percent of the U.S. edible oilmarket). This level of use is about 35 to 40 percent ofthe total U.S. imports of tropical oils; the remainingimports are for industrial uses. Europe consumes higherlevels of tropical oils for food uses than does the UnitedStates; increased consumer concern over saturated fatsin Europe could potentially decrease European de-mand. Industrial uses will need to increase significantlyto prevent a worldwide glut of lauric acid oils, if supplyof palm kernel and coconut oil continues to increase,while the demand for edible uses of these tropical oilsdecreases.

Appendix A-Selected New Industrial Crops ● 79

Oversupply would result in depressed prices forthese oils and for potential domestic substitutes such asCuphea. Higher lauric acid yields for Cuphea (80percent) than for coconut oil (40 to 45 percent) mayresult in a premium for Cuphea oil. However, highertransportation and processing costs might offset someof this premium if Cuphea is grown in the Northwest.An alternative option for commercialization of Cupheamight be to be to develop the species that are high incapric acid instead of those high in lauric acid. Coconutoil contains only 3 to 7 percent capric acid. Althoughthe market for capric acid is smaller than for lauric acid,capric acids fetch higher prices. Thus, varieties higherin capric acid might be more attractive.

Social considerations: Cuphea is intended to be animport substitute for tropical oils (coconut and palmkernel oil). These crops are major exports of Indonesia,Malaysia, and the Philippines, developing countriesthat are of some strategic importance to the UnitedStates. The possible impact that loss of these marketsmight have on the economic stability of these countriesis not well-understood.

Extent of research conducted: Early research on Cupheawas conducted at the University of Gottingen inGermany. Beginning in 1983, breeding, genetics, andagronomy research was undertaken in the UnitedStates. Initial germplasm collections (267 accessions)were made at the USDA/ARS Water Conservation Labin Phoenix, Arizona. Currently, the germplasm pro-gram has been moved to the ARS Laboratory in Ames,Iowa, and has been expanded to include accessionsfrom 50 to 60 Cuphea species. A germplasm collectionexpedition to South America is being planned. Inaddition to germplasm collection, researchers at Ames,in conjunction with Iowa State University, are attempt-ing to improve the nutritional content of Cuphea seeds.There may be some potential to use these seeds as foodsupplements for infants and the elderly. Researchers atOregon State University are attempting to developcultural management practices, prevent seed shattering,and increase the lauric acid content of the oil. Somefinancial support for Cuphea research at Oregon StateUniversity is being provided by the Glycerine andOleochemical Division of the Soap and DetergentAssociation. The USDA is contributing approximately$100,000 to the project. Some research is conducted atthe ARS Laboratory at Tifton, Georgia, to improveagricultural and management practices, and some workis being conducted at ARS Laboratory in Phoenix,Arizona, to develop hybrids. It is estimated that thereare approximately four scientist-years total beingdevoted to Cuphea research, Research hours are beingallocated among three USDA/ARS positions (one eachat Ames, Iowa; Phoenix, Arizona; and Tifton, Georgia)and three research positions at Oregon State University.

SOURCES: 3,12,21,22,34,36,38,44

Guar

Scientific name: Cyanopsis tetragonoblaMajor compounds produced: The seeds produce a gum.

The meal is 35 to 50 percent protein, which containstoxins and is low in lysine.

Replacement: Imported guarMajor uses: Currently used as a strengthening agent in

paper, and as a stabilizer in cosmetics, ice cream, saladdressings and oil-drilling muds.

Agronomic characteristics: Guar is a leguminous herbthat grows well in semiarid regions, and can be grownin areas of the Southwestern U.S. It tolerates alkalineand saline conditions, and when it receives sufficientrain (15.7 to 35.4 in or 40 to 90 cm) yields of 625 to 805lb/acre (700 to 900 kg/ha) seed can be obtained. Guardoes not tolerate cold. The growing season ranges from105 to 150 days. The plant itself could be used forforage.

Technical considerations: A major difficulty with guaris its susceptibility to a variety of pests and diseasesincluding the fungus Alternaria, the bacteria Xantho-monas, and root knot nematodes. There is also a needto improve yields.

Economic considerations: U.S. imports of guar seedshave been decreasing. This decrease may be in partbecause production of guar is already occurring in theUnited States and production needs of the country maybe close to being met. There may not be a need forexpansion of guar production, unless export markets ornew uses can be developed. (See table D-5 in app. D forUs. imports of guar.)

Social considerations: Guar is a legume and has nitro-gen-fixing qualities.

Extent of research conducted: Not extensive.

SOURCES: 43

Guayule

Scientific name: Parthenium argentatumMajor compounds produced: Guayule produces a

high-molecular-weight rubber and resins that are ex-tracted from the whole plant.

Replacement: Imported Hevea rubber and syntheticrubber

Major uses: High-molecular-weight rubber is particu-larly valuable in uses which require elasticity, resil-ience, tackiness, and low heat buildup such as in tires;resins can be used in the chemical industry; extractionresidues could potentially be used as livestock feed.

Agronomic characteristics: The genus Parthenium in-cludes 17 species, all native to North or South America.Both annuals and perennials are known. Guayule is themost studied species. It is native to the Chihuahuadesert region of the Southwestern United States and


Northern Mexico and produces a high-quality rubbersimilar to Hevea. In wild stands, rubber percentageshave ranged between 3.6 and 22.8 percent of the dryweight, and resin yields have ranged between 2.5 and9.8 percent by dry weight of plant tissue.

Technical considerations: The major difficulty withguayule is the yield of rubber. Rubber accumulationseems to be a factor of geoclimatic conditions, withwater and temperature stress stimulating rubber pro-duction. Recently researchers have found the enzyme(rubber polymerase) responsible for synthesizing rub-ber. This enzyme can be stimulated to produce higherlevels by spraying certain chemicals on its leaves, sosome of the yield problems might be overcome.

Guayule has been crossed with other species ofParthenium, most notably with P. fruticosum, to obtaina hybrid. The hybrid contained a lower percentage ofrubber than guayule, but the biomass of the hybrid washigher than that of guayule, indicating that total rubberproduction of the hybrid might be greater than forguayule. In addition, high-molecular-weight rubber(high-quality natural rubber) dominates low-molecu-lar-weight rubber, indicating that the hybrid canproduce high-quality natural rubber. Successive gener-ations of crosses, however, displayed decreasing seedgermination percentage. Improving seed germinationand direct seeding procedures are needed.

Guayule differs from both Hevea and other latex-producing plants in that the rubber is contained insingle thin-walled cells located on the stems andbranches of the shrub. This results in the need for aphysical or chemical separation of the rubber fromother components in the harvested shrub. Excessivehandling results in decreased rubber quality. Improve-ments are needed in harvesting technology. In additionto problems of yield, large-scale testing of the high-molecular-weight rubber in tires is needed, and uses forcoproducts, low-molecular-weight rubber, and otherchemical components need to be developed.

Economic considerations: Guayule is intended to re-place natural rubber imports from Asia, primarily fromMalaysia and Indonesia. From 1983 to 1987, U.S.imports of rubber have averaged 777,000 metric ton peryear, and price per pound was about $0.39. It isestimated that for guayule to be competitive withnatural rubber, prices for rubber must double, orguayule yields must increase to about 1,200 pounds ofrubber per acre. Markets for byproducts also must befound, and production and processing costs must belowered by at least one-third their present levels. Thesechanges are expected to result in a positive cash flowfor farmers and to make guayule competitive withnatural rubber, but they may not necessarily makeguayule competitive with other crops that could begrown.

Social considerations: Guayule tolerates arid conditionsand requires less irrigation than crops that are currentlygrown in the Southwest. Guayule appears to be moresuited to large scale production than production onsmall farms. Because of the volume involved, thespecial processing needs, and the fact that naturalrubber is a strategic material, guayule may requirebuilding new processing plants, which would createnew jobs.

Extent of research conducted: Guayule has been usedfor centuries by native Americans, and by 1910,guayule provided 10 percent of the world’s supply ofnatural rubber. From 1910 to 1946, the United Statesimported approximately 68 million kg of guayulerubber from Mexico. During World War II, interest inresearch and development of guayule rubber was highin the United States. However, after the war ended,shipments of Hevea rubber from Asia resumed, syn-thetic rubbers were developed, and interest in guayulewas severely dampened.

U.S. interest in guayule was revived in the 1970s,and in 1981, the Department of Defense (DoD)guaranteed a $20 million loan to the Gila River IndianCommunity (GRIC) to grow several hundred acres ofguayule, develop a prototype rubber-processing plant,and develop rubber to be tested. Due to severalproblems encountered by GRIC, USDA took over theproject in 1986. The GRIC continued to grow theguayule, and the Firestone Rubber & Tire Co. wascontracted to build an $8.3 million prototype process-ing plant. The plant was scheduled to begin operationsin August of 1989, following a 16-month delay due tosolvent leaking into the atmosphere. The pilot-plantsize is about 150 ton/yr and will provide rubber forDoD testing and coproduct research. The plant isintended to process 275 acres of guayule into 50 tonsof natural rubber, 100 tons of resins and low-molecular-weight rubber, and 1,600 tons of plant residue. Thereare approximately 300 acres of guayule available forprocessing, but rubber yields may be low because theplants ideally should be harvested at 3 to 5 years of ageand they are now 9 to 10 years old.

Agronomic and breeding research is being con-ducted at the University of Arizona, University ofCalifornia-Riverside, Texas A&M University, andNew Mexico State University. Coproduct research isbeing conducted by the Institute of Polymer Science atthe University of Southern Mississippi. Investmentsbetween 1978 and September 1986 have been about$31.9 million, with the DoD providing $13.1 million,USDA providing $13.2 million, other Federal agenciesproviding $2.9 million, and the Firestone Tire & Co.providing $2.7 million. Investments for 1987 to 1988were $19.3 million, with $15 million from DoD and therest from USDA. Funding for fiscal year 1989 includes$500,000 for breeding and genetics being administered

Appendix A-Selected New Industrial Crops ● 81

by the ARS, and another $668,000 in Native LatexGrants being administered by CSRS. The Latex Grantsare being spent as follows: $240,000 for breeding andgenetics research, $160,000 for germplasm collectionand research, $150,000 for coproduct research, and$138,000 for unspecified research. It is estimated thatabout $38 million will need to be spent between 1989and 19% to establish a domestic natural rubberindustry.

SOURCES: 2,26,28,32,34,46,47

Gumweed

Scientific name: Grindelia camporumMajor compounds produced: Diterpene resins, similar

to pine resins, can be extracted from the entire plant.The major resin is grindelic acid and its derivatives.Approximately 5 to 18 percent of above-ground dryweight are crude resins with highest concentration inthe flowers. After extraction, the bagasse residue isnontoxic and contains 8 to 10 percent protein.

Replacement: Pine resinsMajor uses: The resins are used in the naval stores

industry (generic name for large class of chemicalsincluding turpentine and wood rosins). Uses for theseresins include adhesives, varnishes, and paper sizings.The residue could be used as livestock feed.

Agronomic characteristics: Grindelia (a member of theComposite family) consists of about 195 species ofherbs and shrubs native to North and South America.Many of the species are found in the SouthwesternUnited States. Commonly called gumweed, the genusconsists of annuals, biennials, and perennials.Gumweed is xerophytic and halophytic. It is mostactive during hot rainless summer months and canflower and produce two crops in a single growingseason. It is probably unsuitable to the cooler climatesand shorter growing seasons found in more humidregions of the United States. The species most studiedis Grindelia camporum, a native of the Central Valleyin California. Gumweed needs about 30 in (67.5 cm) ofprecipitation to produce reasonable yields. Yields inexperimental plots have been about 2.2 to 2.5 tons ofbiomass per acre and up to 5 tons/acre if harvestedtwice.

Technical considerations: Grindelia are naturally out-crossing species and are self-incompatible. Geneticselection for traits in outcrossing species often resultsin problems of inbreeding depression. With Grindelia,it maybe possible to increase resin yields, but it wouldbeat the expense of biomass, resulting in a total resinyield that is not significantly higher. Increased yieldswill be necessary for commercial feasibility, but maybe difficult to obtain.

Economic considerations: Currently, U.S. production ofrosin is about 600 million pounds. High-quality wood

rosin comes from aged pine stumps, but this supply isdiminishing. Tapping of live trees to obtain gum rosinsis very labor intensive and expensive, and productionof gum rosins from this source is declining. Currently,U.S. production of rosins comes mainly from recoveryof tall oils, byproducts obtained from the manufactureof chemical wood pulp. It is estimated that U.S.consumption of resins will be 781 million pounds (355million kg) by the year 1990.

The estimated cost of growing Grindelia is about$380 per acre. This includes 30 inches of irrigation, aquantity lower than the requirements of currentlygrown crops in the production region. If the crop isharvested twice, approximately 5 tons of biomass peracre per year could be achieved. Assuming a doubleharvest and a processing cost of $35 per ton, the totalcost of production is estimated to be $555 per acre.Given a resin content of 10 percent, the break-even costwould be about $0.56 per pound. The current cost ofwood rosin is about $0.40 per pound. The cost of theGrindelia resin is higher than wood rosin. Grindeliaresin also is of a lower quality than wood rosin andwould have to be further refined to be similar in quality.To achieve economic feasibility, yields will need to behigher, production costs lower, and uses for the bagassebyproduct, perhaps as livestock feed, would be needed.

Social considerations: Grindelia tolerates arid condi-tions and would require less irrigation than crops thatare currently grown in the Southwest.

Extent of research conducted: The National ScienceFoundation funded the collection and evaluation of 10to 15 species of Grindelia from the SouthwesternUnited States. In 1982, a population of 300 plants wasstarted at the University of Arizona’s BioresourcesResearch Facility in Tucson. Private-sector fundingfrom the Diamond-Shamrock Corp. and from Hercules,Inc. has supported product evaluation and developmentresearch at the University of Arizona.

SOURCES: 16,25,29,44

Honesty (Money Plant)

Scientific name: Lunaria annuaMajor compounds produced: The seeds are 30 to 40

percent oil, and contain approximately 48 percenterucic acid, 24 percent C24 fatty acids, 18 percent oleicacid, (all monounsaturated) and 10 percent other fattyacids. The meal is high protein.

Replacement: Imported industrial rapeseed.Major uses: Currently, erucic acid and its derivatives

erucamide and behenylamine are used in plastics, foamsuppressants, and lubricants. Potentially the oil can behydrogenated to yield a hard wax, which could be usedin cosmetics and candles. Oxidative ozonolysis oferucic acid yields brassylic acid and pelargonic acid.Brassylic acid can be transformed into a liquid wax for

292-865 0 - 91 - 4 QL:3


use in high-pressure lubricants and industrial paints,and it can be used to make industrial nylons, such asnylon 1313, for use in electrical insulation, automobileparts, and other high-temperature applications. Pelar-gonic acid can be used in lacquers and plastics. Theprotein meal could be used as a livestock feed or as anadhesive for plywood.

Agronomic characteristics: Honesty is a member of theCruciferae family and consists of both annual andbiennial varieties. Initiation of flowering requires longdaylight hours in the annual varieties and cold wintersin the biennials. Seed yield estimates are unavailable.

Technical considerations: This plant is still essentiallya wild plant and an extensive breeding effort is neededbefore commercialization could even be contemplated.The meal contains glucosinolates which have beenlinked to several physiological problems.

Economic considerations: The potential oil markets areessentially the same as for Crambe and winter rapeseed(i.e., 40 million pounds of high-erucic acid oils used toproduce primarily erucamide).

Social considerations: It is a perennial that providesground cover and potential protection against erosion.

Extent of research conducted: Most research to date hasbeen at the Saskatchewan Research Council in Canada.

SOURCES: 21,22,36,46

Jojoba

Scientific name: Simmondsia chinensisMajor compounds produced: The seeds contain 45 to 55

percent oil, 95 percent of which is in the form of linearwax esters (fatty acids connected directly to fattyalcohols instead of to glycerol or glycerides). Eighty-seven percent of the fatty acids are of chain length 20or 22 (eicosanoic acid is C20 and docosanoic acid isC22), and there are small quantities of palmitoleic acid(C18) and oleic acid (C16). The fatty acids are mono-unsaturated. The meal that remains after oil extractionis about 30 percent protein, reasonably high in lysine,and deficient in methionine.

Replacement: Banned sperm oil and possibly petroleum-derived products.

Major uses: Currently, jojoba oil is being used in thecosmetics industry in a variety of uses ranging fromshampoos to moisturizers, lipsticks, and shavingcreams. It is apparently non-toxic and does not causeeye irritations. Isomerization of jojoba oil yields a softopaque cream resembling face creams.

Hydrogenation produces a crystalline solid, whichhas properties resembling beeswax, candelilla, car-nauba, and spermaceti, all waxes that are commerciallyused now. Crystallographically, hydrogenated jojobaoil is similar to polyethylene and can be combined witheither polyethylene or polypropylene or both to yieldmixed plastics that have lower melting points and are

harder than the pure plastic, plus still retain the tensilestrength of the pure plastic.

Sulfurized jojoba oil is similar to sulfurized spermoil and could potentially be used as a high-pressurelubricant. A major difficulty is that it solidifies attemperatures below 50 0F (10 ‘C) limiting it tohigh-temperature applications. Before being banned,sperm oil was used to prevent foaming in industrialfermentation processes, such as the production ofpenicillin G. Jojoba oil also has antifoaming propertiesand could potentially be used in similar processes.Reactions of jojoba oil with sulfur chloride formsfactice, which is used in manufacturing varnishes,adhesives, printing ink, and flooring materials.

Jojoba waxes could possibly be used in floorfinishes, coatings, furniture polishes, candles, soaps,crayons, and so forth. The seeds contain tannins thatcould potentially be extracted and used in the leatherindustry.

Agronomic characteristics: Jojoba is an evergreennative to the Sonoran Desert region of the Southwest-ern United States and Mexico. It appears to live at least40 years. Latitude and day length do not appear to belimiting factors. Jojoba can grow with 8 to 18 inches(20 to 46 cm) of annual precipitation, but for economicproduction, jojoba should receive 18 to 24 inches (46to 61 cm) of precipitation, which might requireirrigation. It requires porous soil with good drainageand will not tolerate water logging. Jojoba grows insoils ranging from pH 5 to 8 and appears to be tolerantof salinity. In the wild state, jojoba plants are associatedwith a symbiotic fungus (Glomus deserticola) found inthe roots. It is thought that this fungus aids in the uptakeof phosphorus, zinc, copper, and other elements.Current average seed yields are approximately 200pounds/acre (224 kg/ha) from 4-to 5-year-old-shrubs,and 3,000 pounds/acre (3,360 kg/ha) from 11- to12-year-old shrubs. Approximately 2.5 pounds (1.1 kg)of seed are needed to produce 1 pound of oil.

Technical considerations: Jojoba bushes are either maleor female and are wind pollinated. However, male andfemale plants cannot be identified until first flowering,which takes 1 to 4 years. During the first few years,continual removal of male plants and replanting offemale plants is needed. This can cause fields to benonuniform and creates problems with harvesting.Today, most new fields are planted from cuttings ortissue cultures rather than seeds, which helps to reduceor eliminate the problems of identifying males andfemales. Flowering is triggered by cold or droughtstress. A cool fall, followed by a warm wet winter cancause early flowering. If the weather then turns cold (250F or lower during the blooming season of January to

March), the crop could be lost. Jojoba can tolerate hightemperatures (greater than 100oF), but not prolongedtemperatures of below 23 OF. Weed control appears to

Appendix A--Selected New Industrial Crops . 83

be more of a problem than pests and diseases, but asmore plants are planted over larger geographic areas,some pest and disease problems are beginning to occur.A major cost associated with jojoba is harvesting.Seeds on the same bush do not ripen at the same timerequiring multiple harvests. The meal contains sim-mondsins and tannins which are unpalatable to live-stock and potentially toxic. Utilization research per-formed has been experimental; to be accepted forindustrial uses, full-scale utilization research must beperformed. Yields need to be improved.

Economic considerations: Currently, the United Statesplants nearly 42,000 acres to jojoba and producesbetween 100 to 300 tons of jojoba oil per year. TotalU.S exports have been 70 MT in 1985, 134 MT in 1986,and 124 MT in 1987. Japan imports approximately 100tons and West Germany and the Netherlands togetherimport another 100 tons for use in the cosmeticsindustry. Value of exports per pound have been steadilydecreasing from approximately $8.50 in 1985 to about$6.50 in 1987.

Social considerations: Jojoba grows in arid regions andrequires minimal irrigation. Since it is perennial withlong payoff times for investment, it may be bettersuited to large-scale production than small-farm pro-duction.

Extent of research conducted: Research on jojoba isconducted at university and ARS labs in the Southwest,particularly the Arid Land Studies at the University ofArizona.

SOURCES: 11,14,29,30,36

Kenaf

Scientific name: Hibiscus cannaabinus L.Major compounds produced: The plant produces a fiber

with a cellulose content similar to wood but lower inlignin.

Replacement: Wood pulpMajor uses: Potential uses for kenaf include newsprint,

carpet padding, paper for use in stamps, money,magazines, poultry litter, and cardboard. Green,chopped kenaf can be fed as forage.

Agronomic characteristics: Kenaf is an annual, non-wood fiber plant native to east-central Africa. It growsto heights of 12 to 18 feet in approximately 150 days.It can yield between 6 and 10 tons of dry matter peracre. Seed germination requires soil temperatures of atleast 55 ‘F. It is somewhat tolerant of saline conditions.Rainfall of about 5 inches is needed shortly aftergermination to ensure good growth, but after that, kenafis relatively tolerant of dry conditions.

Technical considerations: Weeds generally are notconsidered a problem because of kenaf’s rapid emer-gence and growth; the dense populations needed resultin shaded ground conditions. However, favorable

conditions are needed to promote this rapid growth, andpre-emergent herbicides maybe needed. Kenaf thrivesin high temperatures when abundant soil moisture isavailable, however, it will not tolerate standing wateror water-logged soils. The most serious pest kenaf facesis root nematodes. Most kenaf cultivars are photoperiodsensitive and do not flower until day length decreasesto about 12.5 hours of light in the fall. Kenaf mayrequire nitrogen, phosphorus, potassium, and calciuminputs. In very dry areas, some irrigation may beneeded.

In the Southern Rio Grande Valley, initial experi-ences indicate that rain-fed kenaf produces about 75percent of irrigated yields. Research to improve har-vesting equipment is needed. Development of uniformsize and shape is still needed. Storage needs to beimproved. The system envisioned is a cross betweenthat used for wood chips and that used to store bagasse.Because of heat buildup, added attention must be paidto air circulation and/or water cooling.

Major research is still needed to develop productsthat use kenaf. It has been shown that kenaf can be usedto make newsprint. The newsprint made from kenaf isgenerally whiter and stronger than paper made fromwood pulp, and it does not yellow as badly. Kenaf canbe converted to pulp under high temperature andpressure. Making newsprint from kenaf requires fewerchemicals and about two-thirds the energy needed tomake wood pulp newsprint. Kenaf newsprint uses lessink and does not smudge as much as wood pulpnewsprint. Kenaf improves the strength and brightnessof recycled paper.

Economic considerations: The United States importsapproximately 7 million tons (60 percent of total use)of newsprint a year at a cost of about $4 billion.Constructing this much production capacity wouldrequire a large capital investment as it costs approxi-mately $400 million to erect a 600 ton/day capacityplant, which would produce about 0.2 million tons ofnewsprint per year.

New technologies are opening the way for trees notpreviously used for newsprint (i.e., aspen and fast-growing eucalyptus) to now be converted to newsprint.Increased recycling of newsprint will require less newwood pulp. Additionally, paper mills are accustomed toworking with year-round crops, such as trees, and havelarge investments in forests. Because of high transpor-tation costs, paper mills generally process material inthe immediate area. Utilizing a seasonal crop such askenaf presents problems. Failure of a kenaf crop couldresult in high transportation costs to supply adequateprocessing materials. The potential for crop failure willplace a higher priority on storage facilities, whichincreases the costs of using kenaf.

Kenaf can be used as a supplement to pine for pulpmills already in existence. It is estimated that it will cost


approximately $10 million to install equipment neededto utilize kenaf in conjunction with softwood orrecycled newsprint pulp at current mills. For kenaf tosupply the entire U.S. newsprint market of 12.5 milliontons of newsprint per year, approximately 1 millionacres would need to be planted to kenaf.

Uses other than newsprint need to be found. Sincenewsprint represents about 7 to 10 percent of the pulpand paper industry, there are likely many otheropportunities that could potentially be developed. Inaddition to uses as paper and cardboard, kenaf couldpotentially be used as poultry litter (broiler producersspend about 0.3 cents per pound live weight on litter,and in 1987, poultry production was about 21.5 billionpounds).

Production costs for kenaf average about $20 to $30per ton, and the cost of harvesting is about $10 to $15per ton. Currently it is anticipated that farmers will becontracted to grow kenaf and that harvesting will becustom done because of requirements for cleanliness ofthe product. Kenaf is expected to sell for $50 to $60 perton. Comparison of estimated returns of kenaf and othercrops in Georgia indicate that kenaf (both irrigated andnon irrigated production) is expected to have lower netreturns than tobacco, cotton, and peanuts (irrigated andnonirrigated) and higher net returns than sorghum,wheat, and oats (irrigated and nonirrigated). Nonirri-gated kenaf is expected to have slightly higher netreturns than nonirrigated corn, but irrigated kenaf isestimated to have lower net returns than irrigated corn.In the Rio Grande Valley region of Texas, kenaf is morecompetitive with other crops, particularly the grains.Deficiency payments for cotton decrease the competi-tiveness of kenaf, but nevertheless, it is felt that themost likely area for initial production of kenaf on acommercial basis will be in Texas.

Social considerations: There is potential for some newmills to be built, particularly if production occurs inTexas, and this has the potential to create new jobs andeconomic activity in those areas. Kenaf stalks areharvested free of leaves, with the leaves remaining inthe field. This could result in 1 to 2 tons of dry leafmatter, which is rich in nitrogen, left on the field.Potentially, 60 to 120 pounds of nitrogen per acre couldbe returned to the soil in the form of organic matter.

Extent of research conducted: Research on kenaf beganin 1956 at the Northern Regional Research Center inPeoria, Illinois (an ARS lab). Over 500 fiber crops werescreened, and kenaf was selected as the most promisingfor further research. In 1978, ARS dropped its researchprogram on kenaf with the hope that private industrywould continue the research since it had been shownthat newsprint could be made from kenaf.

The American Newspaper Publishers Associationdid continue some research and began commercial runsof newspapers printed on kenaf paper. The kenaf

demonstration project was begun to commercializekenaf. The ARS and the CSRS in cooperation withKenaf International, Canadian Pacific Forest Products,and CE Sprout-Bauer Co. joined to form the JointKenaf Task Force (JKTF). Phase I of the demonstrationproject began in 1986 with the USDA providing$141,000 and the JKTF members providing $263,000for growing, harvesting, fiber handling, pulping, andpapermaking trials. Phase II was begun in 1987 andundertook commercial trials. The estimated cost to theJKTF was $644,000, with the USDA providing$300,000 of that support. Phase III is currentlyunderway and involves agricultural research and re-search to develop additional uses for kenaf.

Congress appropriated $675,000 in funds for fiscalyear 1989. The money is being spent as follows:$150,000 each to the ARS labs in Weslaco, Texas, andLane, Oklahoma; $75,000 to Mississippi State Uni-versity; $300,000 administered by the CSRS for fiberseparation ($200,000), harvest system modification($20,000), dry-form fruit boxes ($50,000), recyclingresearch ($20,000), and poultry litter research ($10,000to Texas A&M). The Kenaf Paper Co. of Texas(consisting of Kenaf International, Bechtel Enterprises,Inc., and Sequa Capital Corp.) has begun constructionon a $35 million plant in Willacy County, Texas. Theplant will handle 84 tons/day, produce approximately30,000 tons of newsprint annually, and require 4,500acres of kenaf. The plant is expected to begin fulloperation is 1991 and to employ about 160 people.

SOURCES: 4,7,9,23,24,29,41,45,46,48,54

Meadowfoam

Scientific name: Limnanthes speciesMajor copounds produced: The seeds are 20 to 30

percent oil, containing 90 percent C2O and C22 fattyacids, which are primarily monounsaturated. Of thediunsaturated fatty acids, the double bonds are widelyseparated, which potentially leads to greater stability.The meal is high protein.

Replacement: Products derived from petroleum.Major uses: Currently, Japan imports the oil for use in

cosmetics. Potentially, the oil can be converted toliquid wax esters, which can be used in lubricants.Reacting the oil with sulfur yields factice, a solidchemical rubber. Meadowfoam could potentially be asource of suberic acid, which is currently obtained fromcastor oil.

Agronomic characteristics: Meadowfoam is native tothe Pacific Coast Region of North America.. It is plantedin the fall and harvested in June or July. Meadowfoamis best suited to mild climates; seed germination occursin soil temperatures that range between 40 and 60 oF.Some meadowfoam species are insect-pollinated,while others are self-pollinated.


Technical considerations: Self-pollinated meadowfoamspecies are generally agronomically preferable, how-ever those that have been examined have given loweryields and display less genetic variation than insect-pollinated species. No suitable self-pollinated specieshave been found, thus attention is focused on insect-pollinated species, such as Limnanthes alba, whichdisplays genetic variation for seed retention. Seedshattering is a serious problem with several species.Cool, wet weather may decrease insect activity, de-creasing pollination. Yields need to be improved toincrease commercial potential.

The major constraint for meadowfoam is the lack ofa well-defined market. The fatty acids found inmeadowfoam oil are not a replacement for any fattyacids currently being used. Initial tests of use inlubricants have revealed problems of corrosion, foam-ing, and wear scarring. Extensive utilization research isneeded to develop meadowfoam. The meal containsglucosinolates, which causes physiological problemswhen ingested. The oil is colored and needs to becleaned, when desired. The lack of a large germplasmcollection has limited research.

Economic considerations: Limited attempts to growmeadowfoam commercially have been made. In 1986and 1987, approximately 1,000 acres of the meadow-foam variety Mermaid were planted in Oregon. Due tothe lack of appropriate processing facilities, the seedswere shipped to Lubbock, Texas, for oil extraction,then shipped to California for export to Japan.

In 1985 to 1986, the Oregon Meadowfoam GrowersAssociation sold 12 tons of oil to Nikko Chemical Ltd.of Japan. An additional 3 tons of oil was shipped to thesame company in 1986 to 1987. Croda, Japan, an oil,fats, and chemical supplier has also purchased approx-imately 3 tons of meadowfoam oil. In February 1989,Croda, Japan received permission from the JapaneseMinistry of Health and Welfare to use meadowfoam oilin cosmetics. Toxicology and skin-sensitivity testshave been performed in the United States, and no majorproblems have thus far been encountered.

Farmers appear unwilling to grow meadowfoam ifthere is no well-defined market, and manufacturers areunwilling to reformulate their procedures if there is nota consistent high-quality supply. In addition to theamounts of oil exported to Japan, samples have beensent to Canadian firms and the European EconomicCommunity for market development. Currently theOregon Meadowfoam Growers Association has a 1year stock of oil and seeds on hand.

Total processing and transportation costs are $0.55per pound of oil (compared with about $0.03 per poundfor soybean oil). Production costs were about $440 peracre.

Social considerations: Different species of Limnanthesare adapted to poorer soils and some act as xerophytes

and require less water than other grains grown in thesame area.

Extent of research conducted: Most of the industrialapplication research is performed at the NorthernRegional Research Center in Peoria. Researchers atOregon State University are working on varietalimprovement and commercial development. The ARSis spending approximately $350,000 on meadowfoamresearch at Peoria and Oregon State.

SOURCES: 5,22,31,36,43,46

Milkweed

Scientific name: Ascelepidaceae genusMajor compounds produced: Latex can be extracted

from the whole plant. The latex produced is mainlycardiac glycosides, which are generally cytotoxic andaffect the heart, lungs, kidneys, gastrointestinal tractand brain. Nonpolar (hexane) extracts constitute about4 percent of the above-ground dry weight and consistprimarily (85 percent) of triterpenoids and derivativesand 2 percent natural rubber. Polar (methanol) extractsaccount for about 18 percent of the dry weight andcontain primarily sucrose (34 percent), polyphenolics(6 percent) and inositol (5 percent). The remainingresidue after extraction contains pectin and is about 16percent protein. The protein content of the residue iscomparable to that of alfalfa, and contains high levelsof lysine, but also contains toxic constituents.

Replacement: Petroleum-derived productsMajor uses: The latex can be used in glue and chewing

gum. The floss fiber can potentially be used to replacegoosedown.

Agronomic characteristics: The Asclepiadaceae genuscontains about 140 species. Most of the species nativeto North America are perennials, although a fewannuals are known. Asclepias curassavica is planted asan ornamental plant in semitropical and semiaridregions. Asclepias speciosa (showy milkweed) iswidely tolerant of habitat and could be grown in theUnited States in most of the area west of the MississippiRiver. It produces more latex than A. curassavica.

Technical considerations: A major difficulty with estab-lishing millkweed is that of weed control. During theseedling stage, much energy is devoted to root estab-lishment which aids in drought tolerance but results inthe slowly growing, above-ground portion being non-competitive with faster growing weeds. The averageyields of the test plots were about 4.3 MT/ha, butincreasing the planting density is expected to increaseyields to about 7 to 9 MT/ha. Outdoor, uncoveredstorage resulted in a significant decrease in methanol(polar) extractable compounds, but the nonpolar (hex-ane) compounds remained stable. Better storage meth-ods resulted in little loss of either extractable.


Economic considerations: Experimental plots of milk-weed, using wild milkweed seed, had variable produc-tion costs of $169 per acre ($418 per hectare). Highestexpenditures were for weed control. Reduction in thecosts of weed control would significantly reduceproduction costs. In addition, harvesting costs werehigh, but could potentially be lowered by growing onlarger plots to take advantage of economies of scale formachinery. Both pectin and inositol are high-valueproducts produced by milkweed, but extraction andpurification is expensive and not commercially com-petitive at the present time.

Social considerations: Milkweed is itself considered aweed and production may need to be carefully managedto prevent it from becoming a pest.

Extent of research conducted: Native Plants, Inc.conducted some initial research on milkweed, but hasdiscontinued research. The University of Nebraskaconducts research on the fiber floss,

SOURCES: 1,52

Rapeseed

Scientific name: Brassica napusMajor compounds produced: The seeds are approxi-

mately 42 percent oil, of which 45 to 57 percent iserucic acid. The remaining meal is high protein.

Replacement: Imported industrial rapeseed.Major uses: Currently, erucic acid and its derivatives

erucamide and behenylamine are used in plastics, foamsuppressants, and lubricants. Potentially, the oil couldbe hydrogenated to yield a hard wax, which could beused in cosmetics and candles. Oxidative ozonolysis oferucic acid yields brassylic acid and pelargonic acid.Brassylic acid can be transformed into a liquid wax foruse in high-pressure lubricants and industrial paintsand, can be used to make industrial nylons, such asnylon 1313, for use in electrical insulation, automobileparts, and other high-temperature applications. Pelar-gonic acid can be used in lacquers and plastics. Theprotein meal could be used as a livestock feed, or as anadhesive for plywood.

Agronomic characteristics: Rapeseed is a member of theCruciferae family. It can be grown either as a winter ora spring crop and potentially could be double croppedin the Southeast and southern Midwest regions. Gener-ally, it can be grown anywhere that spring and winterwheat is grown. Rapeseed cannot tolerate extreme cold,and the winter varieties have a restricted plantingperiod. The seedlings must be 2 to 3 inches high beforethe first frost if they are to survive. Rapeseed does nottolerate poorly drained soils; high rainfall can reduceyields. Expected average commercial yields of winterrapeseed are about 2,000 lbs/acre under drylandconditions and about 3,000 lbs/acre when irrigated.

Spring variety yields are about one-half that of thewinter varieties,

Technical considerations: Two types of rapeseed can begrown: industrial-quality rapeseed and food-qualityrapeseed. Food-quality rapeseed is marketed as Canolaoil and generally contains less than 2 percent erucicacid, while industrial-quality rapeseed generally con-tains at least 40 percent erucic acid. Canola-quality rapeand industrial-quality rape cross pollinate resulting ina hybrid that is visually indistinguishable from theparents, but that contains an intermediate level of erucicacid (too high for food uses and too low for industrialuses). Production of the two types of rapeseed must bephysically separated. To combat the problem, Statessuch as Washington and Idaho have established rape-seed production districts.

Rapeseed is highly susceptible to flea beetles,cutworms, and various fungi. Asynchronous floweringcan result in variable seed maturity, with some maturepods shattering while other pods are still green, causingharvesting difficulties and yield loss. The meal con-tains glucosinolates and has restricted use as a livestockfeed.

Economic considerations: World production of rapeseedoil has increased nearly 35 percent since 1984 (see tableC-2, app. C). Most of the rapeseed grown are low erucicacid, low glucosinolate varieties used primarily foredible oil (Canola), however Eastern Europe andCanada produce significant amounts of industrial-quality rapeseed also. The supply appears to berelatively stable due to the large number of producersso that adverse conditions in one country do notnecessarily result in a severe supply shock for rapeseedoil. Current U.S. demand for industrial-quality rape-seed (approximately 40 million pounds) is mainly forerucamide and would require an estimated 50,000 acresof domestically produced rapeseed. Development ofmarkets for brassylic acid, such as for the industrialnylon 1313, could increase the demand for high-erucicacid oil sufficiently to require planting of nearly300,000 acres.

Social considerations: About 3,000 to 8,000 acres ofwinter rapeseed are annually grown in Idaho. The largeincrease in imports of rapeseed oil over the last fewyears is due mainly to increases in Canola-quality andnot industrial-quality rapeseed oil (table D-3, app. D).Winter rapeseed provides ground cover over the winterand may decrease soil erosion.

Extent of research conducted: The Office of CriticalMaterials (OCM) is actively trying to commercializewinter rapeseed. Congress has appropriated $325,000for fiscal year 1989 to be used for this purpose. EightStates (Missouri, Kansas, New Mexico, Idaho, Iowa,Nebraska, North Dakota, and Illinois) have formed aconsortium in cooperation with the OCM to performresearch necessary to lead to commercialization. These


States are providing an estimated $2 for every $1 ofFederal support for this research.

SOURCES: 19,27,35,36,38,42,46,49,51

Stokes Aster

Scientific name: Stokesia laevisMajor compounds produced: The seeds contain 27 to 44

percent oil, with 64 to 79 percent of the oil consistingof vernolic acid, a fatty acid that contains an epoxygroup. The meal is high protein.

Replacement: Conversion of oils containing nonepoxyfatty acids, such as soybean, sunflower or linseed, intoepoxy fatty acids. Replacement for petroleum-derivedepoxy compounds.

Major uses: Currently, epoxy fatty acids are usedprimarily in the plastics and coatings industries. Theepoxy groups of fatty acids act as plasticizers (toprovide flexibility) and as stabilizers (by inactivatingagents that might cause degradation). In general, theepoxy sites are highly reactive sites where adjacenttriglyceride molecules attach to form interlockingpolymer networks.

Agronomic characteristics: Stokes aster is a member ofthe Composite family. It is a perennial native to theSoutheastern U.S. and could potentially be grown in theeastern half of the United States and the PacificNorthwest. Potential seed yield has been estimated tobe 1,780 lb/acre (2,000 kg/ha).

Technical considerations: Very little agronomic workhas been done on stokes aster, and it is still essentiallya wild plant. A well-defined market for epoxy fattyacids exists, but the epoxy fatty acids obtained fromstokes aster are not identical to those obtained byconversion of sunflower, linseed, or soybean oil, orthose derived from petroleum. Quality control andutilization research is needed.

Economic considerations: Approximately 100 to 180million pounds of soybean and linseed oil are convertedto epoxy fatty acids annually. While the raw material isrelatively inexpensive, the chemical transformation ofthe fatty acids contained in sunflower and soybean oilto epoxy fatty acids is relatively expensive.

Social considerations: As a perennial, stokes aster haspotential implications for erosion control.

Extent of research conducted: Apparently little researchis being performed on this species.

SOURCES: 20,22,33,36,46

Vernonia

Scientific name: Vernonia anthelmintica and Vernoniagalamensis

Major compounds produced: Seeds from V anthelmin-tica are 23 to 31 percent oil, 68 to 75 percent of which

is vernolic acid, an epoxy fatty acid. Seeds from V.galamensis are 42 percent oil containing 72 to 73percent vernolic acid. Meal from V. galamensis con-tains 42.5 percent crude protein, 10.9 percent crudefiber, and 9.5 percent ash.

Replacement: Conversion of oils containing nonepoxyfatty acids, such as soybean, sunflower, or linseed, intoepoxy fatty acids. Replacement for petroleum-derivedepoxy compounds. Replacement for organic solventsin paints.

Major uses: Currently epoxy fatty acids are usedprimarily in the plastics and coatings industries. Theepoxy groups of fatty acids act as plasticizers (toprovide flexibility) and as stabilizers (by inactivatingagents that might cause degradation). In general, theepoxy sites are highly reactive sites where adjacenttriglyceride moleeules attach to form interlockingpolymer networks. Research is being conducted to useVernonia as a diluent for alkyld resin paints.

Agronomic characteristics: Vernonia species are mem-bers of the Composite family. V. anthelmintica isnative to India, and V. galamensis is a herbaceousannual from Africa. Attempts to grow V. anthelminticain the United States have thus far been unsuccessful,causing researchers to begin focusing their attention onV. galamensis. Yields of V. galamensis in Zimbabwehave been as high as 2,290 pounds of seed/acre.

Technical considerations: Seed shattering has been aproblem with Vernonia, but recently a wild species hasbeen discovered with good seed retention, which mayalleviate this problem. Photoperiodism may limitproduction in temperate regions. Short days are re-quired for flowering, but in colder climates, short daysare soon followed by frost, which prevents seedformation. A variety that flowers earlier has beenfound, so this problem may be overcome, The mealfrom Vernonia species contains antinutritional agentssuch as vernolepin, which may limit use as a livestockfeed. The meal from V. anthelmintica was found to bedeficient in methionine and lysine and could no be usedas livestock feed without additional amino acid supple-ments. Meal from V. galamensis has higher levels oflysine, methionine, and phenylalanine than meal fromV. anthelmintica, but feeding studies have not beenconducted.

Economic considerations: Approximately 100 to 180million pounds of soybean and linseed oil are convertedto epoxy fatty acids annually. While the raw material isrelatively inexpensive, the chemical transformation ofthe fatty acids contained in sunflower and soybean oilto epoxy fatty acids is relatively expensive. About 325million gallons of alkyld resin paints are used in theUnited States each year. Vernonia oil could be used asdiluent in place of organic solvents in these paints.Expected use is one pint of oil per gallon of paint.


Social considerations: Vernonia is a potential replace-ment for industrial uses of soybeans. It could be usedto reduce volatile organic compounds resulting fromsolvents used in paint, with positive impact on airquality.

Extent of research conducted: Vernonia was identifiedby the original USDA/ARS screening in the 1950s. TheNorthern Regional Research Center has conductedsome utilization research. Trial plantings of Vernoniawere made in Georgia in 1964, but little interest wasexpressed in developing this species. Recent agro-nomic research has been conducted in East Africa andthe Carribean rather than in the United States. Utiliza-tion research is being conducted at the CoatingsResearch Institute at Eastern Michigan University. TheCalifornia South Coast Air Quality District, the U.S.Agency for International Development, the State ofMichigan, and Paint Research Associates (an industry-financed research group) are providing $425,000 forthis research. Some research is also being conducted atLehigh University.

SOURCES: 8,18,33,36,37

Appendix A References

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10.

11.

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Appendix A-Selected New Industrial Crops . 89

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Appendix B

Selected Industrial Uses for Traditional Crops

Diesel Fuel From Vegetable Oils

Crop: Sunflowers, soybeans, potential new crops such asrapeseed

Major coproducts: Oil, meal, and potentially glycerolMajor uses: The oil can be used as diesel fuel, and the

meal as livestock feed. Glycerol is a widely usedchemical.

Replacement: Diesel fuel derived from petroleum prod-ucts. The United States uses approximately 40 billiongallons of diesel fuel yearly, with about 3 billiongallons used for agricultural purposes.

Technical considerations: Chemical and physical com-position of the oil determines fuel characteristics. Ingeneral, highly unsaturated oils break down faster thansaturated oils, but increased saturation leads to solidifi-cation at near-room temperatures. Unsaturation isdesirable for maintaining liquidity at low temperatures,but undesirable for stability. Ignition quality (cetanenumber) generally is lower for vegetable oils than fordiesel fuels, and vegetable oils have lower heat ofcombustion. The most serious problem related to usingvegetable oils as diesel fuel is their viscosity. Viscosityis critically dependent on temperature, and the viscosityof vegetable oils is more affected by temperature thanthe viscosity of diesel fuels. The pour points ofvegetable oils are also higher than those of diesel fuels,which could create problems in colder climates.

Vegetable oils can be used straight or blended withdiesel fuel. Short-term testing of oilseed fuels indicatedthat these fuels were roughly equivalent to diesel fuel.Fuel consumption was higher because vegetable oilshave a lower heat of combustion than diesel fuel.Longer-term tests have had problems of depositbuildup in the combustion chamber and injector nozzle(due to the poor thermal stability of vegetable oils) andpiston ring sticking and engine failure (due to de-creased fuel atomization and combustion efficiency),particularly in direct-injection diesel engines, the mostcommon type of diesel engine used in the UnitedStates. Problems have not been as serious in indirect-injection diesel engines.

Alternatively, vegetable oils can be converted tomonoesters, by reacting the oil with alcohol in thepresence of a catalyst. Three monoester molecules anda glycerol molecule are obtained from each triglyceride(the process is similar to deriving fatty acids from oilsto be used for plastics, soaps, lubricants, etc.). Theresulting ester fuels have viscosities similar to those ofdiesel fuels and also tend to vaporize in a manner moresimilar to diesel fuel. Short-term tests using methylesters of rapeseed oil in direct-injection diesel engines

appeared not to result in the carbon deposit buildup thatoccurs with the blends or straight vegetable oils. Usingethyl esters of various degrees of saturation in short-term tests indicated that the unsaturated esters resultedin more coking than the saturated esters. Longer termtesting of monoesters derived from soybean oil resultsin a polymerization and varnish buildup in the cylinderwalls. Methyl esters tend to crystallize at 4 to 5° C,requiring storage and transport in heated vessels. Ethylesters have better low-temperature properties but havehigher conversion costs due to water contaminationproblems.

The land needed to supply enough oil for agriculturaldiesel use alone could be a constraint. Oilseeds that arehigh yielding and contain a high percent of oil arepreferable. Potential candidates are peanuts (40 to 45percent oil), cottonseed (18 to 20 percent oil), safflower(30 to 35 percent oil), rapeseed (40 to 45 percent oil),sunflower (35 to 45 percent oil), and soybeans (18 to 20percent oil). Peanuts and cottonseed are unlikelycandidates for economic reasons. Safflower and rape-seed currently are grown only in small quantities;production would need to be greatly expanded. Soy-beans and sunflowers are the likely candidates. Aver-age U.S. sunflower yields are about 600 pounds oil peracre, while soybeans yield about 400 pounds per acre.For sunflowers to supplant soybeans as a major oilsource, expansion of production is necessary.

Economic considerations: The value of soybeans andsunflowers depends on the value of both the oil and theprotein meal produced. The ratio of oil to mealproduced, and the percent of the value of the oilseedaccounted for by the oil, will in large part determine thesupply response of the oilseed to an increased demandfor the oil and the economic competitiveness of usingthat oil for fuel. Soybeans may be self-limiting becausemore than 60 percent of the value is for the meal.Supplying more soybean oil also results in a greatersupply of meal, which decreases the price of the meal.Production will occur up to the point where theincreases in oil price offset the decreases in meal prices,unless new markets for meal can be found. Theseimpacts may be more significant for on-farm ratherthan off-farm processing.

For sunflowers, it is possible to produce enough oilto replace diesel fuel use without producing excessivemeal for on-farm livestock use. Unfortunately, sun-flower meal is low in lysine and cannot fully supply theprotein requirements of livestock particularly pork andpoultry. Farmers would still need to purchase higher-lysine-protein meal, such as soybean meal, or aminoacid supplements. This to some extent decreases the

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Appendix B--Selected Industrial Uses for Traditional Crops ● 91

attractiveness of on-farm extraction of sunflower seeds.Whether a combination of sunflowers and soybeans ispossible is not clear.

The cost of converting sunflower oil to fuel-grademethyl esters is about $1.00 per gallon. A 25 gallon/hour plant can produce fuel-grade sunflower oil-methylester for about $3.25 per gallon, a price about threetimes higher than diesel fuel.

Social considerations: On-farm extraction of oils poten-tially could have negative impacts on employment,particularly in the oil processing and transportationindustries. Increased centralized processing could po-tentially increase employment in these industries. Totalreplacement of agricultural uses of diesel fuel wouldresult in small petroleum savings because this marketrepresents about 1 percent of total petroleum use.Conversion of soybeans to fuel uses will decreaseagricultural exports unless increased markets for themeal can be found. Edible-vegetable-oil prices willlikely increase. Vegetable oils are expected to burncleaner and cause less air pollution than diesel fuels.

SOURCES: 15,19,24,34

Soybean Uses

Crop: SoybeansMajor coproducts: Oil, flour, and proteinMajor uses: The flour is used to make adhesives, mainly

for plywood. The oil is used in alkyd paints, as aplasticizer and stabilizer in vinyl plastics, as anantifoamant in fermentation processes, as a carrier forprinting ink, as a carrier for agricultural chemicals, andto control grain dust in elevators. The protein is used tomake adhesives that bind pigment to paper in thecoating process. Historic uses, which are no longeravailable, include the use of soybean fiber to makeblankets, upholstery, and other textiles (marketed asAzlon), and the oil combined with lime and sprayedthrough an aerator nozzle for extinguishing fires.

Replacement: Petroleum-derived productsTechnical considerations: Historically, soybeans have

been used for all of the above uses, but have beenreplaced by petroleum products primarily for economicreasons. Some of the technical problems include a lackof water resistance for the flour adhesives and poordurability, peeling, and scaling of paints, which limitsthem to indoor use. Today, about 7,000 tons of soyflour and 8,000 tons of soy protein are used to makeadhesives. Each year, approximately 120 millionpounds of oil are used in the plastics and resins industryand about 40 million pounds of oil are used in the paintand varnish industry.

Soy inks were developed by the American Newspa-per Publishers Association in 1985. Soy inks are clearso the pigment shows better and they do not smudge asmuch as petroleum inks. Newspaper publishers use

about 500 million pounds of ink each year which wouldrequire approximately 350 million pounds of oil.Approximately one-third of the U.S. newspapers areusing soy-based inks for color printing.

Soybean oil used in small volumes (0.02 percent byweight) can be used to suppress dust in grain elevators(up to 99 percent). When compared to untreated grains,use of soybean oil as a dust suppressant does not appearto affect odor, grade, drying characteristics, moldgrowth, or milling and baking qualities, and there maybe some improvement in insect control.

Economic considerations: Food and livestock-feed useskeep the price of soybeans high enough that use forindustrial purposes is often precluded. The situationcould change if the price of petroleum increases.

Soy oil ink cost 50 to 60 percent more thanpetroleum-based ink, because more steps are involvedin its manufacture (i.e., it costs about 90 cents perpound compared to petroleum-based inks, which costabout 60 cents per pound). For color inks, however, thecost of the color pigments is the major cost, and soyinks have gained in this usage. Also, more papers canbe printed per pound of soy ink than convential inkbecause the color pigments blend better with soy oilthan pretroleum-based oil and thus, can be applied in athinner layer.

SOURCES: 3,5,16,20,28,34,38

Road De-icers

Crop: Corn primarily, but potentially other starch orlignocellulose sources

Major coproducts: Starch, oil, and protein feedsMajor uses: Road deicerReplacement: Road saltTechnical considerations: Calcium magnesium acetate

(CMA) is made by reacting acetic acid with dolomiticlimestone. The acetic acid can be obtained by fermen-tation of corn, however, at present, no large-scale plantsexist. The Chevron Co. has marketed CMA. Determi-nation of the optimal bacterial strain for acetic acidproduction is needed. Approximately 60 bushels ofcorn are needed to make 1 ton of CMA.

Economic considerations: Acetic acid can be obtainedfrom corn fermentation (or starch or cellulose fromother sources) or petroleum sources. Estimates are thatusing corn priced at $2.80 per bushel would result inproduction costs of 18 to 19 cents per pound of CMA.This is 7 to 8 times the cost of road salt. CMA boundto sand to increase traction costs about 10 times morethan road salt. Utilizing ground corn cobs as the feedstock instead of corn kernels might lower the cost to 12to 14 cents per pound of CMA. There does not appearto be a significant difference in costs of productionutilizing anaerobic (without oxygen) or aerobic bacte-rial fermentation. It is estimated that an economical size


plant would have a capacity of 500 tons/day and ayearly capacity of about 150,000 tons. This size plantwould utilize 9 million bushels of corn per year, with45,000 tons of distillers dried grain as a byproduct. TheU.S. uses about 10 million tons of salt per year.Capturing 10 percent of this market would utilize 60million bushels of corn.

Social considerations: Significant expanded productioncould increase corn prices, and create dried distillersgrains that would compete with soybean meal in thehigh-protein livestock feed market. A major attractionof CMA is that it has less negative environmentalimpacts than salt. It is less harmful to animals and thesoil than salt, and is 10 times less corrosive. Estimatedcosts of vehicle corrosion and damage to roads andbridges caused by salt are about $5 billion yearly.

SOURCES: 12,21

and the fact that ethanol derived from corn fermentationvaries greatly in price because of variability in corn andbyproduct prices will make widespread use of thistechnology difficult at the current time. There is alsosome concern that increased burning of coal willincrease carbon dioxide levels.

Research conducted: A joint venture is being conductedby Southern Illinois University-Carbondale (SIU-C),the Illinois State Geological Survey (ISGS), theUniveristy of North Dakota Energy and EnvironmentalResearch Center, Ohio University, and Eastern IllinoisUniversity. Funding is provided by the Illinois andOhio Corn Marketing Boards, ISGS, SIU-C, the IllinoisDepartment of Energy and Natural Resources, and theU.S. Department of Energy.

SOURCES: 21,45

Super AbsorbantsCoal Desulfurization

Crop: Corn primarily, but potentially other starch orcellulose sources

Major coproducts: Ethanol, oil, and protein feedsMajor uses: Coal desulfurizationReplacement: Scrubbers and other sulfur removersTechnical considerations: Carbon monoxide and either

ethanol or methanol can be used to remove sulfur fromcoal. One ton of processed coal produces 1/2 barrel ofcrude oil, 25 pounds of carbonyl sulfide (used inagrichemicals and pharmaceuticals), 35 pounds ofhydrogen sulfide (used in pharmaceuticals), 8.3 gallonsof acetaldehyde (used to make either acetic acid oracetone), and iron sulfide, which can be burned forheat. Currently, testing at a 1 to 10 pound/hour scale isoccurring. The next stage will be to test at the 30 to 100pound/hour scale and if the procedure continues to lookpromising, construction of a pilot plant to process2,000 pound/hour will begin. Funding will be soughtfrom the Clean Coal Technology Program (Departmentof Energy) for plant construction.

Economic considerations: A 1986 study by the Centerfor Research on Sulfur in coal estimated the cost of thecarbon monoxide ethanol method to be $134 per ton ofcoal ($5.02 per million Btu). In 1986, the cost oflow-sulfur coal was $49.70 per ton. Improvements intechnology are needed to significantly lower the cost.The ethanol used could potentially be derived fromcorn. About 8 gallons of ethanol are required to processone ton of coal (about 3 bushels of corn).

Social considerations: The United States has largedeposits of coal, which potentially could be used inplace of petroleum. However, much of the coal containssulfur, which can lead to acid rain when burned.Removing the sulfur is expensive. An economicalmethod to remove sulfur would allow coal to be usedin place of petroleum. However, technical difficulties

Crop: CornMajor coproducts: Cornstarch which has been modified

to absorb up to 1,000 times its weight in moisture, oil,and protein feeds.

Major uses: These modified starches are currently usedin disposable diapers (about 200 million pounds/year)and as a burn treatment. They are also being used in fuelfilters to remove water. They could also be used as aseed coating to increase germination, as an agriculturalchemical delivery system, and as a soil conditioner.

Technical considerations: As a soil conditioner, cornstarch polymers bind soil particles into stable aggre-gates, which results in better aeration and increasedwater penetration and retention. There are two types ofpolymers used: 1) hydrogels and 2) water-solublelinear polymers. Hydrogels are polymers crosslinked toadjacent molecules so that the structure is insoluble inwater. They act like a sponge, absorbing 50 to 400times their weight in water and delivering 40 to 95percent of the water to plant roots. They increase thewater-holding capacity of sandy soils and reducefrequency of irrigation. Soil moisture supply is moreconstant. Water-soluble linear polymers are largechains of repeating units. They do not hold water.Rather, they bind soil particles together to form latticesand as such maintain soil in a loose and friable state.The bound soil particles are stable in water. There isless evaporative loss because the top layer of polymer-treated soils acts like a mulch. Besides cornstarch, guarpolysaccharides and lignin can be used to make thepolymers.

Modified corn starch can be used as an encapsulatingagent for active ingredients such as herbicides. Theadvantages of encapsulation are: 1) extension ofactivity, 2) reduction of evaporative and degradativeloss, 3) reduction of leaching, and 4) decrease in thedermal toxicity of the active agent. Encapsulation

Appendix B-Selected Industrial Uses for Traditional Crops . 93

involves dispersing the starch in aqueous alkali fol-lowed by crosslinking reactions after the active agenthas been interspersed. Corn starch can be used as anentrapment agent for both solid and liquid activeagents. The efficiency of encapsulation and rate ofrelease of active agents depends on starch type,temperature and concentration of starch during gelati-nization, amount of active agent incorporated, andmethod of drying. Preliminary data indicates thatherbicides encapsulated in corn starch are less mobilein soil and could potentially reduce the possibilities ofgroundwater pollution. One technical goal is theelimination of chemicals used to form the matrixbecause these chemicals prohibit using many encapsu-lated products for food or livestock feed.

Economic considerations: Byproducts of corn grown forstarch compete with soybeans in the livestock feedmarket. Price for the starch-based products will fluctu-ate with the price of corn and the value of these feedbyproducts.

Social considerations: There is some potential to de-crease groundwater contamination by using encapsu-lated pesticides. Livestock feed byproducts will com-pete with soybeans.

Research conducted: Northern Regional Research Cen-ter in Peoria, Ill.

SOURCES: 6,18,41,43

Ethanol

Crop: Corn primarily, but potentially other starch orlignocellulose sources

Major coproducts: Two production methods are util-ized: dry-mill and wet-mill corn processing. In dry-millprocessing, the corn is ground, slurried with water, andcooked. Enzymes convert the starch to sugar, and yeastferments the sugars to a beer that contains water,alcohol, and dissolved solids. The solids are dried andsold as dried distillers grain (a livestock feed). Theremaining beer is distilled and dehydrated to formanhydrous ethanol, with CO2 as a byproduct. Onebushel of corn produces approximately 2.5 to 2.6gallons of ethanol and 18 pounds of dried distillersgrain.

In wet-mill processing, corn kernels are soaked inwater and sulfur dioxide, and the portions of the cornkernel other than the starch are removed. Theseportions are used to make corn oil, corn gluten feed (20to 21 percent crude protein) and corn gluten meal (60percent crude protein), which can be used as high-protein livestock feeds. The almost pure starch that isleft is converted to sugar, then fermented and distilledto produce ethanol and CO2. Because the wet-millproduction process is identical to the process used toproduce high-fructose corn syrup through the starchphase, the two operations can be combined in the same

plant, resulting in a significant production cost saving.One bushel of corn produces 2.5 to 2.6 gallons ofethanol, 2.5 pounds of gluten meal, 12.5 pounds ofgluten feed and 1.6 pounds of corn oil. In 1985,approximately 60 percent of the nearly 800 milliongallons of ethanol produced came from wet-mill plants.

Major uses: Either as a fuel, a fuel extender, or as anoctane enhancer.

Replacement: GasolineTechnical considerations: Vehicle problems have been

encountered with ethanol/gasoline blends. Altering thevolatility level is required to prevent warm-weatherstalling. First-time use in older cars can result in fuelfilter clogging because ethanol is a solvent thatdissolves built-up gums and deposits already in thesystem. Blends might separate in the presence of water.Use is not recommended for vehicles left idle for longperiods such as recreational vehicles. Most automo-biles have now been adjusted to minimize suchproblems.

Ethanol production needs to be improved. In the nearterm, three new technologies show promise: 1) replace-ment of yeast with Zymomonous mobilis bacteria, 2)membrane separation of solubles, and 3) yeast immobi-lization. Z. mobilis ferments faster than yeast, andtolerates a greater temperature range. It also has ahigher selectivity for producing ethanol and givesgreater yields. Membrane separation of solids reducesenergy requirements by removing as much as 40percent of the water prior to boiling. Membraneclogging is a problem. Immobilization allows the sugaror starch solution to be passed over the enzymes,bacteria, or yeast. Use of the enzymes and yeast ismaximized, and contamination concerns are reducedby eliminating yeast recycling. Immobilization isapplicable only to wet-milling because it requires aclarified substrate.

If ethanol production is to be increased significantly,feedstocks other than corn will be needed. Alternativesare high-starch or cellulosic biomass. Potential cellu-losic candidates include forage crops (e.g., alfalfastems or fescue), crop residues (e.g., corn stalks), ormunicipal wastes (e.g., wood chips or sugar beet pulp).Attempts are being made to identify microorganismsthat convert wood hemicellulose into high yields ofsugar and alpha cellulose. New processes that increasethe efficiency of converting cellulose to sugars arebeing developed.

Economic considerations: Large plants (annual capaci-ties of 100 to 150 million gallons) are able to captureeconomies of scale in both the production and market-ing of the fuel. Small plants (0.5 to 10 million gallonsannually) can be profitable under conditions such as: 1)location in areas of limited local grain production andhigh transportation costs to major grain markets, 2)joint location with food processing or other industrial


facilities where fermentable wastes are produced, or 3)location near a feedlot where byproducts can be feddirectly to livestock without drying.

Costs of ethanol production are highly variablebecause of fluctuating prices for corn and byproducts.Feedstock costs (the net of the price paid for the cornand the credit received for selling the byproducts) haveranged from $0.10 to $0.79 per gallon of ethanol inrecent years. Other cash operating expenses, such aslabor, energy, and administration, have ranged from$0.35 to $0.65 per gallon of ethanol depending on thesize of the plant. Energy costs average about 36 percentof the cash operating expenses. Investment costs tobuild an ethanol plant range from $1.00 to $2.50 pergallon of installed capacity. Construction of a newdry-mill plant with 40-million-gallon annual capacityis about $2.00 to $2.50 per gallon capacity. Addingethanol production capacity to a wet mill alreadyproducing high-fructose corn syrup costs about $1.00to $1.50 per gallon capacity. It is estimated that thecapital charge per gallon of ethanol produced is $0.19to $0.48. For a stand alone (ethanol production only)plant, total production costs (feedstock costs, cashoperating costs, and capital costs) have ranged from alow of $0.75 per gallon (in a year with exceptionallyhigh byproduct prices) to an average of $1.40 to $1.50per gallon. Ethanol production at high-fructose cornsyrup production plants can reduce production costs byas much as $0.20 per gallon.

Currently, gasoline/ethanol blends (required mini-mum of 10 percent ethanol) are exempted from 6 of the9 cents Federal excise tax on gasoline, which isequivalent to a 60 cent per gallon subsidy for ethanol.Additionally, 28 states offer state fuel tax exemptionsor producer subsidies which average 20 to 30 cents/gallon. Using corn priced at $2.00 per bushel, andmaintaining Federal subsidies, ethanol is competitivewith petroleum at $22 to $24 per barrel in plants usingthe average technology available, at $20 per barrel innew state-of-the-art wet-processing milks, and at $13per barrel at extensions of high-fructose corn syrupmills. Removal of the Federal excise tax exemption andcorn prices of $2.50 per bushel implies that petroleumprices of about $40 per barrel are needed for ethanol tobe price competitive with gasoline.

Ethanol yields from cellulosic biomass have beenincreased from about 40 gallon/ton of biomass to 60gallon/ton. Approximate cost is $1.50 to $2.00 pergallon. Wood used for energy is both lower valued andmore expensive to harvest because harvesting opera-tions are geared to removing large logs. Improvementsin harvesting would lower costs. Collecting agricul-tural residues is also expensive. Municipal wastes mayoffer the best feedstock source. Currently, ethanolproduction from cellulose is more expensive than corn

but could be competitive with corn at corn prices in the$3.50 to $4.00 per bushel range.

Methyl tertiary butyl ether (MTBE) competes withethanol as an octane enhancer. Currently, MTBE sellsfor about $0.70 per gallon. Ethanol sells for $1.20 pergallon, but because of the 60 cents per gallon Federalsubsidy, ethanol is less expensive than MTBE. MTBEproduction costs are sensitive to the price of methanoland butanes. Most production expansion is likely tooccur in oil-producing regions, which can take advan-tage of low-cost methanol supplies. Refiners who havealready committed to internal production of MTBE arelikely to continue using it rather than ethanol. Use ofethanol is further discouraged by the need to physicallyseparate it from gasoline to prevent phase separation.Independent fuel distributors who do not use pipelinesfor fuel transport and who must purchase high-octaneblending agents are likely to be the primary customersof ethanol for octane enhancement. Passage of theClean Air Act which mandates use of oxygenates toreduce pollution in some cities may enhance theposition of ethanol relative to MTBE.

Increased production of ethanol affects the cornmarket, the oilseed market, and potentially the live-stock and other grains markets. Ethanol productionraises corn prices and decreases the price of soybeanmeal because of the high quantity of gluten feedsproduced as a byproduct of ethanol production. Fallingsoybean prices and rising corn prices cause a shift ofacreage from soybean to corn production, particularlyin the Corn Belt. It is unlikely that livestock productionwill be significantly affected unless ethanol productionexceeds 3 billion gallons annually because increasedcorn prices would be offset by decreased protein-supplement prices. Above 3 billion gallons, lowerbyproduct-feed prices would possibly result in in-creased beef production. Large-scale expansion ofethanol production is unlikely unless exemption fromfederal excise taxes are guaranteed at least through theyear 2000 (the exemption is due to expire in September1993). Without the continuation of the exemption,ethanol production is not expected to exceed 1.1 billiongallons. With the exemption continued through 2000,ethanol production could expand to a level of 2.7billion gallons by 1995, which would trigger highercorn prices and use an additional 800 million bushelsof corn. Increased production of protein byproductswould require finding export markets if the byproductsare to maintain their value. Passage of the Clean Air Actis expected to create additional incentives for the useand expanded production of ethanol.

Social considerations: Environmental concerns haverenewed interest in alternative fuels. The Clean Air Actmandates that states implement plans to control emis-sions when concentrations of lead, sulfur dioxide,nitrogen dioxide, ozone, carbon monoxide, and partic-

Appendix B-Selected Industrial Uses for Traditional Crops . 95

ulate matter exceed standards. Many of these pollutantsare found in motor vehicle emissions. Because ethanolcontains oxygen, addition of ethanol to gasolineincreases the air-to-fuel ratio, and carbon monoxideand hydrocarbon emissions are decreased. Nitrogenoxide emission levels increase. Addition of ethanol togasoline increases fuel volatility and thus increases theemission levels of volatile organic compounds, whichin the presence of sunlight form ozone. MTBE alsoreduces carbon monoxide without increasing fuelvolatility.

Significant changes in aggregate farm income forgrain producers as a result of market price changes isunlikely to occur because of the impact of thecommodity support programs. For corn producers,ethanol production would need to increase to the 3 to4 billion gallon range by 1995 to exceed corn targetprices if they remain at current levels. Large increasesin ethanol production would benefit corn producers,and possibly other grain producers, but harm soybeanproducers. Because of differences in regional produc-tion patterns, there could be significant interregionalimpacts. The Corn Belt could gain, and the DeltaRegion and Southeast could lose.

A U.S. Department of Agriculture Economic Re-search Service study found that if commodity programsin the 1990 farm bill remain similar to those in the 1985Food Security Act and the Federal excise tax exemp-tion is extended through the year 2000, then expandingethanol production to the 2.7 billion gallon level wouldresult in Federal commodity program savings exceed-ing federal ethanol subsidies through 1994. After that,ethanol subsidies exceed farm program savings. Fur-thermore, by the year 2000, the cumulative cost of theethanol subsidies exceeds the cumulative savings of thecommodity programs.

Estimates are that production of 3 billion gallons ofethanol would increase direct employment by 3,000 to9,000 jobs. No estimate was made for indirect employ-ment impacts or for employment that may be lost inother sectors of the economy.

SOURCES: 2,10,12,13,22,36,39,40,46

Degradable Plastics

Crop: Corn primarily, but other starch or cellulosesources are possible

Major products: Starch, oil, and protein feedsMajor uses: Degradable plasticsReplacement: Nondegradable plasticsTechnical considerations: First generation degradable

plastics are generally of two types; photodegradableand/or biodegradable. Photodegradable plastics de-grade in the presence of ultraviolet light and areproduced by adding photosensitive agents (e.g., photo-sensitive transition-metal salts or organometallic com-

pounds) or by forming copolymers with photosyntheticgroups (e.g., carbonyl groups). Photodegradable six-pack rings, films, and bags are commercially available.

Biodegradable plastics are designed to degrade in thepresence of microorganisms. The most commonmethod used incorporates starch and usually someautooxidants (i.e., compounds that form free radicalsthat accelerate polymer chain break down) into theplastic. Early products generally contained about 7percent starch because this was the maximum loadingmany plastic polymers could handle without process-ing or equipment changes. Newer methods are usinghigher starch levels. The U.S. Department of Agricul-ture has, for instance, developed a method that mixesdry starch or starch derivatives with dry syntheticplastic, water, sodium hydroxide, and urea. Plasticscontaining as much as 50 percent cornstarch can bemade, but durability decreases. Biodegradable plasticbags and agricultural mulches are commercially avail-able.

Another possible approach is the formation of starch(or lignin or cellulose) copolymers with plastics.Radiation or chemicals can be used to generate freeradicals (reactive sites) on the starch molecule. Thesefree radical sites are then reacted with a polymerizablemonomer (a building block for plastics), which is thenpolymerized. Alternatively, in place of using freeradicals, a third polymer compatible with both thesynthetic plastic and the lignin, starch, or cellulose isused. This third polymer links to each of the other twopolymers to forma stable bond. The physical propertiesof these copolymers, particularly water volubility,depend on the nature of the synthetic plastic used.Hydrophilic polymers, such as polyacrylamide, willdisperse in water. Hydrophobic polymers, such aspolystyrene, will not. This method offers flexibility asto the types of plastics that can be made.

The approaches described above to produce biode-gradable plastics all use some combination of biologi-cal and petroleum based polymers. Second generationbiodegradable plastics are being developed that utilizebiological polymers (i.e., starch, cellulose, lactic acid,etc). Under certain conditions, starch can be combinedwith water to create a compound that is somewhatsimilar to crystalline polystyrene, and that disintegratesin water. Lactic acid-based biodegradable plastics arebeing produced from raw materials such as potato andcheese wastes. The bacteria Alicaligenes eutrophus canuse organic acids and sugar as a feedstock to producepoly(hydroxybutyrate-hydro-xyvalerate) polymers(PHBV) which can be injection molded and made intofilms with conventional plastic processing equipment.Other bacteria such as Klebsiella pneumonia convertglycerol (potentially derived from vegetable oils) intoacrolein which can be used to make acrylic plastics.


A major constraint to the acceptance of degradableplastics is the lack of a clear definition of degradability.It is not known under what conditions these plasticsdegrade and what is contained in the residues leftbehind. USDA is testing degradability of blendedplastics and beginning to develop assays to measuredegradability. The special strains of bacteria developedfor the assays were able to degrade the starch in theblends within 20 to 30 days. However, after 60 days,the plastic part of the blends was intact. The plasticfilms used did not visually appear different, but pitswhere the starch had been were found on electronmicroscope scans. The plastic films had lost tensilestrength and were susceptible to mechanical breakup.For films that will be used as agricultural mulches andthen plowed under the ground, this type of degradationmight be acceptable. For many other uses, it may notbe. Additionally, tests performed in soil showed thatthe rate of degradation varied substantially amongdifferent soil types.

Starch/plastic blends containing less than 30 percentstarch degrade slowly. Some studies have shown thata threshold value exists at 59 percent starch loading.Below 59 percent, only 16 percent of the starchparticles are accessible to each other; above 59 percentloading, 77 percent of the starch particles are accessibleto each other which greatly accelerates degradation.Most commercial degradable starch/plastic blendscontain about 6 percent starch. Enzyme digestion testscarried out in controlled experiments on cellulose/polymer grafts resulted in the cellulose in the graftsbeing degraded faster than cellulose alone.

Economic considerations: Some degradable plastics arecurrently on the market. Most of these products arephotodegradable six-pack yokes. Some starch blendsare used as lawn bags and agricultural mulches.Estimates are that on average, they cost 5 to 15 percentmore than convential plastic products.

Estimated manufacturing costs for some of thedegradable plastics are high. For example, manufactureof plastics with the A. eutrophus bacteria currently costsabout $15 per pound, but expanded production isexpected to lower to cost, possibly to half this level.This compares to about $0.65 per pound for conven-tional plastics. The starch-based polymer plastics areexpected to sell at $2.20 per pound.

Because many of the degradable plastics utilizecornstarch, there is potential to increase demand forcorn. The intended use for many of the degradableplastics is in packaging, since the life span of theseproducts is very short. U.S. consumption of plastics forpackaging is expected to reach 18.8 billion pounds by1992. As a rough approximation of how replacement ofthese plastics with degradable plastics might affectcorn demand, assume that the entire volume ofpackaging plastics is replaced by a 50 percent starch-

plastic blend. The amount of corn needed to supply thestarch is approximately 4 percent of the annual averageproduction of corn. The economic analysis for such anincrease would be similar to that for corn ethanol sinceboth ethanol and degradable plastics utilize the starchportion of the grain. In both cases, coproducts producedwould be corn gluten meal and corn gluten feed, whichwould compete with soybean meal in the high-proteinlivestock feed markets. As with ethanol, productioncosts of starch blends will depend somewhat on theprice of corn and the value of the corn products.

This analysis however, assumes that corn starch willbe the natural polymer of choice in natural polymer/synthetic polymer blends and/or grafts. Other naturalpolymers can be used such as cellulose and lignin. Bothcould be derived from corn stalks. However, both canalso be derived from the paper and pulp manufacturingindustry. As an example, the United States paperindustry produces 33 million MT of Kraft lignin eachyear, which is primarily used for fuel, silage, orcompost. Water-soluble graft copolymers can be madefrom this lignin. Potentially, these copolymers could beused in a variety of ways, including degradable plastics.

Social considerations: Each year the United Statesproduces about 320 billion pounds of municipal solidwaste, of which 7 percent (by weight) and 18 percent(by volume) are plastics. In 1987,55 billion pounds ofplastic were produced and 22 billion pounds werediscarded. More than half of the plastics discarded arein the form of packaging. Plastics are among the fastestgrowing components of municipal waste.

Utilizing degradable plastics is one tool in dealingwith the large amounts of municipal waste produced inthe United States each year. But by itself, it is not goingto be enough. Other solutions will need to be foundalso. Some environmentalists are concerned aboutdegradable plastics because of the lack of knowledgeabout the residues that remain after degradation.Additionally, there is concern that degradable plasticswill adversely affect attempts to increase the recyclingof plastics. Degradable plastics mixed with nonde-gradable plastics during recycling could contaminatethe recycled plastic product. A major use envisioned fordegradable plastics is in the food packaging arena.However, the Food and Drug Administration has notapproved such use. Degradable plastics with highstarch contents under appropriate conditions becomemoldy. Premature partial degradation might exposefood to harmful organisms. Leaching of chemicalsfrom the plastic might also occur. Considerable re-search is needed to determine the safety of degradableplastics for food uses.

Extent of research conducted: The General AccountingOffice evaluated the extent of Federal support fordegradable plastic research for 1988. A total of$1,729,000 supported 12 projects. The sources of

Appendix l&Selected Industrial Uses for Traditional Crops ● 97

funding were the Department of Agriculture ($941,000for 4 projects), Department of Defense ($575,000 for 4projects), Department of Energy ($150,000 for 3projects) and National Science Foundation ($63,000for 1 project). The USDA projects are developingdegradable plastics utilizing corn starch and testingdegradable plastics already available. DOD research issupporting research on bacterial production of plasticsand degradable plastics that can be used for marinewaste disposal. The DOE is supporting research mainlyon cellulose and lignin copolymers and somewhat onstarch copolymers. The NSF is supporting research onlignin copolymers.

Research on lactic acid-based plastics is beingconducted at Battelle Memorial Institute (Columbus,OH) and Argonne (IL) National Laboratory. Researchusing K. pneumonia and vegetable oils is beingconducted at Northern Regional Research Laboratory(Peoria, IL). Researchers at MIT, Univ. of Massachu-setts, Office of Naval Research, Michigan State Uni-versity, and University of Virginia are also working ondeveloping biopolymers. Japan and Europe also haveprograms to produced biopolymers.

In addition to federally supported research, severalprivate firms are interested in degradable plastics.Some already have products on the market. Someexamples, by no means exhaustive, are:1. Rhone-Poulenc, Ecoplastics, Princeton Polymer

Laboratories, Du Pent, Union Carbide, DowChemicals, Mobil Chemicals, First Brands, Web-ster Industries, and SunBag all produce photode-gradable additives and products.

2. Archer Daniels Midland, St. Lawrence Starch,Ampacet, AgriTech, Amko Plastics, BeresfordPackaging, Polytech, and Webster Industries makestarch-based masterbatch and products.

3. The Warner Lambert Company is producing starch-based polymers.

4. Montedison is producing thermoplastic starch res-ins that are alloys of cornstarch and synthetic resins.

5. ICI Biological Products is producing PHBV poly-mers.

SOURCES: 4789 11,14,21,25,26,29,30,31,32,33,35,36,42,44977?

Biomass As a Chemical Feedstock Source

Crop: Corn primarily, but other starch and cellulosesources are possible

Major coproducts: Starch, oil, and gluten mealMajor uses: The starch is used to make commodity

chemicals, the oil is used for edible purposes, and thegluten meal is used as livestock feed.

Replacement: Commodity chemicals derived from pe-troleum

Technical considerations: Technically, it is possible toproduce fuel and most commodity chemicals from

biomass (organic material produced by photosynthe-sis). Development of biomass as a source of fuel isimpeded by: 1) the size of the United States fuelindustry, 2) low energy content, 3) seasonality, and 4)the dispersed geographic locations of biomass. Use ofbiomass for commodity-chemical production wouldrequire fewer biomass resources and not put as muchpressure on food sources. As an example, production ofatypical commodity chemical at the rate of 0.5 millionmetric ton/year would require less than 1 percent of theUnited States corn crop. Thus, it seems reasonable toexpect the greatest potential for biomass conversion tobe for commodity-chemical production. Glucose is theprimary starting material, obtained from starch derivedfrom crops or Iignocellulose found in woody andfibrous plants. The glucose can be converted viachemical transformations into a variety of commoditychemicals. Starch is easier to work with but competesmore directly with food uses for plants. Crops thatcould serve as a starch source include corn, cassava,and buffalo gourd (a potential new crop). Lignocellu-lose is more difficult to hydrolyze to sugars but maybemore available in larger quantities. Potentially it couldbe produced on land less suitable for good productionand therefore not compete as strongly with food uses.

Economic considerations: The major constraint is eco-nomics. The petrochemical industry is highly inte-grated with multiple byproducts being used to produceother chemicals. In addition, large economies of scaleallow for the relatively inexpensive production of fueland many commodity chemicals. Some major com-modity chemicals used in the United States willprobably continue to be produced from petrochemicalsources for some time. One example is ethylene.Production of ethylene from starch is complex andmore expensive than cracking petroleum. Additionally,it is a large market. It is estimated that to provide 100percent of the yearly ethylene market from starchderived from corn would require 50 percent of the corncrop. Producing ethylene, and similarly propylene,from starch seems impractical.

Chemicals other than ethylene and propylene may,however, have potential. Possibilities include ethanol,acetic acid, acetone, isopropanol, n-butanol, methylethyl ketone, and tetrahydrofuran. These chemicals areused in the production of other compounds. With somereduction in price, they might be competitive withpetrochemical sources. Improvements in conversionefficiencies are needed. Other likely candidates arethose chemicals that contain oxygen, since starch andglucose both contain about 50 percent oxygen. Possi-bilities include sorbitol used in the food processingindustry, citric acid used in detergents, lactic acid usedin thermoplastics and possibly biodegradable plastics.

The ability of biomass to compete with petroleum asa chemical feedstock hinges on rising petroleum prices.


As long as petroleum is fairly cheap, biomass will notbe economically attractive. In addition, coal gasifica-tion and natural gas conversion can also be used toproduce many of the same chemicals as biomass orpetroleum cracking. Currently, natural gas is simplyflared off as a waste product in petroleum drilling andprocessing in the Middle East. Potentially this could beused to manufacture chemical feedstocks. The UnitedStates is rich in coal. This coal is a more geographicallyconcentrated resource than biomass. It is unlikely thatas large a capital investment will be needed to fitprocessed coal into petroleum feedstock schemes aswould be necessary for biomass. Additionally, manyU.S. oil companies already have large investments incoal reserves. Environmental questions could have animpact on use of coal as a chemical feedstock. Land-usepatterns and subsequent environmental impacts will beimportant if biomass is used to produce fuel andcommodity chemicals.

Social considerations: Reasons given for using biomassto produce commodity chemicals include sustainedproduction in many parts of the world, smaller andmore geographically dispersed production facilities,conservation of nonrenewable resources, and the po-tential to use wastes that would otherwise needdisposal.

Extent of research conducted: The Tennessee ValleyAuthority, in cooperation with the Department ofEnergy, conducts research to convert lignocellulose tochemicals.

SOURCES: 1,4,6,18,23,27,37,46

Appendix B References

1.

2.

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4.

5.

6.

Bajpai, Rakesh, Frisby, Jim, Hsieh, Fu-Hung, Iannotti,Gene, Kerley, Monty, Miles, John, Mueller, Rick, Vande-populiere, Joe, and Van Dyne, Don, “Evaluation andProduction of Feedstock Chemicals,’ paper presented at theSecond National Corn Utilization Conference, Columbus,OH, NOV. 17-18, 1988.Barrier, John W., “Alcohol Fuels and TVA’s BiomassResearch,’ Forum for Applied Research and Public Policy,Winter 1988, pp. 60-62.Burnett, R.S., “Soy Protein Industrial Products,” Soybeanand Soybean Products, vol. II, K.S. Markley (cd.) (NewYork, NY: Inner Science Publishers Inc., 1951), pp.1003-1053.Curlee, T. Randall, “Biomass-Derived Plastics: ViableEconomic Alternatives to Petrochemical Plastics?,” h4a-terials and Society, vol. 13, No. 4, 1989, pp. 381409.Dicks, Michael R., and Buckley, Katharine C., “AlternativeOpportunities in Agriculture: Expanding Output ThroughDiversification,’ U.S. Department of Agriculture, Eco-nomic Research Service, Agricultural Economic Report No.633, May 1990.Deane, William M., ‘‘New Industrial Markets for Starch,’paper p~sented at the Second National Corn UtilizationConfenmce, Columbus, OH, Nov. 17-18, 1988.

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Fanta, G. F., “Starch-Thermoplastic Polymer Compositesby Graft Polymerization,” paper presented at the SecondNational Corn Utilization Conference, Columbus, OH,NOV. 17-18, 1988.Gibbons, Ann, “Making Plastics That Biodegrade,” Tech-nology Review, February/March 1989, pp. 69-73.Gilbert, Richard D., hmikar, S.V., Fornes, R.E., andRhodes, N., “Synthesis and Characterization of Biodegrad-able Polysaccharide Block Copolymers,” paper presentedat the Second National Corn Utilization Conference,Cohunbus, OH, NOV. 17-18, 1988.Goldstein, Barry, Carr, Patrick M., Darby, William P.,DeVeaux, Jennie S., Icerman, Larry, Shultz Jr., Eugene B.,“Roots of the Buffalo Gourd: A Novel Source of FuelEthanol,’ Fuels and Chemicalsji-om Oilseeds: Technologyand Policy Options, American Association for the Advanee-rnent of Science Selected Symposium No. 91, Eugene B.Shultz, Jr., and Robert P. Morgan (eds.) (Boulder, CO:Wesmiew Mess, Inc., 1984), pp. 895-906.Gould, J. Michael, Gordon, S.H., Dexter, L.B., and Swan-son, C.L., “Microbial Degradation of Plastics ContainingStarch,” paper presented at the Second National CornUtilization Conference, Columbus, OH, Nov. 17-18,1988.Grethlein, Hans and Datta, Rathin, “Economic Analysis ofAlternative Fermentation Route for the Production of RoadDeicer from Corn,” poster paper at the Second NationaICorn Utilization Conference, Columbus, OH, Nov. 17-18,1988,GrinneIl, Gerald E., “Ethanol Fuel: The Policy Issues,”Forum for Applied Research and Public Policy, Winter1988, pp. 48-49.Hardin, Ben, “Farm Surpluses: Sources for Plastics,”Agricultural Research, October 1986, pp. 12-13.Hassett, David J., “Diesel Fuel From chemically ModifkdVegetable Oils,” Fuels and Chemicals From Oilseeds:Technology and Policy Options, American Association forthe Advancement of Science Selected Symposium No. 91,Eugene B. Shuhz, Jr., and Robeti P. Morgan (eds.) (Boulder,CO: Westview Press, Inc., 1984), pp. 855-864.Johnson, Dale W., “Non-food Uses of Soy Protein Prod-ucts,” World Soybean Research Conference III Proceed-ings (Boulder, CO: West View Press, Inc., 1985).Jordan, Wayne R., Newton, Ronald J., and Rains, D.W.,“Biological Water Use Efficiency in Dryland Agriculture,”contractor report prepared for the Office of TechnologyAssessment, 1983.Kaplan, Kim, and Adarns, Sean, “New Uses for StarchFrom Surplus Corn, “ AgriculturalResearch, October 1987,pg. 11.Kautinan, Kenton R. “Testing of Vegetable Oils in DieselEngines, “ Fuels and Chemicals From Oilseeds: Technol-ogy and Policy Options, American Association for theAdvancement of Science Selected Symposium No. 91,Eugene B. Shuhz,Jr., and Robert P. Morgan (eds.) (Boulder,CO: Westview Press, Inc., 1984), pp. 143-175.Keith, David, American Soybean Association, persomilcommunication, 1989.Kelly Harrison Associates, “A Survey of Potential NewCorn Uses,” August 1986.Lambefi, Russ, Tennessee Valley Authority, personalcommunication, February 1991.

Appendix IA!$elected Industrial Uses for Traditional Crops . 99

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Appendix C

Selected New Food Crops and Other Industrial Products

Table C-l—Selected Potential New Food Crops

Grains Beans Fruits Tubers Vegetables

Amaranth Adzuki Atemoya Cassava Canola oilBlue corn Black turtle Carombola Cocoyam ChayoteQuinoa Chickpeas Lingonberry Groundnut JimacaTriticale Edible soybeans Mayhaw Sweet potato TomatilloWhite Iupin Mung Papaya TaroWild rice PersimmonSOURCE: Office of Technology Assessment, 1991.

Biopharmaceuticals

U.S. research on plants as sources of medicinalappears to be limited. Most major drug companies and theNational Cancer Institute have either reduced or elimi-nated plant screening for drug potential. One successfulplant-derived drug is anticancer alkaloids found in theMadagascar periwinkle by Eli Lilly & Co. (9). TheNational Cancer Institute is currently interested in testingtaxol recovered from the bark of the Pacific yew foranticancer activity (5).

Difficulties in screening and characterizing compoundshave impeded research on biopharmaceuticals. It maybecheaper to synthesize the simple compounds than toextract and purify them from plants. Highly complexcompounds are more difficult to synthesize, and in thesecases plant extraction might be competitive. Cell cultur-ing is another alternative (9).

The United States does import plant-derived pharma-ceuticals, including cinchona bark (quinine), belladonna,coca leaves, and opium for medicinal use. Additionally,the United States exports some plants that are used asmedicines in other countries. Ginseng (Panax ginseng) isan example. It grows wild in deciduous hardwood forestsand is cultivated, with 90 percent of the domesticproduction in Marathon County, Wisconsin. Averageper-acre yields are 3 tons of green ginseng root, whichdries to about 1 ton. Ginseng is risky to produce, highlysusceptible to fungi, and takes 6 to 7 years to mature.Planting costs, seedbed preparation, weeding, and har-vesting cost nearly $20,000 per acre. Prices of cultivatedginseng have averaged around $50 per pound (1980-83)(3).

Potential medicinal plants include Coleus barbatus, aperennial from India. The diterpene forskolin, currentlyused in research and potentially a hypertensive, has beenisolated from the root tubers. Attempts to grow this plant

in Michigan have been successful, but quality is highlyvariable (10).

Biopesticides

Currently, plant-derived insecticides and syntheticanalogs are available for use. Some examples includepyrethrum, rotenone, nicotine, and hellebore. Pyrethrumis obtained from flowers grown in Kenya, Tanzania, andEcuador. Synthetic analogs, which are more stable andeffective in the field, have replaced much of the use ofpyrethrum. Rotenone comes from roots of Leguminosaespecies and is used to control animal ectoparasites and inhome and garden uses. Nicotine is not widely usedbecause of high production costs, toxicity and limitedeffectiveness (2). Powder from the roots of hellebore areused to kill lice and caterpillars. Other plants suggested aspotential producers of insecticides include:

1.

2.

3.

4.

Sweetflag (Acorus calamus), a semiaquatic peren-nial that can be grown on dry land. An Americanvariety grows in the Southeastern United States.Essential oils obtained from the roots of Europeanand Indian varieties produce B-asarone and asaryl-aldehyde, which attract and sterilize fruit flies, andcan be used as a fumigant for stored grains (4).Big sagebrush (Artemesia tridentata), a perennialthat grows in the deserts of the Western UnitedStates. Active ingredients include the antifeedantdeacetoxymatricarin, which acts against the Colo-rado potato beetle among other insects (4).Heliopsis longipes, a perennial herb native toMexico. Active ingredients are found in the root andinclude affinin which acts against mosquitoes andhouseflies (4).Mamey apple (Mammea Americana), a tree native tothe West Indies and which can be grown in Florida.The principal active ingredients are mammein andits derivatives, which are obtained in the seeds andfruit pulp. It can be used against fleas, ticks, and lice(4).

–l00-

Appendix C-Selected New Food Crops and Other Industrial Products ● 101

5.

6.

7.

Sweet basil (Ocimun basilicum), currently used asan herb or spice and easily grown in the UnitedStates. The oil contains many compounds that areactive against the larva of mites, aphids, andmosquitoes (4).Mexican marigold (Tagetes minuta), an annualnative to South America which can be grown in theUnited States. Active ingredients include 5-ocimenone and a-terthienyl, which are found inmany parts of the plant and act as nematocides tokill mosquito larvae. Approximately 50 to 60percent of the oil is tagetone, which acts as ajuvenilizing hormone (4).Neem (Azadirachta indica), a tree native to India. Itthrives in hot dry areas and is salt tolerant. It is easyto care for and fruits in about 5 years. One tree canproduce 30 to 50 kg of seeds per year. Thirty kg ofseeds yield about 6 kg of oil and 24 kg of meal.Active ingredients include azadirachtin contained inthe seed oil, which acts as a growth regulator andfeeding deterrent against many beetles. Neem is abroad-spectrum insecticide; only small amounts ofthe active ingredients are required. Research onneem is being conducted at the USDA HorticultureResearch Station in Miami. Recently, the horticul-ture products division of WR Grace & Co. acquiredtrademarks and patents for the technology used toproduce insecticides from neem and will market aninsecticide under the name of Margosan-O(1,4,6,7).

To be commercially viable, an insecticide needs to beeffective against a wide range of insects.

Active ingredients derived from plants could also beused as herbicides. A potential plant with herbicidalproperties is Dyer’s Woad (Isates tinctoria). This plantgrows in the Western United States. The seed podscontain a chemical that is toxic to the roots of grasses (8).

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

Appendix C References

Ahmed, Saleem, and Grainge, Michael, “Potential of theNeem T~e (Azadirachta indica) for Pest Control and RuralDevelopment,’ Economic Botany, vol. 40, No. 2, April-June 1986, pp. 201-209.

Balandrin, Manuel F., Klocke, James A., Wurtele, EveSyrkin, and Bollinger, Wm. Hugh, “Natural Plant Chemic-als: Sources of Industrial and Medicinal Materials, ’Science, vol. 228, June 1985, pp. 1154-1160.

Carlson, Alvar W., “Ginseng: America’s Botanical DrugComection to the Orient,” Economic Botany, vol. 40, No.2, April-June 1986, pp. 233-249.

Jacobson, Martin, “Insecticides, Insect Repellents, andAttractants From Arid/Semiarid Land Plants,’ Plants: ThePotential for Extracting Proteins, Medicines, and OtherUsefil Chemicals-Workshop Proceedings, OTA-BP-F-23(Washington, DC: U.S. Congress, OffIce of TechnologyAssessment, September 1983), pp. 138-146.

Meyer, Brian, “Manipulating Forest Trees Anything ButSimple,” Agricultural Biotechnology News, January-February 1989.

Naj, Amal Kumar, ‘‘ W.R. Grace Acquires Patents To MakeNatural Insecticide From Tropical Tree,” Wall StreetJournal, Technology Section, Tuesday, Jan. 31, 1989.

Naj, Amal Kurnar, “Can Biotechnology Control FarmPests?” Wall Street Journal, Thursday, May 11, 1989.

Sherman, Howard, U.S. Department of Agriculture, Agri-cultural Research Service, “Dyer’s Woad Wages ChemicalWar in West,” Agricultural Research, vol. 36, No. 7,August 1988.

Tyler, Varro E., “Plant Drugs in the Twenty-First Cen-tury,” Economic Botany, vol. 40, No. 3, July-September1986, pp. 279-288.

Valdes, L.J., III, Mislankar, S. G., and Paul, A.G., “Coleusbarbatus (C. forskohleii Lamiaceae) and the Potential NewDrug Forskolin (Coleonol),” Economic Botany, vol. 41,No. 4, October-December 1987, pp. 474483.

Appendix D

Miscellaneous Commodity Statistics

Table D-l—Calculations of Acreage Requirements

General formula used:(Import levels) x (percent of fatty acid)”+ (new crop yields/acre) x (percent of oil) x (percent of fatty acid)a = acres of new crop needed

Import Percent of Yield/ Percent Percent ofImported crops Ieve!sb,c fatty acidd New crops acree,f of oild fatty acidsd

Coconut oil . . . . . . . . . . . . 1,120 45 Lauric Cuphea . . . . . . .Palm kernel oil . . . . . . . . . . 403 50 Laurie Lesquerella . . . .Castor oil . . . . . . . . . . . . . . 94 85 Hydroxy Stokes Aster . . .Soybean oil . . . . . . . . . . . . 180 Converted to epoxy Vernonia . . . . . .Rapeseed oil . . . . . . . . . . . 191 50 Erucic Crambe . . . . . . .Hevea rubber . . . . . . . . . . . 1,790 Rapeseed . . . . .Newsprint . . . . . . . . . . . . . . 7 Guayule . . . . . .

Kenaf. . . . . . . . .

1,500 30 80 Launc1,500 25 65 Hydroxy1,500 35 70 Epoxy1,500 25 70 Epoxy1,500 40 55 Erucic2,000 40 50 Erucic

5007

NOTE: See table 5-2.awhere applicable; bNewsprint imports in million tons (1 987 levels); cOil and rubber imports in million Ibs (1 987 levels); ‘Assumed average values; ‘Oilse~and guayule yields in Ibs per acre (assumed values); ‘Kenaf yields in tons per acre (assumed values).

Table D-2—World Production of Major Oils (million MT)

1984-85 1985-86 1986-87 1987-88’

Coconut oil . . . . . . . . . . . . 2.63 3.32 2.99 2.64Linseed . . . . . . . . . . . . . . . . 0.64 0.59 0.61 0.63Palm kernel oil . . . . . . . . . . 0.96 1.11 1.09 1.14Palm oil . . . . . . . . . . . . . . . 6.92 8.17 8.09 8.57Rapeseed . . . . . . . . . . . . . 5.60 6.18 6.80 7.48Soybean . . . . . . . . . . . . . . . 13.34 13.77 15.07 15.35Sunflower . . . . . . . . . . . . . . 6.17 6.63 6.47 7.03Tallow . . . . . . . . . . . . . . . . 6.52 6.40 6.39 6.23aData for 1987-88 is preliminary.

SOURCE: U.S. Department of Agriculture, Agriw/tura/ Statistics 1988 (Washington, DC: U.S. Government Printing Office, 1988).

Table D-3--Rapeseed Production in Selected Countries (1,000 MT)

Country 1976-78 1984 1985 1986Canada. . . . . . . . . . . . . . . . 2,102 3,228 3,508 3,809North Europea . . . . . . . . . . 119 771 990 1,033West Europeb . . . . . . . . . . . 298 2,892 3,026 2,517East Europec . . . . . . . . . . . 447 1,526 1,668 1,955China . . . . . . . . . . . . . . . . . 1,462 4,205 5,607 5,870India . . . . . . . . . . . . . . . . . . 1,712 2,608 3,073 2,636aNorth Europe includes Sweden, Denmark, and Finiand.bWest Europe includes France, United Kingdom, and West Germany.cEast Europe includes Czechoslovakia, East Germany, and Poland.

SOURCE: U.S. Department of Agriculture, Economic Research Service, “World Indices of Agricultural and Food Production, 1977-88,” Statistical Bulletin No.759, March 1988.

–102–

Appendix D--Miscellaneous Commodity Statistics ● 103

Table D-4--U.S. Vegetable Oil Imports

Quantity (MT)

Oil 1985 1986 1987 Major supplier

Castor . . . . . . . . . . . . . . . . . 37,189 37,664 42,528 BrazilCoconut . . . . . . . . . . . . . . . 450,199 548,317 506,387 PhilippinesOlive. . . . . . . . . . . . . . . . . . 43,959 54,010 63,736 ItalyPalm. . . . . . . . . . . . . . . . . . 225,410 279,597 187,899 MalaysiaPalm kernel . . . . . . . . . . . . 128,310 195,963 182,951 MalaysiaRape . . . . . . . . . . . . . . . . . . 15,332 55,293 87,317 Canada, East EuropeTang . . . . . . . . . . . . . . . . . . 6,939 5,575 5,895 ArgentinaSOURCE: U.S. Department of Agriculture, Economic Research Service, Commodity Economics Division, “Foreign Agricultural Trade of the United States,”

Calendar Year 1987 Supplement, June 1988.

Table D-5-1987 U.S. Wax Importsa

wax Quantity(MT) Dollar/MT Dollar/lb

Beeswax . . . . . . . . . . . . . . . . . 832 2,798 1.27Candelilla wax. . . . . . . . . . . . . 352 2,054 0.93Carnauba wax. . . . . . . . . . . . . 4,015 1,854 0.84a The data is the price paid to the exporter, not the wholesale price and does not include costs of shipping, insurance,

etc.SOURCE: U.S. Department of Agriculture, Economic Research Service, Commodity Ecmomics Division, “Foreign

Agricultural Trade of the United States,” Calendar Year 1987 Supplement, June 1988.

Table D-6—U.S. Imports of Guar Seeds

Year Quantity (MT) Value ($1,000)

1985 . . . . . . . . . . . . . . . . . . . . 804 831986 . . . . . . . . . . . . . . . . . . . . 301 251987 . . . . . . . . . . . . . . . . . . . . 12 4SOURCE: U.S. Department of Agriculture, Economic Research Service,

Commodity Economics Division, “Foreign Agricultural Trade ofthe United States,” Calendar Year 1987 Supplement, June1988.

Table D-7—U.S. Imports of Rubber, 1986-87

Year Quantity (MT) Value ($1,000)

1986 . . . . . . . . . . . . . . . . . . . . 777,577 612,0601987 . . . . . . . . . . . . . . . . . . . . 813,871 741,498Note that the value does not include cost of shipping, insurance, etc.SOURCE: U.S. Department of Agriculture, Economic Research Service,

Commodity Economics Division, “Foreign Agricultural Trade ofthe United States,” Calendar Year 1987 Supplement, June1988.

Table D-8-Wholesale Prices of Major Oils

Oil source Fatty acid Dollar/lba Rangeb

Castor oil . . . . . . . . . . . . . . . . . . . . . . .Coconut . . . . . . . . . . . . . . . . . . . . . . .Linseed . . . . . . . . . . . . . . . . . . . . . . . .Palm . . . . . . . . . . . . . . . . . . . . . . . . . .Rapeseed . . . . . . . . . . . . . . . . . . . . . .Soybean . . . . . . . . . . . . . . . . . . . . . . .Sunflower . . . . . . . . . . . . . . . . . . . . . .Tallow . . . . . . . . . . . . . . . . . . . . . . . . .Tung . . . . . . . . . . . . . . . . . . . . . . . . . .

Ricinoleic acidLaurie acidC18 acidsPalmitric/Laurie acidErucic acidLinoleic acidLinoleic acidStearic AcidMultiunsaturated acids

0.390.230.250.170.640.150.160.150.53

0.33-0.730.16-0.600.25-0.330.14-0.330.55-0.640.15-0.310.16-0.340.09-0.150.39-1.19

a1987 wholesale price per pound.bRange in wholesale price per pound, 1983-87.

SOURCE: U.S. Department of Agriculture, A@cu/fura/ Statistics 1988 (Washington, DC: U.S. Government PrintingOffice, 1988)


Table D-9—Oil Content of U.S. Oilseed Crops

Oilseed crop Percent oil

Table D-10-1987 Harvested Acreage and Value ofMajor U.S. Crops

Cottonseed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-20Peanut . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45-50Rapeseed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40-45Safflower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30-35Soybean . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-20Sunflower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35-45SOURCE: Everett H. Pryde, “Chemicals and Fuels From Commercial

Oilseed Crops:’ Fuels and Chemicals From Oiiseeds:T&nologyandPolioy Options, American Association fortheAdvancement of Science Selected Symposia Series No. 91,Eugene B. Shultz, Jr. and Robert P. Morgan (eds.) (Boulder,CO: Westview Press, Inc., 1984), pp. 51-69.

Acreage VauleCrop (millions of acres) (billions of dollars)

Barley . . . . . . . . . . . . . . 10 0.9Corn . . . . . . . . . . . . . . . 65 12.1Oats . . . . . . . . . . . . . . . 7 0.6Sorghum . . . . . . . . . . . . 10 1.1Soybeans . . . . . . . . . . . 56 10.4Wheat . . . . . . . . . . . . . . 56 5.3SOURCE: U.S. Department of Agriculture, Agricultural Statistics 1988

(Washington, DC: U.S. Government Printing Office, 1988).

Appendix E

Workshop Participants and Reviewers

Agricultural Research and Technology Transfer Policy for the 1990s Workshop

Norman BergSeverna Park, MD

Donald BillsAgricultural Research ServiceU.S. Department of AgricultureBeltsville, MD

Patrick BorichDirectorCooperative Extension ServiceUniversity of MinnesotaSt. Paul, MN

Lucas CalpouzosSchool of AgricultureCalifornia State UniversityChico, CA

Mary CarterAssociate AdministratorAgricultural Research ServiceU.S. Department of AgricultureWashington, DC

Neville ClarkTexas Agricultural Experiment StationTexas A&M UniversityCollege Station, TX

Arnold DentonSenior Vice PresidentCampell Soup CompanyCamden, NJ

Chester T. DickersonDirector Agricultural AffairsMonsanto CompanyWashington, DC

Catherine DonnellyAssociate DirectorAgriculture Experiment StationCollege of Agriculture and Life ScienceUniversity of VermontBurlington, VT

Jeanne EdwardsWeston, MA

W.P. FlattDeanCollege of AgricultureUniversity of GeorgiaAthens, GA

Ray FrisbeIPM CoordinatorDepartment of EntomologyTexas A&M UniversityCollege Station, TX

Paul GenhoNational Cattlemen’s AssociationDeseret Ranches of FloridaSt. Cloud, FL

Robert HeilDirectorAgricultural Experiment StationColorado State UniversityFort Collins, CO

Jim HildrethManaging DirectorFarm FoundationOak Brook IL

Verner HurtDirectorAgricultural and Forestry Experiment StationMississippi State UniversityMississippi State, MS

Terry KinneyYork SC

Ronald KnutsonProfessorDepartment of Agricultural EconomicsTexas A&M UniversityCollege Station, TX

William MarshallPresidentMicrobial Genetics Div.Pioneer Hi-Bred International, Inc.Johnston, IA

–l05–


Roger MitchellDirectorAgricultural Experiment StationUniversity of MissouriColumbia, MO

Lucinda NobleDirectorCooperative ExtensionCornell UniversityIthaca. NY

Susan OffuttOffice of Budget ManagementNew Executive Office Bldg.Washington, DC

Dave PhillipsPresidentNational Association of County AgentsLewistown, MT

Jack PincusDirector of MarketingMichigan Biotechnology InstituteLansing, MI

Dan RagsdaleResearch DirectorNational Corn Growers AssociationSt. Louis, MO

Roy RauschkolbResident DirectorMaricopa Agricultural CenterMaricopa, AZ

Alden ReineDeanCooperative Agricultural Research CenterPraire View A&M UniversityPraire View, TX

Grace Ellen RiceAmerican Farm Bureau FederationWashington, DC

Keith SmithDirector of ResearchAmerican Soybean AssociationSt. Louis, MO

William StilesSubcommittee ConsultantSubcommittee on Department Operations,

Research, and Foreign AgricultureCommittee on AgricultureU.S. House of RepresentativesWashington, DC

William TallentAssistant AdministratorAgricultural Research ServiceU.S. Department of AgricultureWashington, DC

Jim TavaresAssociate Executive DirectorBoard on AgricultureNational Research CouncilWashington, DC

Luther TweetenAnderson Chair for Agricultural TradeDepartment of AgriculturalEconomics and Rural SociologyOhio State UniversityColumbus, OH

Walter WallaDirectorExtension ServiceUniversity of Kentucky

Tim WallaceExtension EconomistDepartment of Agricultural EconomicsUniversity of CaliforniaBerkeley, CA

Fred WoodsAgricultural ProgramsExtension Service

Robert Robinson U.S. Department of AgricultureAssociate Administrator Washington, DCEconomic Research ServiceU.S. Department of Agriculture

John Woeste

Washington, DCDirectorCooperative Extension Service

Jerome Seibert University of FloridaEconomist Gainesville, FLDepartment of Agricultural EconomicsUniversity of CaliforniaBerkeley, CA

NOTE: OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by the workshop participants.The workshop participants do not, however, necessarily approve, disapprove, or endorse this report. OTA assumes fullresponsibility for the report and the accuracy of its contents.

Appendix &Workshop Participants and Reviewers ● 107

Crop Technology Workshop

Michael AdangAssociate ProfessorDepartment of EntomologyUniversity of GeorgiaAthens, GA

Garren O. BensonProfessorDepartment of AgronomyIowa State UniversityAmes, IA

Norman BrownPresidentFBS Systems Inc.Aledo, IL

J.A. BrowningProfessorDepartment of Plant PathologyTexas A&M UniversityCollege Station, TX

John BurkeResearch LeaderAgricultural Research ServiceU.S. Department of AgricultureLubbock TX

Raghavan CharudattanProfessorDepartment of Plant PathologyUniversity of FloridaGainesville, FL

Sharon K. ClarkPresidentMinnesota Corn Growers Assoc.Madison, MN

Ken CookCenter for Resource EconomicsWashington, DC

James DavisVice-President of Development&

General CounselCrop Genetics InternationalHanover, MD

Willard DownsProfessorOklahoma State UniversityStillwater, OK

Lynn ForsterProfessorDepartment of Agricultural Economics

and Rural SociologyOhio State UniversityColumbus, OH

Nicholas FreyProduct Development ManagerSpecialty Plant Products DivisionPioneer Hi-Bred InternationalDes Moines, IA

James FuxaProfessorDepartment of EntomologyLouisiana State UniversityBaton Rouge, LA

Robert HallAssociate ProfessorDepartment of Plant ScienceSouth Dakota State UniversityBrookings, SD

Chuck HassebrookCenter for Rural AffairsWalthill, NE

Dale HicksProfessorDepartment of Agronomy and

Plant GeneticsUniversity of MinnesotaSt. Paul, MN

Donald HoltDirectorAgriculture Experiment DirectorUniversity of IllinoisUrbana, IL

Marjorie HoyProfessorDepartment of EntomologyUniversity of CaliforniaBerekely, CA

Jeffrey IhnenAttorney-at-LawVenable, Baetjer, Howard, and CivilettiWashington, DC


George KennedyProfessorDepartment of EntomologyNorth Carolina State UniversityRaleigh, NC

John C. KirschmanFSC AssociatesLewisville, NC

Ganesh KishoreResearch ManagerMonsanto Agricultural Products Co.Chesterfield, MO

Jerry R. LambertProfessorDepartment of Agricultural EngineeringExtension Service /USDAClemson UniversityClemson, SC

Sue Loesch-FriesDepartment of Plant PathologyUniversity of WisconsinMadison, WI

Gaines E. MilesProfessorDepartment of Agricultural EngineeringPurdue UniversityWest Lafayette, IN

Kevin MillerFarmerTeutopolis, IL

Kent MixFarmerLamesa, TX

Philip RegalDepartment of Ecology

and Behavioral BiologyUniversity of MinnesotaMinneapolis, MN

Jane RisslerNational Wildlife FederationWashington, DC

Douglas SchmaleFarmerLodgepole, NE

Dr. Allan SchmidProfessorDepartment of EconomicsMichigan State UniversityEast Lansing, MI

Ronald H. SmithExtension SpecialistAuburn UniversityAuburn, AL

Steve SonkaProfessorDepartment of Ag. EconomicsUniversity of IllinoisUrbana, IL

Nicholas D. StoneAssistant ProfessorDepartment of EntomologyVirginia Polytechnic Institute and State UniversityBlacksburg, VA

Christen UpperProfessor/Research ChemistARS/USDADepartment of Plant PathologyUniversity of WisconsinMadison, WI

Ann VidaverDepartment of Plant PathologyUniversity of NebraskaLincoln, NE

William WilsonAssociate ProfessorDepartment of Agricultural EconomicsNorth Dakota State UniversityFargo, ND

Paul ZornerDirector of Bioherbicide ResearchMycogen CorporationSan Diego, CA

NOTE: OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by the workshop participants.The workshop participants do not, however, necessarily approve, disapprove, or endorse this report. OTA assumes fullresponsibility for the report and the accuracy of its contents.

Appendix E-Workshop Participants and Reviewers ● 109

Emerson BabbEminent ScholarDepartment of Food and Resource EconomicsUniversity of FloridaGainesville, FL

Wm. Hugh BollingerVice President Environmental ProductsTerraTekSalt Lake City, UT

Kenneth CarlsonResearch ChemistNorthern Regional Research CenterAgricultural Research ServiceU.S. Department of AgriculturePeoria, IL

Daniel KuglerOffice of Critical Agricultural MaterialsU.S. Department of AgricultureWashington, DC

Reviewers

Norman RaskProfessorDepartment of Agricultural Economics


Joseph RoethliOffice of Critical Agricultural MaterialsU.S. Department of AgricultureWashington, DC

Thomas SporlederProfessorDepartment of Agricultural Economics


NOTE: OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by the reviewers. The reviewersdo not, however, necessarily approve, disapprove, or endorse this report. OTA assumes full responsibility for the report andthe accuracy of its contents.

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