Agricultural Commodities as Industrial

Raw Materials

June 1991

OTA-F-476

NTIS order #PB91-198093

GPO stock #052-003-01237-5
Recommended Citation:

U.S. Congress, Office of Technology Assessment, Agricultural Commodities as Industrial

Raw Materials, OTA-F-476 (Washington, DC: U.S. Government Printing Office, May 1991).

For sale by the Superintendent of Documents

U.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 led

Congress to search for solutions to these problems. Because agriculture is a major industry in

rural areas, diversifying agricultural markets to include industrial uses in addition to

traditional food and feed markets, is viewed as a means of strengthening agricultural and rural

economies. Additional concerns that could potentially be addressed by using agricultural

commodities 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 agricultural

commodities as industrial raw materials. This report examines potential new crops and

traditional crops for industrial uses including replacements for petroleum and imported

strategic materials; replacements for imported newsprint, wood rosins, rubbers, and oils; and

degradable plastics. The analysis includes an assessment of the technical, institutional,

economic, and policy constraints to the development of crops for these uses; discussion of

programs available for assistance; and examination of the potential implications of using

agricultural 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 rural

economies and solve the problems of American agriculture. However, it is possible to provide

domestic sources for many imported industrial materials, some of which are considered to be

of strategic importance, and potentially to replace selected petroleum-derived chemicals. And,

some industrial uses of agricultural commodities offer potential to decrease certain types of

environmental pollution.

This report was requested as part of a larger study examining emerging agricultural

technologies and related issues for the 1990s. The study was requested by the Senate

Committee on Agriculture, Nutrition, and Forestry, the House Committee on Agriculture, and

the House Committee on Government Operations. Two reports issued from this study are:

Agricultural Research and Technology Transfer Policies for the 1990s and U.S. Dairy

Industry at a Crossroad: Biotechnology and Policy Choices. One additional report is in

progress. Findings of this report are relevant to specific legislation regarding agricultural

research and technology transfer that was debated for the 1990 Farm Bill. The information

contained 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 also

like to acknowledge the critiques of the reviewers who helped to ensure the accuracy of our

analysis. It should be understood, however, that OTA assumes full responsibility for the

content of this report.

u JOHN H.-GIBBONS

Director

. . . 111
OTA Project Staff—Agricultural Commodities as Industrial Raw Materials

Roger C. Herdman, Assistant Director, OTA

Health 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
Contents

Page

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 as

Industrial Raw Materials ● ....0.0 .00000... ● .......0 .0..0.000 . . . . . . . . .

RURAL DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Impacts of Changing Farm Income and Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rural Employment Potential in Agriculturally Related Industries . . . . . . . . . . . . . . . . . . .

Rural Employment Potential in Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

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Potential Rural Employment Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

REGIONAL SPECIALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

AGRICULTURAL SECTOR STABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

INTERNATIONAL IMPLICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

COMPETITION WITH CURRENT CROPS AND INTERREGIONAL IMPACT . . . . . 30

SMALL FARM IMPACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30

ENVIRONMENTAL IMPACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

COMMODITY SURPLUSES AND GOVERNMENT EXPENDITURES . . . . . . . . . . . . . 33

POTENTIAL TO SUPPLY STRATEGIC MATERIALS AND REPLACE

PETROLEUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Detergent Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

v
Rubber Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

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

FULL UTILIZATION OF LAND RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

PREMATURE COMMERCIALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

SUMMARY AND CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

CHAPTER 3 REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43

Chapter 4. Factors That Affect the Research, Development, and

Commercialization ... ... .. . .. .. ... .. .. ... ... . 41

RESEARCH AND DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

Industrial Use Research Funding and Institutional Involvement . . . . . . . . . . . . . . . . . . . . 42

COMMERCIALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Industrial Interest in Public-Sector Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Private-Sector Access to Public-Sector Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Technology Transfer Mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47

Financial Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48

SUMMARY AND CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......50

CHAPTER 4 REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50

Chapter 5. Factors Involved in the Adoption of New Technologies by

Industry and Agricultural Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

ADOPTION OF NEW TECHNOLOGIES BY INDUSTRY . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Technology Extension and Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54

ADOPTION OF NEW TECHNOLOGIES BY AGRICULTURAL PRODUCERS . . . . . 55

Technical Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Economic Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Agricultural Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58

POLICY IMPLICATIONS . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

CHAPTER 5 REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59

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

PROPOSED LEGISLATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61

Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Policy Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65

POLICY OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Commodity Program Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66

Research, Development, and Commercialization Proposals . . . . . . . . . . . . . . . . . . . . . . . . 67

Options Requiring Further Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

CURRENT LEGISLATIVE ACTIVITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

CHAPTER 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
Boxes

Box Page

3-A. Social and Market Impacts of Ethanol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

4-A. European Research Program To Develop New Industrial Crops and Uses of

Traditional Crops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

5-A. Commercialization of Soybeans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

6-A. Alternative Agricultural Products Act of 1990: House Proposal . . . . . . . . . . . . . . . . . 62

6-B. Alternative Agricultural Research and Commercialization Act of 1990:

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

Tables

Table Page

2-1. Industrial Fatty Acids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

2-2. Fats and Oils: Use in Selected Industrial Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

2-3. Industrial Uses of Selected Oils, April/May 1990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

2-4. 1987 U. S. Wax Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

2-5. Industrial Uses of Rosin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

2-6, Use of Pulp in Paper and Paperboard Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

2-7. Potential New Industrial Crops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

2-8. Potential Industrial Uses for Traditional Crops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

3-1. Farm Family Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

3-2. Farm Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

3-3. Share of Total Employment in Agriculturally Related Industries, 1984 . . . . . . . . . . 19

3-4. U.S. Agricultural Acreagea and Production, Selected Years . . . . . . . . . . . . . . . . . . . . 19

3-5. Employment Changes in 1975-81 and 1981-84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

3-6. Distribution of Jobs in Agriculturally Related Industries . . . . . . . . . . . . . . . . . . . . . . . 20

3-7. Nonmetro Share of Manufacturing Jobs by Job Type . . . . . . . . . . . . . . . . . . . . . . . . . . 21

3-8. Distribution of Manufacturing Jobs, 1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

3-9. Manufacturing Employment Trends of Industries Potentially Using

Industrial Agricultural Commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

3-10. Likely Production Locations of New Crops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

3-11. Participation in Federal Farm Programs by Farm Size, 1987 . . . . . . . . . . . . . . . . . . . 25

3-12. Participation in Federal Farm Programs by Crop Acres, 1987 . . . . . . . . . . . . . . . . . . 26

3-13. Income Sources by Sales Category, 1988 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

3-14. Commodity Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

3-15. Major Primary Feedstocks Derived From Petroleum . . . . . . . . . . . . . . . . . . . . . . . . . . 29

3-16. Expected Global Production Capacity of Surfactant Alcohols . . . . . . . . . . . . . . . . . . 32

3-17. Expected World Rubber Demand Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

3-18. Estimated Acreage Needed To Supply One Billion Gallons of Fuel . . . . . . . . . . . . 33

3-19. Estimated Acreage Requirements for Selected New Crops To Replace Imports. . 33

3-20. Estimated Acreage Needed To Replace World Supplies . . . . . . . . . . . . . . . . . . . . . . . 34

4-1. USDA Fiscal Year 1989 Expenditures for Selected New Crops . . . . . . . . . . . . . . . . . 43

4-2. Expenditures for Guayule Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

4-3. Expenditures for Kenaf Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

4-4. 1988 Federal Expenditures for Degradable Plastic Research . . . . . . . . . . . . . . . . . . . . 44

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Chapter 1

Summary

Interest in diversifying agriculture has been increasing, due to changes affecting the industry.

Widely fluctuating farm incomes ($38 billion in

1979,$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 base

of rural communities, and the pressures faced by

small farms, have intensified the search for new

economic activities. Soil erosion, agrichemical

groundwater contamination, and other environmental problems resulting from modern agriculture

have spurred interest in developing new crops that

may be better suited to some geoclimatic regions

than current crops and that provide fanners with

more crop rotation alternatives. Policymakers dealing with government budget constraints are seeking

ways to reduce surpluses and commodity support

payments. Concerns about the long-term supply of

petroleum have led to an interest in the potential of

renewable resources, including agricultural commodities, to replace petroleum derived products.

Development of new industrial crops and uses of

traditional crops is viewed as at least a partial

solution to these pressing problems.

Agricultural commodities traditionally are used

for food or livestock feed, but potentially could

provide chemicals for use in a wide range of

industrial applications. Vegetable oils and plant

resins can be used as components of lubricants,

paints, detergents, and plastics among others. Starch

can be used to produce biopolymers, or as a food

source for bacteria that produce commodity chemicals. New fibers can replace wood pulp in a variety

of paper and paperboard products. Crops that are

traditionally grown in the United States are used in

limited quantities for industrial purposes. Additionally, the United States imports selected agricultural

products for industrial use. Uses of traditional crops

can be expanded, and new crops can be adapted to

U.S. production to provide many of these products.

Many constraints must be overcome before agricultural commodities will become a primary source

of industrial raw materials. Technical constraints

include agronomic problems such as seed shattering

and dormancy, low yields, insect pollination, and

photoperiodism among others. For some new crops,

the lack of germplasm may constrain research

efforts. Utilization research is needed before chemicals from crops can be used industrially. And, the

efficiency and productivity of new industrial use

processes must be increased. With sufficient research funding and effort, it is likely that many of

these technical constraints can be overcome.

Economic, rather than technical constraints, will

likely impede the development of new industrial

crops and uses most severely. New industrial uses

must be acceptable to manufacturers and the products produced accepted by consumers. For example,

several proposed new crops produce chemicals that

are already being used in industrial processes. The

current sources of these chemicals are petroleum and

agricultural imports. To be acceptable to manufacturers, chemicals derived from new crops must be

competitive with current sources in terms of price,

quality, and performance. Similarly, many potential

new uses for agricultural commodities will compete

with products already in use.

New crops must also be acceptable to farmers.

Adoption of new crops by farmers will depend

largely on their profitability relative to crops the

farmer can grow now. Profitability can be increased

if multiple uses for new crops can be found and

developed; many of the chemicals that could be

derived from new crops currently have limited

demand.

Research to develop industrial uses of agricultural

commodities is diverse and takes place in government laboratories, universities, and the private

sector. Several Federal programs exist that can

facilitate the development of new industrial crops

and uses, and funding for research and development

activities has been an estimated $10 to $15 million

annually. Federal funding has primarily supported

research on the new crops guayule, kenaf, Crambe,

and rapeseed, and on new uses of cornstarch (e.g., for

ethanol production). Federal funding sources inl~ese n~ers represent net income from fiWmiIl gin 1982-84 dollars. Net income includes cash receipts from farm marketing and government

payments, plus non-money and other farm income minus production expenses. Off-farm income is not included. Source: USDA Agricultural Statistics,

1988.

–l–
2 ● Agricultural Commodities as Industrial Raw Materials

elude primarily the Department of Defense, the

National Science Foundation, the Department of

Energy, and the Department of Agriculture. Proponents of developing agricultural commodities as

industrial raw materials perceive these programs as

being inadequate, and have called for new initiatives. Legislation introduced in the 100th and 101st

Congresses, and passed in the 101st Congress,

authorizes funding for research, development, and

commercialization of new crops and new uses of

traditional crops. Goals of the legislation include

diversifying and stabilizing the agricultural sector,

enhancing rural development, and increasing family-farm incomes. Additionally, proponents hope

that the new crops and uses of traditional crops will

be more environmentally benign than current crops,

will improve the U.S. balance of trade, and will

decrease Federal agricultural payments. However,

several questions remain concerning the appropriate

goals of new crop and use development, and the best

institutional arrangements for achieving those goals.

Major Findings

As with all new technologies, development,

commercialization and adoption of new industrial

crops and uses of traditional crops will have many

impacts, some positive and some negative. At issue

are questions such as:

●

●

●

●

What benefits can realistically be achieved?

What adverse impacts can be expected?

What constraints (policy, institutional, social,

economic, environmental, or technical) impede

development?

How can policy and institutions be structured to

be efficient, cost-effective, maximize benefits,

and minimize adverse impacts?

Chemicals derived from agricultural commodities

have a potentially broad range of industrial applications, and many are technically promising. Technical feasibility, however, will not be sufficient for

widespread adoption. Chemicals derived from agricultural commodities must be less expensive than

those currently available, or provide a superior

product in terms of quality, performance, supply

availability, or environmental benefits among other

criteria. Environmental regulations could have a

significant impact on the development of new

industrial crops and uses of traditional crops. And

economic competitiveness will hinge on the ability

to develop markets for processing byproducts. OTA

concludes that:

●

●

It

Development of new industrial crops and uses

of traditional crops offers future flexibility to

respond to changing political, economic, and

environmental conditions in supplying industrial materials, although currently, many are not

economically competitive with alternatives.

Commercialization potential will be enhanced

if research and development efforts take a

systemic approach and are directed toward

creating a package of products rather than a

single product.

takes many years to develop a new use or crop,

and during that time political, economic, and environmental conditions could change. Research and

development of new products and processes lays the

groundwork necessary to respond quickly and effectively to these changing conditions. It is unlikely that

individual firms will be willing to make large

investments to develop substitutes for future hypothetical changes. Arguments can be made, however,

that this may constitute a legitimate public-sector

investment.

The economic competitiveness of using agricultural commodities for industrial uses hinges on the

ability to develop markets for the primary product

and any processing byproducts. For example, the

cost of using corn for ethanol production depends on

the cost of the corn minus any credits received for the

gluten meal, distillers grains, and oil produced as

byproducts. The industrial market share of vegetable

oil fatty acids will depend on the fatty acids being

competitive with petroleum-derived products as

well as the extent to which the glycerin byproduct

can compete with petroleum-derived glycerin, and

markets can be found for the meal. Thus, development strategies must consider developing a package

of products, rather than a single use only.

Research Needs

At the present time, the information that is needed

to make a thorough assessment of the market

potential, and socioeconomic and environmental

impacts of developing new technologies using

agricultural commodities is seriously lacking. A

clear need exists for research not only to help

develop new crops and uses, but also to help

policymakers evaluate the potential benefits to be

gained from these new technologies. Rigorous
Chapter l-Summary ● 3

analysis of the potential magnitude of impacts, who

gains and loses and by how much, and whether

benefits can be achieved in a cost-effective manner

is needed. In particular:

Chemical, physical, and biological research is

needed to improve the efficiency of obtaining

chemicals from agricultural crops, to improve

the efficiency of their use in industrial processes, to develop new products, and to improve

the agronomic characteristics of agricultural

crops.

Market research is needed to identify commercial opportunities and constraints.

Social science research is needed to evaluate

the socioeconomic impacts that will result from

technical change.

Environmental research is needed to evaluate

the potential positive and negative environmental impacts of developing new industrial

crops and uses of traditional crops.

Germplasm collection and germplasm storage

and maintenance research is needed.

Many technical and agronomic improvements are

still needed before new industrial crops and uses of

traditional crops will be commercially viable. Lack

of germplasm may constrain research efforts,

particularly for new crops. Research to improve

technical feasibility can improve the economic

competitiveness of using chemicals derived from

agricultural commodities, but it cannot be assumed,

that in all cases, these improvements will be

sufficient to guarantee success. Market needs must

be identified and products developed that can

economically meet those needs. Developing a product first, and then trying to find a market, is not the

most effective approach. Identifying market needs

will require an understanding of the short and long

term trends in input supply, product demand, and

structural change occuring within the industries

involved. Development of new industrial crops and

uses of traditional crops, like any new technology,

will benefit some, and harm others. These trade-offs

have not been analyzed adequately.

Potential Impacts of Using Agricultural

Commodities as Industrial Raw Materials

Due to the lack of studies needed to evaluate the

potential market and impacts of new industrial crops

and uses of traditional crops, definitive statements

concerning the potential benefits and cost-effectiveness of development cannot be made at the

present time. Of the few available studies, most

examine expanding ethanol production from corn,

an industrial use of a traditional crop. While they do

not directly analyze new industrial crops or uses of

traditional crops, some studies are available that

examine issues pertinent to the development of these

new technologies. For example, research evaluating

factors that cause instability in the agricultural sector

and new technology adoption by farmers have been

conducted, and can be used to analyze the potential

impact on small farms and agricultural stability of

new crops and uses. Additionally, studies on rural

industrialization and changes in rural employment

during the 1970s, when demand for agricultural

commodities grew rapidly, can provide insights on

potential rural employment impacts of expanding

industrial uses of some agricultural commodities.

These studies raise serious questions about the

potential benefits and costs of new industrial crop

and use development. Based on these studies, OTA

concludes:

●

●

●

●

●

Evaluation of rural employment in the 1970s

and 1980s suggests that the rural employment

impacts of new industrial crops and uses may

be modest, and that most employment increases

are likely to be in metropolitan rather than rural

communities. The rural counties likely to be

most affected are the fewer than 25 percent that

are agriculturally dependent.

Development of new industrial crops and uses

of traditional crops, without additional policy

measures, is likely to have a modest impact on

the income of small-commercial and part-time

farmers.

New industrial crops and uses of traditional

crops could potentially provide a domestic

source of strategic and essential chemical

compounds that are currently imported or

derived from petroleum, however, many are not

currently economically competitive with these

sources.

New industrial crops and uses of traditional

crops can potentially have positive and negative environmental impacts.

It is not clear that the development of new

industrial crops and uses of traditional crops

will significantly rectify factors that cause

instability in agriculture, and thus stabilize the

agricultural sector.
4 ● Agricultural Commodities as Industrial Raw Materials

●

●

●

●

It cannot be unambiguously stated that new

industrial crops and uses of traditional crops

will improve the U.S. trade deficit or significantly reduce Federal expenditures.

Development of new industrial crops and uses

of traditional crops could potentially compete

for some of the markets of currently produced

crops.

Development of new industrial crops and uses

of traditional crops has the potential to provide

diversification alternatives and new agricultural markets.

Premature attempts to commercialize the new

industrial crops and uses of traditional crops

may delay any further efforts to develop these

uses.

Rural development, small farm survival, and

agricultural stabilization will require comprehensive

approaches. Development and commercialization of

new industrial crops and uses of traditional crops can

be one component of these approaches but, by itself,

will not be sufficient to accomplish these goals.

Information needed to assess the cost-effectiveness

of new crop and use commercialization relative to

other strategies is not available. Historically, however, social rates of return to agricultural research

investment have been high.

Rural Employment

The structure of rural communities has changed

significantly over the last 40 years; rural economies

have diversified and are now strongly linked to the

U.S. national economy and to global events. Linkages between agriculture and rural economies has

eroded over this time, and rural development policy

and agricultural policy are no longer synonymous.

Development and commercialization of new industrial crops and uses, while containing industrial

elements, is still, however, essentially an agricultural policy.

Proponents of new industrial crop and use development feel that these efforts will increase rural

employment through community multiplier effects

resulting from enhanced farm income and increased

agricultural input use, and by creating new jobs

resulting from the full-utilization, expansion, or

construction of processing and manufacturing facilities that use agricultural commodities. The second

half of the 1970s was characterized by rapid

expansion of agricultural production and provides

insights on potential employment impacts of increased industrial demand for agricultural commodities. Over this period, rural employment in agriculturally related industries increased slowly. In general, the agriculture processing industry is not

labor-intensive, has excess capacity, and has increased productivity even as employment levels

dropped. Agriculturally dependent counties (less

than 25 percent of all rural counties) are those that

will be most significantly affected.

Agricultural commodity processing facilities are

not always located near the site of production of the

commodity. Indeed, at least half of all jobs in

agriculturally related industries are located in metropolitan, rather than rural, areas. Need and availability of skilled workers, institutions that provide

managerial and vocational education, natural resources, and appropriate infrastructure including

transportation and information technologies will be

major determinants of manufacturing or processing

plant location. These needs will generally favor

metropolitan areas, rather than rural communities.

However, special storage, processing, or transportation requirements may make construction or expansion of processing facilities in crop production

regions desirable.

Aid to Small Farms

One goal of using agricultural commodities as

industrial raw materials is to provide higher income

alternatives to small farms. However, in many cases,

the problems faced by small farms are not the lack

of available technologies, rather it is the inability of

their operators to take advantage of new technologies. Small farm operators may lack financial

resources or the management skills needed. Adoption of new technologies is risky, and operators of

small farms may not be willing or able to accept the

added risk. Gains from new technologies accrue

primarily to early adopters; it is unlikely that small

farms will be the earliest adopters of many of the

new technologies.

Small, part-time farmers receive the majority of

their income from off-farm activities; changes in the

market prices of commodities may not significantly

increase their total income. For those that participate, agricultural commodity programs buffer the

impacts of price changes for many traditional crops.

These factors limit the income effects for small

farms that might result from the development of new

uses for traditional crops. Commercialization of new

industrial crops and uses of traditional crops—
Chapter I-Summary ● 5

combined with programs to teach operators of small

farms new management skills, help them obtain

financing, and provide insurance for the additional

risks assumed-may help to enhance small farm

incomes. Without these additional programs, commercialization of new industrial crops and uses of

traditional crops may not significantly enhance the

income of small farms.

Strategic Materials and Petroleum

Replacement Potential

Several of the new crops could provide the United

States with a domestic supply of materials that have

strategic and essential industrial uses. The United

States currently imports agricultural commodities or

uses petroleum derived chemicals for these purposes. Materials of strategic importance are stored in

a strategic material reserve. Domestic production

may be desirable for security reasons.

Agricultural commodities used to produce fuel

and primary feedstock chemicals have the potential

to replace the largest quantities of petroleum imports. Other markets, such as some of the uses for

vegetable oils, are much smaller. It is technically

feasible to use agriculturally derived chemicals as

fuel and industrial feedstocks, but because the

petroleum industry is a highly integrated and flexible system that can change the type, amount, and

price of chemicals it produces to respond to market

conditions, the use of agriculturally derived chemicals is not currently economically competitive in

most of these markets.

Large-scale development of agricultural commodities for fuel and chemical uses will likely result

in major changes in land-use patterns, accompanied

by environmental impacts, as well as impacts on

food prices. Additionally, petroleum-derived energy

is used to produce agricultural commodities and

convert chemicals derived from these commodities;

this usage must be subtracted to determine petroleum replacement potential.

Environmental Impacts

New industrial crops and uses can potentially

have 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 discourage crop rotations, and conservation programs that

prohibit harvesting of crops grown on some land

may inhibit the use of these new crops. Changes in

the 1990 Farm Bill may correct some of these

constraints. Several new crops are better adapted to

semiarid environments and require less irrigation

than many crops currently grown in those areas.

Potential positive environmental impacts could result from new uses of traditional crops such as road

de-icers, and coal desulfurization. Alternative fuels

could potentially improve air quality. Currently,

these uses are not economically competitive, in part

because the prices of alternatives do not reflect the

true cost of adverse environmental impacts.

Many new crops are not native to the United

States and the introduction of foreign species can

sometimes lead to unexpected problems. Some

newly introduced crops (i.e., Johnson grass) have

become serious weeds, while others could potentially serve as a repository for crop diseases. Many

crops may be genetically engineered, and the environmental release of these crops raises many environmental questions. Additionally, large changes in

land use patterns and inputs could have far-reaching

environmental impacts, not all of which may be

positive.

Agricultural Stability

Instability in the U.S. agricultural industry results

primarily from weather variation, market imperfections (i.e., lack of complete markets and asymetric

information between buyers and sellers) and macroeconomic policy (primarily U.S. Government deficits and money supply policies). Globalization of the

goods and financial markets magnifies these impacts.

The development of new industrial crops and uses

of traditional crops does not address macroeconomic

policies. In addition to the agricultural sector itself,

many industries that will use new crops to produce

new products are also highly sensitive to macroeconomic conditions. Diversifying into these new

markets will not shelter the agriculture sector from

macroeconomic impacts. Diversification of crop

production can moderate adverse weather impacts,

but if monoculture increases to meet the demands for

new uses of traditional crops, the opposite effect

could occur. Development of new marketing institutions, or greater use of available market instruments

that reduce risks (i.e., futures markets, forward

contracts, crop insurance, etc.) could improve agricultural stability. Improvements in market institutions and reduction of U.S. deficits are needed to

help stabilize agriculture.
6 ● Agricultural Commodities as Industrial Raw Materials

Diversification

Technological approaches can offer new market

and production opportunities and provide flexibility

to respond to changing economic, political, and

environmental conditions. Many of the new industrial crops and uses of traditional crops are not

economically and/or technically competitive in their

current state of development and under current

economic conditions, but conditions can change. It

takes many years of sustained research to develop a

new crop or a new use. Providing research and

development funding and encouraging public sector/private sector interaction now, can greatly reduce

the lead time necessary should conditions change

and commercialization becomes attractive.

Premature Commercialization

Premature commercialization attempts could potentially halt, or at least delay, the development of a

new industrial crop or use. As an example, public

disillusionment with degradable plastics has resulted in lawsuits against companies making degradable plastic products, and some demands for the

elimination of publicly supported research for these

products. Legislation passed in the 101st Congress

authorizes funding to encourage rapid commercialization of industrial uses of agricultural commodities.

Additional Potential Impacts

Current domestic uses for many of the chemicals

derived from new crops are limited, and production

of these crops to meet this demand may not have a

huge impact on U.S. agriculture in the aggregate.

Concentrated production in a localized region could

possibly be significant for that area. Simultaneous

development of several new crops and uses will have

larger impacts. Development of new uses for a

currently grown crop that raises the price of the crop

may have a more significant impact due to the

volumes involved and the impact on commodity

support payments. The potential for domestic and

export market expansion can only be discussed in

crude terms. Good market studies are needed, but

unfortunately are lacking.

Impacts of most new crops and uses on Federal

farm expenditures, surpluses, and the trade deficit

cannot be determined at the present time. Improved

information about market demand and profitability

is needed to make those assessments. Surpluses and

commodity payment impacts of new crops will

depend on which currently grown crops are replaced

by new crops. For example, corn is a surplus crop

and, in 1988, nearly 60 percent of the crop was

enrolled in the commodity support program. On the

other hand, production of oats in the United States is

in deficit and, in 1988, less than 1 percent of the crop

was enrolled in commodity programs. Shifting

acreage from corn production to new crop production may result in decreased corn surpluses and

reduced Federal commodity expenditures. However,

shifting acreage from the production of oats to new

crops will not significantly affect surpluses and

commodity payments.

For new uses of traditional crops, impacts on

Federal expenditures will depend in part on whether

the new use must be subsidized to be economically

competitive. Ethanol is an example. Excise tax

exemptions potentially could offset most, or all,

commodity program savings. The impacts of new

industrial crops and uses of traditional crops on the

trade deficit are similarly ambiguous.

Development and adoption of new crops or new

uses could result in some income reallocation. Many

new crops and uses have high protein meal as a

byproduct. Significant levels of adoption could

potentially displace soybean meal in some livestock

feed markets, and lower soybean prices. Byproducts

from ethanol production will also put pressure on

soybean prices as they compete in the same oil and

livestock feed markets. Soybean farmers in the

Southeast and Delta regions are most likely to be

adversely affected, while corn farmers in the Midwest will be most positively affected.

Many new crops have the potential to substitute

for, and at least partially replace, major agricultural

exports of developing countries, some of which are

of strategic importance to the United States. Substitutes for coconut oil, palm oil, and rubber are

examples. Attempts to increase exports of corn

gluten meal, which is a byproduct of ethanol

production, may meet with resistance from the

European Community. An improved understanding

of potential international ramifications is needed.

Policy Issues

The lack of research to evaluate market potential

and impact of new industrial crop and use development, as well as the technical constraints that still

exist suggest several research needs as have already

been 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 a

package of technologies and products is developed

with markets identified for all products.

Because legislation has the goal of developing

new products, research will need to be more focused

and directed than would be the case if the goal were

to improve scientific knowledge. To improve the

science base, it is reasonable to focus research

funding on proposals that are the most scientifically

sound and interesting regardless of the topic area.

However, taking this approach to the development

of new products is likely to exclude research needed

for commercialization. Research results are unpredictable, so some undirected research is still needed.

However, most of the research should be focused on

overcoming as many obstacles to commercialization

as possible.

While disciplinary research in the physical, biological, and social sciences is needed, multidisciplinary research will be essential. Because of the

diffuse geographical nature of agricultural production and industry distribution, multiregional research may be needed in some cases. A European

Economic Community research program (ECLAIR

—European Collaborative Linkage of Agriculture

and Industry Through Research), established to

develop industrial uses of agricultural commodities,

recognizes these needs and explicitly requires multidisciplinary research and the active participation of

at least two countries in all projects. U.S. legislation

does not require multidisciplinary or multiregional

research although this type of research could qualify

for funding. Ample evidence exists, however, that if

it is not required, it is unlikely to occur.

There must be a mechanism to set research

priorities. Development of many new crops and uses

will be expensive. As an example, between 1978 and

1989, Federal expenditures for guayule development have been nearly $50 million. Estimated

funding requirements through 1996 are an additional

$38 million. Funding is limited, and it must be

decided how to best allocate those resources. A

mechanism is needed to assess the benefits, negative

impacts, timeframe and development costs of new

technologies, and then to allocate resources to those

that are most promising.

To achieve technical change, policies must address constraints and opportunities in the research

and development, commercialization, and adoption

stages. A wide variety of options and flexibility in

their selection will be of paramount importance.

Funding for research, public sector/private sector

cooperative agreements, and commercialization is

important, but not the only issue. Finding ways to

help industry minimize the search costs of acquiring

information, providing technical assistance and

training to aid the adoption of new technologies, and

agricultural extension programs to aid farmer adoption of new crops also are important.

Additional questions exist as to the most appropriate institutional structure for administering policies

and developing new technologies using agricultural

commodities: is the establishment of a new institution (within but independent of USDA) necessary, or

might a reassessment of how USDA sets priorities

and allocates resources for research and development of agricultural technologies achieve similar

ends? An underlying force driving the call for new

legislation to help develop new industrial crops and

uses of traditional crops is the perceived lack of

responsiveness of the U.S. Department of Agriculture. Proponents of new industrial crop and use

commercialization feel that USDA provides inadequate research funding and insufficient interaction

with the private sector. Similar frustrations are often

voiced with respect to other agricultural technologies. In terms of research, development, and commercialization, new industrial crops and uses of

traditional crops are no different from other agricultural technologies. Thus a critical issue is whether it

is best to establish corporations to commercialize

each technology type, or to address fundamental

problems that exist within USDA.

On the one hand, a new institution could focus its

full attention on new crops and uses and serve as a

central organization that is easily recognized and

accessible to those interested in commercializing

new agricultural technologies. On the other hand, a

new institution may be isolated and unable to

coordinate with other agencies in USDA, develop its

own constituency (making it difficult to terminate)

and may develop goals that are in conflict with those

of the USDA. Historically, the establishment of new

institutions within USDA has been a serious problem, and has hampered attempts to coordinate

policies and programs. Addressing fundamental

problems with USDA priority setting and research

resource allocation mechanisms will improve the

research and development prospects of a wide range

of agricultural technologies, not just new industrial

crops and uses of traditional crops.
8 ● Agricultural Commodities as Industrial Raw Materials

Policy Options

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

mix of products and processes) involves three

stages: research and development (development of

ideas or models), commercialization (commercial

development and marketing), and technology adoption. 2 To successfully achieve technical change,

policies are needed that help overcome constraints in

all three phases. Presently, science policy focuses

mainly on research, development, and commercialization. Issues of adoption have been given little

attention. OTA has identified several potential

policy options to help facilitate the development of

new industrial crops and uses of traditional crops.

Research and Development

Public-sector research for industrial new crops

and uses requires a sustained allocation of personnel

and funding. Emphasis should be placed on interdisciplinary research. Interregional projects will be

needed in some cases. Research needed to develop

new industrial products must include marketing,

economic, and social welfare analysis as well as

biological and chemical research. Potential environmental impacts must be evaluated; this is particularly pertinent for genetically engineered crops, and

for new crop introductions that involve expanding

the range of indigenous species, or the planned

introduction of non-indigenous species to the United

States. Research to develop new industrial crops and

uses could be constrained by the lack of appropriate

germplasm needed to improve agronomic characteristics and to screen for useful, and as yet unidentified, chemicals. Collection and research to improve

maintenance and storage of germplasm is needed.

Technology Transfer and Commercialization

The Technology Transfer Act of 1986 and the

National Competitiveness Technology Transfer Act

of 1989 removed most major barriers to privatesector cooperative agreements with Federal laboratories. There is still a need to provide adequate

funding for these activities and to provide professional incentives for public sector participation. In

addition to cooperative agreements, public sector/

private sector interaction can be stimulated by other

means as well. Other policies might include loans

and use of specialized public-sector facilities and

equipment. Programs such as the Small Business

Innovation Research Program can help the private

and public sectors share the cost of risky research.

Federally supported research is conducted in

thousands of Federal, university, and non-profit

laboratories. Learning about and assessing pertinent

information is still a major problem for private firms

interested in utilizing publicly funded research.

Holding conferences that showcase Federal laboratory research and improving databases describing

federally funded research are two methods of

providing information to private fins.

Adoption

Many new products and technologies developed

and marketed may be inputs or processes needed to

produce other products. In these cases, the adoption

of these new technologies by firms within an

industry will be needed. As with technology transfer, gathering information about new technologies is

costly. Many firms maybe small or lack an in-house

research capacity, and may need assistance before

using these new technologies. There may be a need

for technical extension programs. Likewise, agricultural extension as well as commodity programs will

play major roles in determiningg the extent and speed

of farm adoption of new crops.

Legislation Passed

OTA has identified the need for policies to

address the research and development of new

industrial crops and uses of traditional crops, technology transfer and commercialization issues, and

the issues of the adoption of new technologies.

These options are discussed in chapter 6, and were

made available to the House and Senate Agricultural

Committees during their debate on the Farm Bill. In

the fall of 1990, the 101st Congress passed the Food,

Agriculture, Conservation, and Trade Act of 1990

(1990 Farm Bill). The issues of industrial crops and

uses of traditional crops, USDA research priorities,

and agricultural commodity programs that affect

farmer adoption of new crops were debated and

legislation passed as part of the Farm Bill. Following

is a summary of the main legislation that affects the

development and commercialization of new industrial 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 stage

is referred to as research and development.
Chapter 1--Summary ● 9

●

●

●

The Alternative Agricultural Research and

Commercialization Act was passed to establish

a Center for these actitivities. Establishment of

Regional Centers to assist commercialization

was also authorized.

Commodity programs were changed to allow

for greater planting flexibility. A Triple Base

Option was adopted.

An Agricultural Science and Technology Review Board was created within USDA to

review current and emerging agricultural research issues and to provide a technical assessment of new technologies.

Alternative Agricultural Research and

Commercialization Act

This Act creates an Alternative Agricultural

Research and Commercialization Center, an independent entity located within USDA. The Act also

authorizes the establishment of two to six regional

centers to assist in commercializing new industrial

crops and uses of traditional crops. Heavy emphasis

is placed on commercialization funding. Funding is

also provided for research and development, and

public sector/private sector cooperative research

agreements.

Because of incompatible timing of the Farm Bill

and Appropriations legislation, funding for the new

Alternative Agricultural Research and Commercialization Center was not provided. Instead, the Critical

Agricultural Materials Act was reauthorized through

FY 1995 and funding appropriated for the Office of

Critical Materials. Congress will likely consider

funding of the Center in 1991.

Commodity Programs

Congress passed a Triple Base 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 from production. Fifteen

percent of base acreage is excluded from receiving

commodity payments and can be planted to program

crops or other designated crops (i.e., oilseeds and

industrial or experimental crops designated by the

Secretary of Agriculture). An additional 10 percent

of acreage can be planted to non-program crops

without the loss of program base acreage. These new

flexibility provisions, and removal of acreage that is

eligible for support payments will help to remove

some of the disincentives to the planting of new

industrial crops. Additionally, target prices were

nominally frozen at 1990 levels, but changes in the

way deficiency payments are calculated may effectively reduce price levels.

Agricultural Science and Technology

Review Board

This board consists of 11 representatives from

ARS, CSRS, Extension Service, Land Grant Universities, private foundations, and firms involved in

agricultural research, technology transfer, or education. The purpose of the Board is to provide a

technology assessment of current and emerging

public and private agricultural research and technology transfer initiatives and to determine their

potential to foster a variety of environmental, social,

economic, and scientific goals. The report of the

Board is to include an assessment of research

activities conducted, and recommendations on how

such research could best be directed to achieve

desired goals. Establishment of this Board is an

attempt to address some of the fundamental problems existing in the USDA research and extension

system.

The legislation enacted addresses some research,

development, technology transfer, and farm adoption issues relevant to new crops and new uses of

industrial crops. Congress may wish, in the future, to

explore further other issues that could enhance the

development of these crops and uses. These issues

include germplasm collection and maintenance, the

role of technical assistance and technical extension

programs, improving equity markets in rural communities, and establishing programs to help small

farm operators adopt and utilize new technologies.

Conclusions

Using agricultural commodities as industrial raw

materials will not provide a quick and painless fix

for the problems of agriculture and rural economies.

They can provide future flexibility to respond to

changing needs and economic environments, but

many technical, economic, and policy constraints

must be overcome. Many of the new industrial crops

and uses of traditional crops are still in relatively

early stages of development. Several years of

research and development will be necessary before

their commercialization will be feasible. The lack of

marketing strategies and research to assess the

impacts of new technologies complicates decisions
10 ● Agricultural Commodities as Industrial Raw Materials

on research priorities and appropriate policies and

institutions needed to achieve success. Potential

impacts on income reallocation and the environment, as well as regional effects need further study

before large-scale funding for commercialization is

required. Successful commercialization will require

not just funding assistance, but a systemic policy

that articulates clear and achievable goals and

provides the instruments needed to reach those

goals.

An encompassing research and development

strategy is needed and must be designed to meet

market needs; hence a strategic, multidisciplinary,

multiregional approach should be taken with both

public and private sector involvement. Changes in

agricultural commodity programs, in addition to

those already made, may still be needed to remove

disincentives to the adoption of many new crops.

Because of research information still needed, and the

time still required to develop many of the new crops

and products, a two-step approach to commercialization might be useful. The European community is

taking this approach by first establishing a precommercialization program to determine feasibility,

and then following up with a later program to

encourage commercialization. The U.S. Small Business Innovation Research Program also takes a

multistage approach to the commercialization of

new technologies.

In the United States, initial primary emphasis

could be given to the basic, applied and precommercialization research needed to develop new crops

and uses. A high priority should be an early

technology assessment of products and processes to

analyze potential markets, socioeconomic and environmental impacts, technical constraints, and areas

of research needed to address these issues fully. The

establishment of the USDA Science and Technology

Review Board should improve the prospects for this

type of assessment. The technology assessment

would lay the groundwork for development, and

provide the information needed to make intelligent

decisions about commercialization priorities, possible impacts of new technologies, and further

research or policy actions needed.

Interdisciplinary, and in appropriate cases, multiregional research should be given the highest

funding priority. This could include: chemical,

physical, and biological research needed to improve

production yields and chemical conversion efficiencies, and to establish quality control and performance standards; agronomic research to improve

suitability for agricultural production; germplasm

collection and maintenance research; and social

science and environmental research. Technology

transfer issues should also be addressed. These

issues include funding for cooperative agreements,

database management, and Federal laboratoryindustrial conferences.

Once information is available to identify market

potential and technical, economic, and institutional

constraints, the second step to commercialization

can be made. A strategic plan can be developed to

commercialize the most promising technologies.

Financial aid for commercialization and the role of

regulations may need to be considered. Industrial

adoption and diffusion of new processes may require

additional technical assistance and technical extension programs. For new industrial crops and uses,

additional changes may be needed in agricultural

commodity programs.

Because many new industrial crops and uses of

traditional crops are still in the early stages of

development, there is time for a thorough analysis of

the actual potential of these new products, the

constraints to commercialization, and the potential

impacts of development. This information, once it is

available, will permit the design of appropriate

policy and institutions needed to achieve the benefits

that can be gained from using agricultural commodities as industrial raw materials.
Chapter 2

Introduction

Industrial Uses of Agricultural

Commodities in the United States

Currently, the United States uses chemicals derived from agricultural commodities for a wide

range of industrial applications. Industrial uses,

however, represent only a small percent of total U.S.

production of agricultural commodities. As an

example, industrial uses of vegetable oils use no

more than 2 percent of the total U.S. production of

vegetable oils (12). Industrially useful compounds

derived from renewable resources, including agricultural commodities include:

1. oils and waxes;

2. resins, gums, rubbers, and latexes;

3. fibers;

4. starches and sugars; and

5. proteins.

Oils and Waxes

Lipids (fats and oils) are water-insoluble compounds found in the cells of plants and animals. They

serve as structural components of membranes, and

as metabolic fuel. Lipids are composed of triglycerides that can be decomposed into fatty acids and

glycerol, a chemical that is used in soaps and

detergents. Fatty acids consist of carbon chains. The

length of the chain, the number of double bonds

between the carbons of the chain (the degree of

unsaturation), and the type of reactive groups

attached (e.g., epoxy and hydroxy groups), determine the characteristics and uses of the various fatty

acids. Longer chain (12 or more carbons) fatty acids

are used most frequently in detergents. Shorter chain

(10 or fewer carbons) fatty acids are used primarily

in plastics (1 1). Oilseed crops are a major source of

oils and fatty acids used for industrial purposes.

Table 2-1 lists the fatty acids most commonly used

in industrial applications. Table 2-2 presents total

quantities of fats and oils used for industrial

purposes in 1987 and 1988. Table 2-3 presents

industrial uses of selected oils for May and April

19900

Waxes are similar to oils, but are generally harder

and more brittle (more saturated), and contain esters

of longer-chain fatty acids and alcohols. Waxes are

Table 2-1—industrial Fatty Acids

Most

Class Fatty acid common sources

Saturated . . . . . . . . C1z (Iauric) Coconut oil

C16 (palmitric) Palm oil

C18 (stearic) Tallow, hydrogenated oil

Monounsaturated. . C18 (oleic) Olive, tall oils

C22 (erucic) Rapeseed oil

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

Multiunsaturated . . C18 Linseed, tung, fish oil

Hydroxy. . . . . . . . . . C18 (ricinoleic) Castor oil

SOURCE: 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 Industrial

Products (million pounds)

1987 1988

Soap . . . . . . . . . . . . . . . . . . . . . 918 807

Paints/varnish . . . . . . . . . . . . . 261 176

Resins/plastics . . . . . . . . . . . . 199 202

Lubricants . . . . . . . . . . . . . . . . 109 111

Fatty acids . . . . . . . . . . . . . . . . 2,195 2,181

Other . . . . . . . . . . . . . . . . . . . . 597 501

Total . . . . . . . . . . . . . . . . . . 4,279 3,978

NOTE: 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, Economic

Research Service, 1990.

used in candles, crayons, and floor polishes among

other uses. The United States imports many of the

waxes used (table 2-4).

Resins, Gums, Rubbers, and Latexes

Resins, usually obtained from plant secretions,

are solid or semisolid organic substances (usually

terpenoids) that are soluble in organic solvents and

insoluble in water. The most commonly used resins

are produced by pine trees. Rosin, a resin mixture

extracted from tall oils (a byproduct of chemical

wood pulp manufacture) or from dead pine stumps

has many uses in the chemical industry (table 2-5).

Many of the gums (e.g., xanthan, dextran, polytran, gullan, and pulludan) currently used are derived

from seaweeds and kelps or are produced by

microbial bioprocessing. These polysaccharide biopolymers are used primarily as viscosifiers (thicken-

–11–
12 . Agricultural Commodities as Industrial Raw Materials

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

April/May 1990 (thousand pounds) Percent

Use total consumption

Oil Industrial use April 1990 May 1990 Rubber and chemicals. . . . . . . . . . . . . . . . . . 35.2

Paper sizing . . . . . . . . . . . . . . . . . . . . . . . . . 33.5

Ester gums and synthetic resins. . . . . . . . . . 22.7

Paints, varnishes, and lacquers . . . . . . . . . . 2.2

Other uses. . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7

SOURCE: 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. . . . . . . . . . . . . . . . . . . . . . .

D

3,038

9,599

D

8,020

D

3,442

9,981

D

8,725

22,819 25,320

10,255

D

104

D

12,112

13,849

D

175

D

11,642

Table 2-6-Use of Pulp in Paper and

Paperboard Production

5,200 5,903 Use Percent total

31,224

D

831

398

471

D

28,932

D

410

501

418

D

Newsprint . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.5

Tissue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5

Printing and writing . . . . . . . . . . . . . . . . . . . . 26.0

Packaging and industrial . . . . . . . . . . . . . . . 8.5

Paperboard. . . . . . . . . . . . . . . . . . . . . . . . . . . 49.5

SOURCE: U.S. Department of Agriculture, Forest Service, “An Analysis of

the Timber Situation of the United States, 1989-2040, Part I: The

Current Resource and Use Situation,” 1989.

4,385 4,438

5,600

D

D

5,573

D

D 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 unbranched

chains. Starch is the principal carbohydrate storage

product of higher plants. Current U.S. production of

ethanol requires about 400 million bushels of corn.

An additional 4.5 billion pounds of cornstarch are

used for other industrial purposes. Of that amount,

nearly 3.5 billion pounds are used in the paper,

paperboard, and related industries (primarily as

adhesives). The remainder is used predominantly in

the textile industry (as warp sizers) and as thickeners

and stabilizers (3).

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

SOURCE: James Schaub, U.S. Department of Agriculture, Economic

Research Service, 1990.

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

Beeswax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 832 MT

Candelilla wax. . . . . . . . . . . . . . . . . . . . . . . . 352 MT

Carnauba wax. . . . . . . . . . . . . . . . . . . . . . . . 4.015 MT

SOURCE: U.S. Department of Agriculture, Economic Research Service,

Foreign Agricultural/ Trade of the United States, Calendar Year

1987 Su@ement (Washington, DC: U.S. Government Printing

Office, June 1988).

ers), flocculating agents

lubricants (11).

Natural rubber used in

(aggregating agents), and

Proteins

Industrial uses of proteins include adhesives that

help bind pigments to paper. However, proteins are

most commonly used for food and feed purposes,

rather than as industrial feedstocks.

the United States is Hevea

rubber imported primarily from Malaysia and Indonesia. The United States imports about 800,000

metric ton (MT) of Hevea rubber yearly.

Fibers

Fiber can be obtained from trees and other fibrous

plants (e.g., hemp, ramie). In the United States, the

primary fiber source is the forestry industry. Wood

pulp is used in the making of paper and paperboard

products (table 2-6).

New Industrial Crops and Uses of

Traditional Crops

Chemicals with industrial uses can be derived

from crops that are traditionally grown in the United

States or from new crops, which must be adapted to

U.S. production. New crops can be derived from the

domestication of wild species of plants, or introduced from other countries. Cuphea, an oilseed that
Chapter 2-Introduction ● 13

could replace coconut oil, is an example of an

attempt to domesticate a wild species. Industrial

rapeseed, an oilseed that produces a chemical used

as a slip agent in some plastics, is cultivated in many

countries and is now being adapted to U.S. production.

Research and development of new industrial

crops in the United States is diverse. Table 2-7 lists

some potential new crops that could be developed

for U.S. production. The list is not exhaustive, but

rather includes new crops that are considered to have

high commercial potential based on the types of

chemical compounds these plants produce. Four

oilseeds (Crambe, rapeseed, meadowfoam, and

jojoba), one new rubber, guayule, and one new fiber,

kenaf, are in relatively advanced stages of development. Each of these potential new industrial crops is

discussed in greater detail in Appendix A: Selected

New Industrial Crops.

New industrial use of crops that U.S. farmers are

already producing is also being pursued (table 2-8).

Examples include using sunflower seed oil as diesel

fuel, or using compounds derived from corn to make

a road de-icer that could replace salt. These and a

number of other new uses are discussed in Appendix

B: Selected Industrial Uses for Traditional Crops.

Research is also being conducted to develop new

food crops, forage crops, horticultural and ornamental crops, biomedicinal crops, and crops that produce

biopesticides among others. New industrial uses of

forestry crops and of ligno-cellulose derived from

plant wastes are also being explored.

Changing demographic patterns in the United

States have led to increased demand for many new

food items. Imports of Latin and Asian fruits, grains,

and vegetables have been steadily rising. Many of

these crops could be grown in the United States.

Some of these new food crops, like some of the new

industrial crops, are drought tolerant and could be

grown in areas where water shortages are becoming

a problem. Additionally, some new specialty-food

crops may face fewer commercialization barriers

than new industrial crops (5). Horticultural crops are

a rapidly growing, high-value market. Grower cash

receipts for horticultural and ornamental crops grew

from 5 percent of all crop receipts in 1981 to 11

percent in 1987, with estimated receipts in that year

of about $7 billion (10). Examples are discussed

briefly in Appendix C: Selected New Food Crops

and Other Uses. There may also be potential to

Table 2-7—Potential New industrial Crops

Compound

Crop of interest Replacement

OilSeed:

Buffalo gourd . . . .

Chinese tallow . . .

Crambe . . . . . . . . .

Cuphea . . . . . . . . .

Honesty . . . . . . . .

Jojoba . . . . . . . . . .

Lesquerella . . . . . .

Meadowfoam . . . .

Rapeseed . . . . . . .

Stokes aster . . . . .

Vernonia . . . . . . . .

Oleic acid

Tallow

Erucic acid

Laurie acid,

capric acid

Erucic acid

Wax esters

Hydroxy fatty acids

Long chain fatty

acids

Erucic acid

Epoxy fatty acids

Epoxy fatty acids

Gums, resins, etc.:

Baccharis . . . . . . . Resins

Grindelia . . . . . . . . Resins

Guar . . . . . . . . . . . Gum

Guayule . . . . . . . . Rubber

Milkweed . . . . . . . . Latex

Fibers:

Kenaf . . . . . . . . . . Pulp similar to

wood

Petroleum/soybean oil

Imported cocoa butter

Imported rapeseed oil

Coconut oil/palm kernel

oil

Imported rapeseed oil

Sperm whale oil

Castor oil

Petroleum derivatives

Imported rapeseed oil

Petroleum/soybean oil

Petroleum/soybean oil

Wood rosins, tall oils

Wood rosins, tall oils

Imported guar

Imported hevea rubber

Petroleum derivatives

Imported newsprint

SOURCE: Office of Technology Assessment, 1991.

Table 2-8-Potential industrial Uses for

Traditional Crops

Use Crop

Adhesives, matings . . . . . . . . . . . . . . .

Coal *sulfurization . . . . . . . . . . . . . . .

Diesel fuel . . . . . . . . . . . . . . . . . . . . . . .

Ethanol . . . . . . . . . . . . . . . . . . . . . . . . . .

Degradable plastics . . . . . . . . . . . . . . .

Ink carrier . . . . . . . . . . . . . . . . . . . . . . . .

Road de-icer . . . . . . . . . . . . . . . . . . . . .

Super absorbants . . . . . . . . . . . . . . . . .

Soybeans

Corn

Soybeans, sunflowers

Corn

Corn

Soybeans

Corn

Corn

SOURCE: Office of Technology Assessment, 1991.

expand the use of animals and animal products as

well.

This report focuses primarily on the potential

benefits from, and constraints to, the development

and commercialization of new industrial crops and

uses of traditional crops, rather than on new food,

forage, ornamental crops, etc. It also focuses on

production agriculture, rather than on developing

new products for the forestry industry. The rationale

for focusing on industrial uses and crops is that

supplying the industrial market will potentially lead

to entirely new markets for agricultural products.

Additionally, these industrial markets are potentially high-volume markets that could use excess

agricultural capacity. Development of new edible
14 ● Agricultural Commodities as Industrial Raw Materials

crops is considered more likely to result in the

redistribution of market share, than to expand the

total market.

Proposed Benefits of Using

Agricultural Commodities as

Industrial Raw Materials

Proponents of the development of new industrial

crops and uses for traditional crops cite many

potential benefits that can accrue to society (2,9,17).

Those most frequently cited include market diversification and increased farm income, improved agricultural resource utilization, reduced commodity

surpluses and support payments, enhanced international competitiveness, reduced negative environmental impacts, revitalized rural economies, a domestic supply of strategic and essential materials,

and decreased dependency on petroleum.

Diversification of Agricultural Markets

Currently, U.S. agriculture relies on the production of a limited number of crops, many of which are

in surplus production, and are used primarily for

human and livestock food. Depressed prices and

price variability of these commodities results from

domestic surplus production and global competition

in their production and marketing, and have resulted

in low and variable income for U.S. farmers. The

United States has lost market share in the export of

many of its major commodities.

As a result of the severe problems facing agriculture in the early 1980s, the Secretary of Agriculture

convened a challenge forum in 1984 to explore new

directions for agricultural products and markets. The

New Farm and Forest Products Task Force was

established as a result of this forum. The task force

concluded that diversification of agriculture is the

only alternative, and should become a national

priority. The task force stated that technological

innovation can potentially develop high-value products, is key to economic growth, and is necessary to

avoid stagnation in mature industries such as agriculture.

Because the agricultural industry represents

approximately 18 percent of the U.S. Gross National

Product, the report concluded that a stronger agricultural sector will strengthen the U.S. economy.

Additionally, agriculture plays a major role in the

balance of payments, and development of new

products could potentially lead to new export

markets and possibly decrease some imports. Because of these possibilities, the task force recommended the development of new agricultural products that would use the equivalent of 150 million

acres of production capacity, to be achieved within

25 years (17).

Underutilization of Land Resources

In 1989, the United States planted approximately

341 million acres of land to crops. Another 60

million acres were removed from production and

enrolled in Federal programs (26 million acres in

Acreage Reduction Programs and 34 million acres in

Conservation Reserve Programs). Additional acreage that could potentially be used for crop production was planted to pasture (12,14,18). It has been

proposed that the development of industrial markets

for agricultural commodities might result in the

more productive use of cropland that may currently

be underutilized.

Reduction of Commodity Surpluses

Reduction of surpluses is expected to occur as

new industrial markets are found for surplus crops,

or as farmers shift acreage from the production of

surplus crops to new crops. In 1989, the U.S.

Commodity Credit Corporation had net outlays of

approximately $10.5 billion to support farmers and

operate Federal commodity programs (13). According to proponents, alternative and more profitable

markets for the crops most heavily supported could

decrease Federal commodity payments and reduce

storage needs.

Enhanced International Competitiveness

In 1989, agricultural exports represented approximately 12 percent of the value of total U.S. exports

(13). However, the United States has lost market

share in the international trade of several commodities, and is no longer the world’s lowest cost

producer of many of these commodities. High

commodity-support levels encourage production in

other countries. Protectionist policies restrict trade.

Proponents indicate that development of new uses

for traditional crops or new crops could lead to the

development of high-value industrial exports to

replace some of the low-value bulk commodities

that are currently the major U.S. exports. Many of

the new crops potentially could reduce U.S. reliance

on petroleum and other imports.
Chapter 2--Introduction ● 15

Improved Environmental Adaptation

Proponents argue that new industrial crops and

uses potentially can offer many environmental

benefits. It maybe feasible to develop new crops that

are better adapted to certain environments than crops

that are traditionally grown (9). Of the new industrial

crops discussed in this report, many are well adapted

to semiarid climates. These crops have lower water

requirements than many crops that are presently

being grown. Irrigation may still be required to

achieve commercial production levels, but probably

not to the extent required for traditional crops. For

regions of the Southwestern United States and the

Plains States, where competing demands for water

use are becoming intense, the need for crops with

reduced irrigation needs is becoming more important. An added advantage of some of these droughttolerant crops is that they are also relatively tolerant

of salt. Saline buildup is a major problem in irrigated

areas. Examples of potential new industrial crops

that are relatively drought tolerant are bladderpod,

buffalo gourd, coyote bush, guar, guayule, gumweed, and jojoba.

Potential exists to develop other new crops that

are resistant to pests, weeds, and disease; these crops

may require fewer chemicals than traditional crops.

Additionally, development of plants that can fix

nitrogen could reduce fertilizer use. Buffalo gourd

and honesty are two potential new industrial crops

that are perennials and provide good ground cover.

Crops such as these maybe used to help control soil

erosion. New crops may also provide more rotation

options to farmers, which could potentially decrease

erosion and chemical use. Additionally, proponents

feel that new uses for traditional crops may offer air

quality advantages (less polluting alternative fuels),

waste disposal advantages (degradable plastics), and

reduce groundwater contamination (chemical delivery systems, road de-icers), among other potential

benefits.

Rural Development

Proponents of development of industrial users of

agricultural commodities indicate that such development could help to revitalize rura1 economies in two

ways. First, the development of new crops and uses

can provide more profitable alternatives to farmers,

increasing farm income and land values. Increased

farm income and land values could improve the tax

base of rural communities, which could lead to

improved schools, hospitals, infrastructure, etc.

Services related to agriculture, such as input supplies

will be needed. These services would have a

multiplier effect within the economy. Second, the

development of new crops and uses might stimulate

the construction, expansion, or fuller use of processing and manufacturing plants. This would also create

new jobs within some communities.

Strategic Materials

A domestic capacity to produce many strategic

and essential materials that the United States currently imports, could reduce U.S. vulnerability to

foreign events according to proponents. Strategic

materials are those critical to national defense, and

include many metals, natural rubber, and castor oil.

Essential materials are those required by industry to

manufacture products depended on daily, and include many gums, waxes, oils, and resins. The

Defense Production Act (DPA) of 1950 (amended in

1980) requires that sufficient stocks of strategic

materials be kept for wartime needs; stocks are

managed by the Department of Defense. The mandated stockpile level of natural rubber is 850,000

short tons and that of castor oil is 5 million pounds.

Since the United States is a large consumer, attempts

to purchase the necessary quantities result in large

price swings and current stocks are less than the

levels mandated (1,8).

U.S. reliance on imports of natural rubber led

Congress to pass the Native Latex Commercialization and Economic Act (Public Law 95-592) in

1978. This act was passed with the specific goal to

develop a domestic natural rubber industry. In 1984,

Congress amended and renamed this act the Critical

Agricultural Materials Act (Public Law 98-284),

which broadened the goal of the Native Latex Act to

develop a domestic capacity to produce critical and

essential industrial materials from agricultural commodities.

Summary

Agricultural commodities yield many chemicals

that have industrial applications. Proponents feel

that commercializing these applications will lead to

numerous benefits for society in general, and for the

rural 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 of

these new technologies. The purpose of this report is
16 ● Agricultural Commodities as Industrial Raw Materials

to provide information Congress can use to assess

the potential benefits of, and constraints to, developing new industrial crops and uses of traditional

crops.

The potential benefits of new industrial crops and

use development have not been systematically and

rigorously analyzed. This report takes a first step at

doing so, and presents that analysis in chapter 3.

Factors involved in the research, development, and

commercialization of these new technologies are

discussed in chapter 4. To realize the benefits of new

agricultural technology development, new processes

must be adopted by manufacturers, and new crops

must be adopted by farmers. Factors involved in the

adoption of new technologies are discussed in

chapter 5. Understanding of the factors involved in

the research, development, commercialization, and

adoption of new industrial crops and uses of

traditional crops can aid in designing policy to

achieve maximum benefits. Policy options are

presented in chapter 6.

1.

2.

3.

4.

5.

6.

7

Chapter 2 References

Babey, John, U.S. Department of Defense, personal

communication, 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 for

Starch,” paper presented at The Second National

Corn Utilization Conference, Columbus, OH, Nov.

17-18, 1988.

Hoffmann, Joseph J., and McLaughlin, Steven P.,

“Grindelia Camporum: Potential Cash Crop for the

Arid Southwest,” Economic Botany 40(2), AprilJune 1986, pp. 162-169.

Johnson, Duane, “New Grains and Pseudograins,”

paper presented at the First National Symposium on

New Crops: Research, Development and Economics,

Indianapolis, IN, Oct. 23-26, 1988.

Princen, L.H., and Rothus, J.A., “Development of

New Crops for Industrial Raw Materials,” Journal of

the American Oil Chemists’ Society, vol. 61, 1984,

pp. 281-289.

Schaub, James, U.S. Department of Agriculture,

Economic Research Service, personal communication, 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 From

Plants—Thesis and Uncertainties,” PZants: The Potential for Extracting Protein, Medicines, and Other

Use@l Chemicals—Workshop Proceedings, OTABP-F-23 (Washington, DC: U.S. Congress, Office of

Technology Assessment, September 1983), pp. 170-

177.

Theisen, A. A., Knox, E. G., and Mann, F. L., Feasibility of Introducing Food Crops Better A&zpted to

Environmental Stress (Washington, DC: U.S. Government Printing Office, March 1978).

Twner, Steve, and Stegelin, Forrest, Symposia Coorganizers, “Market and Economic Research in

Ornamental Horticulture,” American Journal of

Agricultural Economics, vol. 71, No. 5, December

1989, p. 1329.

U.S. Congress, Office of Technology Assessment,

Commercial Biotechnology: An International Analysis, OTA-BA-218 (Washington, DC: U.S. Government Printing Office, January 1984).

U.S. Department of Agriculture, Agricultural Statistics, 1988 (Washington, DC: U.S. Government

Printing Office, 1988).

U.S. Department of Agriculture, Economic Research

Service, Agricultural Outlook, AO-170, December

1990.

U.S. Department of Agriculture, Economic Research

Service, Agriculutral Resources: Cropland, Water,

and Conservation Situation and Outlook Report,

AR-19, September 1990.

U.S. Department of Agriculture, Economic Research

Service, Foreign Agricultural Trade of the United

States, Calendar Year 1987 Supplement (Washington, DC: U.S. Government Printing Office, June

1988).

U.S. Department of Agriculture, Forest Service, “An

Analysis of the Timber Situation of the United States,

1989-2040, Part I: The Current Resource and Use

Situation,” 1989.

U.S. Department of Agriculture, New Farm and

Forest Products Task Force, “New Farm and Forest

Products: Responses to the Challenges and Opportunities Facing American Agriculture, ’ A Report to the

Secretary, June 25, 1987.

Van Dyne, Donald L., Iannotti, Eugene L., and

Mitchell, Roger, “A Systems Approach to Corn

Utilization,’ paper presented at The Second National

Corn Utilization Conference, Columbus, OH, Nov.

17-18, 1988.
Chapter 3

Analysis of Potential Impacts of Using Agricultural

Commodities as Industrial Raw Materials

Despite claims that new industrial crop and use

development will result in many benefits for society,

few studies have attempted to examine whether this

is, in fact, the case, and if so, what are the magnitudes

of the impacts. Because of the lack of needed

information, a definitive answer cannot yet be given.

However, extrapolations from a few existing studies

can be made, and market size and market trends for

some products can be roughly estimated. Studies

that examined the rural employment impacts of

expanding agricultural production in the 1970s

provide a framework to examine the potential

employment impacts that could result from new

industrial crop and use development. Analysis of

technology adoption by farmers can yield insights

on the potential impacts on different size farms. And,

potential environmental impacts can be discussed.

An examination of these issues follows.

Rural Development

Proponents of the commercialization of new

industrial crops and uses for traditional crops

indicate that these new technologies will revitalize

rural1 economies in two major ways: by changing

farm income and number; and by creating jobs

related to resource use, the processing of the raw

commodities, and the production of new products.

Increased farm income can have a multiplier effect,

allowing farmers to spend more money in the

community. Sustained income increases could also

increase farmland prices and hence the tax base of

many rural communities. Increased levels of production require increased inputs, transportation, and

storage, and would foster the associated industries.

Development of new industrial crops and uses of

traditional crops could also have an impact on job

creation via the construction, expansion, or fuller

utilization of processing and manufacturing facilities.

Impacts of Changing Farm Income and

Numbers

The crisis within the agricultural sector in the

1980s is a reflection of decreased farm income,

declining asset values, and high debt load. Total

farm-family income in the first half of the 1980s

remained relatively stable and did not decline from

1970s levels, despite low commodity prices, because increasing off-farm income helped compensate for decreased farm income (table 3-1).2 The

value of farm assets, however, declined significantly. Lower land values decrease local government revenues. Development of new industrial

markets for commodities might help to increase farm

land values since these values depend in large part

on future market and income growth expectations

(37).

Table 3-l—Farm Family Income (dollars)

Net farm Off-farm Total farm

Year incomea

income family income

1960 . . . . . . . . . . . . . . . 2,729

1970 . . . . . . . . . . . . . . . 4,869

1975 . . . . . . . . . . . . . . . 8,785

1980 . . . . . . . . . . . . . . . 9,233

1981 . . . . . . . . . . . . . . . 8,378

1982 . . . . . . . . . . . . . . . 9,997

1983 . . . . . . . . . . . . . . . 10,074

1984 . . . . . . . . . . . . . . . 11,345

1985 . . . . . . . . . . . . . . . 13,881

2,140

5,974

9,481

14,263

14,709

15,175

15,619

16,265

17,945

4,869

10,843

18,266

23,486

23,087

25,172

25,693

27,610

31,826

aBefore inventory adjustment.

SOURCE: 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.

IRm~ and ~ome~opli~ me used ~terchangeably throughout the text. Nonmetropolitan counties are defined as those not fi Metropolitan

Statistical 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. Additional

contiguous counties are included in the MSA if they are economically and socially integrated with the core county. Based on the 1980 Census of Housing

and 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 of

Nonmetropolitan 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–
18 ● Agricultural Commodities as Industrial Raw Materials

While farm-family income remained relatively

stable, farm3 numbers continued to decline throughout the 1970s and 1980s (table 3-2). Impacts of

declining farm numbers are difficult to ascertain. In

general, the land is bought by other farmers and

continues to remain in production, so that total

agricultural output does not significantly decline.

However, declining farm numbers may negatively

affect community employment levels. Multiplier

effects for agriculture are generally estimated to be

between 2.5 and 4, but these effects are for the total

economy and do not consider location. Studies that

have analyzed local rural area impacts from changes

in agriculture estimate multiplier effects of less than

2. These estimates imply that in farming dependent

counties,4 for every one farm producer that leaves

the industry, up to one additional job maybe lost in

the community (27).

Impacts resulting from changes in farm number,

income, and land values will be highest in areas that

are most dependent on agriculture as a source of

income and employment (table 3-3). Approximately

22 percent of nonmetropolitan counties are farming

dependent, and an additional 23 percent are farming

important.5 These counties are concentrated in the

Plains Region (North Dakota, South Dakota, Nebraska, Kansas, western Oklahoma, and northern

Texas) with some spillover in neighboring States.

Between 1979 and 1985, total employment declined

by 0.3 percent in these counties (6,15,51).

Development of new uses for traditional commodities would most affect the 17 percent of all

nonmetropolitan counties with at least 50 percent of

farm sales from corn, soybeans, wheat, cotton, or

rice (i.e., agricultural-export-dependent counties).

About 7 percent of all nonmetropolitan counties are

both agricultural dependent and agricultural-export

dependent. 6 These counties are concentrated along

the Canadian border in the Northern Plains Region

and in the Central Corn Belt and Delta Region (16).

Table 3-2—Farm Numbers

Year Number

1960 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,963,000

1970 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,949,000

1980 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,433,000

1981 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,434,000

1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,328,000

1986 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,214,000

1989a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,172,920

aPreliminary estimation obtained from U.S. Department of Agriculture,

Agricultural Statistic 1989

SOURCE: 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.

Development of new uses could result in potentially

positive or negative impacts in these regions,

depending on how the new use development affects

the price of the traditional crop grown in the region.

Rural Employment Potential in Agriculturally

Related Industries

Studies that explicitly evaluate the rural employment potential of new industrial crops and uses of

traditional crops are not available. However, many

of the impacts of commercialization of new crops

and uses will result from increased demand for

agricultural commodities. During the 1970s, U.S.

agricultural production increased rapidly in response to increased world demand for food and

favorable economic conditions. The effects of increased production on rural employment in agriculturally related industries provides insight into the

potential employment impacts in these industries of

increased industrial demand for agricultural commodities.

Between 1974 and 1981, U.S. agricultural production expanded by 45 million acres of crops

harvested (table 3-4). Employment in rural agriculturally 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 (2,443

counties), there were 716 farming dependent counties. Using income from the years 1981, 1982, 1984, 1985, 1986, and the 1983 definition of

nonmetropolitan counties (2,357 counties) there were512 farming dependent counties. Source: Thomas F. Hady and Peggy J. Ross, U.S. Department

of 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 labor

and 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 Nonmetro

nonrnetro dependent dependent employment

Us. counties counties counties (million) a

Total . . . . . . . . . . . . . . . . . . . . . . . 19.5 31.3 32.4 46.0 6.22

Farm sector . . . . . . . . . . . . . . . . . . 4.1 13.6 15.8 29.9 2.68

Farm inputs . . . . . . . . . . . . . . . . . . 0.4 1.1 1.5 2.7 0.21

Processing/marketing . . . . . . . . . 3.2 5.8 4.7 5.2 1.15

Wholesale/retail . . . . . . . . . . . . . . 9.5 8.7 8.1 6.7 1.73

Indirect . . . . . . . . . . . . . . . . . . . . . 2.2 2.2 2.3 1.6 0.45

aObtained 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 and

Productionb

, Selected Years

Table 3-5—Employment Changes in 1975-81 and

1981-84 (percent change per annum)

1973 1981 1984

Corn:

Acreage . . . . . . . . . . . . . . . . . . . 62.1 74.5 71.9

Production . . . . . . . . . . . . . . . . . 5.67 8.12 7.67

Wheat:

Acreage . . . . . . . . . . . . . . . . . . . 54.1 80.6 66.9

Production . . . . . . . . . . . . . . . . . 1.71 2.79 2.59

Soybeans:

Acreage . . . . . . . . . . . . . . . . . . . 55.7 66.2 66.1

Production . . . . . . . . . . . . . . . . . 1.55 1.99 1.86

Major crops:c

Acreage . . . . . . . . . . . . . . . . . . . 310 354 335

aHarvested 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, dry

edible 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 1975

and 1981, rural employment in the agricultural

input, and marketing and processing industries (food

and textiles), increased by 106,000. Employment in

the farm sector (farm proprietors, agricultural services, and farm wage and salary workers) actually

declined by 158,000 jobs. The one truly bright spot

was the increase in the retail/wholesale industry

(groceries, restaurants, clothing stores). Employment in this sector increased by 400,000 jobs.

During the early 1980s, demand for U.S. agricultural

products and employment in most agriculturally

related industries declined; the wholesale/retail industry continued to grow although at a slower rate

(37).

These trends suggest that expanding agricultural

production will increase rural employment modestly

in the input supply industry. Favorable agricultural

1975-81 a1981 -84b

Total U.S. employment . . . . . . . . . . +2.9 +1.1

Total 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 time

period (in 1,000’s).

cFarm sector includes agricultural services, farm proprietors, and agriculture wage and salary workers.

dprocessing and marketing includes those related to food processing and

the textile industry.

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

SOURCE: Dorm Reimund and Mindy Petrulis, U.S. Department of Agriculture, Economic Research Service, “Performance of the Agricultural Sector,” Rural Change and the Rural Economic Po/ky

Agenda for the 1980’s: Prospects for the Future, September

1988, pp. 77-102.

income conditions did not alter the long-term

decline in farm-sector employment (over 40 percent

of total rural agricultural employment), which is

largely due to technological change and increased

productivity. Farm numbers will likely continue to

decline if agricultural productivity continues to

increase. Rural employment in the retail/wholesale

industry appears to be more closely tied to the

condition of the overall economy than to agriculture

specifically.

Rural processing-sector employment increased

slowly from 1975 to 1981, in part because increased

supplies were primarily exported as raw, rather than

processed commodities. Employment expansion potential related to new crops and use development

will depend on how much new or additional

processing capacity will be needed to accommodate

these new crops and uses. Processing capacity has
20 . Agricultural Commodities as Industrial Raw Materials

increased in the 1980s, but the number of mills

(wheat and oilseed) has declined. Oil refining

capacity increased about 17 percent between 1975

and 1983. Refiners typically operate at about 75

percent of capacity (41).

Recent trends of automation and productivity

increases within the processing sector will limit

future employment growth potential (37). Economies of scale favor large plants; capacity can be

increased with a less than proportional increase in

energy and equipment costs. The number of laborers

needed in larger and smaller plants is comparable

because milling and processing is more capital-than

labor-intensive (7,17,41). Approximately 40 percent

of the wet corn, cotton, soybean oil, and flour mills

in the United States have fewer than 20 employees

per mill. The total employment (number of production workers plus management, maintenance workers, etc.) in soybean processing facilities is approximately 9,000 to 10,000 (2,41).

A majority of the jobs in several agriculturally

related industries are in fact located in metropolitan,

rather than rural, areas (table 3-6); expanding

employment in these industries may benefit metropolitan regions more than rural areas. Commodityprocessing plants are not always located near the site

of commodity production. Transportation costs of

the raw commodity relative to the processed product

is a major factor in determining plant location.

Access to road and rail transportation, and frequently to barge transportation, is an important

consideration. For example, of the wheat grown in

Kansas and milled into flour, half is milled in Kansas

(primarily in mills located in urban areas) and the

rest is shipped throughout the country for milling.

Oilseed refining capacity is located primarily (60

percent) in urban areas, although there has been a

recent trend for companies with large processing

mills to build new refineries near the processing

plant (17,26).

The new crops guayule and kenaf might be good

candidates for new processing plant construction in

rural areas and near the site of production. The

rubber in guayule is contained in thin-walled cells

located on the stems and branches of the shrub.

Excessive handling and storage decreases rubber

quality (28). Kenaf is a bulky product to transport.7

Table 3-6-Distribution of Jobs in Agriculturally

Related Industries

Metro Nonmetro

(percent)

Farm sector . . . . . . . . . . . . . . . . . . . . . 36 64

Input supply . . . . . . . . . . . . . . . . . . . . 51 49

Processing/marketing . . . . . . . . . . . . 65 35

Food . . . . . . . . . . . . . . . . . . . . . . . . 71 29

Textiles . . . . . . . . . . . . . . . . . . . . . . 60 40

Retail/wholesale . . . . . . . . . . . . . . . . . 82 18

SOURCE: Dorm Reimund and Mindy Petrulis, U.S. Department of Agriculture, Economic Research Serviee, “Performance of the Agricultural Sector,” Rural Change and the Rural Economic Poky

Agenda for the 1980’s: Prospects for the Future, September

1988, pp. 77-102.

Oilseeds, on the other hand, are generally readily

transportable and storable; some modification of

existing oilseed mills might suffice to accommodate

many of these new crops. A case by case evaluation

of processing needs and constraints is needed to

assess the potential of new crops and uses to

contribute to rural processing-sector employment.

Rural Employment Potential in

Manufacturing

The impacts of increased industrial use of agricultural commodities on rural manufacturing employment will depend on the need to expand and modify

capacity, and on the location of the expansion. In

many cases, major users of chemicals derived from

new and traditional crops will be firms that already

exist. In some cases, substitution of agriculturally

derived chemicals for petroleum-derived chemicals

in production will be relatively easy, and only

modification of existing plants may be needed. In

other cases, either major production modifications

or increased capacity will be needed; expansion will

be more likely in these circumstances.

The location of new manufacturing facilities will

depend on resource availability, transportation

costs, availability of skilled workers, and easy

access to information. Industries that are dealing

with volatile or unestablished markets, rapid technical change, or other conditions that require innovative responses will generally favor metropolitan

locations where they have access to information,

specialized skills, and professional expertise (25).

Rural areas generally have a comparative advantage

over 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 lowted

in 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 and

labor costs.

The importance of resource availability and lowcost labor relative to the need for highly skilled labor

will largely determine the type of personnel employed, and whether a firm locates in a metropolitan

or rural area (5). Urban companies have a higher

proportion of managerial and professional-technical

jobs than do rural firms (table 3-7). Rural production

jobs are generally lower paying, less technically

skilled, and the first to be eliminated by unfavorable

economic conditions (5,25).

Industries characterized by top-of-the-cycle8

products are more concentrated in metropolitan

areas, because they require technically skilled labor

(table 3-8). High tech companies are an example.

These firms employ relatively more scientific and

technical personnel, have higher levels of research

and development expenditures, manufacture more

highly sophisticated products, and generally have

proven to be more competitive in the world economy

than companies characterized as bottom-of-thecycle. The latter tend to use highly standardized

production methods and employ relatively lessskilled labor (5).

Although rural manufacturing is characterized by

a higher percentage of bottom-of-the-cycle and

natural resource based industries, some top-of-thecycle firms do locate in rural areas. In recent years,

rural employment in these firms has increased,

primarily in the South and West. Rural employment

in top-of-the-cycle industries in the Midwest and

Northeast has been declining. The greatest growth,

particularly in the West, has been in rural counties

adjacent to urban centers (5).

Many industries that are expected to use chemicals derived from agricultural commodities are

considered to be top-of-the-cycle industries, although there are two major exceptions. The rubber

and allied products industry is characterized by more

routine procedures and is generally classified as a

bottom-of-the-cycle (mature) industry. The paper

and allied products industry is heavily reliant on

natural resources. The detergent industry, a hightech industry that uses agriculturally derived chemiTable 3-7—Nonmetro Share of Manufacturing Jobs

by Job Type

Metro Nonmetro

Managerial . . . . . . . . . . . . . . . . . . . . . 90 10

Professional/technical . . . . . . . . . . . . 90 10

Sales/administrative support . . . . . . . 75 25

Precision production jobs . . . . . . . . . . 77 23

Machine operators . . . . . . . . . . . . . . . 70 30

Laborers . . . . . . . . . . . . . . . . . . . . . . . 65 35

SOURCE: David A, MeGranahan, “Rural Workers in the National Economy,” Rural Change and the Rural Economic Policy Agenda for

the 1980’s: Prospects for the Future, September 19SS, pp.

29-47.

Table 3-8-Distribution of Manufacturing Jobs, 1984

Proportion

Metro Nonmetro of nonmetro

Type of industry (million jobs) employment

Total manufacturing. . . 15.2 4.2 21.7

Top of the cycle . . . . . . 7.4 1.2 13.7

Bottom of the cycle . . . 5.6 2.0 25.9

Resource . . . . . . . . . . . 2.2 1.1 33.3

SOURCE: Leonard E. Bloomquist, U.S. Department of Agriculture, Economic Researeh Serviee, “Performance of the Rural Manufacturing Sector,” Rurai Change and the Rural Economic Policy

Agenda for the 1980’s: Prospects for the Future, September

19ss, pp. 49-75.

cals, is expanding its capacity to use vegetable oils.

New plant construction, however, is in urban rather

than rural areas (14).

Many of the industries that are likely to use

agricultural commodities as a raw material source

are undergoing worldwide consolidation, and capacity is increasing. Employment trends have been

mixed (table 3-9) (9).

It is difficult to determine the multiplier effects of

manufacturing plants in rural locations. Total 1984

U.S. manufacturing employment was 19.4 million.

It is estimated that an additional 6.5 million jobs

were created supplying input services to these

manufacturers; an additional 1.8 million jobs in the

agricultural, mining and construction industries are

also linked to manufacturing. No estimations were

made of the rural-urban distribution of these jobs

(54). Some studies have suggested that in rural areas,

one additional community job is created for every

three manufacturing jobs (47). Growth in manufacturing employment in nonmetropolitan areas averEfioduct &velOprnent g~s through many phases, from conception to routine manufacturing. Products at the top of the cycle are in the eflfierp~es

of development. These phases include conception and prototype development, and the establishment of the manufacturing procedures, Products at the

top 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 cycle

products. These fiis are generally the innovative (high-tech) fmns. Bottom of the cycle products are those that are more highly developed and for which

the manufacturing process is highly standardized and routine. Bottom of the cycle industries use a higher proportion of labor with lesser technical skills.
22 ● Agricultural Commodities as Industrial Raw Materials

Table 3-9-Manufacturing Employment Trends of

Industries Potentially Using Industrial

Agricultural Commodities

Trend

1989 (1979-89)

employment percent per

level annum change

Plastics and synthetic materials. . 187,000 –1

Paints and allied products. . . . . . . 63,000 -1

Soaps, cleaners, toilet goods . . . . 161,000 +1

Rubber and miscellaneous

products . . . . . . . . . . . . . . . . . . . 840,000 +1

Petroleum and coal products . . . . 163.000 –3

SOURCE: 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 rural

communities. Employment trends in the 1970s and

1980s suggests that large increases in demand and

production of agricultural commodities will be

needed to increase employment significantly in rural

agriculturally related industries. Agriculturally dependent communities are likely to benefit the most.

Significantly, much of the employment growth in

agriculturally related industries is likely to occur in

metropolitan, rather than rural, communities. Rural

areas are likely to have a comparative advantage

with firms for which natural resources or low-cost

labor are important considerations. As noted, firms

requiring highly skilled labor, are likely to concentrate in metropolitan regions. These include several

of the industries that are expected to commercialize

products derived from agricultural commodities.

These studies and industry trends suggest that

commercialization of industrial uses for agricultural

commodities may have modest impacts on rural

employment, and that much of the employment

growth may be in metropolitan communities. From

society’s point of view, new job creation may be

desirable regardless of location, but firm location in

metropolitan areas does not revitalize rural economies.

Proponents of industrial crops and use commercialization argue that even modest rural employment

increases are worth pursuing. This is true only if

equivalent benefits cannot be obtained by other

methods at lower cost. The cost-effectiveness of this

strategy has not been evaluated and conclusions

cannot be made. Historically, however, social returns to agricultural research investments have been

high, ranging from an estimated 45 to 135 percent

(30).

Regional Specialization

Many new crops under development potentially

can be grown in several regions of the United States

(table 3-10). However, like traditional crops, some

regions may have a production advantage over

others, and regional specialization of production

may result. Thus, the introduction of new crops or

uses of traditional crops may benefit some regions,

while having little effect on others.

Two examples illustrate the point. Kenaf can be

grown throughout the South, but appears to be

particularly attractive compared to the net returns of

other options in parts of Texas. This area is likely to

be one of the earliest producers of kenaf. Crambe

and rapeseed can be grown extensively in the United

States, but Crambe is more tolerant of dry conditions

than rapeseed. Crambe may have an advantage over

rapeseed in the Plains region, whereas rapeseed,

particularly the winter varieties, may have advantages in the Southeast (20).

Transportation costs could also play a role in

determining production location. Prices received by

farmers reflect transportation costs. Farmers at great

distances from processing plants receive lower

prices. For example, soybean producers in the Plains

region receive lower prices than producers in the

Midwest, in part due to lower quality (less oil), but

largely due to transportation costs (41). Lower prices

decrease the attractiveness of a crop to farmers. A

new crop’s competitiveness may be enhanced if it is

grown in an area where it is relatively easy to convert

existing processing facilities to accommodate it.

Agricultural Sector Stability

Market failure and macroeconomic policy are the

primary factors affecting the stability (extent of farm

price and net return variability over time) of

agriculture (48). Market failure arises from uncertainty (e.g., such as weather and assymetric information between buyers and sellers). Development of

new marketing institutions, or use of existing

institutions that reduce marketing uncertainties (e.g.,

forward contacting, futures and insurance markets)

potentially could reduce inefficiencies in the marketing of industrial crops and uses of traditional
Chapter 3--Analysis of Potential Impacts of Using Agricultural Commodities as Industrial Raw Materials ● 23

Table 3-10—Likely Production Locations of

New 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 . . . . . . . . . . . . . . . . . . .

Southwest

Southeast

Midwest/Southeast/Plains

States

Northwest/Midwest

Northern States/Alaska

Southwest

Southwest

Pacific Northwest

Northwest./Plains States/

Midwest/Southeast

Midwest/Southeast

Southeast

Southwest

Southwest

Southwest

Southwest

Plains/Southwest/West

South

SOURCE: Office of Technology Assessment, 1991.

crops. Diversifying agricultural production potentially could reduce adverse weather impacts.

Macroeconomic policy influences the price of

commodities and land values in the United States, as

well as exchange rates, interest rates, inflation, and

rates of economic growth here and abroad. During

the 1970s, attempts to recycle petrodollars sparked

rapid economic growth in developing countries.

Coupled with the switch from freed to flexible

exchange rates, this growth led to an export boom for

U.S. agricultural commodities. At the same time

however, inflation in the United States was rising

and the Federal deficit was being paid for by

monetary policy. In late 1979, the Federal Reserve

began to disinflate the U.S. economy. This severe

monetary action led to high interest rates and values

of the U.S. dollar as Federal Government deficits

were now being financed by foreign savings. High

debt loads at high interest rates, coupled with high

U.S. dollar values, meant that developing nations

could no longer afford to pay for U.S. agricultural

commodities and exports plummeted. Because

nearly 1 in every 3 acres planted in the United States

is destined for the export market, decreasing exports

lead to declining U.S. farm income and land prices

(42).

The roller-coaster ride that U.S. agriculture has

undergone since 1975 points out the vulnerability of

that segment of the economy to macroeconomic

policy (3,42). Several industries that would use

chemicals derived from agriculture are also susceptible to macroeconomic policies, and display highly

variable demand for raw commodities. The rubber

industry serves as an example. Nearly 60 percent of

all rubber used in the United States is used to make

tires. Tire production is intimately linked to the

automobile industry, which is highly vulnerable to

interest rates. Between 1977 and 1989, U.S. rubber

consumption has fluctuated between 5.3 and 7.4

billion pounds (45).

Thus the impact of new crops and uses of

traditional crops on agricultural stability may be

small. While new crops can offer production opportunities that help limit the risk from adverse weather,

disease, or insect problems, development of new

uses for traditional crops potentially could have the

opposite effect by increasing monoculture. Development of new risk-reducing marketing arrangements,

or increased use of those that exist could lead to

some increased stability, as could diversification of

markets for agricultural commodities. As noted,

however, many industries that are expected to use

agricultural commodities fluctuate in their use of

raw materials. Whether these markets will lead to

increased stability has not been adequately analyzed.

Macroeconomic policy will continue to be a key

factor in agricultural stability.

International Implications

Some new mops being developed potentially

could replace a significant proportion of major

exports of some developing countries, which could

result in economic stress for these countries. Cuphea, for example, could substitute for coconut and

palm kernel oil. Tropical oils represent 11.5,2.5, and

7.5 percent of the total 1985 exports of Malaysia,

Indonesia, and the Philippines respectively (59).

Additionally, Hevea rubber, which potentially could

be at least partially replaced by guayule, is a major

export of Malaysia and Indonesia. Some of these

countries, the Philippines in particular, are considered to be strategically important to the United

States.

In addition to the strategic implications, there are

potential long-term impacts on U.S. export markets

to consider. Studies indicate that the future growth

of U.S. exports depends largely on expanding

markets in developing countries rather than industri-
24 ● Agricultural Commodities as Industrial Raw Materials

alized nations (39). Replacing the exports of these

countries narrows their opportunities for economic

development and for attainment of scarce foreign

reserves to purchase U.S. products.

An additional consideration is trade relationships

with industrialized nations. For example, the export

of corn gluten meal (a byproduct of ethanol production) to Europe is a contentious issue between the

United States and the European Community. The

economic competitiveness of ethanol production

depends in part on having markets for corn gluten

meal; being able to export the meal decreases the

downward price pressure that ethanol production has

on soybeans. Understanding of potential international impacts is needed to help anticipate possible

trade disputes.

Competition With Current Crops and

Interregional Impacts

A major goal in the development of new industrial

crops and uses is to provide new markets that do not

compete with markets currently supplied by traditional crops. Many primary uses being developed

will not, but there will be some exceptions. There

may, however, be considerable competition with

traditional crops through competition in the byproduct markets. It cannot be unambiguously stated that

new industrial crops and uses of traditional crops

will not compete for markets currently supplied by

traditional crops.

If new crops compete directly for markets with

crops that are currently being grown, the latter could

fall in price, resulting in decreased income to

producers of that crop. For example, some new

oilseed crops could potentially compete with soybeans. Examples are Vernonia and Stokesia which

produce oils containing epoxy fatty acids, that

potentially could replace the approximately 100 to

180 million pounds of soybean, linseed, and sunflower seed oil that are converted to epoxy fatty

acids for industrial use each year (the equivalent of

8 to 15 million bushels of soybeans) (36). Additionally, potential byproducts of glycerol and highprotein meals could compete with soybean oil for

industrial markets and for use as livestock feeds (2).

New uses for traditional crops may also affect

demand for current crops. For example, many new

uses being developed for corn only use the starch

component of corn. Oil, distillers dried grains, and

corn gluten meal are produced as byproducts. The oil

competes with oils derived from oilseeds, particularly soybeans. The distilled dried grains and gluten

meal compete directly with soybean meal as highprotein livestock feeds. Increased supplies of these

corn byproducts will decrease the price of soybeans,

possibly by up to 4 cents a bushel per 100 million

additional bushels of corn used (60,61).

Competition with traditional crops would have

different regional impacts. For example, soybean

production 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 and

Delta regions will have problems. Production costs

of soybeans are also higher in the Southeast and

Delta regions. The result could be a decrease in farm

income in those regions (41). Finding new uses for

soybean oil or meal may help to alleviate some of the

potential impacts on soybean prices.

Small Farm Impacts

Most 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 exist

to their production on large farms. Since many of the

crops are bulk commodities, they may have relatively low unit values. Minimizing production costs

will be important. Economies of scale, particularly

for machinery, might help lower production costs for

large farms. Additionally, farms that have a larger

financial base may be able to absorb the economic

risk associated with new crops better than smaller

farms. Some new crops, such as jojoba and guayule

are perennials that require several years to reach

maturation. Crops such as this require large upfront

costs and have long payback times on the investment. This could create serious cash-flow problems,

particularly for small farm operators or those with

little access to financing.

A correlation exists between farm size and speed

of adoption, with larger farms adopting technology

first (55). Small farm operators may be unwilling or

unable to adopt new technologies. For example, a

study of Oklahoma farmers showed that although

production of specialty vegetables could raise farm

income for part- and full-time farmers who operated

small enterprises (defined in the Oklahoma study as

those having sales of less than $40,000), fewer than

6 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 on

small-sized farms, operators of large farms may be

the earliest adopters and, thus, may capture most

benefits.

The income impacts of new uses for traditional

crops will be affected by farm commodity programs.

For crops covered, commodity programs buffer the

effects of changing market prices on farm income.

High market prices are offset by lower deficiency

payments, and low program participation. When

market prices are low, program participation by

farmers is high, and modest changes in market prices

have little impact on total farm income. Impacts of

higher market prices would be greatest for farmers

who do not participate in commodity programs or for

producers of commodities not covered by commodity programs. Participation rates are lowest among

the smallest and largest farms. Producers who

specialize in the production of cash grains9 have the

highest rates of participation (table 3-11). In 1987,

83 percent of all cash grain farmers participated in

farm programs, more than 83 percent of the

feedgrain, cotton, wheat, and soybean acreage was

grown on farms operated by program participants

(table 3-12) (32).

Significant changes in aggregate income would

occur only if market prices exceed target prices, or

if demand is high enough to reduce set-aside acreage

requirements significantly. It is estimated that ethanol production from corn would need to increase

current production levels by a factor of 3 to 4 to

approach that situation10 (60).

Many small farm operators do not rely on farm

income for the majority of family income (table

3-13) (57). These statistics suggest that modest

changes in market prices for many of the traditional

crops that are in surplus may not result in large

increases in income for small-sized farms, and

small-farm operators may be unable to adopt new

crops. Policies that help small-farm operators accept

the added risks of new crops, and programs that

teach new management skills would increase the

Table 3-n-Participation in Federal Farm Programs

by Farm Size, 1987a

Percent participating

Harvested acres

1 to 99 . . . . . . . . . . . . . . . . . .

100 to 199 . . . . . . . . . . . . . . .

200 to 499 . . . . . . . . . . . . . . .

500 to 999 . . . . . . . . . . . . . . .

1,000 to 1,999 . . . . . . . . . . . .

Greater than 2,000 . . . . . . . .

Farm sales class

Less 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 . . . .

20.6

59.9

78.0

87.0

87.3

81.6

6.7

12.0

23.3

38.8

54.3

62.2

65.7

60.0

49.7

34.8

aNote that 1987 was a year characterized by Iow commodity prices, and

participation rates in agricultural programs were high.

bParticipants are defined as farm operations that receive any cash

payments or payments in kind from Federal farm programs. These include

benefits such as deficiency payments, whole herd dairy buyout, support

price payments, indemnity programs, disaster payments, paid land

diversion, inventory reduction payments, or payments for approved soil

and water conservation projects. Participants also include farmers who

place any portion of their production in the Commodity Credit Corporation

for nonrecourse loans or have any acreage under the annual commodity

acreage adjustment programs or the conservation reserve program.

SOURCE: Merritt Padgitt, U.S. Department of Agriculture, Economic

Research Service, “Production, Resource Use, and Operating

Characteristics of Pariticpants and Nonparticipants in Farm

Prograrns,’’Agrikultural Resources: Cropiand, Wster, and Conservation Situation and Out/ook Report September 1990, pp.

48-54.

likelihood of new crops and uses benefiting smallfarm operators.

The question also arises of who captures the value

added11 of new products. For example, in 1987

consumers spent $377 billion for foods produced on

U.S. farms. About 25 percent ($94 billion) went to

farmers and the remainder went to the food industry

for processing, handling, and retailing. For many

food crops, such as grains and oilseeds, the farm

value is a small share of the retail price (13). Studies

that assess who captures the benefits of the value

added from industrial uses of agricultural commodities 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 farms

include 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, so

the 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
26 ● Agricultural Commodities as Industrial Raw Materials

Table 3-12—Participation in Federal Farm Programs

by Crop Acres, 1987a

Percent

Crop participating b

Feed grainsc . . . . . . . . . . . . . . . . . . . . . . . . . . 83.0

Soybeans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85.8

Wheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88.6

Cotton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89.5

Rice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91.1

Peanuts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75.7

Tobacco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47.9

aNote 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 include

benefits such as deficiency payments, whole herd dairy buyout, support

price payments, indemnity programs, disaster payments, paid land

diversion, inventory reduction payments, or payments for approved soil

and water conservation projects. Participants also include farmers who

place any portion of their production in the Commodity Credit Corporation

for nonrecourse loans or have any acreage under the annual commodity

acreage adjustment programs or the conservation reserve program.

c

lncludes acres of corn for grain and silage, and sorghum, barley, and oats

for grain.

SOURCE: Merritt Padgitt, U.S. Department of Agriculture, Economic

Research Service, “Production, Resource Use, and Operating

Characteristics of Pariticpants and Nonparticipants in Farm

Programs, ’’Agriwltura/ Resources: Cropiand, Water, and Conservation Situation and Outlook Report September 1990, pp.

48-54.

Environmental Impacts

New industrial crops and uses of traditional crops

potentially could have positive or negative environmental impacts. Replacing salt with calcium magnesium acetate (a new product) as a road de-icer could

reduce the soil and water contamination problems

associated with salt. Use of starch, or starchvegetable oil mixtures as a delivery system for

herbicides and pesticides potentially could mitigate

rapid leaching of these chemicals. Degradable plastics may in the future help alleviate waste disposal

problems, but at the present time, too many questions exist regarding the extent of degradation, the

chemicals released, and the impact on plastic

recycling to state that degradable plastics will have

a positive effect on the environment. Likewise,

using ethanol as a gasoline additive decreases

carbon monoxide emissions, but may increase volatile hydrocarbon emissions. Increased uses for corn

could increase corn production, which is chemically

intensive. The implications this might have on

groundwater pollution need further investigation.

Many new crops may be better suited to certain

environments than crops that are currently being

grown there. Many new crops are drought tolerant

and their water demands are much lower than many

traditional crops. In areas where irrigation is becomTable 3-13-Income Sources by Sales Category, 1988

Percent total Percent gross

income from cash farm

off-farm income from Percent of

Sales 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 4

Greater than $500,000. 3 4 2

aTotal 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 Research Service, “Financial Characteristics of U.S. Farms,

January 1, 1989,” Agriculture Information Bulletin No. 579,

December 1989.

ing more expensive, these new crops could be

attractive. Additionally, several crops provide good

ground cover and possibly could reduce soil erosion.

For many potential new crops, information concerning pest, weed, and disease problems is lacking.

In the wild, plants maybe relatively free from pests

and disease, but intensive cultivation creates a

different environment, one that is often favorable for

the development of pest and disease problems. This

is true with traditional crops and appears to be what

is happening with jojoba, a new crop now being

cultivated in the Southwest. In the wild, jojoba is

relatively free of pests and diseases, but cultivated

stands are beginning to experience problems (29).

The availability of new crops will provide more

options to farmers who wish to rotate crops. Crop

rotation patterns can be used to reduce soil erosion

and chemical and fertilizer applications. However,

in most cases, crop rotation is limited in U.S.

agriculture primarily because of economic disincentives, some of which stem from agricultural commodity programs, rather than, lack of crop options.

Development of new crops is unlikely to increase

crop rotation significantly without changes in economic incentives. Changes in the 1990 Farm Bill

may improve this situation.

Several potential new industrial crops are not

native to the United States. Commercialization in

the United States will require the introduction of

alien species. Historically, new crops have been

introduced without problems; most of the major

crops produced in the United States today are not

native. However, on occasion, the process does go

awry 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 introduced

into U.S. agriculture as a superior forage crop, it is

today a serious weed requiring widespread use of

herbicides. It is also a close relative of sorghum and

is able to cross-fertilize with that crop, rendering a

useless offspring. Sometimes a newly introduced

species, while relatively benign itself, may serve as

a host for diseases of other plants. A historical

example is common barberry, which served as a host

for wheat stem rust, a fungus that debilitates wheat.

A national eradication program was needed to

destroy this plant (24). Domestication of native wild

species raises issues of weediness potential and

cross-hybridization with wild relatives. These issues

have not been adequately evaluated.

Some new crops and uses will involve biotechnology; crops may be genetically engineered to have

new characteristics. Many environmental concerns

have been raised concerning the release of these

plants. Genetically engineered organisms will need

regulatory approval. Well-defined regulations and

regulatory agencies operating in a timely and

effective manner will be needed to ensure speedy

commercialization of biotechnologically derived

new crops and uses of traditional crops.

The potential environmental impacts of large

increases inland use for agricultural production have

not been adequately evaluated. Major changes in

land use patterns will have implications for erosion,

ground and surface water contamination, wildlife,

and non-agricultural plants among others.

Commodity Surpluses and

Government Expenditures

Development of new uses for traditional crops

that are in surplus could potentially reduce those

surpluses. Current carryover stocks of some major

commodities are low due to particularly adverse

weather conditions in recent years, but historically,

large surpluses of some commodities have existed

(table 3-14). Currently, agricultural commodity

programs strongly encourage the planting of some

crops that are in surplus. Farmers will need strong

economic incentives to decrease production of these

commodities and begin producing new crops.

Table 3-14-Commodity Stocks

(million bushels)

Wheat Corn Soybeans

1985/86 a . . . . . . . . . . . . . . . . . . . . 1,905 4,040 536

1986/87 . . . . . . . . . . . . . . . . . . . . . 1,821 4,882 436

1987/88 . . . . . . . . . . . . . . . . . . . . . 1,261 4,259 302

1988/89 . . . . . . . . . . . . . . . . . . . . . 702 1,930 182

1989/90b . . . . . . . . . . . . . . . . . . . . 536 1,344 239

1990/91b . . . . . . . . . . . . . . . . . . . . 945 1,236 255

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

soybeans.

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 surpluses if farmers shift acreage from the production

of surplus crops to the new crops. However, this

might not occur, because farmers may produce new

crops on acreage shifted from the production of

minor, non-surplus crops. New crops may be more

economically competitive with the latter than they

are with the surplus commodities. If this is the case,

then the development of new crops may not result in

a significant reduction of surpluses. Not enough

information is available to determine the impact of

new industrial crops on surpluses.

Similarly, it is not possible to state unambiguously that new industrial crops or uses of traditional

crops will reduce Federal expenditures. Currently,

for example, ethanol derived from cornstarch is

competitive as a fuel additive only because it is

heavily subsidized via excise tax exemptions. An

Economic Research Service (ERS) study indicates

that an expansion of the ethanol industry will reduce

agricultural commodity support payments, but this

reduction will be offset by increased subsidies

resulting from lost excise tax revenues (60).12 The

Federal Government still pays, but the program that

provides the funding has changed. New uses that

utilize commodity program crops, and are competitive (without subsidies) with available alternatives

could possibly lower Federal expenditures.

An additional consideration is the potential impact that new uses of one crop may have on other

crops covered by commodity programs. For example, 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 positive

impact on government payments for the time period exarnined in their study. The GAO and USDA studies used different econometric models of the

agricultural 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.
28 ● Agricultural Commodities as Industrial Raw Materials

expected to decrease the price of soybeans. Soybeans are covered by nonrecourse loans. Traditionally, the market price of soybeans has been higher

than the loan rate, and support payments have not

been needed (41). It is not clear whether the price of

soybeans would drop low enough for high farmer

participation and defaults on nonrecourse soybean

loans, but this is a possibility. Under these conditions, Federal agricultural commodity expenditures

for soybeans would increase. Alternatively, rising

corn prices may cause some livestock producers to

switch to other grains for feed. Increased use of

wheat, for example, could raise wheat prices. Wheat

is also supported by commodity programs and these

expenditures might decrease. The interactions in

commodity markets are complex and changing one

aspect on the market will result in many secondary

impacts. The net effect of these impacts and how

they would affect Federal commodity expenditures

are not known.

Potential To Supply Strategic

Materials and Replace Petroleum

It is possible to develop a domestic capability to

produce many strategic and essential industrial

materials. 13 This capability could lead to an increased sense of security and reduce vulnerability to

external political factors. Many potential new crops

that could supply strategic and essential materials

are in the early stages of development and numerous

technical constraints must be overcome. Many new

and strategically important crops are not economically competitive with available alternatives. Development takes many years, however, and today’s

research lays the groundwork necessary for future

competitiveness and helps provide flexibility to

respond to changing needs and economic environments.

Guayule (rubber) is an example of a new strategic

crop that is technically more developed, but is not

yet price-competitive with imported natural Hevea

rubber. However, because of its strategic importance, the Department of Defense has stated in a

Memorandum of Understanding with the Department of Agriculture that it will seek to ensure that a

significant portion (20 percent) of its annual tire

purchases are tires made from guayule rubber,

provided: that the initial price of guayule rubber is

not over three times that of Hevea rubber; and that

within 5 years of initial purchase, the price of

guayule rubber becomes competitive with that of

Hevea rubber (31). This arrangement provides a

market pull for the development of guayule in the

United States despite the fact that it is not currently

economically competitive with Hevea rubber.

The potential to replace petroleum is an important

issue and an extensive and detailed analysis is

beyond the capacity of this study. A few pertinent

observations can be noted however. Petroleum is

used to produce many products in the United States,

including gasoline, diesel fuel, residual oil (used in

boilers), jet fuel, chemical feedstocks, and miscellaneous products (including kerosene, lubricants,

etc.). Transportation fuels are by far the largest use,

and account for nearly 64 percent of the petroleum

used (53). Chemical feedstocks represent another 7

to 8 percent of petroleum use (10). Many of the new

industrial crops and uses of traditional crops potentially could replace some of these uses.

Development strategies required to significantly

replace petroleum uses in fuel and the chemical

feedstocks industries are likely to be different. This

is because fuels are sold in energy units, while

chemical feedstocks are sold in weight units. Conversion of carbohydrates (sugars and starches) to

ethanol, for example, conserves energy, but mass is

lost (CO2 is lost). This puts an additional burden on

using biomass in the chemical feedstock industry

(22). Chemical purity is required for the chemical

industry; fuel uses generally tolerate greater contamination. Chemicals obtained from biomass sources

generaIly have a higher level of contamination than

those derived from petroleum cracking (10).

The potential to replace the largest quantity of

petroleum is to develop substitutes for transportation

fuel. Use of biomass as a fuel source, in general, is

impeded by the size of the United States fuel

industry, low energy content, seasonality, the dispersed geographic location of supply, and lack of

supply infrastructure (22,53). Potential fuel replacements derived from agricultural commodities include ethanol to replace gasoline and vegetable oils

to 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 Utitti

States during a national emergency, and are not found or produced in the United States in stilcient quantities to meet such needs. Castor oil and mtural

rubber 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 biomass

feedstock to use for ethanol production. Current

ethanol production replaces less than 1 percent of

total U.S. gasoline consumption (62).14 Significant

replacement of gasoline using ethanol derived from

corn would require an increase in ethanol production

of several orders of magnitude. This would result in

many 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 ethanol

production from corn, imply that the prospects of

substantial increases in ethanol use in transportation

are not favorable (53). A mitigating factor might be

the recent passage of the Clean Air Bill, which

mandates use of oxygenates (compounds high in

oxygen content such as ethanol among others) in

fuel for some cities that do not meet Clean Air

Standards. Additionally, improvements in the conversion of lignocellulose to ethanol, instead of starch

to ethanol, might improve the economics of ethanol

use for transportation fuels. These technical advances are not expected to occur prior to the year

2000, and the implications of this development for

the farm sector are not clear at this time.

The potential for vegetable oil-based diesel fuel is

similarly difficult to predict. The United States

consumes approximately 40 billion gallons of diesel

fuel each year, with approximately 10 percent of this

total used in agriculture (23). Using soybean oil, just

for agricultural uses, would require an additional 15

to 20 million acres of production over current levels.

This would increase the price of soybean oil for food

uses. The increased meal produced would likely

saturate the soybean meal markets. If the oil is

converted to monoesters for use, then the glycerol

byproduct will also need to be marketed. Using

crops that produce more oil per acre, such as

sunflowers and possibly rapeseed, could potentially

improve the situation, as could finding uses for the

meal other than for livestock feed.

Alternatively, new and traditional crops can be

used to produce commodity chemicals, rather than

fuel. Currently, about 7 to 8 percent of the petroleum

used in the United States is used to produce

commodity chemicals (10). Five compounds deTable 3-15-Major Primary Feedstocks Derived

From Petroleum

U.S production, 1989

Feedstock billion Ibs)

Benzene . . . . . . . . . . . . . . . . . . . . . . . . . . 11.7

Ethylene . . . . . . . . . . . . . . . . . . . . . . . . . . 35.0

Propylene . . . . . . . . . . . . . . . . . . . . . . . . . 20.0

Toluene . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8

Xvlene . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8

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

rived from petroleum account for 70 to 75 percent of

all primary feedstocks (table 3-15). These compounds and their derivatives represent 50 to 55

percent of all organic feedstocks produced by the

chemical industry (8).

The extent to which petroleum is replaced by

chemicals derived from agricultural commodities

will depend on economic competitiveness, superior

performance, availability of other substitutes, and on

the net energy balance of crop production (i.e., the

ratio of energy output relative to the energy used for

agricultural production and processing). Today,

economics do not favor using agricultural commodities to derive most commodity chemicals, but rising

petroleum prices and improvements in processing

technologies could alter that situation (12,22,33).

Replacement of petroleum-derived chemicals

with plant-derived chemicals can be done in two

ways: direct or indirect substitution. Direct substitution involves the replacement of a petroleumderived chemical with an identical biomass-derived

chemical. This strategy has the advantage of having

acceptable products and markets that already exist.

The disadvantage is that it is difficult for plantderived chemicals to compete economically because

the petroleum chemical industry is highly integrated, is flexible in the chemical mix produced, and

has large economies of scale. Additionally, the

chemical industry may be able to adjust prices

substantially in response to threatened competition.

The indirect replacement strategy requires developing plant-derived chemicals that have a slightly

different chemical composition, but the same functions as petroleum-derived chemicals. In this case,

benefits in terms of superior performance, improved

storage or supply characteristics, or improved enviIdOne bushel of corn produces appro xirnately 2.5 gallons of ethanol. U.S. production of ethanol uses appro xirnately 350 to 400 million bushels of

com (approximately 5 percent of com production).
30 ● Agricultural Commodities as Industrial Raw Materials

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 prices

for the commodity, increase farm income, decrease surpluses, decrease Federal commodity payments, increase job

creation in rural communities, and in some cases, have positive environmental impacts. An example will help to

illustrate some of the complications that might occur. The analysis is taken from a USDA/ERS study on the potential

impacts of increasing ethanol production from corn (51,52). The analysis assumed that commodity price supports

would 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 expansion

of ethanol production to about 2.7 billion gallons of ethanol per year by 1995, which would require an additional

800 million bushels of corn annually. Such a scenario is unlikely to occur without changes in economic incentives

of ethanol production or possibly government legislation mandating increased use of ethanol. Additionally, the price

and 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 corn

prices. It is estimated that corn prices will increase approximately 2 to 4 cents per bushel, for each additional 100

million bushels used to produce ethanol. However, corn is not the only commodity that will be effected Corn is

used primarily as a livestock feed. As the price of corn rises, livestock producers may switch to other feed grains

such as wheat or sorghum. The increase in demand could result in some increase in prices for these grains. Ethanol

production from corn requires only the starch. Produced as byproducts are corn oil and distillers dried grains (from

dry mill processing) or corn gluten meal and feed (from wet mill processing). Corn oil competes in the edible oil

market with the oil obtained from oilseed crops such as soybeans and sunflowers. Additionally, distillers dried

grains and corn gluten meal and feed compete with soybean meal as a high-protein livestock feed. Thus the value

of soybeans decreases. In the short run, prices could decrease as much as 20 percent. In the long run, it is expected

that farmers will shift out of soybean production to the production of other crops, particularly corn, and the decreased

supply of soybeans will help raise the price again.

Livestock Sector--Changing prices for grains and protein meals could affect livestock production. Ethanol

production below 3 billion gallons is not expected to significantly affect Livestock production because higher grain

prices will likely be offset by lower protein meal prices. The impacts on livestock production will depend on how

easily ethanol byproducts can be substituted for corn in the feed rations. Limited opportunities for substitution could

result in higher feed prices and lower livestock production. Substitution opportunities are likely to be different for

beef, pork, and poultry. Lower livestock production could result in higher meat prices for consumers. Estimates are

that 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 higher

corn prices. The benefits to corn producers enrolled in the corn commodity program will not be as high because the

commodity program to some extent buffers the effect of higher market prices (i.e., higher market pr.ices result in

lower 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 chemi

cost disadvantages (10,22). Indirect substitution

using primarily oils and resins does occur, but the

high variability of supply and price has restricted

these uses.

Technically, starch derived from corn (or other

sources) could be used to make several commodity

chemicals, many of which are intermediates in the

production of other chemicals. The markets for some

of these chemicals (e.g., ethylene) are large. Some

smaller markets (e.g., ketones and alcohols) might

be more likely candidates for development. Other

cals with high oxygen ;&tents, since plant-derived

chemicals usually contain oxygen, while petroleumderived chemicals do not. Examples include sorbitol

(food processing), lactic acid (thermoplastics), and

citric acid (detergents) (12). Starch can also be used

to produce polymers used either alone or in combination with other compounds such as plastics.

Currently, biomass-derived plastics are not economically competitive except in a few specialty highvalue markets (e.g., surgical sutures). Major technical 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 derived

from corn starch) for petroleum replacement are the

fatty acids and resins discussed in this report.

Opportunities for vegetable oils to replace linear

alcohols and olefins derived from petrochemicals

(e.g., ethylene and propylene) depend on improved

yields of olefins from oils, and the development of

new products in the detergent (12 to 18 carbon

range) and the plasticizer (6 to 10 carbon) ranges.

Also important is the potential of biomass-derived

glycerin to replace petrochemically derived glycerin, because the first step in preparation of fatty

alcohols and olefins involves the conversion of

triglycerides to methyl ester and glycerin (22). The

extent to which petroleum replacement has already

occurred and the potential for further replacement

needs additional analysis, but industry trends and

expectations can be discussed for some industries.

Detergent Industry

Vegetable oils (coconut and palm kernel) and

petroleum-derived ethylene can be used to produce

linear alkylate and alcohol surfactants, chemicals

used in the production of soaps and detergents.

Global production and percent of linear alkylate
Chapter 3--Analysis of Potential Impacts of Using Agricultural Commodities as Industrial Raw Materials ● 31

increased corn prices. Additionally, producers of other grains, for example wheat, may also experience higher

incomes if the prices of these grains also increases. Soybean farmers will lose income because of the competition

in the oil and high-protein meal markets. The differential price changes for grains and soybeans could result in

interregional income shifts. Farmers in the Corn Belt can switch soybean acreage to corn. Producers m the Southern

United States, particularly the Delta region cannot. It is estimated that farm income in that region could decrease

by 5 to 7 percent. Total gross receipts from crop production are expected to increase $1 to $2 billion if ethanol

production is increased to 2.7 billion gallons (51,52).

Farm Program Costs—Increases in ethanol production will decrease farm program costs because of the

increases 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 for

other grains such as wheat, sorghum, oats, and barley. It is estimated that if commodity supports remain at the same

levels established in the 1985 Food Security Act, then ethanol production levels of 2.7 billion gallons by 1995 could

result in commodity program savings of about $9 billion between 1987 and 1995. However, there is a possibility

for 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 program

because market prices have been higher than the loan rate. Between 1987 and 1995, it is estimated that Federal tax

losses due to the excise tax exemption on a 2.7 billion gallon ethanol industry would be about $5 billion. This

estimate 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 ethanol

production. However, if the analysis is continued to the year 20(X), the tax losses from exemption of ethanol exceed

the gains from lower commodity payments, and cumulative tax losses from 1987 to 2000 exceed the cumulative

commodity program gains over that time (51,52).

Rural Development--The ethanol industry will contribute to rural development mainly through the

construction 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 is

estimated that expansion of ethanol production to the 3-billion-gallon level could potentially directly employ an

additional 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 carbon

monoxide (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 corn

production. 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 use

for one commodity can have significant, and perhaps unexpected impacts on other commodities. Because different

crops predominate in different geographical regions of the United States, there could be significant interregional

impacts.

Potential candidates (other than those derived triglycerides to methyl ester and glycerin (22). The

from corn starch) for petroleum replacement are the

fatty acids and resins discussed in this report.

Opportunities for vegetable oils to replace linear

alcohols and olefins derived from petrochemicals

(e.g., ethylene and propylene) depend on improved

yields of olefins from oils, and the development of

new products in the detergent (12 to 18 carbon

range) and the plasticizer (6 to 10 carbon) ranges.

Also important is the potential of biomass-derived

glycerin to replace petrochemically derived glycerin, because the first step in preparation of fatty

alcohols and olefins involves the conversion of

extent to which petroleum replacement has already

occurred and the potential for further replacement

needs additional analysis, but industry trends and

expectations can be discussed for some industries.

Detergent Industry

Vegetable oils (coconut and palm kernel) and

petroleum-derived ethylene can be used to produce

linear alkylate and alcohol surfactants, chemicals

used in the production of soaps and detergents.

Global production and percent of linear alkylate
Chapter 3--Analysis of Potential Impacts of Using Agricultural Commodities as Industrial Raw Materials ● 33

potentially cultivate an additional 100 to 140 million

acres. Some of this land is planted to pasture used for

livestock grazing. Some is held in small or fragmented holdings and faces competition from nonagricultural uses; conversion to crop production will

be relatively expensive and expected returns need to

be high enough to offset the conversion costs (4,44).

Additionally, much of the land removed from crop

production is fragile and subject to soil erosion.

Through 1990, 33.9 million acres of land had been

enrolled in the Conservation Reserve Program15

(50,56). If these acres are to be returned to crop

production, extreme care in crop selection will be

needed.

The acreage requiredl6 to grow crops that would

significantly reduce U.S. petroleum fuel use would

be substantial (table 3-18). To replace U.S. petroleum-derived ethylene with cornstarch-derived ethylene, would require production of approximately

27 million acres of corn.17 Current U.S. production

levels of ethanol from cornstarch replace no more

than 1 percent of the gasoline used in the United

States. Using soybeans to replace just the agricultural uses of diesel fuel would require increasing

soybean production by nearly 10 million acres over

current production levels.18 Using crops such as

sunflowers or the new crop rapeseed, which produce

substantially higher levels of oil per acre than

soybeans, would decrease the acreage needed, but

even so, a significant portion of U.S. crop acreage

would need to be devoted to fuel production.

Crop acreage needed to supply total demand for

commodities which would substitute for those

currently imported (i.e., oils and resins), will be

determined by domestic demand and export potential. A rough approximation needed to satisfy current

U.S. demand can be made (table 3- 19). Calculations

are based on current imports of oils, resins, and

Table 3-18-Estimated Acreage Needed To Supply

One Billion Gallons of Fuela

Crop Fuel replaced Acreage

Soybeans . . . . . . . . . . . . . . . Diesel 22 million

Sunflowers . . . . . . . . . . . . . . Diesel 16 million

Rapeseed . . . . . . . . . . . . . . . Diesel 8 million

Ethanol . . . . . . . . . . . . . . . . . Gasoline 3.5 million

aoestimate petroleum replacement, calculations must reestimated on an

energy basis rather than a volume basis (vegetable oils and ethanol have

a lower energy content than diesel fuel and gasoline respectively, and

would therefore require a greater volume to achieve the same energy

content) and energy requirements needed to grow and process the

agricultural commodities need to be considered. Agricultural commodity

yields were assumed to be the U.S. average, 1984-88.

SOURCE: Office of Technology Assessment, 1991.

Table 3-19—Estimated Acreage Requirements for

Selected New Crops To Replace Importsa

Estimated acreage

New crop Imported crop (million of acres)

Cuphea . . . . . . . . . . .

Cuphea . . . . . . . . . . .

Lesquerella . . . . . . .

Stokes aster . . . . . . .

Vernonia . . . . . . . . . .

Crambe . . . . . . . . . . .

Rapeseed. . . . . . . . .

Guayule . . . . . . . . . .

Kenaf . . . . . . . . . . . .

Soybean oil. . . . . . . .

Coconut oil 1.40

Palm kernel oil 0.56

Castor oil 0.33

Converted soybean oil 0.49

Converted soybean oil 0.68

Rapeseed oil 0.29

Rapeseed oil 0.24

Hevea rubber 3.60

Newsprint 1.00

Printing inks 1.01

aEstimations were based on 1987 levels of U.S. imports and yields of new

crops obtained in experimental plots. Calculations involving-oilseeds are

based on fatty acid equivalents.

SOURCE: Office of Technology Assessment, 1991.

fibers for which the new crops could substitute, and

include demand for both food and nonfood uses.19

Hence, some calculations may overestimate the

acreage needed to satisfy industrial uses. Acreage

needs may also be overstated because yields of new

crops are based on levels currently obtainable, not

necessarily those that would be needed for economic

viability .20 (See app. D, table D-1 for calculation

details.)

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 ~er8Y

content (rather than volume), net energy requirements (energy required for production and processing subtracted), and average crop yields that could

be expected if production signiilcanfly expanded (rather than current U.S. averages). If these factors were includ~ acreage requirements would likely

be 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 Polmd

of 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/ac

estimated to be needed for economic competitiveness.
34 ● Agricultural Commodities as Industrial Raw Materials

Rough calculations of U.S. acreage needed to

replace current world production levels for some of

these imported agricultural commodities can approximate export potential (table 3-20).

These estimates represent upper levels based on

current world demand. Total acreage needs would

depend on the potential to expand demand for these

commodities beyond current levels, and the ability

of the new crops to capture a significant percentage

of the world market share. One would not expect

U.S. production of new crops to displace world

production completely. New crops will, in many

cases, be substitutes for these imported crops and,

therefore, they will compete with each other for

many of the same markets. Large supply increases

(without sufficient demand increases) will decrease

the price of all substitutes and affect the production

levels and market share of all substitute commodities.

Increasing global capacity to produce, process

and manufacture products from agricultural commodities will affect the potential for U.S. exports of

these products. Other countries (e.g., Argentina and

Brazil for soybeans and Canada and the European

Community for edible quality rapeseed) have demonstrated a capacity to increase production in

response to favorable prices. Guayule can readily be

grown in Mexico. Supply of lauric acid oils is

expected to increase to 7.1 million tons by the year

2000 (i.e., 3.7 million tons of coconut oil and 3.4

million tons of palm kernel oil), due primarily to the

maturation of high yielding palm trees planted in

Asia (1,14). The International Agricultural Research

System and multinational seed companies are increasing the ability to rapidly transfer and adapt new

seed varieties to many countries in the world (35).

Developing and newly industrialized countries

are increasing their capability to produce products

from agricultural commodities for their own domestic use, and in some cases are beginning to capture

market share in world markets. For example, most of

the new capacity to produce natural oil surfactants

has been built in Third-World or newly industrialized nations; the industry has overcapacity, and is

still expanding. Prior to 1986, U.S. producers

supplied the linear alkylate and alcohol surfactant

demand in the United States and Canada. Now, 5 to

10 percent is supplied by imports from Western

Europe and Third World nations (14). Analysis of

the U.S. potential to capture market share for both

Table 3-20-Estimated Acreage Needed To Replace

World Supplies

World production Acres needed

Imported crop New crop (million Ibs.) (millions)

Coconuta . . . . . Cuphea 2.77 7.6

Palm kernela . . Cuphea 1.48 4.5

Rubber . . . . . . Guayule 9,250 18.5

Castor c 

. . . . . . . Lesquerella 1,705 1.1

Newsprint d . . . . Kenaf 3 3

a

4.7

aworld production levels are 1989/1990 preliminary estimates of coconut

and palm kernel oil in million metric tons. Acreage calculations based on

acres needed to obtain an equivalent amount of Iauric acid as would be

obtained from the coconut and palm kernel oil. Source: U.S. Department

of Agriculture, Foreign Agricultural Service, World Oilseed Situation and

Outlook, November 1990.

bWorld production level is in million pounds and is based on 1990 estimates

of world rubber production of 25 billion pounds, 37 percent of which is

natural rubber. Source: Stephen Stinson, “Rubber Chemicals Industry

Strong, Slowly Growing Despitee Changes,” Chemical and Engineering

News, May 21, 1990, pp. 45-66.

cWorld production level is in million pounds of castor beans, and is based

on 1984 to 1986 production of selected countries (including Brazil and

India). Calculation is based on pounds of Lesquerella seed needed to

replace castor beans. Source: U.S. Department of Agriculture, Economic

Research 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 12.3

million metric tons being 41 percent of world consumption. source: Fred

D. Iannazzi, ‘The Economics Are Right for U.S. Mills To Recycle Old

Newspapers, Resource Recycling, July 1989, p. 34.

SOURCE: Office of Technology Assessment, 1991.

raw and processed products derived from agricultural commodities is needed.

Future increases in recycling efforts may also

affect virgin commodity needs. For example, in

1987 the United States consumed approximately

12.3 million metric tons of newsprint (41 percent of

world consumption). Approximately 32 percent is

recycled. Of the newsprint manufactured in the

United States, 24 percent of the fiber used is from

recycled newsprint while 76 percent is virgin fiber.

Newsprint made from 100 percent recycled newsprint is generally of lower quality than that made

with virgin fiber, but room exists for significant

increases in recycled newsprint, which could reduce

the use of virgin fibers for this use (18). Some studies

indicate that mixing kenaf with recycled newspaper

pulp improves the strength and brightness of the

recycled paper; the role that kenaf could play in

recycling needs further study.

Determination of the acreage needed to produce

agricultural crops for industrial uses has implications for the U.S. Gross National Product (GNP)

which would be affected by additional production

and use of idled resources. Replacing imports with

domestic 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 for

the fiscal years 1986 through 1988, was $591 million

per year. The value of U.S. imports of rubber and

gums for the same time period was approximately

$759 million per year (58). Annual U.S. imports of

newsprint are valued at approximately $4.5 billion

(11).

Additional impacts could result from value added

in the agricultural sector. The agricultural sector

consists of the farm sector, upstream activities

related to farming (i.e., firms that supply agricultural

inputs 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 and

fiber system accounts for about 18 percent of the

U.S. GNP; farming accounts for 2 percent, upstream

activities account for about 2 percent, and the

remaining 14 percent results from the downstream

activities (16,21). Currently, excess capacity exists in

the farm sector and many of the downstream

activities. This implies that the impacts of small

changes in price and production volume would be

limited to the farm sector. Changes in upstream

activities occur at higher prices and volumes than in

the farm sector, and downstream activities require

highest levels of change.

Ultimately however, it is necessary to decide

whether using all excess capacity is wise or whether

it is better to maintain some excess capacity. Recent

dry weather has reduced surplus stocks to minimum

levels. Rebuilding stocks will require planting

additional acreage. Without some excess capacity,

the ability to respond to factors beyond our control

would be hampered. Maintaining at least some

excess production capacity may provide a measure

of food security.

Premature Commercialization

Premature commercialization of new industrial

agricultural products can indefinitely delay successful marketing. The development of degradable

plastics to alleviate solid waste and litter problems

illustrates this point. In the early stages, environmentalists supported these products for some specific uses, such as six-pack beverage rings. However, as product types and claims of effectiveness

multiplied, criticism emerged. The products were

marketed without a clear definition of, or standards

for, degradability. Lawsuits have been filed against

some manufacturers of these products for false and

misleading advertising. Additionally there have

been calls for an end of public sector research on

these products, and some states have considered

legislation banning their use. Potential markets for

degradable plastics are estimated to be declining.

Apparently, research for second-generation degradable plastics has been continuing, but confusion

and doubts about the appropriateness of these

technologies remain with the public and environmental community. It remains to be seen what effect

these doubts will have on future efforts to market

degradable plastic products (46,49).

Triticale, a wheat-rye hybrid that is high in

protein, is an example of a new crop that was

introduced (in the 1950s) without clearly establishing its market. From the beginning, triticale was

viewed as another wheat, even though its processing

qualities were different from wheat and it could not

directly substitute for wheat. This problem, combined with yields that were lower than wheat, lead to

the foundering of triticale as a new grain crop.

Today, triticale is grown in the United States in

small quantities, primarily as a forage crop in the

Southeast, with some use in specialty baking products (19).

It is enticing to try to commercialize a product as

quickly as possible to obtain any potential benefits

the product might yield, and unnecessary delays

should be avoided. However, commercializing a

new crop or product prematurely risks destroying the

potential of that new product. A clear marketing

strategy that analyzes potential problems is needed.

Summary and Conclusions

The lack of studies evaluating the potential

impacts of new industrial crops and uses of traditional crops precludes making definitive statements

on what these impacts will be. This chapter is a

preliminary attempt to analyze potential impacts,

but more detailed analysis is needed. Based on this

initial analysis, several conclusions are suggested.

Examination of rural employment impacts during

the 1970s when agricultural production rapidly

expanded, suggest that development of new crops

and uses may result in modest rural employment

zlvege~ble oiIs fiported include palQ palm kernel, coconuL olive, rapeseed, castor, @g, and b~d oils.
36 . Agricultural Commodities as Industrial Raw Materials

growth in agriculturally related industries. Agriculturally dependent communities would be most

affected. However, the majority of the agriculturally

related jobs created are likely to be located in

metropolitan, rather than rural communities. Additionally, many of the industries that will use

chemicals derived from agricultural commodities

are already located in metropolitan areas, and in

several cases, may require highly skilled labor.

Location of new manufacturing facilities in many

rural areas will be difficult to achieve.

Development of new industrial crops and uses of

traditional crops does have the potential to provide

a domestic source of strategic and essential industrial materials. Technically, biomass-derived chemicals could also potentially replace many petroleumderived chemicals. The major constraint is economics. The chemical industry is highly integrated,

flexible, and has large economies of scale. Penetration of many of these markets is difficult. Additionally, some of these markets are large (i.e. fuel and

primary chemical feedstocks) and significant replacement would use millions of acres of cropland,

have far-reaching environmental implications, and

could significantly increase food prices.

The benefits of new technologies are captured by

those who first adopt the technology. A strong

correlation exists between early adoption and size of

farm enterprise. It is likely that operators of large

farms will adopt new crops before operators of small

farms and, therefore, capture these benefits. For

traditional crops covered by Federal commodity

programs, market prices must increase enough to

exceed price support levels to have a large impact on

farm income. The extent to which small farm

operators are enrolled in commodity programs will

determine how changing market prices affect their

income levels. Programs that help small farm

operators become early adopters of new technologies will improve the chances of these farmers

benefiting from new industrial crops and uses of

traditional crops.

The development and production of new industrial crops and uses in the United States could, in

some cases, replace major exports of some developing nations, some of which are considered to be of

strategic importance to the United States. Additionally, attempts to increase exports of some of the

products has the potential to increase trade frictions

between the United States and the European Community.

The United States currently has excess agricultural production capacity. Large scale replacement

of U.S. fuel use or primary chemical feedstocks

would require significant acreage for crop production, however, economics do not favor these developments at the current time. Use of agriculturally

derived chemicals to replace some of the oils and

resins currently imported is not likely to reduce

excess agricultural capacity significantly given current demand and supply conditions.

The ability of new crops to reduce Federal

commodity payments will depend on whether or not

acreage is shifted from production of crops that are

federally supported to those that are not. New uses

of traditional crops that are supported, will reduce

commodity payments if the new use is not itself

subsidized.

Development of new industrial crops and uses of

traditional crops will have many environmental

impacts, some positive, and some negative. Potentially, new fuels could improve air quality. New

crops that are better adapted to their environments

potentially could reduce erosion and demand for

irrigation. However, many new crops are not native

to the United States and problems can and do arise

from the introduction of new species. Additionally,

many of the crops may be genetically engineered;

several environmental issues are raised by this

possibility.

As with any new technology, there will be

winners and losers. Many new industrial crops and

uses of traditional crops potentially will compete

with traditional crops. Improved understanding of

these impacts is needed.

The lack of studies evaluating the potential

impacts of new industrial crops and uses of traditional crops points to the need to fired social science

research in addition to the physical, chemical, and

biological research. Interdisciplinary research can

provide insights into the likely effects that will result

from the development of these new technologies, as

well as factors that affect the development of the

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

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

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

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Chapter 4

Factors That Affect Research, Development,

and Commercialization

While the development of new industrial crops

and uses of traditional crops potentially could

benefit society, such development is not a simple

matter. It involves technical change, the complex

process by which economies change over time with

respect to the products produced, and the processes

used to produce them (22). New ideas, models,

products, and processes must be conceptualized and

research conducted to develop promising products

and processes for commercial use. New processes

and products must be adopted by firms and spread

throughout an industry to achieve maximum impacts. Governments can affect the rate of technical

change by influencing the general economic environment (fiscal and monetary policy as well as

regulatory policy can enhance or inhibit technical

change), and by specific policies designed to encourage technical change.

U.S. technical policy focuses predominantly on

the research to develop new ideas. Federal and State

governments, and the private sector, have numerous

programs and provide billions of dollars to support

such research. Commercialization is generally the

responsibility of the private sector, although the

Federal and State Governments have passed legislation and developed some programs to encourage

technology transfer from public-sector research to

the private sector. Many of these programs are of

recent origin and have limited funding. The process

of adoption of new technologies, with a few notable

exceptions, receives little public-sector attention.

For new industrial crops and uses of traditional

crops to be commercialized, many technical and

economic constraints must be overcome. Involvement of the public and private sectors is needed. The

extent of this involvement, and the speed at which

new technologies will be developed and commercialized will be influenced by many factors. This

chapter analyzes many of these factors, and describes some Federal and State programs available

to encourage the research, development, and commercialization of new technologies. Chapter 5 will

discuss important factors involved in the adoption of

new technologies.

Research and Development

It is one of the myths of technical change that the

process proceeds in a linear manner from basic to

applied research, to development, to marketing, and

to dissemination. In fact, a more accurate description

might be one where science- and technologyoriented research follow two parallel but interacting

paths. The two paths are connected by a common

pool of scientific knowledge that feeds and draws

from each research path. While personal insight,

professional curiosity, and the state of the science all

play a role, the speed and direction of technical

change is highly influenced by the interaction of

economic and institutional factors.

Private-sector research and development is motivated by profit-seeking and will tend to occur

whenever profit and risk conditions create comparatively attractive investment opportunities. Firms

undertake research and development to reduce the

unit costs of production (generally through process

development), and/or to stimulate demand for outputs (new product development). Firms develop new

processes to reduce the use of production inputs that

are, in the future, expected to become relatively

more expensive than other inputs (i.e., firms minimize the present discounted value of expected future

costs). The resources allocated to a particular line of

research will also be influenced by the cost and

productivity of the research. New product research

resources are usually concentrated on products that

are expected to have the highest prices and largest

markets, and development efforts are accelerated for

such new products. Development activities are

slower 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 by

setting its own research priorities and providing

adequate resources to meet established goals. The

public sector can take a passive approach by

following the research priority agenda determined

by interest groups. Interest groups demand publicsector funding for research that they believe will

-41–
42 . Agricultural Commodities as Industrial Raw Materials

bring a payoff to themselves. They commit their own

resources in a similar fashion. Federal fiscal constraints tend to reinforce the passive approach to

public research by intensifying the search by scientists and research administrators for private research

monies and competitive grants (16).

With the possible exceptions of guayule and

ethanol derived from cornstarch, Federal policy

concerning new industrial crop and use development

has been relatively passive. Interest groups, for the

most part, have not demanded this type of publicsector research, and the private sector has not

invested in public-sector research of this type. The

private sector has shown interest in new industrial

crops and uses that have relatively clear potential to

substitute for inputs whose cost is increasing (relative to the cost of other inputs), or whose market is

affected by regulation. Situations where these factors are not so obvious have not elicited substantial

private-sector interest.

The new industrial crops Vernonia and Cuphea

illustrate these points. Lauric-acid containing oils

(coconut and palm kernel oil) and petroleum-derived

ethylene can be used to produced surfactants for use

in detergents, emulsifiers, and wetting agents. The

new crop Cuphea also produces oil containing lauric

acid, and could be used in place of coconut and palm

kernel oil or ethylene in many detergents. Raw

material costs in the detergent industry are a small

portion of total product cost and have little impact on

profitability. Additionally, supplies of coconut and

palm kernel oil are expected to at least double within

the next decade as recently planted, high-yielding

palms begin to mature (1,7). The detergent industry

provides limited funding for Cuphea. Industry

interest in developing Vernonia is increasing.

Stricter volatile organic emission standards are

forcing the reformulation of many paints and coatings. Preliminary results show that use of Vernonia

oil as a diluent in place of organic solvents can

reduce volatile emissions. The paint and coatings

industry is increasing its support for research on

Vernonia (19).

Industrial Use Research Funding and

Institutional Involvement

The Federal institution most involved in agricultural research is the U.S. Department of Agriculture

(USDA). Research funds are allocated through the

Cooperative State Research Service (CSRS) and the

Agricultural Research Service (ARS). Research

funds awarded to the State Agricultural Experiment

Stations located within the Land Grant Universities

are administered through CSRS. Funding includes

formula funds (Hatch, Evans-Allen, McIntyreStennis, Animal Health, etc.), special grants, education and facilities grants, and competitive grants.

Total CSRS funding to the State Experiment Stations for fiscal year 1990 was approximately $344

million. It is estimated that approximately $5 million

is allocated to research and development of new

crops and uses of traditional crops ($2 million for

new crop research and $3 million for new use

research) (12). Universities have performed most of

the agronomic research and some utilization research on new crops and industrial uses.

The fiscal year 1990 budget for the ARS was

approximately $609 million. Of this amount, it is

estimated that expenditures for industrial-use research were $15.5 million. Much of this funding,

however, focused on more traditional uses of cotton

fibers and not new uses. An estimated $2.7 million

was allocated to new crop research. Additionally,

another $6.7 million was spent on research that

could indirectly enhance industrial uses (12, 17). The

primary ARS center for research on new crops and

industrial uses is the Northern Regional Research

Center in Peoria, Illinois, which focuses primarily

on utilization research.

The Critical Agricultural Materials Act established the Office of Critical Materials (OCM)

located within USDA. This office serves as ‘‘a

central location where USDA can address research

and development with respect to agricultural crops

that have the potential of producing critical materials

for strategic and industrial purposes.” A Joint

Commission on Research and Development of

Critical Agricultural Materials, which includes representatives from the Department of Agriculture, the

Department of Commerce, the Bureau of Indian

Affairs, the National Science Foundation, the Department of State, the Department of Defense, and

the Federal Emergency Management Agency, oversees the activities of the Office of Critical Materials.

This office is trying to commercialize many of the

new industrial crops discussed in this report. Commercialization efforts have been greatest for

guayule, kenaf, jojoba, Crambe, and industrial

rapeseed. Some efforts have been made to commercialize meadowfoam and Lesquerella. The 1990

Farm Bill reauthorized the Critical Agricultural
Chapter 4--Factors That Affect Research, Development, and Commercialization . 43

Materials Act through FY 1995, and Congress

appropriated $1,968,000 for FY 1991 to fund

research on guayule ($668,000), Crambe and rapeseed ($500,000), and other unspecified research

($800,000).

In addition to ARS and CSRS activities, other

USDA agencies such as the Forest Service also

support research on industrial uses of forest products. Other Federal agencies such as the Department

of Defense (DoD), the Department of Commerce,

the Department of Energy, the National Science

Foundation, and the Agency for International Development provide some funding for industrial uses of

agricultural commodities. The States, as well as the

private sector also provide some funding, as do

commodity organizations, such as the National and

State Corn Growers Associations.

Funding Levels for Specific New Crops and

Industrial Uses

USDA expenditures for selected new crops for

fiscal year 1989 are summarized in table 4-1. To put

these funding levels in perspective, USDA and the

State Agricultural Experiment stations annually

spend, on average, an estimated $120 million for

corn, wheat, and soybean research.

The $325,000 being spent by USDA on Crambe

and winter rapeseed supports an eight State consortium that is attempting to commercialize these two

crops. The eight States involved are Missouri,

Kansas, New Mexico, Idaho, Iowa, Nebraska, North

Dakota, and Illinois. It is estimated that these States

are receiving an additional $2 in State support for

every $1 of Federal support (12).

Guayule is the new crop most heavily supported,

as mandated by the Native Latex Act and later the

Critical Agricultural Materials Act. Much of the

funding has come from DoD and USDA. Table 4-2

summarizes known expenditures for guayule development. Private-sector expenditures on guayule

research are estimated to be three to four times

USDA levels (12).

Kenaf is also receiving public- and private-sector

attention. The Joint Kenaf Task Force (JKTF)

composed of Kenaf International, CIP Inc., and

Combustion Engineering’s Sprout-Bauer Division,

in cooperation with USDA, is attempting to commercialize kenaf. The program consists of three

phases. Phase I, begun in 1986, involved agronomic

and papermaking research. Phase II, begun in 1987,

Table 4-l—USDA Fiscal Year 1989 Expenditures for

Selected New Crops (dollars)

Crop Amount

Cuphea . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100,000

Meadowfoam . . . . . . . . . . . . . . . . . . . . . . 350,000

Lesquerella . . . . . . . . . . . . . . . . . . . . . . . 20,000

Crambe/rapeseed . . . . . . . . . . . . . . . . . . 325,000

Guayule . . . . . . . . . . . . . . . . . . . . . . . . . . 1,168,000

Kenaf . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.638,000

SOURCE: 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 Defense

13.2 U.S. Department of Agriculture

2.9 Other Federal

2.7 Firestone Tire & Rubber

1987-88 . . . . . . . . . . 15.0 Department of Defense

4.3 U.S. Department of Agriculture

1989 . . . . . . . . . . . . . 1.168 U.S. Departrnent of Agriculture

1989-96 estimated . . 38.0

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

Cooperative State Research Service, 1990.

focused on commercial trials. Phase III, currently in

progress, is focusing on agronomic and utilization

research. Table 4-3 summarizes expenditures for

kenaf research. It is estimated that private-sector

support is three to four times the USDA expenditures (3,1 1,12).

The California South Coast Air Quality Management District, the State of Michigan, the U.S.

Agency for International Development, and Paint

Research Associates (an industry-financed research

group) have committed $425,000 for Vernonia

research (19). The Tennessee Valley Authority, in

cooperation with the Department of Energy, conducts research on the conversion of lignocellulose to

chemicals. Funding levels for other crops are unavailable, but the amounts seem to be small. (See

Appendix A: Selected New Industrial Crops for more

specific information concerning each individual

crop.)

Research and development of new uses for

traditional crops is also conducted by the public and

private sectors. The General Accounting Office has

evaluated the extent of Federal support for degradable plastic research (28). Their findings for fiscal

year 1988 are summarized in table 4-4. Several

private firms are also interested in degradable
44 ● Agricultural Commodities as Industrial Raw Materials

Table 4-3—Expenditures for Kenaf Research

(dollars)

Research Amount Agency

Phase I 141,000 U.S. Department of Agriculture

263,000 Joint Kenaf Task Force

Phase II 300,000 U.S. Department of Agriculture

644,000 Joint Kenaf Task Force

Phase III 675,000 U.S. Department of Agriculture

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

Cooperative State Research Service, 1990.

Table 4-4-1988 Federal Expenditures for

Degradable Plastic Research

Agency No. of projects Funding

U.S. Department of Agriculture . . 4 $ 941,000

Department of Defense . . . . . . . . 4 575,000

Department of Energy . . . . . . . . . 3 150,000

National Science Foundation . . . . 1 63,000

Total . . . . . . . . . . . . . . . . . . . . . 12 $1,729,000

SOURCE: U.S. Congress, General Accounting Office, “Degradable Plastics: Standards, Research and Development,” RCED-88-208

(Gaithersburg, MD: September 1988).

plastics, and have products on the market, many of

which use cornstarch.

Funding for ethanol desulfurization of coal has

been provided by the Illinois State Geological

Society, Southern Illinois University-Carbondale,

Illinois Department of Energy and Natural Resources, the Illinois and Ohio Corn Marketing

Boards, and the U.S. Department of Energy. Expenditures of approximately $2.85 million have

been allocated for 1987 through 1991 (33).

Funding levels for other uses are unavailable. (See

Appendix B: Selected New Industrial Uses for

Traditional Crops for more specific information on

each use.) In addition to the United States, other

countries have expressed interest in developing new

industrial crops and uses for traditional crops. For

example, Japan is currently in the second year of a

7-year, $100 million program to develop degradable

plastics (21). The European Community has also

begun funding a program to develop new industrial

crops and uses of traditional crops (box 4-A).

Commercialization

New products and processes developed in Federal

laboratories or universities will not be in the form of

a fully developed, marketable product. Commercialization will require considerable research and development effort on the part of companies. For new

crops and uses, commercial-scale extraction, separation, purification, and chemical transformation

mechanisms that are economically competitive will

need to be developed. For chemicals used in

strategic applications, reliability and performance

characteristics will be of paramount importance.

Consistent quality control procedures must be developed, and for many uses, performance standards

must be established. In some situations, waste

disposal procedures must be developed. Commercialization efforts by private firms will follow their

research and development efforts and will be driven

by the same economic factors.

Cooperation and technology transfer between the

public and private sectors will be a key component

of the commercialization effort. Technology transfer

is the process by which technology, knowledge,

and/or information developed in one organization, in

one area, or for one purpose is applied and used in

another organization, in another area, or for another

purpose. Technology transfer can include the transfer of legal rights and the informal movement of

information, knowledge, and skills. Private-sector

awareness, interest, and capacity to utilize publicsector research effectively will be critical to the

successful commercialization of new uses of agricultural commodities.

Industrial Interest in Public-Sector Research

A critical component of technology transfer is the

interest of industry, without which institutions to

transfer technology will be ineffective. Industrial

interest has frequently been lacking in the past;

industries have not wanted to use technologies not

developed in their own laboratories (29). Industry

has felt that it can get little value from cooperative

agreements and has not encouraged them. Small

firms have often felt that this is a big company game

that they are ill-equipped to play (13). These

attitudes may be changing, primarily because of

industry’s need to respond to rapidly changing

markets, and because of legislation that has made

licensing and collaborative R&D with Federal

laboratories easier (23).

Economics will play a major role in the privatesector demand for technology developed in the

public sector. Many new crops being developed are

intended to substitute for chemicals that are currently either imported or derived from petroleum,

and which may be widely accepted and available. It

is 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 and

Uses of Traditional Crops

In addition to the United States, the European Community (EC) is exploring alternative crops and uses as a

means of alleviating their agricultural problems. The EC has initiated a program called the European Collaborative

Linkage of Agriculture and Industry Through Research (ECLAIR), to improve the interface between industry and

agriculture. ECLAIR is being administered through the Science, Research and Development Directorate. ECLAIR

has been funded for $80 million over 3 years. All grants require matching finds from an industrial partner. Awards

are 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; and

4. Methods of Transformation and their control.

Preference will be given to large, interdisciplinary projects, to proposals utilizing advanced technologies such

as biotechnology, to projects that potentially can improve the competitiveness of European agriculture and/or have

positive environmental impacts (Other social goals are not explicitly considered, unlike U.S. proposals that place

heavy emphasis on technology applicability to small-scale farms and potential rural job creation) (5). The ECLAIR

program requires projects to involve participants from at least two member countries. U.S. proposals can

accommodate 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 to

carry out research necessary before commercialization can be contemplated, and focuses strictly on precompetitive

research and development. Precompetitive research is considered to be beyond the stage of basic research, but the

results of the research will still require further development to be marketable.

Commercialization will be attempted in another program currently in the planning stages. Current projections

for this commercialization program are about $160 million for 3 to 4 years. Additionally, each member country of

the EC carries out its own agricultural research and some funds maybe available for alternative crops through each

country’s research (15).

Interest has been shown in Europe for utilizing crops for fuel production and for industrial uses. Crops for

which 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 on

food 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 (primaranticipation of future hypothetical shortages (30).

This may be particularly true for development of

renewable resources, which vary frequently and

widely in price and supply.

Economic factors that will affect private-sector

interest in using agricultural commodities as inputs

include price, quality, performance, and reliability

of supply. Price is determined largely by the current

and expected trends in supply and demand, the

number of substitutes available, transportation,

processing, and storage costs, and exchange rates for

internationally traded products. Short-run supplies

are most affected by environmental or political

factors, such as adverse weather, embargoes and

commodity cartels. Long-run supply trends are

affected by technological change and institutional

factors (e.g., Federal agricultural programs), and the

ily land and labor) needed to produce the commodities (27).

Demand for agricultural products results from

food and feed, industrial, and on-farm uses. Crops

that have multiple uses for primary products and

byproducts will have more marketing options. Demand for commodities will be highly price sensitive

if numerous substitutes are available. Proximity of

crop production locations to processing plants,

distance of processing plants to markets, method of

transport (i.e., air, land, or water), and special

transport requirements will affect transportation

costs. Processing costs will be affected by techniques used, purification requirements, waste disposal, and volume. Frequently there are returns to

scale in the processing of agricultural commodities,

which leads to lower per-unit processing costs for
46 ● Agricultural Commodities as Industrial Raw Materials

high-volume commodities. Fiscal and monetary

policies will affect exchange rates, which in turn,

affect the price of imported and exported commodities.

The major production cost for many new uses is

the price of the commodity itself. The net cost of

using a commodity for industrial uses is the price

paid for the commodity minus any credits received

for the sale of byproducts. In many cases, increasing

the use of an agricultural commodity will increase

the price of the raw commodity and decrease the

price of the byproducts, effectively raising the cost

of using the agricultural commodity (25,31). Demand for food and livestock feed exerts pressure on

the price of many commodities, and variability in the

commodity and byproduct markets leads to wide

price fluctuations. These factors make it difficult for

agricultural commodities to be price competitive in

many uses. Ethanol derived from cornstarch illustrates these points. In recent years, the net cost of

corn (price of corn minus credit for byproducts) has

ranged from 10 to 79 cents per gallon of ethanol

produced. Additionally, as ethanol production increases, the price of corn increases and the value of

the byproducts decreases (oil, protein meals), effectively raising the net cost of using corn for ethanol

production (31).

In addition to price, the quality of a commodity

will affect its competitiveness. A premium can be

expected to be paid for crops that have many useful

compounds, or compounds whose chemical structure is such that they yield superior performance

relative to chemicals they could replace. Superior

performance will be important if costly product or

process reformulations are needed to use the new

crop, and could improve the attractiveness of a new

use, even if it is more expensive. As an example,

soybean oil-based printing inks are more expensive

than petroleum-based inks but are beginning to

capture part of the market, particularly in color

printing, because they give better colors and resist

rub-off (20).

Reliability of supply is an important consideration

for manufacturers. Crops that have few producers, or

that are produced in few geographical regions, are

more susceptible to supply shocks from weather or

political factors. Development of alternative supplies might help to ensure supply availability and

reduce price variability. Given a more reliable

supply and less price variability, manufacturers may

be more willing to increase their use of agricultural

commodities as a source of chemicals. An example

that illustrates this concept is the use of lauric

acid-containing vegetable oils in the detergent

industry. Coconut oil and petroleum-derived compounds can be used to manufacture detergents, but

because of the high price variability and unreliability

of supply of coconut oil, petroleum-derived products

have been preferred. The maturation of highyielding palms that produce palm and palm kernel

oil is expected to double world supply of lauric acid

oils by 1995. The prospect of a larger and more

diversified source of supply and less price variability, has stimulated the detergent industry to increase

capacity to utilize natural oils (7). Although, many

traditional crops are in surplus and supplies for

industrial use are available, supply fluctuations

affect the cost of using these crops in industrial

applications.

An understanding of these economic factors is

essential to any market strategy for new industrial

crops and uses of traditional crops. Factors within

the production process that are now expensive or

that are expected to become expensive relative to

other production factors are good candidates for

substitution through the development of new processes or products. Other good candidates include

production inputs whose supply is highly variable,

and products or processes that meet only minimal

performance standards. Convenience and quality

considerations are particularly pertinent to the development of consumer products. New industrial

crops and uses of traditional crops that fill welldefined market needs are those most likely to

succeed.

Private-Sector Access to Public-Sector

Information

A major obstacle to the transfer of technology is

the difficulty of learning about or accessing pertinent information (23). Research that might be of

value to industry is conducted in numerous Federal

and university laboratories in the United States and

in other countries. Keeping up to date on this

research is a massive undertaking even for large

companies with substantial research budgets. For

small fins, it is nearly impossible. Industry ability

to access research data on new industrial crops and

uses of traditional crops may be a serious constraint

because firms that are likely to commercialize the

new technologies may not historically have had
Chapter 4--Factors That Affect Research, Development, and Commercialization ● 47

extensive dealings with the Agricultural Research

Service or with university Colleges of Agriculture.

Mechanisms that aid in the exchange of information

and reduce the time and cost involved in searching

for information will enhance the opportunity for

technology transfer.

The Federal Laboratory Consortium (FLC), consisting of a small central staff and volunteer representatives from at least 300 Federal labs, functions

as a single source of entry for firms into the Federal

laboratory system. It promotes communication with

industry and shows firms where to go for help on a

particular problem within the Federal laboratory

system. The FLC also maintains computerized

general-purpose databases on technologies of possible interest to industry.1 In conjunction with groups

such as the Industrial Research Institute, the FLC

holds Federal laboratory-industry conferences to

identify possible areas of collaboration. The number

of industry participants has been growing. These

conferences, which bring industry and Federal

laboratory representatives together, provide economical means for companies to search for technologies that fit their needs. This program is clearly not

devoted strictly to the development of industrial

crops and uses. However, USDA is a member of the

consortium, and this link can serve as a mechanism

for firms to find out about ARS research activities

(29). The FLC currently receives about $1 million

per year, with funding due to expire in fiscal year

1991. 2

In addition to establishing the Office of Critical

Materials, the Critical Agricultural Materials Act

also provided for the establishment of a database on

industrial crops to be housed in the National

Agricultural Library (NAL). The NAL, in cooperation with the Arid Lands Information Center at the

University of Arizona, collects published material

on industrial crops. Bibliographies of several crops

are available. The information is also available

through AGRICOLA, the Library’s computerized

database system relating to agricultural research.

The CRIS and TEKTRAN databases also contain

information about ARS and university agricultural

research (32).

Many universities also have established offices

that aid in disseminating research information to

industry. These university offices are not devoted

exclusively to developing new industrial crops and

uses, but can direct interested firms to researchers

performing this type of research within the university.

Technology Transfer Mechanisms

Technology transfer between Federal and university laboratories and industry can be facilitated in

many ways, including personnel exchange between

laboratories and industry, private-firm use of specialized laboratory facilities, and the granting of

licenses to firms to commercialize technologies

patented by the public sector.

Cooperative agreements between industry and

public-sector research institutions are designed to

create new technology that the firm can then

commercialize, rather than to transfer preexisting

technologies. With risk and expense sharing, industry is better able to take on large and long-term

projects with uncertain payoffs. These types of

arrangements can be difficult because they may

require a fundamental reorientation on both sides.

Issues of conflicts of interest, fairness to fins,

national security, and proprietary information can

create obstacles. Nonetheless, collaborative agreements exist between Federal laboratories and industry, and between universities and industry. The

cooperative agreements that seem to be most effective are those made at a scientist-to-scientist level,

rather than at the administrative level (13).

Incentives for collaboration in Federal laboratories are sometimes weak or even negative. Technology-transfer activities sometimes do not count in a

researcher’s performance evaluation even though

the law specifies that it should. Researchers may

view collaborative agreements unattractive if the

work is proprietary and cannot be published as the

researcher’s own. Sabbaticals in industry are often

not counted as pensionable. Only recently have

researchers and their laboratories been permitted to

keep portions of patent royalties for their inventions.

It is not possible to copyright material developed in

whole or part by government employees (29).

Slow negotiations and delays can cause deals to

collapse 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.
48 ● Agricultural Commodities as Industrial Raw Materials

revolve around a company’s desire for exclusive

rights to help recover the cost of expensive R&D

efforts, which may require the Federal laboratory to

waive its patent rights. Until recently, industry

collaboration has been impeded by the possibility of

data and information release under the Freedom of

Information Act (FOIA). The National Competitiveness Technology Transfer Act of 1989 largely

removed this obstacle by exempting the results of

collaborative R&D from release under FOIA for 5

years (29).

Personnel exchange between private- and publicsector researchers is possible; however, it is uncommon for industry researchers to take visiting positions, particularly at Federal laboratories. The reverse is also quite rare. In the place of formal

personnel exchange, visitor programs of just a few

hours or days can provide an informal technologytransfer mechanism. Such programs provide opportunities for firms to stay in touch with the latest

developments, particularly those in the government

laboratories (29).

Startup firms are new firms established specifically to commercialize new technologies. The process can be aided by having the parent laboratory

grant scientists entrepreneurial leave, with the right

to return to old jobs within a stated time. However,

this option does have problems, foremost among

them the potential for conflicts of interest and brain

drain. Some laboratories have established their own

corporations to encourage startups, and provide

services to entrepreneurs including office and laboratory space and help in forming business plans and

incorporation. They also contribute capital in return

for a minority interest in the firm (29). Other

methods of technology transfer include allowing

firms to use a Federal laboratory’s specialized

facilities and publication of semitechnical brochures

to acquaint industry with technologies that may be

of interest.

The Stevenson-Wydler Technology Innovation

Act of 1980 (Public Law 96-480) and the Federal

Technology Transfer Act of 1986 (Public Law

99-502) were enacted to facilitate technology transfer between Federal laboratories and industry. The

Stevenson-Wydler Act provided Federal laboratories with a mandate to undertake technology transfer

activities, while the Technology Transfer Act created an organizational structure to meet this mandate.

Federal laboratories are allowed to participate in

cooperative R&D agreements and to grant exclusive

licenses for resulting patents to the private businesses with which they cooperate. Each Federal

department with one or more laboratories must

allocate at least 0.5 percent of its existing research

budget for technology transfer activities; additional

funding for these activities was not provided.

Identifying technologies with commercial possibilities, patenting, finding firms that might be interested, and exchanging information with those firms

takes time, effort, and substantial funding. In some

cases, startup firms will require support in the form

of office space, help in writing a business plan,

access to venture capital, etc.

Successful technology transfer requires a fulltime staff, and a sustained financial commitment.

Firms may hesitate to pledge themselves to multiyear projects when the government will commit

funds only year by year. Given the financial

constraints that already exist in many Federal

research laboratories, it is perhaps not surprising that

progress has been slow (29). However, cooperative

agreements between industries and Federal laboratories are occurring. According to the USDA, the

Agricultural Research Service has entered into 127

cooperative research and development agreements

with industrial firms since 1986, and is in the process

of negotiating 34 more agreements (32). Several of

these agreements are for the purpose of commercializing new crops or uses of traditional crops.

Financial Assistance

Sometimes firms are interested in developing a

new technology or product but the cost of the

research and development needed to commercialize

the technology exceeds the budget of the firm. This

is a particular problem for small firms or startups.

Federal and State programs are available to provide

financial assistance to small firms.

Small Business Innovation Research Program

The Small Business Development Act was passed

in 1982. Part of the Act required all Federal agencies

that provide external research funds to establish a

Small Business Innovation Research (SBIR) program modeled after a National Science Foundation

program begun in 1977. Funding for each agency’s

SBIR program is equal to 1.25 percent of the

agency’s total external research funding budget. The

total annual SBIR budget is approximately $350
Chapter 4--Factors That Affect Research, Development, and Commercialization ● 49

million. Eligibility is restricted to small firms of

fewer than 500 employees.

Grants provide finding for research from an idea

to a prototype in three phases. Phase I grants are for

$50,000 for 6 months and are used to determine

technical feasibility, determine that sufficient progress has been made before larger funding takes place,

and determine whether the firm can do high-quality

research. Phase II involves the principal research.

Grants last 1 to 2 years at levels up to $500,000

depending on the agency. Phase I studies accounted

for about $109 million in 1987, and phase II

accounted for $241 million. Phase III involves

finding follow-on private funding to pursue commercial application (SBIR does not fund the final

stages of bringing a product to market, but the Small

Business Administration does help firms find private financing for commercialization).

USDA is one of the Federal agencies that has an

SBIR program. The budget for USDA-SBIR for

fiscal year 1989 was approximately $4 million. The

USDA-SBIR program is divided into eight topic

areas. New crop proposals generally fit into the Plant

Production and Protection section. A new section on

Industrial Applications has been established for

fiscal year 1991. USDA-SBIR has received a small

number of grant applications for new industrial crop

projects, but they were not funded.

In addition to the USDA-SBIR program, funding

for industrial uses of agricultural commodities is

provided by the SBIR programs of other Federal

agencies. One of the original projects funded by the

National Science Foundation SBIR program in

1977, was a project to study the Feasibility of

Introducing Food Crops Better Adapted to Environmental Stress. Emphasis was placed on food crops,

but some new industrial crops, including many of

those discussed in this report, were also evaluated.

This study played a role in the establishment of

Kenaf International, a private company working

with the USDA Office of Critical Materials to

commercialize kenaf. NSF-SBIR has funded research on milkweed among other crops, although

this crop has not been successfully commercialized

(4,26).

College and University Innovation Research

(CUIR) Program

This program is being proposed by the National

Science Foundation. It would function in a reamer

similar to the SBIR program, but applications for

funding would come from universities, not industry.

The intention of the program is to allow university

researchers to pursue commercialization of their

research results without having to leave their university positions as has happened in many cases. Initial

funding 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, Vermont, and Virginia) have loan guarantee programs

that are intended to stimulate business activity. Loan

guarantee programs are more attractive than loan

programs because they are lower cost and share the

risk between the public and private sector. The State

programs are generally aimed at manufacturing

firms and are open to rural and urban businesses. At

least 10 States (Connecticut, Indiana, Kansas,

Maine, Massachusetts, Michigan, Minnesota, Montana, New York, and Wisconsin) have venture

capital programs although none are aimed specifically at rural businesses. The Minnesota program

(Greater Minnesota Corp.) may have the strongest

rural component (6, 9).

Other Federal Programs

The Small Business Administration (SBA) makes

direct and guaranteed loans to small businesses. It is

not aimed at rural businesses, but because of the size

of the program, it is a significant financial resource

for rural businesses. In addition to the loan programs, SBA also supports small businesses through

programs that support small business development

corporations (SBDC) and small business investment

corporations (SBIC). The SBDC program makes

long-term capital available to emerging small businesses. The SBIC program encourages investors to

make equity capital available to eligible small

businesses (14).

The USDA Farmers Home Administration

(FmHA) also operates a business and industrial loan

program, which provides loan guarantees aimed at

rural businesses. Eligible firms can be of any size

and as a result loans made under this program tend

to be large (14). Additionally, rural development

programs provide funding for firms located in rural

areas. None of these programs is geared toward

commercializing new crops or uses of traditional
50 ● Agricultural Commodities as Industrial Raw Materials

crops, but firms involved in these activities may be

eligible for these programs.

Summary and Conclusions

The foregoing analysis has several implications

for development of policies to encourage technical

change. Technical change involves research and

development, commercialization, and adoption of

new products and processes. Constraints, impediments, and opportunities in all three components

must be addressed. This chapter has focused on

research and development, and commercialization.

The factors involved in the adoption of new technologies will be discussed in chapter 5.

The United States has several policies and programs to encourage research and development.

Currently, public- and private-sector funding and

research for new industrial crops and uses of

traditional crops is limited. If new crops and uses are

to be commercialized, adequate resources over a

sustained period of time will be needed. A new

industrial crops and use research and development

policy must recognize the role that institutions and

economics will play. It is clear that chemicals

derived from agricultural commodities can be used

for a broad range of industrial applications, and

many are technically promising. Technical feasibility, however, will not be sufficient. Chemicals

derived from agricultural commodities must be less

expensive than those currently available, or provide

a superior product in terms of quality, performance,

supply reliability, or environmental benefits. Products and processes that fill specific market needs and

provide superior quality and performance, and/or

lower costs will be more attractive to industry, and

it is in those technologies that industry interest will

be highest. Research needs for technology development are generally framed within the context of the

chemical, physical, or biological sciences. Attention

to institutional structure and economic and social

analysis is often lacking. This lack of market and

economic analysis is a glaring deficiency and a

severe constraint to the intelligent allocation of

research funding for new crop and new use development. Research policy should include research for

social science research as well as for chemical and

biological research.

There has been a recent increase in attention to the

problems of commercialization. Several programs,

although not specific to new industrial crops and

uses of traditional crops, are available to aid

technology transfer from Federal laboratories to the

private sector. However, these programs tend to treat

firms homogeneously. Policy must be flexible

enough to be able to offer a wide range of assistance

options. Research, development, and commercialization efforts face different constraints and proceed

in different ways in response to industry structure.

Industries characterized by many small, highly

innovative firms will have different needs than

industries composed of very large fins, or small to

medium-size firms lacking research capacity. For

example, small, innovative firms may need financial

help. Lack of information and inexperience with

technology transfer from Federal laboratories may

be a more serious constraint for large firms that have

large research budgets. Finding additional ways to

help industry minimize the search costs for information could prove quite beneficial. A successful

policy must be able to address these differing needs.

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

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vol. 67, No. 44, Oct. 30, 1989, pp. 29-56.

Science of Food and Agriculture, “Soybean Oil

Inks,” vol. 2, No. 2, July 1990.

Studt, Tim, “Degradable Plastics: New Technologies

for Waste Management,” R & D Magazine, March

1990.

22.

23.

24.

25.

26.

27.

28.

29.

30.

31.

32.

33.

Stoneman, Paul, The Economic Analysis of Technical

Change (NewYork, NY: Oxford University Press,

1983).

Thayer, Ann, “Industry, Federal Lab Technology

Transfer On Rise,” Chemical and Engineering

News, Jan. 1, 1990, p. 13.

Thirtle, Colin G., and Ruttan, Vernon W., Economic

Development Center, Departments of Economics

and Agricultural and Applied Economics, University

of Minnesota, “The Role of Demand and Supply in

the Generation and Diffusion of Technical Change,”

Bulletin No. 86-5, September 1986.

Thompson, James, and Smith, Keith, “History of

Industrial Use of Soybeans,” paper presented at

Symposium on Value-Added Products from Proteins

and Coproducts, American Oil Chemists Society

Annual Meeting, May 1989.

Tibbetts, Roland, National Science Foundation,

Small Business Innovation Research Program, personal communication, February 1990.

Tomek, WilLiam G,, and Robinson, Kenneth L.,

AgricuZturaZ Product Prices (Ithaca, NY and I.mndon, England: Cornell University Press, 1981).

U.S. Congress, General Accounting Office, Resources, Community, and Economic Development

Division, Degradable Plastics: Standards, Research

and Development, RCED-88-208 (Gaithersburg,

MD: U.S. Government Printing Office, September

1988).

U.S. Congress, Office of Technology Assessment,

Making Things Better: Competing in A4anufacturing,

OTA-JTE-443 (Washington, DC: U.S. Government

Printing 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).

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January 1988.

U.S. Department of Agriculture, Office of Agricultural 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 Technologies

by Industry and Agricultural Producers

Many new technologies involving agricultural

commodities will not be final consumer products,

rather they will be inputs into the manufacture of

other products. The new technologies may be new

manufacturing processes (to accommodate a new

raw material), or intermediate products that will be

used in the production of other products (e.g.,

plastics are used to manufacture final consumer

products). Adoption and incorporation of new materials, processes, and technologies into the manufacturing procedures of firms is a key component to

the success of newly developed and commercialized

technologies that use agricultural commodities.

Economic factors play a major role in industry

adoption of new technologies. Industrial use of a

new material or technology may require new equipment, design, manufacturing, and operating

changes, and worker training. New materials and

technologies are unlikely to be adopted unless they

provide cost and/or performance advantages relative

to technologies already in use. Many of the economic considerations that influence a firm to allocate resources to the research and development of a

new product, will influence the adoption of new

technologies by firms (see ch. 4).

The adoption of new agricultural technologies by

farmers, in addition to manufacturers, must also be

considered, because in some cases, new industrial

uses will involve crops not currently grown in the

United States. Again, economic considerations will

play a key role. This chapter examines factors

involved in adoption of new technologies and crops

by manufacturers and farmers, as well as programs

to assist technology adoption.

Adoption of New Technologies

by Industry

Industrial adoption of new technology will depend on industry’s interest in, knowledge of, and

ability to use effectively the new technology. The

cost and effectiveness of the search for information

about new technologies will influence the speed of

adoption. In general, industries characterized by

high labor intensity, rapid growth, and competition

within the industry, and industries composed of

firms of similar size and profitability are more rapid

adopters of new technologies (15).

Firms will consider the profitability, the risk and

uncertainty of use, and the cost of any necessary

management and production changes when evaluating the possible adoption of a new technology (11).

New technologies must be cost competitive with

current technologies, or offer clear performance

advantages. Sometimes, the price of an intermediate

material, even if expensive, represents a srnall

percentage of the total cost of the final product, and

thus even large price increases for intermediate

materials may not be sufficient to encourage the

adoption of a substitute material. Use of a new

process or intermediate material may require the

purchase of new equipment or new worker skills that

require additional training. Product design, operating procedures, and manufacturing processes may be

needed to use a new technology. The expense of

making these changes is an integral part of the

decision to adopt a new technology.

Confidence in the performance characteristics of

a new material or process is critical to new technology use in strategic applications where acceptable

performance variation is narrowly limited. Intermediate materials containing agriculturally derived

rather than petroleum-derived chemicals, for example, may have slightly altered chemical characteristics and behave differently in the same manufacturing procedure. Lack of familiarity with this variation

is a significant constraint to use in strategic applications, and new materials and processes may first be

adopted by firms for use in non-strategic applications. Confidence for strategic applications may be

increased if new intermediate material and process

standards are developed. However, testing and

standard-setting are often done on a volunteer basis

by professional societies who have neither the time

or resources to make this a priority, or are undertaken

by individual firms and are proprietary (18).

The commercialization of biodegradable plastics

demonstrates some of these points. The plastics

industry is composed of a few major resin producers

and several small and medium-sized companies that

make plastic products. A few major producers make

–53–
54 ● Agricultural Commodities as Industrial Raw Materials

biodegradable starch-based masterbatch (primarily

firms whose major businesses involve corn or

starch) and several small to medium-sized firms

make biodegradable products such as grocery and

trash bags. However, most of the large resin

manufacturers who produce degradable resins, produce photodegradable rather than biodegradable

plasticsl (13). This is because of cost considerations

associated with methods of production: photodegradable materials can be made by simply adding

photosensitive agents or forming copolymers with

photosynthetic groups. The characteristics of the

materials do not change substantially, so they can

easily be processed with existing equipment. Starchbased materials on the other hand, can cost about 25

percent more to produce than photodegradable

materials, in large part because high levels of starch

require new equipment and processing procedures

(13). This cost differential explains why the frost

commercially available biodegradable plastic products contained 6 to 7 percent starch; that amount of

starch can be incorporated into plastics without

significant processing and equipment changes (12).

Thus, even firms that adopted the starch-based

master batch to produce biodegradable plastic products, did so in a way that did not substantially alter

their production methods.

Products using agricultural commodities that can

easily and cost-effectively fit into existing production procedures are those that will be adopted frost.

Products that have clear cost or quality advantages,

even if new procedures are needed, may also be

adopted relatively quickly. Products or processes for

which the advantages are not as obvious, will be

more slowly adopted if at all. However, even if a new

process or product has clear economic benefits, it

may still be adopted slowly because firms that could

use these new technologies are either not aware of

them, or unsure of the type of equipment or training

needed to utilize the new products and processes.

For these firms, access to accurate information that

is specific to their needs can determine whether or

not they adopt a new technology. A good technical

assistance program could be invaluable in such

cases.

Federal technology policy has, for the most part,

focused on the research, development, and commercialization of new technologies; technology adoption is generally not given high priority. Federal

programs generally encourage the development of

cutting-edge technologies and the establishment of

new innovative firms to commercialize these technologies. Only limited attention is paid to upgrading

the technology and skill levels in existing fins,

particularly those lacking research capacity. The

potential users of new agricultural commoditybased technologies in many cases will be firms that

already exist; some of which may need assistance in

learning about and adopting these new technologies.

Technology extension programs may be able to offer

this assistance.

Technology Extension and Assistance

Technical extension programs generally consist

of an accessible office staffed with engineers or

experienced industrial personnel who can provide

help in solving problems for manufacturing fins.

Effective programs make on-site diagnoses, provide

customized client reports, and work one-on-one with

firms to implement recommendations made by the

service and accepted by the fro’s manager. These

programs help fins, particularly small manufacturers, choose and manage new technologies and

equipment, and provide advice on training requirements. Industrial extension services do not provide

funds for capital investment or operating expenses;

they give technical, not financial assistance. They

can, however, financially help small firms via their

diagnoses, which may reveal that the problem is one

of management, not funding. They can also direct

firms to sources of funds, such as State and Federal

loan programs for small businesses, and can support

firms in their dealings with banks (17).

The Omnibus Trade and Competitiveness Act of

1988 gave the Bureau of Standards (now the

National Institute of Standards and Technology,

NIST) new responsibilities for technology transfer

to manufacturing. The Act directed NIST to create

and support non-profit regional centers for the

transfer of manufacturing technology, especially to

small 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 incorpomtti

within thepolymerchains so that the plastics degrade in response to ultra-violet light. An example of a photodegradable plastic product is most degradable

six-pack beverage rings. Biodegradable plastics are those that have been modified to disintegrate under biological actions. The most common approach

has been to blend the plastic polymer with starch so that under the appropriate environmental conditions, microorganisms will digest the starch breaking

the 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 transfer

technologies developed at NIST to manufacturing

companies, make new manufacturing technologies

usable to smaller firms, actively provide technical

and management information to these firms, demonstrate advanced production technologies, and make

short-term loans of advanced manufacturing equipment to firms with fewer than 100 employees. Three

such centers currently exist (funded at $4.5 million)

and three more are planned. The Centers expect to

concentrate more on off-the-shelf, best-practice

technologies than on high-technology, cutting-edge

systems. The primary service offered will be modernization plans customized to fit the needs of

individual fins. The Act also authorized $1.3

million for fiscal year 1990 to expand State technology extension programs (17).

The Small Business Administration, primarily

through the Small Business Development Centers

located mostly on university campuses, use faculty

and students to provide business management and

marketing advice, and to advise on particular problems, some of which maybe technical. There are 53

such centers nationwide in all but four States, funded

by State and Federal Governments and universities

(17).

At least 40 States have programs to promote

technology, but most of their effort and funding goes

for research and development in universities and

high-technology startup ventures, not to help existing firms adopt best-practice technology. Only 14

programs in 10 States have technology extension

programs whose main purpose is direct consultation

with manufacturers on the use of technology. In

1988, States spent approximately $57 million for

technology transfer and technology managerial assistance (17). Specialists in rural development recognize the importance of technical assistance, and

some studies even suggest that lack of appropriate

technical assistance is at least as significant a

problem for rural firms as finance availability

(2,4,9).

Neither the State extension programs nor the

NIST programs are specific for industrial crops or

uses of traditional crops. However, for small firms to

use new crops in their manufacturing processes, or

to develop new products using agricultural commodities, the purchase of new equipment and

development of new operating procedures may be

required. Technology extension programs may be

able to provide some assistance in these areas.

Adoption of New Technologies by

Agricultural Producers

In addition to industry adoption of new technologies using agricultural commodities, farmers must

grow the commodities to provide the raw materials.

The adoption of new industrial crops by farmers will

be more problematic than the development of new

uses of traditional crops. Farmers have accepted and

are growing traditional crops. New crops, however,

will be riskier for farmers to grow because they lack

experience producing these new crops. Factors that

affect farmer adoption of new crops will be significant in terms of the overall success of developing

new industrial uses for these crops. Economic

factors and agricultural commodity programs will

influence the attractiveness of new crops relative to

traditional crops. Many technical, economic, and

institutional constraints need to be resolved before

new crops are ready to be commercially grown.

Technical Considerations

Many of the new industrial crops are in the early

stages of development and agronomic research is

needed before they can be produced. Some problems

yet to be overcome for one or more of the new crops

include low germination rates and seedling vigor,

asynchronous flowering, seed shattering, selfpollination, low yields, and photoperiodism (5,7).

Seed dormancy (lack of germination) and poor

seedling vigor not only are undesirable agricultural

qualities, but diminish the opportunities for scientists to continue research on that species. Asynchronous flowering (flowering of individual plants at

different times) allows a wild plant species to

survive periods of adverse weather, but in commercial crops may necessitate multiple harvesting,

which greatly increases cost. Seed shattering (the

inability of a plant to retain its seed after maturation)

is also a useful survival tactic in the wild, but greatly

decreases the ability to capture the yield from a

commercialized plant. Self-pollinating plants are

generally preferred to cross-pollinating plants because of improved control. Photoperiodism is important in determining the length of the growing

season and will affect the potential for double

cropping and the geographic regions where the crop

can be grown. Examples of potential new crops that

must overcome one or more of these constraints
56 ● Agricultural Commodities as Industrial Raw Materials

include meadowfoam (insect pollination), Cuphea

(seed shattering, seed dormancy), Vernonia (photoperiodism), and Lesquerella (seed dormancy, seed

shattering). Sufficient time and resources devoted to

research will likely overcome these problems, but

lack of germplasm could slow progress.

New crops will be more readily adopted if they do

not require large capital investments or major

adjustments in the management style of the farm.

New crops that do not require purchase of new

machinery or equipment, and which complement

traditional crops in terms of planting and harvesting

time, are likely to be more attractive than new crops

that cannot be so readily incorporated into existing

farm procedures. Major changes in the plant’s

physical structure, such as altering plant height,

density and degree of branching, and changing the

position and structure of the ovule containing the

seeds, may be needed to allow use of farm equipment. Additionally, new crops that can play several

on-farm roles and present multiple management

options may be more attractive. Oats, for example,

are still planted in significant quantities because in

addition to providing positive net returns, oats use

existing farm equipment, are used in crop rotation

schemes, provide good ground cover for erosion

control, and can be grown for forage and livestock

feed.

Economic Considerations

Farmer decisions involving crop mix are based on

many factors, including income-leisure tradeoffs,

food and occupational safety, and environmental

quality. However, a major driving force is the desire

to achieve highest expected net returns for the farm

enterprise (21 ). To be accepted by farmers, a new

crop must be competitive with other crops that a

farmer can produce with the same resources. Crops

compete for the same acreage and production

resources; the types and quantities chosen for

production will be those for which farm profits are

greatest. The expected net returns will be influenced

by market conditions and agricultural programs.

Role of Net Returns

Production costs include fried and variable costs.

Fixed costs must be paid regardless of whether

production occurs, and in the short run, are not the

major determinant of crop mix. Variable costs differ

depending on what crop is grown, and play an

important role in crop-choice decisions. Variable

costs include the costs of labor, machinery and fuel,

chemicals, seeds, irrigation, etc. Production costs for

the same crops can vary widely among geographic

regions, leading to geographical specialization in the

production of certain crops (21).

Low production costs and positive net returns are

not always sufficient to guarantee widespread adoption of a new crop. The net returns of one crop

relative 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 are

about $50 per acre, with receipts of about $102 per

acre, yielding a net return of about $52 per acre. Net

returns 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 and

costs of $54). Oats have lower production costs than

corn or soybeans, and are profitable, but in 1987,6.9

million acres of oats were planted in Illinois,

Indiana, and Iowa, whereas 24.4 million acres of

corn and 20.9 million acres of soybeans were

planted. The most acreage was planted to the crops

with the highest net returns (3,19,21).

Risk will play a role in a farmer’s perception of net

returns. A great deal of uncertainty exists surrounding the production of a new crop. Culturing and

harvesting practices, handling procedures, markets

etc. are not well-established. This uncertainty increases a farmer’s risk, making it likely that farmers

will discount the expected price of a new crop. Even

if the expected net returns of a new crop are

comparable to those of a traditional crop, the farmer

may not plant the new crop. Because of the

discounting for the added risk, anew crop may need

to have higher expected net returns than traditional

crops to be attractive to farmers.

Role of Agricultural Commodity Programs

Agricultural commodity programs will also affect

the potential adoption of new crops. A loan rate is

established for crops covered by commodity programs. At harvest time, farmers enrolled in commodity programs have the option of selling the crop

on the market and paying back the loan rate (if the

market price is greater than the loan rate), or of

accepting the loan rate and forfeiting the crop as

payment (if the market price is lower than the loan

rate). Some commodities (i.e., corn, wheat, cotton,

rice, barley, sorghum, and oats) have target prices in

addition to the loan rate. The difference between the

target 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 payment. Deficiency payments are made on a certain

percent of the base acres and yields of the eligible

commodities. Because some of the eligible commodities are in surplus, receipt of the deficiency

payments requires a mandatory set-aside of base

acres (Acreage Reduction Program and Paid Land

Diversion). No crops can be grown for market on

set-aside acres (l).

Acreage Reduction Programs have a large impact

on crop-mix decisions. Two examples illustrate this

point. In some areas of the Southeast,. Delta, and

Southern Corn Belt regions, double-cropping of

soybeans after harvesting winter wheat is a common

practice. If a farmer participates in the wheat

program, the farmer can plant soybeans only on that

acreage previously planted to wheat. If a large

acreage reduction requirement is in effect, the

amount of land eligible for double cropping soybeans is significantly reduced (20). In the Corn Belt,

the two major crops grown are corn and soybeans.

An acreage reduction requirement for corn has a

substantial impact on soybean acreage. In the

presence of an acreage reduction program, corn

acreage changes more in response to a price change

than it does under free market conditions. However,

in the presence of an acreage reduction program for

corn, changes in soybean acreage (in response to a

change in the price of soybeans) are lower than

would occur under free market conditions. Additionally, changes in soybean acreage in response to a

change in the price of corn are higher in the presence

of a corn acreage reduction program relative to free

market conditions. Thus, the effect of acreage

reduction programs on farmer response to the

relative prices of crops leads to a different allocation

of farm acreage than would occur under free market

conditions. Specifically, the presence of corn acreage reduction programs magnifies the impact of corn

prices, and diminishes the impact of soybean prices

on a farmer’s decisions regarding the number of

soybean acres to plant (8,21). It is reasonable to

assume that new crops competing for acreage with

crops that are subject to acreage reduction programs

will experience similar impacts. This has significant

implications for the adoption of new crops.

Commodity program restrictions that prohibit

growing crops other than program crops on base

acreage, inhibit crop diversification. However, even

if this constraint is relaxed somewhat, acreage of

other crops may not increase significantly because of

the loss of deficiency payments. Under the Food

Security Act of 1985, and the Food Security

Improvement Act of 1986, soybeans and sunflowers

cannot be planted on underplanted base acreage of

commodity program crops without losing those base

acres. The Disaster Assistance Act of 1988 relaxes

this provision and allows plantings of sunflowers

and soybeans on 10 to 25 percent of permitted

acreage for major program crops without loss of base

acreage, provided that the increased planting does

not depress the expected soybean prices below 115

percent of the loan rate for the previous year. Using

net returns, and including the deficiency payments

received for corn, cotton, spring wheat, and barley,

the impact of the program on soybean acres and

sunflower acres was estimated. The results indicate

that even though base acreage is not lost, the loss of

deficiency payments is sufficient to require higherthan-expected soybean prices to encourage farmers

to plant soybeans on base acreage instead of corn in

the Corn Belt, and instead of cotton in the Delta

region. Likewise, it is estimated that there will not be

much of an increase in sunflower production relative

to spring wheat or barley production in the Plains

States. Hence, even if alternative crops are allowed

to be planted on base acres of commodity program

crops without loss of the base acreage, the expected

price of the alternate crop must be high to offset the

deficiency payment (21).

As this report was going to press, Congress passed

the 1990 Farm Bill. The Bill addressed some of these

issues by adopting a Triple Base Option, to begin in

1992. Under this option, base acreage is divided into

three categories: acreage reduction program (ARP),

program acreage (permitted acres), and flexible

acreage. The ARP acres and 15 percent of the base

acres are ineligible for deficiency payments. Designated crops may be planted on up to 25 percent of the

base (flexible acres).2

To demonstrate how the program works, assume

that a farmer has a 100-acre corn base and a 10

percent ARP is in effect. Under these conditions, 10

acres (ARP) are idled, leaving 90 acres on which

crops can be grown. Any designated crop can be

grown 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, possibly

including many of the industrial crops discussed in this report. Fruits, vegetables, and dry edible beans are excluded.

292-865 0 - 91 - 3 QL:3
58 ● Agricultural Commodities as Industrial Raw Materials

only (i.e., no deficiency payments).3 The remaining

75 acres (permitted acres) can be planted to corn and

are eligible for deficiency payments. An additional

option offered to farmers is that 10 of these 75 acres

can be planted to designated crops other than corn

without a loss of base acres. Thus a total of 25 acres

(25 percent of base) could potentially be planted to

crops other than corn and still maintain the 100 acre

corn base (flexible acres), but only a maximum of 75

acres will be eligible for deficiency payments.

Additionally, target prices have been nominally

frozen at 1990 levels, but changes in the way

deficiency payments are calculated may effectively

reduce target prices. These changes are expected to

increase planting flexibility and to remove some of

the institutional constraints to the adoption of new

industrial crops. New industrial crops will still need

to compete with traditional crops in terms of

profitability on the flexible acreage, but profitability

will be based more on market prices than on

commodity program prices.

Role of Multiple Uses

Multiple uses of primary products and byproducts

derived from new crops will improve their commercial prospects. Soybeans illustrate this point. Two

major products are derived from soybeans: oil and a

high protein meal that remains after oil extraction.

Soybean oil is used primarily for edible purposes (70

to 75 percent of the U.S. edible oil use), but also has

industrial uses. The meal is used primarily as

livestock feed. On average, the price of a pound of

soybean oil is about three times the price of a pound

of meal. However, the value of the meal accounts for

60 to 65 percent of the value of a bushel of soybeans

because soybeans are only 18 percent oil (10).

Production of soybeans solely for oil appears

unlikely to result in a farm price high enough to

make soybeans an attractive crop. Many new crops

being developed for the industrial use of one primary

product (i.e., the oil from oilseed crops, rubber from

guayule, etc.) will likely face a similar situation.

Combined food and nonfood uses of the primary

product may not result in prices that are favorable for

the new crops. Markets for byproducts will need to

be developed. Simultaneous development of multiple markets for new crop products is imperative.

Use of Existing Infrastructure

Adoption of new industrial crops will be facilitated 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 large

capital investments for a crop that may be low

volume (at least initially) and for which the market

is not secure. The commercial development of

soybeans illustrates many of the concepts discussed

in this chapter (see box 5-A).

Agricultural Extension

The largest Federal program to aid in the adoption

of new technologies is the Agricultural Extension

Service (AES). Funding is approximately $1.2

billion (31 percent Federal) per year. There are

offices in nearly every county in all 50 States, with

a staff of 9,650 county agents and 4,650 scientific

and technical specialists. The AES conducts educational programs to help farmers and agribusiness

firms use the results of agricultural research. Historically, it has been successful in helping farmers

adopt new technologies, and will continue to play a

substantial role in educating farmers about new

industrial crops. Recently, the AES has identified as

high priority, the development of strategic marketing approaches to market agricultural commodities.

This approach is needed to aid development of new

industrial crops and uses of traditional crops. It is too

early to judge how successful the AES will be in

establishing this approach (16).

Policy Implications

Policy to develop a reliable supply of new

industrial crops and uses of traditional crops must

consider constraints and opportunities in all phases

of technical change. In addition to policies that

encourage research, development, and commercialization, there must also be policies that address the

adoption of new technologies by industry and

farmers (see ch. 6).

A strategic approach is needed to develop new

industrial crops and uses of traditional crops. Subsector constraints must be identified and linkages

established between the producers of the crops, and

the manufacturers and consumers who will use the

crops (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 history

of soybean commercialization shows that considerable time may be required for widespread adoption and use of

new crops. Soybeans were introduced into the United States in the early 1800s but were grown primarily for hay

and had little economic importance for decades. Imported soybeans were not processed in the United States until

around 1910; U.S.-produced beans were first processed in 1914, but commercial processing did not begin until

1922. Processing of soybeans occurred in cottonseed mills that had been adapted to accommodate soybeans, and

early production was in areas where processing facilities already existed. Thus soybean production and processing

adjusted to existing industry structure; new industries were not created to accommodate soybeans. Once soybeans

became firmly established as an important crop, new processing and poultry production facilities located in soybean

production regions (10).

Prior to World War II, U.S. production of soybeans was insufficient to meet demand, and the United States

imported 40 percent of the fats and oils it used. Soybean production increased following World War II in response

to several simultaneous events. First, demand for meat products increased, which placed a premium on high-quality

livestock feeds; soybean meal was uniquely suited (because of its high protein and lysine content) to fill that

demand Second, tractors continued to replace horses (decreasing the demand for oats) and new synthetic fibers

began to replace cotton, resulting in decreased prices for these commodities. Increasing soybean prices coupled with

decreasing oats and cotton prices made soybeans relatively more attractive than these crops and acreage was shifted

from producing cotton and oats to soybean production. Third, the Federal Government not only supported research

to develop and improve soybeans and processing technologies, but offered production supports as well. Programs

for 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, soybeans

have been covered by commodity-loan programs every year since 1941. Historically, large amounts of soybeans

have often been placed under price supports, but acquisitions by the Commodity Credit Corporation have been

relatively small. Soybean producers use the loan program as a financial mechanism to obtain cash, and then redeem

the 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 were

planted. Highest acreage planted was 71.4 million acres in 1979. Between 1%7 and 1%9 the United States produced

74 percent of the world’s soybeans. By 1984 to 1986, that level had dropped to 56 percent. Nations other than the

United States responded to favorable soybean prices and their production increased. Other countries also increased

their 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 oil

it produced (10,18).

Soybeans have never been widely used for industrial purposes. In 1%0, about 6 percent of the oil produced

was used industrially, while today’s level is about 2 percent (10). From a farmer’s point of view, soybean prices

may 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 may

also face this situation (6).

of subsector constraints is the Production-Maket- remove some of the disincentives to new industrial

ing-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 References

Becker, Geoffrey S., U.S. Congress, Congressional

Research Service, “Fundamentals of Domestic Farm

Programs, “ 88-311 ENR, Mar. 31, 1988.

Drabenstott, Mark, and Moore, Charles, “New

Source of Financing for Rural Development,’ Amer4Some 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 from

the commodity.
60 ● Agricultural Commodities as Industrial Raw Materials

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

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 Research

Service, “The U.S. Oats Industry,” Agricultural

Economic Report No. 573, July 1987.

Johnson, Thomas G., ‘‘Entrepreneurship and Development Finance: Keys to Rural Revitalization: Discussion, American Journal of Agricultural Economics, vol. 71, No. 5, December 1989, pp. 1324-

1326.

Kaplin, Kim, U.S. Department of Agriculture, Agricultural Research Service, “Vernonia, New Industrial Oil Crop,” Agricultural Research, April 1989,

pp. 10-11.

Keith, David, American Soybean Association, personal communication, July 1989.

Knapp, Steven J., “New Temperate Industrial

Oilseed Crops,” paper presented at the First National

New Crops Symposium, Indianapolis, IN, October

1988.

he, David R., and Helrnberger, Peter G., “Estimating Supply Response in the Presence of Farm

Programs,” American Journal of Agricultural Economics, vol. 67, May 1985, pp. 193-203.

Milkove, Daniel L., and Sullivan, Patrick J., U.S.

Department of Agriculture, Economic Research

Service, “Financial Aid Programs as a Component of

Economic Development Strategy,’ Rural Economic

Development in the 1980’s: Prospects for the Future,

Rural Research Development Report No. 69, September 1988, pp. 307-331.

Schaub, James, McArthur, W. C., Hacklander,

Duane, Glauber, Joseph, Leath, Mack, and Doty,

Harry, U.S. Department of Agriculture, Economic

Research Service, “The U.S. Soybean Industry,”

Agricultural Economic Report No. 588, May 1988.

Stoneman, Paul, The Economic Analysis of Technical

Change (New York NY: Oxford University Press,

1983).

Studt, Tim, “Degradable Plastics: New Technologies

for Waste Management,” R & D, March 1990, pp.

51-56.

13.

14.

15.

16.

17.

18.

19.

20.

21.

Thayer, Ann, “Degradable Plastics Generate Controversy in Solid Waste Issues, ’ Chemical and Engineering News, June 25, 1990, pp. 7-14.

Theisen, A.A., Knox, E. G., and Mann, F. L., Feasibility of Introducing Food Crops Better Adapted to

Environmental Stress (Washington, DC: U.S. Government Printing Office, March 1978).

Thirtle, Colin G., and Ruttan, Vernon W., Economic

Development Center, Departments of Economics

and Agricultural and Applied Economics, University

of Minnesota, “The Role of Demand and Supply in

the 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 Ways

To 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. Government

Printing 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 Statistics, 1988 (Washington, DC: U.S. Government

Printing Office, 1988).

Westcott, Paul C., U.S. Department of Agriculture,

Economic Research Service, “Winter Wheat Plantings and Soybean Double Cropping, ’ Oil Crops,

Situation and Outlook Report, OCS-20, January

1989.

Westcott, Paul C., and Glauber, Joseph W., U.S.

Department of Agriculture, Economic Research

Service, “A Net Returns Analysis of the Flexible

Plantings 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. agriculture

underwent a difficult period of adjustment. The

Secretary of Agriculture convened a Challenge

Forum in 1984 to explore ways to alleviate these

problems. The New Farm and Forest Products Task

Force was created as a result of those discussions.

The Task Force issued its findings in 1987, and

concluded that agriculture must diversify (6).

This study, and continuing problems in the

agricultural sector, have lead to interest in using

agricultural commodities as industrial raw materials.

Congress wants to help rural economies and small

farmers to recover from difficult times, and new

crops and uses are viewed as a potential mechanism

to accomplish these goals. To increase competitiveness, Congress wishes to accelerate cooperation

between the public and private sector to commercialize new agricultural technologies. The perceived

lack of interest by the U.S. Department of Agriculture (USDA) in developing new industrial crops and

uses spawned the introduction of legislation in the

100th and 101st Congresses. Several policy recommendations proposed by the Task Force have been

incorporated in the legislation. The House of Representatives bill is titled the Alternative Agricultural

Products Act of 1990. The Senate bill is titled the

Alternative Agricultural Research and Commercialization Act of 1990. Boxes 6-A and 6-B provide a

summary of the main provisions of these bills.

The Task Force reached its conclusion largely on

the assumption that “the world now has in place an

enormous and steadily increasing capacity to produce basic agricultural commodities in quantities

which well exceed demand. ” It should be noted that

this assumption is not universally accepted. In many

parts of the world, available arable land is already

under cultivation and the potential for increased

irrigation is limited. Increases in supply will come

from improved productivity. Evidence exists that

increases in agricultural productivity are slowing

worldwide. In the United States, it is estimated that

by the end of this century, barring major technological change, increases in productivity will be lower

than increases in demand, which is assumed to

increase as a linear extension of past trends (7). It is

hoped that advances in biotechnology and information technology will increase productivity, but at the

present time it is not clear when, and to what extent,

these increases can be expected. Thus, although

there are potential benefits to diversification, further

discussion of the urgency and extent of diversification needed is reasonable.

Proposed Legislation

Goals

Effective policy must articulate clear and achievable goals, and provide the necessary mechanisms to

attain the goals. The purpose of developing new

crops and uses of traditional crops is to bring about

technical change in agriculture. In support of this

goal, proposed legislation seeks to provide increased

funding for research, improve cooperation between

public- and private-sector research, and help share

the financial risk of commercializing new technologies. It is hoped that these new technologies, while

benefiting society as a whole, will specifically

improve economic conditions in rural communities

and agriculture, particularly for small farms.

An immediate question that arises in developing

policy to stimulate new crop and use development is

whether policy should be restricted to nonfood,

nonfeed uses of agricultural commodities, or

whether new food crops should also be considered.

Proponents of the nonfood, nonfeed approach argue

that industrial uses are more likely to have larger,

faster growing, and higher priced markets than food

uses. They feel that larger benefits can be achieved

if scarce funds are concentrated on new industrial

crops and uses of traditional crops. Proponents of

including new food crops argue that these new crops

diversify agricultural production, increase farm income, and can have positive environmental impacts

similar to those of industrial crops. Furthermore,

new food crops may be easier to market than

industrial crops. In addition to the arguments over

what plant types should be included, there is the

question of whether animal products should also be

considered.

Previous legislation to encourage new uses for

agricultural commodities has focused on nonfood,

nonfeed uses. The goal of the Native Latex Act was

specifically to develop a domestic rubber industry.

That goal was later broadened with the passage of

-61–
62 ● Agricultural Commodities as Industrial Raw Materials

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

Purpose

● 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 a

12-member National Alternative Agricultural Products Board, appointed by the Secretary of Agriculture, and

comprised of individuals from the private sector. The Board is authorized to appoint an Advisory Council to help

review and recommend applications, monitor research progress, monitor operation of the Regional Centers, and

provide technical assistance.

The Board is authorized to establish two to five regional centers. Each center must match the funding provided

by 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, and

venture 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. where

appropriate; and disseminates information.

Regional Centers encourage interaction among the public and private sector, identify areas where new products

and processes can contribute to economic growth; provide technical assistance and business counseling to small

businesses to commercialize new uses; identify projects worthy of assistance; make use of existing programs to

accelerate commercialization; advise the Institute Director of proposal viability; and coordinate with Small Business

Development Centers and the Institute.

Financial Eligibility Criteria

Research 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. Eligible

applicants include universities or educational institutions, non-profit organizations, and businesses.

Selection Criteria

Research 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 include

potential to reduce costs of Federal agricultural assistance programs; unavailability of other adequate funding

sources; potential positive impacts on resource conservation, public health and safety, and the environment; and

ability 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 rural

areas; 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 for

Commercialization Assistance. Of the Research and Development Grants, at least two-thirds of the funding will be

allocated to projects that have substantial funding from their own resources, and that have entered into contratual

arrangements with commercial companies that provide at least 20 percent of the total funding for the project. At

least 5 percent of the funding is reserved for 1890 institutions. Funds committed by the Institute for any projects

shall 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 to

fiscal year 1995.

1In both the House and Senate bills, commercialization is defined as activities associated with the development of prototype products or

manufacturing plants, the application of technology and techniques to the development of industrial production and the market development

of new industrial uses of new and traditional agricultural and forestry products and processes that will lead to the creation of marketable goods

and 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 Commercialization Corporation, an independent, nonprofit entity within USDA, and headed by a nine-member board, composed

of members from the public and private sectors. It will have four to nine regional centers overseen by an advisory

council 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 new

products.

The Board oversees the Corporation and advises on research projects to be funded. The regional center advisory

boards review applications, monitor ongoing projects, and provide technical and business counseling to entities not

seeking 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; interest

subsidy 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 new

product development; identify areas where commercialization could foster rural economic growth; provide

technical assistance and counsel to small businesses interested in commercialization; identify new farm and forest

products and processes worthy of financial assistance; use existing scientific, engineering, technical, and

management education programs to accelerate commercialization efforts; review proposals for financial assistance;

and coordinate activities with Small Business Development Centers.

Financial Eligibility Criteria

Commercialization 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 terms

and conditions of assistance. Applications are filed with the director of the regional center and must document that

the proposal is scientifically sound and technologically feasible, and marketable.

Research and Development Grants—No eligibility criteria are specified

Selection Criteria

Research 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 material

at a profit; create jobs in economically distressed areas; have State or local government and private financial

participation; be likely to reduce Federal commodity program costs; be unlikely to obtain adequate non-Federal

funding; be likely to have a positive impact on resource conservation and the environment; and be likely to help

family-sized farms and adjacent communities.

Commercialization Assistance—Projects selected must create jobs in economically distressed areas; have State

or local government and private financial participation; have good management qualifications; show strong market

demand 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 $10

million, $20 million, $30 million, and $50 million respectively, and $75 million per year for fiscal years 1994 to

1999.
64 ● Agricultural Commodities as Industrial Raw Materials

the Critical Agricultural Materials Act to develop a

domestic capacity to produce critical and essential

industrial materials. New legislation also focuses on

the development of new industrial crops and uses of

traditional crops rather than on food crops.

It is not clear that developing agricultural commodities as an industrial raw material source will

have a significant impact on rural economic development. Clearly, developing new crops and uses of

traditional crops can be a component of a comprehensive rural policy, but as a policy in itself, it is

unlikely to revitalize rural economies. Furthermore,

in the absence of additional programs (e.g., teaching

new management skills to fanners, and helping them

share the additional risks of new technologies),

potential benefits from the development of new

crops and uses may accrue primarily to large-scale

farms rather than to small farms.

Proposed legislation limits private-sector participation to small firms (for research and cooperative

agreements) and to firms that will locate manufacturing facilities in rural areas (for commercialization

funding). There are many good reasons for limiting

assistance to small firms. These firms are often

innovative, but due to lack of resources, are unable

to pursue long-term, risky projects. Additionally, it

is feared that providing funding to large firms simply

displaces private funds that would have been invested anyway.

Limiting commercialization funding to firms that

will locate in rural communities is an attempt to

achieve the goal of revitalizing rural economies.

These goals are laudable, but may be inconsistent

with the other goals of the proposed legislation. As

already discussed, the goal of rural revitalization

may not be achievable by this policy. In addition,

many firms that are likely to be involved in the

commercialization of these new products and processes, are large rather than small firms. The eligibility restrictions in the legislation are such that in the

attempt to achieve one goal (that of rural development), serious constraints to achieving other goals

(development of new agricultural markets) maybe

introduced. Potentially, there are products where the

two goals will be compatible, but it is likely to be a

subset of the total products that could be developed.

This raises the question of whether all goals are and

should be equal, or whether some should have higher

priority than others.

Institutions

in addition to having clear goals, effective policy

must be flexible and offer a range of mechanisms to

achieve stated goals. Policies to achieve technical

change will need to address opportunities and

constraints in the research and development, commercialization, and adoption stages. As a means of

administering the new policy, legislation proposes

the establishment of an independent corporation

housed within USDA. However, it is not clear that

industrial uses of agricultural commodities are such

unique agricultural technologies that their development can only be accomplished with the establishment of a new corporation. Rather, the impetus for

an independent institution arises because of perceptions that USDA is not interested in, nor has been

responsive to constituent requests for new industrial

crop and use research. Critics point to the lack of

funding for new industrial use and crop research as

evidence that this is not a USDA priority. The issue

raised is one of how the USDA establishes its

priorities and allocates its resources to meet those

priorities.

The OTA report Agricultural Research and Technology Transfer Policies for the 1990s finds that the

issues of priority-setting, planning, and resource

allocation for agricultural research is a general

problem within USDA, and not one limited to new

crop and new use research (9). The existence of an

agricultural research and extension system that is

responsive to user needs, sets research priorities and

measurable goals, allocates resources in a manner

necessary to achieve those goals, and develops a

more effective technology-transfer component

could eliminate the need to develop entities with

narrow authorities. Arguments can be made that the

creation of new programs to address individual

research issues is merely a band-aid approach that

creates a new level of bureaucracy without significantly affecting the fundamental problems within

the agricultural research and extension system. A

General Accounting Office review of management

procedures in USDA indicates that one major reason

why USDA has difficulty in managing initiatives

that cut across agencies and programs is because

historically, as new needs arose, new agencies were

created within USDA to handle these needs. These

agencies, over time, develop policies consistent with

their perceived goals (but not necessarily with

USDA goals), and attract constituencies that support
Chapter 6-Proposed Legislation and Policy Options ● 65

each agency’s continuance (8). It could be argued

that creation of an agricultural corporation to commercialize new crops and uses continues this trend.

Reauthorization of the Office of Critical Materials

(OCM) is an alternative to making fundamental

changes in the USDA research and extension system

or to establishing a new corporation for developing

industrial uses for agricultural commodities. The

goals of the Critical Materials Act, which established this office, are more modest than those of

current legislation. However, OCM is actively

involved in the commercialization of new industrial

crops; it has cooperative agreements with the private

sector and is engaged in projects with industry to

demonstrate the commercial feasibility of some of

the new crops. Expansion of the mandate of this

office to include new uses of traditional crops, and

better coordination with the Small Business Innovation Research Programs, could achieve several of the

same goals of the current legislation.

Policy Instruments

The new legislation offers several mechanisms to

encourage the development of new industrial crops

and uses for traditional crops including funding for

research and development, in addition to that

provided in other categories of the USDA research

title. The new legislation strongly emphasizes and

funds technology transfer of research from the

public sector to the private sector by funding

cooperative research agreements.

Proposed legislation does contain some provision

for technical assistance, but it is limited. Staff at

regional centers, as well as advisory boards are to

provide technical and business counseling to firms

that are engaged in commercializing new industrial

crops and products. They are to coordinate with the

Small Business Development Centers (SBDC) and

other regional and local agencies or groups involved

in development. Some studies have suggested that

lack of technical assistance is at least as important a

constraint to rural firms as are financial constraints

(1,5). Small rural firms most frequently use local

bankers, accountants, and lawyers for technical and

business counseling, rather than the SBDC, even

though there are 53 such centers in all but four States

with a budget of nearly $90 million (4,10). Working

closely with, and providing educational classes for

local bankers, accountants and lawyers may be an

effective way for the regional centers to provide

some technical assistance. Additionally, the role of

the Agricultural Extension Service might be expanded. Historically, the Extension Service has

transferred information about new production technologies to farmers. Recently, the Extension Service

has begun to develop a strategic marketing orientation to help farmers and agribusiness focus on

market potential.

Technical and business counseling provided by

the programs described above will be useful, but in

many cases may be inadequate. To use new processes, many small firms may need a detailed

evaluation of their management and production

strategies. Effective State technical assistance programs frequently make site visits and provide

customized reports to clients. These evaluations

average 5 to 6 days of service at a cost ranging from

$1,000 to $20,000 per client (10). This type of

technical assistance will not be provided for in the

proposed legislation. Given the potential importance

of rural technical assistance to help produce new

products from agricultural commodities, Congress

may need to consider putting more effort into this

aspect of commercialization than is currently available in the proposed legislation. One possibility

might be to provide block grants to effective State

programs.

Proposed legislation provides funding for commercialization. The legislation defines commercialization as activities associated with the development

of new products and processes, the application of

technology and techniques to the development of

new products and processes, and the market development of new products or processes. Funding

targeted for the development of new products and

processes would be awarded to innovative firms in

a reamer similar to the SBIR programs. Funding and

adequate technical assistance needed to help the

majority of firms lacking research capacity to adopt

the newly developed processes, is lacking. Proposed

legislation is thus similar to most U.S. technology

policy in that it only addresses the issues of new

technology research, development, and commercialization, and not the problems of industrial technology adoption.

In addition to commercialization funding and

technical assistance, there may also be a need for

assistance in financing capital investment and operating expenses, particularly in rural areas. Some

studies indicate that debt financing markets in rural
66 ● Agricultural Commodities as Industrial Raw Materials

communities operate efficiently, and that operating

capital is available for rural firms (1,5). However,

equity markets in rural areas are generally not so

well developed as in urban areas. Congress may

wish to explore options that generally improve the

effectiveness of equity markets in rural areas.

Improving the SBIC programs supported by the

Small Business Administration and developing secondary financial markets to help rural lending

institutions share risk are two possible avenues to

explore.

One function of the Alternative Agricultural

Research and Commercialization Board, proposed

in the legislation, is to disseminate information

about commercialization projects. However little

funding is provided for this function. Informing

industry of potential research and commercialization opportunities is an important component of

generating industrial interest in developing new

products using agricultural commodities. There is

growing participation of industry in Federal laboratory and industry fairs; this could be a potential

avenue for informing industry about publicly funded

research on new industrial crops and uses of

traditional crops. Additionally, the Critical Agricultural Materials Act specifically provided for the

establishment of a database regarding new industrial

crops and use development at the National Agricultural Library. New legislation does not explicitly

provide for this function. Research conducted at

non-land grant universities, and that conducted at

State Experiment Stations but without Cooperative

State Research Service (CSRS) funding may not

necessarily be included in USDA databases. Congress may wish to consider provisions for database

maintenance.

A strategic approach is needed for the development of industrial products from agricultural commodities. A first priority is an understanding of the

market potential for new industrial crops and uses.

Appraisal is needed of the structure of the industries

that will use the new agricultural commodities and

of competing technologies currently used and being

developed. It is impossible to identify all contingencies that might occur, and funding generic research

can lead to new insights. However, a shotgun

approach to new crop and use development is not

likely to be effective, particularly if a short development time frame is desired; some research must

focused. A priority of new crop and use commercialization should be the development of a marketing

and research and development strategy; socialscience research will play a fundamental role.

Conceivably this approach could be undertaken in

the proposed legislation, but social science research

is not explicitly discussed. It is the current lack of

research in these areas that makes it difficult to

evaluate the commercialization potential of industrial uses of agricultural commodities.

Policy Options

Policy options presented are in three categories:

1.

2.

3.

commodity programs options;

research, development, and commercialization

proposals; and

additional options that require further study.

Commodity Program Options

Agricultural commodity programs, as they currently exist, provide substantial barriers to the

adoption of new crops by farmers. Additionally,

these programs skew farmer production decisions so

that a few crops are produced in surplus (e.g., corn)

while other crops are not produced in quantities

sufficient to meet domestic demand (e.g., oats).

Agricultural commodity programs have three main

components: non-recourse loans, target prices (deficiency payments), and supply-control programs.

Simultaneous adjustments in at least two, and

possibly all three of these components will be

needed to remove barriers to diversification.

Agricultural commodity programs have a major

impact on farmer planting decisions. The risk of

losing future base acreage if crops other than those

enrolled in commodity programs are planted, is a

significant impediment to the planting of any crops

other than specified commodity program crops.

Farmers continue to plant acreage to certain crops

even when these crops are in surplus and market

signals indicate other crops might be more profitable

to grow. Planting disincentives exist not only for

new crops, but for many traditional crops as well.

Because of surplus production, Acreage Reduction

Programs (supply control) are implemented.

OTA proposes four options for commodity programs:

. changes in the commodity base acreage formula to increase planting flexibility, referred to

hereafter as “Normal Crop Acreage”;
Chapter 6--Proposed Legislation and Policy Options . 67

●

●

●

changes in the commodity base acreage formula to increase planting flexibility, referred to

hereafter as “Triple Base Option”;

changes in the target prices, referred to hereafter as ‘‘Target Prices”; and

continuation of commodity programs similar to

those contained in the 1985 Food Security Act,

referred to hereafter as ‘‘Status Quo.

Normal Crop Acreage

Normal crop acreage (NCA) was the system used

in 1978 and 1979 for wheat, feed grains, upland

cotton, and rice, and was based on the number of

farm acres that had been planted to specified crops

in 1977. Which crops should be included in normal

acreage is subject to debate. Base acreage is

established for the whole farm, rather than for

individual crops. Within the NCA concept, farmers

can allocate acreage to any crop they chose, so long

as the total program crops plus set-aside acres do not

exceed the NCA. This program allows increased

planting flexibility for the farmer, but decreases the

ability of the USDA to control supply, Supply

control is particularly difficult if target prices for

selected commodities are high relative to market

prices of other commodities. Farmers will opt to

plant the crop with the high target price. Thus, even

though they can plant any crop they chose without

losing base acreage, they may still choose to produce

certain crops in surplus because of the strong price

signal sent by the target prices. Passage of this

option, without changes in target prices, will not

eliminate many of the disincentives to the adoption

of new crops (3). Normal crop acreage is the

proposal recommended by the administration.

Triple Base Option

The triple base option is also intended to provide

planting flexibility. This option divides base acreage

into three categories: land taken out of production;

land planted for which deficiency payments are

made; and land planted for which no deficiency

payments are made but where market crops could be

grown. The plan provides planting flexibility on the

permitted acreage without risk of losing base acreage. Because the planting decisions made for the

third base (that which receives no deficiency payments) are based more on market price signals than

on target prices, this option presumably would

remove some disincentives to planting new crops,

assuming that these new crops are permitted under

the terms of the commodity program. However, farm

groups generally oppose this option because they

feel it is motivated not by a desire to provide

flexibility, but rather to reduce payments to farmers

because of budget constraints. It is also argued that

this plan is inequitable because not all farmers can

grow more than one crop profitably due to weather

and soil constraints (2).

Target Prices

This option would either change the target price

itself, or change the acreage and yields of program

crops eligible to receive deficiency payments, which

would effectively change the target price. Changes

in the base acreage formula only, without changes in

target prices, may be insufficient to remove barriers

to the adoption of new crops, or to reduce commodity surpluses significantly. These outcomes seem to

be likelier with the Normal Crop Acreage than with

Triple Base Option, because the Triple Base Option

effectively reduces target prices by decreasing the

acreage eligible for coverage. Reduction in target

prices are expected to result in a dollar-for-dollar

reduction in farm income. The Triple Base Option

would reduce farm income less significantly. Decreasing target prices combined with the Normal

Crop Acreage could result in greater crop diversity.

Some concern exists that increased planting of

non-program crops by farmers participating in

commodity programs would negatively affect prices

of those crops and hence, the income of farmers who

grow non-program crops without participating in the

commodity programs.

Status Quo

Maintainin g commodity programs similar to

those in the 1985 Food Security Act is unlikely to

remove disincentives to the production of new crops

by farmers.

Research, Development, and

Commercialization Proposals

OTA proposes three alternatives for the research

and development of new crops and new uses of

traditional crops:

●

●

continuation of the current policy including

appropriations for the Office of Critical Materials, referred to hereafter as the “Status Quo”;

establishment of institutions outlined in the

House and Senate bills referred to hereafter as

the “Agricultural Corporation Alternative”;

and
68 ● Agricultural Commodities as Industrial Raw Materials

● reorganization of the agricultural research and

extension system to be more responsive to

end-user needs, referred to hereafter as the

“National Research and Extension Policy Alternative. ’

Status Quo

The status quo option calls for maintaining the

Office of Critical Materials as the main office to

coordinate the research, development, and commercialization of industrial materials from agricultural

commodities. New-use research and development

will continue to be mainly the responsibility of the

ARS. The SBIR programs will play a small role, and

States will develop their own programs. Features

and likely consequences of the status quo include the

following:

1.

2.

3.

4.

The Office of Critical Materials and the SBIR

programs are small and relatively isolated

programs within USDA. The role of the

Federal Government in the development of

new crops and new uses of traditional crops is

likely to remain modest in size. The Office of

Critical Materials is mainly involved in the

development of new industrial crops, rather

than new uses of traditional crops. New uses of

traditional crops will remain the responsibility

of primarily ARS and CSRS research. New

food crops are not part of the program.

Continuation of the Office of Critical Materials will not address the underlying problems of

priority setting, planning, and resource allocation within USDA.

Coordination of USDA programs will be by

informal mechanisms rather than an integral

part of the program itself; the Office of Critical

Materials (OCM) has no authority over, or

input into, the policies of other programs

within USDA. The OCM does works closely

with individual researchers at the Northern

Regional Research Center (ARS) and in landgrant universities to develop the new crops

they have identified as potential candidates for

commercialization. Coordination between

OCM and the USDA Small Business Innovation Program, however, is informal.

The goals of the Critical Agricultural Material

Act are more modest than proposed legislation. The focus is on the development of a

domestic capacity to supply industrial materials that the United States uses on a daily basis

5.

6.

7.

8.

9.

and that are currently obtained via imports or

from petroleum. The emphasis is on supplying

a relatively well-defined market rather than on

achieving broad social goals, although one

could argue that the security gained by having

a domestic source of strategic and essential

materials is a worthwhile social goal.

Financial selection criteria is not limited to

small firms only. The broader range of potential participants, compared to proposed legislation, may increase the commercialization prospects for some products.

Small business technical assistance and commercialization loans are not part of the program. However, there is a strong technologytransfer component in the form of demonstration programs with industry, and provision of

agronomic data about new crops to farmers

and extension personnel.

Unlike the legislative proposals, the Critical

Material Act contains an explicit provision for

germplasm collection. Lack of germplasm is a

serious constraint for the development of some

new crops.

There is currently no long-term commitment

of funds to the Critical Materials Office.

Development of new uses and new crops will

require a sustained and adequate commitment

of resources.

There will be no explicit funding for generic

technology-transfer programs for ARS; technology-transfer finding is strictly for industrial uses of new and traditional crops.

Agricultural Corporation Alternative

This alternative involves the passage of a compromise version of the House and Senate bills. Its

features and likely consequences include the following:

1.

2.

There will be a significant expansion of the

Federal role in research, development, and

commercialization of new industrial crops

and uses of traditional crops.

There will be an additional administrative

layer added to USDA, but Department problems of priority setting, research planning,

and resource allocation will not be addressed.

Furthermore, a new administrative component could potentially add to the difficulties

already facing USDA in its efforts to coordi-
Chapter 6-Proposed Legislation and Policy Options ● 69

3.

4.

5.

6.

7.

8.

9.

10,

nate cross-cutting problems across multiple

agencies.

No explicit provision exists for the development of a strategic plan to develop new crops

and uses of traditional crops. The House bill

does provide for hearings to establish goals

and priorities; it may be possible to incorporate strategic planning within this framework,

but it is not guaranteed. Furthermore, no

mention is made of social-science research in

any of the proposals. This research, though an

integral part of developing new products, is

currently lacking.

Development of regional centers leads to a

more decentralized approach to new crop and

new use development. Decentralized approaches increase the likelihood of duplication and neglect of important elements. However, regional centers are closer to problem

areas and are likely to have more local

contacts than centralized offices.

Goals of the legislation may be difficult to

achieve without additional policy. Agricultural policy and rural policy are not synonymous, and aiming production at small farms

will be difficult to achieve.

Financial selection criteria may be too restrictive and diminish opportunities for commercialization. It may be difficult for anew crop

or new use proposal to satisfy all, or even a

majority of the criteria stated in these bills.

Flexibility in the interpretation of the criteria

will be needed.

Venture capital will be provided under the

proposed legislation. Equity capital may be

limited in rural areas and this provision could

be beneficial. However, other approaches

such as expanding equity funding to all rural

firms, and improvements in rural equitycapital markets might lead to increased rural

development impacts.

There is no explicit provision of funds for

germplasm collection. It is not clear that

proposed legislation considered this as research needed for development of new crops

and uses of traditional crops.

Some duplication of SBIR program activities

may exist.

There will be no explicit funding for generic

technology transfer programs at ARS; funding is strictly for new industrial crops and

uses of traditional crops.

11.

12.

13.

14.

There will be no funding for new food crops;

this potential avenue for diversification is

excluded.

No explicit consideration exists for database

needs. Some projects may automatically be

covered by USDA research databases, but

others will not. This could potentially increase the difficulty of information dissemination.

Technical assistance provided will be small

and in many cases, insufficient. Additional

consideration needs to be given to this

component of new crop and use development

and commercialization.

No provision is made for adoption of new

processes and technology across industry.

National Research and Extension Policy

Alternative

This proposal is based on the assumption that no

reason exists to treat new crop and new use research

and development differently from other agricultural

technologies. The impetus to establish a new corporation to promote the research, development, and

commercialization of new crops and uses arises from

perceptions that USDA has been unresponsive to

this type of research. The perceived lack of responsiveness of the USDA to changing needs and

priorities is not limited to new crops and uses of

traditional crops. Because of the agency’s apparent

intransigence, a reevaluation of the agricultural

research and extension system is warranted. In the

OTA study Agricultural Research and Technology

Transfer Policies for the 1990s, this alternative is

explained in detail.

Essential elements of the proposal include a User

Advisory Council composed of elected representatives from farmer organizations, agribusiness organizations, public interest organizations, foundations,

and government action agencies. The council identifies problems, recommends goals and funding levels, coordinates industry support, and evaluates

progress. The council works closely with the Agricultural Science and Education Policy Board

(ASEPB), which will be the research and technology-transfer planning center for USDA. The board

is headed by the Assistant Secretary for Science and

Education, and will include the Assistant Secretary

for Economics, the Administrator of each USDA

research and technology transfer agency, chairmen

of the committees on policy, and representatives
70 ● Agricultural Commodities as Industrial Raw Materials

from NIH, NSF, non-land grant universities, and

1890 universities. The board, with the active involvement of the User Advisory Council, sets goals,

establishes priorities, assigns agency research responsibilities, and evaluates results, among other

duties.

Technical panels are created for each major

research and technology-transfer priority. These

panels work with the board and provide scientific

expertise in the planning process. This proposal

provides a basis for effective agricultural research

and extension planning in a mission-oriented context. User input is an integral component of the

proposal. Allocation of funding is to priority programs rather than agencies. Features and likely

impacts of this proposal include the following:

1.

2.

3.

4.

5.

USDA’s fundamental problems with priority

setting, planning, resource allocation, and

technology transfer will be addressed.

New crop and new use research and development may not necessarily be designated a

priority area by the User Advisory Council.

Proponents argue that because new crops and

uses do not have a constituency, they will not

receive attention; however, this research has

been given attention by the Secretary of

Agriculture, and has been designated as priority area by the current User’s Advisory Board.

Funding will depend on whether new industrial crop and use development is considered

essential to the health of agriculture. If so, new

crop and new use research will be a priority

and a sustained level of funding will occur.

However, there is flexibility to reduce or

eliminate this funding if priorities change.

Because the technical panels help to identify

all areas of research that will be necessary to

achieve stated goals, a flexible and multidisciplinary systems approach to agricultural research, development, and extension that cuts

across USDA agencies, will be established.

This approach would allow, for instance, for

the collection of germplasm and for socialscience research. This approach also allows for

the development of some types of information

necessary for technical assistance. It would

also encourage the development of a marketing strategy and provide for the assessment of

likely impacts of the new technology.

This proposal is a research and technologytransfer proposal and would not provide fund6.

7.

8.

ing for commercialization or prototype plant

development.

Explicit funding for technology transfer programs at ARS is possible but not guaranteed

under this proposal, Technology transfer from

Federal labs other than USDA might not be

included, but representatives from other agencies sit on the Board.

Increased funding for new food crops is

possible but not guaranteed.

The role of the Agricultural Extension Service

will be an important part of the program.

Options Requiring Further Study

Following is a list of options which Congress may

want to explore further to enhance the potential of

new industrial crop and use of traditional crop

commercialization.

Financial Options

Rural debt markets seem to be working efficiently, but equity markets are not as well developed

in rural areas. Congress might want to engage a

study to explore possibilities to improve rural equity

markets. This might include development and improvement of secondary financial markets as one

possibility. For rural development to occur, a wide

diversity of employment opportunities must be

made available. Venture capital for more than just

plants to produce products using agricultural commodities is needed.

Technical Assistance

Technical assistance, particularly in rural communities is a serious constraint for firms. Technical

assistance, as well as improved access to funds for

capital investment and operating expenses is needed

to enhance the potential of adoption of new technologies and processes by firms. Improved access to

training will also be needed. Programs to improve

the delivery of technical assistance should be

examined. One possibility might be to provide block

grants to State programs that are effective at

delivering technical assistance to rural fins.

Germplasm Collection

To develop new crops and improve traditional

crops, availability of appropriate germplasm will be

needed. Germplasm collection, improvement of

facilities, and research on new storage and maintenance technologies is needed.
Chapter -reposed Legislation and Policy Options ● 71

Small Farm Programs

Small farm operators may need to learn new

management skills to use new technologies and face

difficulties managing the risk associated with new

technologies. Programs that aid farmers in these

endeavors may help facilitate new technology benefiting small farms.

Macroeconomic Policy

The U.S. Government now has large and growing

debts. Numerous studies have demonstrated the

adverse impacts this has had on agriculture and rural

economies. Finding solutions to the Federal deficit

will be important to improving the agricultural

sector and rural economies. In addition, tax policy

can be used to improve the general economic climate

for research, development, and commercialization

of new technologies.

Current Legislative Activity

Congress passed a Farm Bill in the fall of 1990,

just as this report was going to press. The report, in

draft, was made available to the Senate and House

Agricultural Committees prior to passage of the

Farm Bill. A compromise version of the House and

Senate Alternative Agricultural bills was passed as

part of Title XVI, the research title of the Farm Bill.

The final bill (the Alternative Agricultural Research

and Commercialization Act) is similar to the Senate

proposal with minor changes. There are provisions

for two to six regional centers rather than up to nine

as was previously proposed. Additionally an explicit

category of finding exists for new animal products.

And, eligibility for commercialization funds is no

longer restricted to small fins.

Because of incompatible timing of the Farm Bill

and Appropriations legislation, funding for the new

Alternative Agricultural Research and Commercialization Center was not provided. Instead, the

Critical Agricultural Materials Act was reauthorized

through FY 1995 and the 1991 funding for the Office

of Critical Materials is $800,000. Other funding

provided for new crops and uses of traditional crops

include $668,000 for guayule research and $500,000

for Crambe and rapeseed research. Research funds

for kenaf ($1,106,000), meadowfoam, jojoba, milkweed, soybean oil inks, and plastics from cornstarch

are also provided for in the ARS budget and special

grants. Additionally, there is a grant program for

research on the production and marketing of ethanol

and industrial hydrocarbons from agricultural commodities and forest products authorized a t

$20,000,000 per year for fiscal years 1991 through

1995. It is likely that Congress will take up the issue

of funding the new programs authorized in the Farm

Bill in 1991.

Changes were also made in the agricultural

commodity programs. Congress passed a Triple

Base 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 from

production. Program crops or other designated crops

(i.e., oilseeds and industrial or experimental crops

designated by the Secretary of Agriculture), can be

planted on 15 percent of the base acreage, but are not

eligible for commodity support payments. An additional 10 percent of the base acreage can be planted

to designated crops without loss of program base.

This new flexibility provision, and removal of

acreage that is eligible for support payments will

help to remove some of the disincentives to the

planting of new industrial crops. Additionally, target

prices were nominally frozen at 1990 levels, but

changes in the method of calculating deficiency

payments may effectively lower target price levels.

In addition, Congress created a new Agricultural

Science and Technology Review Board consisting

of 11 representatives from ARS, CSRS, Extension

Service, Land Grant Universities, private foundations and firms involved in agricultural research,

technology transfer, or education. The purpose of the

Board is to provide a technology assessment of

current and emerging public and private agricultural

research and technology-transfer initiatives, and

determin e their potential to foster a variety of

environmental, social, economic, and scientific

goals. The report of the Board is to include an

assessment of research activities conducted, and

recommendations on how such research could best

be directed to achieve the desired goals. Establishment of this Board is an attempt to address some of

the fundamental problems existing in the USDA

research and extension system.

Conclusion

Using agricultural commodities as industrial raw

materials will not provide a quick and painless fix

for the problems of agriculture and rural economies.
72 . Agricultural Commodities as Industrial Raw Materials

They can provide future flexibility to respond to

changing needs and economic environments, but

many technical, economic, and policy constraints

must be overcome. Many of the new industrial crops

and uses of traditional crops are still in relatively

early stages of development. Several years of

research and development will be necessary before

their commercialization will be feasible. The lack of

marketing strategies and research to assess the

impacts of new technologies complicates decisions

on research priorities and appropriate policies and

institutions needed to achieve success. Potential

impacts on income reallocation and the environment, as well as regional effects need further study

before large-scale funding for commercialization is

required. Successful commercialization will require

not just funding assistance, but a systemic policy

that articulates clear and achievable goals and

provides the instruments needed to reach those

goals.

An encompassing research and development

strategy is needed and must be designed to meet

market needs; hence a strategic, multidisciplinary,

multiregional approach should be taken with both

public and private sector involvement. Changes in

agricultural commodity programs, in addition to

those already made, may still be needed to remove

disincentives to the adoption of many new crops.

Because of research information still needed, and the

time still required to develop many of the new crops

and products, a two-step approach to commercialization might be useful. The European community is

taking this approach by first establishing a precommercialization program to determine feasibility,

and then following up with a later program to

encourage commercialization. The U.S. Small Business Innovation Research Program also takes a

multistage approach to the commercialization of

new technologies. In the United States, initial

primary emphasis could be given to the basic,

applied and precommercialization research needed

to develop new crops and uses. A high priority

should be an early technology assessment of products and processes to analyze potential markets,

socioeconomic and environmental impacts, technical constraints, and areas of research needed to

address these issues fully. The establishment of the

USDA Science and Technology Review Board

should improve the prospects for this type of

assessment. The technology assessment would lay

the groundwork for development, and provide the

information needed to make intelligent decisions

about commercialization priorities, possible impacts

of new technologies, and further research or policy

actions needed.

Interdisciplinary, and in appropriate cases, multiregional research should be given the highest

funding priority. This could include: chemical,

physical, and biological research needed to improve

production yields and chemical conversion efficiencies, and to establish quality control and performance standards; agronomic research to improve

suitability for agricultural production; germplasm

collection and maintenance research; and social

science and environmental research. Technology

transfer issues should also be addressed. These

issues include funding for cooperative agreements,

database management, and Federal laboratoryindustrial conferences.

Once information is available to identify market

potential and technical, economic, and institutional

constraints, the second step to commercialization

can be made. A strategic plan can be developed to

commercialize the most promising technologies.

Financial aid for commercialization and the role of

regulations may need to be considered. Industrial

adoption and diffusion of new processes may require

additional technical assistance and technical extension programs. For new industrial crops and uses,

additional changes may be needed in agricultural

commodity programs.

Because many new industrial crops and uses of

traditional crops are still in the early stages of

development, there is time for a thorough analysis of

the actual potential of these new products, the

constraints to commercialization, and the potential

impacts of development. This information, once it is

available, will permit the design of appropriate

policy and institutions needed to achieve the benefits

that may exist.

1.

2.

3.

Chapter 6 References

Drabenstott, Mark and Morris, Charles, “New

Sources 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 Research

Service, “The Triple Base Plan,” 89-381 ENR, June

1989.

Ek, Carl, U.S. Congress, Congressional Research

Service, “Normal Crop Acreage,” 89-467 ENR,

August 1989.
Chapter 6-Proposed Legislation and Policy Options ● 73

4.

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 Economics, vol. 71, No. 5, December 1989, pp. 1305-

1323.

John, DeWitt, “Keys to Rural Revitalization in the

1990’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, “New

Farm and Forest Products-Responses to the Challenges and Opportunities Facing American Agriculture,’ A Report to the Secretary of Agriculture, 10.

Washington, DC, June 25, 1987.

Tweeten, Luther, ‘‘The Competitive Environment for

Agricultural Research and Technology Transfer,”

contractor report prepared for the Office of Technology Assessment, September 1989.

U.S. Congress, General Accounting Office, U.S.

Department of Agriculture: Interim Report on Ways

To 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 Transfer

Policies for the 1990s: A Special Report of OTA’s

Assessment on Emerging Agricultural TechnologyIssues 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. Government

Printing Office, February 1990).
Appendix A

Selected New Industrial Crops

Bladderpod

Scientific name: Lesquerella species

Major compounds produced: The seeds contain 11 to 39

percent oil of which 50 to 74 percent are fatty acids

containing hydroxy groups. The predominant hydroxy

fatty acids produced are lesquerolic acid, densipolic

acid, and auricolic acid. Individual species of Lesquerella tend to specialize in the production of one of the

three hydroxy fatty acids to the exclusion of the other

two. After oil extraction, a high-protein meal that is

relatively high in lysine remains.

Replacement: Imported castor oil (mainly the hydroxy

fatty acid ricinoleic acid).

Major uses: Hydroxy fatty acids are used primarily in

plastics. The oil from Lesquerella can be used to

produce a plastic that is tougher than those currently

available.

Agronomic characteristics: Lesquerella, a member of

the Cruciferae family, contains about 70 species and is

native to dry areas from Oklahoma to Mexico. It

produces thick stands in the wild, is relatively tolerant

of cold, and can survive with annual rainfall of 10 to 16

inches (25 to 40 cm). Observed yields of species in the

wild have ranged from about 979 lb/acre of seed (1 ,100

kg/ha) to 2,000 lb/acre.

Technical considerations: The chemical structures of the

hydroxy fatty acids produced by Lesquerella are

similar, but not identical, to that of ricinoleic acid

(castor oil). Extensive testing and evaluative studies

will need to be conducted to determine if these hydroxy

acids can substitute for ricinoleic acid. About 20

species of Lesquerella have been field tested in

Arizona. L. fendleri appears to be the most promising

for domestication. It displays significant genetic variation leading to easier selection for agronomic characteristics. However, L. fendleri suffers from seed dormancy and seed shattering, which increases research

and commercialization difficulties. The meal contains

glucosinolates.

Economic considerations: Brazil and India are the major

producers of castor beans. Between 1983 to 1986,

production in those two countries has ranged from

524,000 metric tons (MT) to 886,000 MT, with 1986

output of 586,000 MT. This erratic production has

contributed to highly variable prices for castor oil. U.S.

imports of castor oil have increased somewhat, but

because the United States is a major purchaser, too

large an increase in imports would significantly raise

the price. Castor oil is classified as a strategic oil and

is stockpiled.

Social considerations: It is possible to grow castor beans

in the United States but because of the high toxicity and

allergic reactions experienced by field workers, it is not

done. No other plant tested has been found to produce

high levels of ricinoleic acid. Lesquerella is adapted to

dry climates and requires fertilizer levels equivalent to

other alternatives that could be grown in the same area.

Extent of research conducted: Lesquerella was identified early as a high producer of hydroxy fatty acids in

the Northern Regional Research Center (NRRC)

screening of potential industrial plants, but only

recently has research interest been shown. The Agricultural Research Service of the U.S. Department of

Agriculture and the United States Water Conservation

Laboratory in Phoenix, Arizona, have collected

germplasm. Plant breeding to improve yields, and

water management studies are being conducted at

Phoenix. Much of the research to date has been

evaluating the seeds for oil content and concentration.

Some utilization research is being conducted at the

NRRC in Peoria (substituting Lesquerella for ricinoleic

acid). The Cooperative State Research Service (CSRS)

through the Office of Critical Materials is spending

$20,000 on crushing and assessment work at the

NRRC.

SOURCES: 36,43,44,46

Buffalo Gourd

Scientific name: Cucurbita foetidissima

Major compounds produced: Seeds of wild species are

21 to 43 percent oil by weight with a mean of 33

percent. Some hybrids that have been developed have

seeds that are 38 to 41 percent oil with a mean of 39

percent. Among the hybrids analyzed, the fatty acid

distribution was palmitic-7.8 percent, stearic-3.6 percent, oleic-27.l percent, and linoleic-61.5 percent.

Among wild species, there is an inverse relationship

between linoleic and oleic acid concentration. The meal

that remains after oil extraction is about 30 percent

protein by weight. It is relatively low in lysine. The

roots contain high levels of starch. By dry weight,

first-year roots are 47 to 64 percent starch, and

second-year roots are 50 to 65 percent starch.

Replacement: Epoxy fatty acids derived from sunflower

oil, soybean oil, and petroleum. The root could be used

as a feedstock for ethanol production.

Major uses: The fatty acid distribution of the oil is very

similar to that of sunflowers. Buffalo gourd oil could be

used for the same industrial uses as sunflower and

soybean 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 meal

could be used as livestock feed. The starch could be

used as a feedstock for ethanol production.

Agronomic characteristics: Buffalo gourd is a wild

member of the squash and pumpkin family. It is native

to the arid and semiarid regions of North America and

could be grown in the Ogallala aquifer region. It can

survive in regions with as little as 6 inches (150 mm)

of rain, but probably will require at least 10 inches (250

mm) of water to achieve economical yield levels. It is

relatively intolerant of cold temperatures, and cannot

tolerate poorly drained soils. Buffalo gourd can be

grown either as an annual or a perennial. Utilizing a

perennial cultural system optimizes seed yield (oil

production) and limits root (starch) yield. The annual

mode of production optimizes root yield. Conservative

estimates of seed yield are 1,780 lb/acre (2,000 kg/ha).

Some experimental plots using hybrids have averaged

2,760 lb/acre (3,000 kg/ha) with one plot producing

2,914 lb/acre (3,274 kg/ha). Starch yields of 6,061

lb/acre (6,810 kg/ha) have been achieved experimentally.

Technical considerations: Increased yields, efficient

harvesting techniques, and improved disease resistance

are needed.

Economic considerations: Fatty acids derived from the

oil of buffalo gourd, like sunflowers and soybeans,

must be chemically converted to epoxy fatty acids. It is

the cost of this conversion, more than the cost of the raw

oil, which limits the use of natural oils to provide epoxy

fatty acids. Buffalo gourd may not have an advantage

over sunflower or soybean oil for these uses. As a

feedstock for ethanol production, buffalo gourd might

have potential. It takes approximately 1.8 to 1.9

kilograms of starch to produce one Liter of ethanol.

Therefore, it is possible to produce approximately 404

gal/acre (3780 l/ha) of ethanol from the roots. It is

estimated that buffalo gourd priced at about $25 per ton

would be competitive with grains for ethanol production.

Social considerations: Buffalo gourd is adapted to arid

climates and irrigation requirements are lower than

those of many other crops which could be grown in

those regions. It provides extensive ground cover and,

particularly if grown as a perennial, could reduce

erosion on susceptible soils. Buffalo gourd is a plant

that might have more uses in developing countries than

in the United States. The starchy root can be dried and

used as cooking fuel rather than wood, and the oil from

the seed is edible.

Extent of research conducted: Buffalo gourd research is

conducted at the University of Arizona.

SOURCES: 10,13,15,43,44

Chinese Tallow

Scientific name: Sapium sebiferum

Major 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 palmitic

and oleic acids. The oil contains oleic, linoleic, and

linolenic acids.

Replacement: Imported cocoa butter

Major uses: Potentially the tallow could be used as a

substitute for cocoa butter and the oil could possibly be

used as a drying oil for paints and varnishes.

Agronomic characteristics: The Chinese tallow tree is a

member of the Euphorbiaceae family and is native to

subtropical China. It currently is grown in the South

Atlantic and Gulf Coastal Plains and in some areas of

southern California as an ornamental. It is best adapted

to semitropical climates. Chinese tallow is tolerant of

salinity and can be grown on poorly draining soils.

Seed production can begin in the third season of growth

and yields up to 10,000 lb/acre can be achieved. The

seeds ripen in the fall. The tree can live 50 years.

Technical considerations: Need to increase yields, and

utilization research.

Economic considerations: The United States imports

70,000 to 80,000 metric tons of cocoa butter each year,

valued at about $348 million. One study estimates a

possible net return of $3,200 per hectare per year after

5 years.

Social considerations: Chinese tallow will grow on more

marginal lands. Since it is a perennial and requires a

long time to yield, it may be more suitable to plantation

type of growth.

Extent of research conducted: The Small Business

Innovation Research program of the National Science

Foundation (flowering, biology, ecology, and genetics), the NRRC (oil characterization), and the Short

Rotation Woody Crops Program of the Department of

Energy (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 percent of the dry weight of the plant are resins.

Replacement: Wood rosins

Major uses: Could be used in rubbers and chemicals.

Agronomic characteristics: Baccharis is a member of

the Composite family. The genus consists of over 300

species of dioecious, sometimes evergreen shrubs,

which are native to North and South America. The

genus contains arid-adapted species. Baccharis pilularis 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 grow

it in Tucson, Arizona, were unsuccessful due apparently to a sensitivity to high temperatures and low

humidity in combination with overwatering. Baccharis

sarothroides is better adapted to the drought, heat, cold,

and high salinity of its native Sonoran Desert environment.

Technical considerations: Hybrids of B. pilularis and B.

sarothroides have been achieved. All of the hybrid

plants obtained displayed pistillate (female) sexual

expression. Excess production of pappus on female

plants is a nuisance and a fire hazard, and staminate

(male) sexual expression is preferred. Research is

needed in this area as well as in the production yields

of resins.

Economic considerations: Currently, annual U.S. production of rosin, is about 600 million pounds. High

quality wood rosin comes from aged pine stumps, but

this supply is diminishing. Tapping of live trees to

obtain gum rosins is very labor intensive and expensive, and production from this source is also declining.

Currently, U.S. production of rosins comes mainly

from recovery of tall oils, byproducts obtained from the

manufacture of chemical wood pulp. It is estimated that

the United States consumption of resin will be 781

million pounds (355 million kilograms) by the year

1990.

Social considerations: Baccharis tolerates arid conditions and requires less irrigation than crops that are

currently grown in the Southwest.

Extent of research conducted: In 1975, at the University

of Arizona, Tucson, B. pilularis and B. sarothroides

were crossed to achieve an interspecific hybrid, which

combined the arid land adaptability of B. sarothroides

with the compact growth of B. pihdaris. The hybrid was

released by the University of Arizona Experiment

Station as an ornamental shrub, under the name of

Centennial.

SOURCES: 43

Crambe

Scientific name: Crambe abyssinica

Major compounds produced: The seeds are 30 to 45

percent oil, 50 to 60 percent of which is erucic acid, a

C22 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, foam

suppressants, and lubricants. Potentially, the oil could

be hydrogenated to yield a hard wax that could be used

in cosmetics and candles. Oxidative ozonolysis of

erucic acid yields brassylic acid and pelargonic acid.

Brassylic acid can be transformed into a liquid wax for

use in high-pressure lubricants and industrial paints

and, to make industrial nylons, such as nylon 1313, for

use in electrical insulation, automobile parts, and other

high-temperature applications. Pelargonic acid can be

used in lacquers and plastics. The protein meal could be

used as a livestock feed or as an adhesive for plywood.

Agronomic characteristics: Crambe is a member of the

Cruciferae family and is native to the Mediterranean

region. It is planted in the spring, has a short growing

season of 90 to 100 days, and can be grown in all of the

48 lower states of the United States. Crambe tolerates

dry conditions well but will not tolerate heavy, wet

soils. Seed yields in experimental plots have ranged

between 1,000 to 2,500 lb/acre, with the Meyer cultivar

yielding 2,163 lb/acre. Commercial yields are expected

to be about 1,500 lb/acre. Delayed harvest can lead to

seed shattering.

Technical considerations: There appears to be no

technical barriers to the direct substitution of Crambe

oil for high erucic acid rapeseed oil. Crambe is

susceptible to the fungus Alternaria brassicicola and

turnip mosaic virus, and broadleaf weeds can be a

problem. Currently there are no herbicides approved

for use on Crambe; approval for Treflan is being

sought. The seeds are very small and very lightweight,

placing a premium on proper seed handling. Leakproof equipment may be needed. The seeds are covered

by a hull which must be removed prior to processing.

Dehulling equipment similar to that used for sunflower

seeds is needed. A lack of cold-tolerant varieties

diminishes the opportunity to plant Crambe as a winter

crop in the Southeast. Crambe seeds can contain up to

8 percent glucosinolates, sulfur-containing compounds

attached to glucose molecules, which have been linked

to thyroid disturbances, liver damage, throat abscesses,

appetite depression, tongue swelling, and abortion.

Meal with high levels of glucosinolates can generally

be fed to beef cattle (ruminants), but not to swine and

poultry. The U.S. Food and Drug Administration has

approved crambe meal (obtained by solvent extraction)

use in beef finishing ratios at concentrations of less than

4.2 percent of the total weight of the ration.

Economic considerations: World production of rapeseed

oil has increased nearly 35 percent since 1984, although

much of that increase is due to canola (edible) quality

oil, and not industrial-quality oil. The current U.S.

market for high erucic acid oil is approximately 40

million pounds per year. Most of this oil is used to

produce erucamide, used as an antislip agent in plastics.

An estimated 65,000 to 85,000 acres of Crambe is

needed to supply this market. Development of a market

for industrial nylons made from brassylic acid is

estimated to require planting of nearly 300,000 acres.

The estimated production costs per acre, in the

Midwest (including land, but excluding transportation

costs beyond the farm gate and farm management and

risk charges), are $147, Crambe/winter rapeseed will
78 ● Agricultural Commodities as Industrial Raw Materials

compete with winter wheat in the Plains Region. Net

earnings of wheat, deficiency payments included, are

about $200 per acre. Estimated processing costs for

rapeseed oil range between $0.16 and $0.31 per gallon

of oil depending on seed volume and oil content,

processing plant size, extraction method used, and

whether the plant was newly constructed or retrofitted

to process rapeseed. Because Crambe oil content is less

than rapeseed, and the seeds must be dehulled before

processing, it is expected that processing costs for

Crambe will be slightly higher than for rapeseed.

Social considerations: Crambe will grow in drier areas

than rapeseed and may therefore be more suitable for

growth in the Plains Region of the United States.

Fertilizer needs are comparable to wheat.

Extent of research conducted: Both Crambe and winter

rapeseed are crops that the Office of Critical Materials

(OCM) is actively trying to commercialize. Congress

has appropriated $325,000 for fiscal year 1989 to be

used for this purpose. Eight States (Missouri, Kansas,

New Mexico, Idaho, Iowa, Nebraska, North Dakota,

and Illinois) have formed a consortium in cooperation

with the OCM to perform research necessary to lead to

commercialization. Funding by these States is estimated to be $2 for every $1 of Federal support.

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

Cuphea

Scientific name: Cuphea species

Major compounds produced: The seeds are from 25 to

as much as 40 percent oil. Some species have oil that

contains up to 80 percent lauric acid, a C12 saturated

fatty acid. Other species contain high levels of CIO fatty

acids such as capric acid. The meal is high protein.

Replacement: Imported coconut oil (lauric acid, capric

acid) and imported palm kernel oil (lauric acid).

Major uses: Currently, palm oil and coconut oil are used

both as edible oils and for industrial purposes, primarily in soaps and detergents (as surfactants) and in

lubricants.

Agronomic characteristics: The Cuphea genus is a

member of the Lythraceae family and consists of

approximately 250 species native to Mexico and

Central and South America. One species, Cuphea

viscosissima, is native to the United States. Several

species are adapted to temperate climates. Experimental plots have yielded 250 to 2,000 lb/acre of seed (280

to 2,240 kg/ha). There are both insect and selfpollinated species.

Technical considerations: The major problems are seed

shattering and seed dormancy. Seed yield per se does

not appear to be a significant problem, but because of

the inability to retain the seeds, harvesting is difficult

and yields diminished. Hundreds of populations in

several species of Cuphea have been sampled, but so

far none have demonstrated genetic variability for seed

retention. Chemical mutagenesis of seeds to induce

genetic variation for seed shattering has been attempted. The results have been disappointing thus far.

Seed dormancy in some species has made it difficult to

grow populations large enough to continue further

evaluations. Species that are insect pollinated have long

floral tubes, which preclude access by honeybees to the

nectar. Suitable insect pollinators have not been found,

causing the discontinuation of research on most of the

insect-pollinated species of Cuphea. Cuphea oil is

colored, but this appears to be a minor problem that can

be alleviated during processing, if required. It is not

known whether the meal contains any antinutritional

elements that would prevent its use as a livestock feed.

Because Cuphea is projected as a domestic source of

lauric acid (a very well-established market), extensive

utilization research may not be necessary. If the

problem of seed shattering cannot be overcome, it is

unlikely that Cuphea could be commercialized.

Economic considerations: Coconut oil is the major

source of lauric acid, but over time, it has been losing

market share due to erratic supplies caused by adverse

weather conditions and declining productivity of aging

coconut plantations in the Philippines. Some new,

higher yielding varieties of coconut palms have been

developed and are beginning to be planted. It is

expected that when these trees mature, coconut oil

production will increase. An alternative source of lauric

acid is palm kernel oil from Malaysia and Indonesia.

Production of both palm oil and palm kernel oil is

increasing and potentially could increase significantly

more, largely due to increased planting of new varieties

of the African palm, which produce high yields of oil,

can be grown in marginal lands, and are highly resistant

to pests and diseases. It is expected that supplies of

palm oil and palm kernel oil will increase substantially

when these new varieties mature. The increased production of palm kernel oil coupled with coconut oil is

expected to double the supply of lauric acid oils by

1995.

Currently the United States uses about 650 million

pounds of tropical (palm, palm kernel, and coconut)

oils for food uses (about 5 percent of the U.S. edible oil

market). This level of use is about 35 to 40 percent of

the total U.S. imports of tropical oils; the remaining

imports are for industrial uses. Europe consumes higher

levels of tropical oils for food uses than does the United

States; increased consumer concern over saturated fats

in Europe could potentially decrease European demand. Industrial uses will need to increase significantly

to prevent a worldwide glut of lauric acid oils, if supply

of palm kernel and coconut oil continues to increase,

while the demand for edible uses of these tropical oils

decreases.
Appendix A-Selected New Industrial Crops ● 79

Oversupply would result in depressed prices for

these oils and for potential domestic substitutes such as

Cuphea. Higher lauric acid yields for Cuphea (80

percent) than for coconut oil (40 to 45 percent) may

result in a premium for Cuphea oil. However, higher

transportation and processing costs might offset some

of this premium if Cuphea is grown in the Northwest.

An alternative option for commercialization of Cuphea

might be to be to develop the species that are high in

capric acid instead of those high in lauric acid. Coconut

oil contains only 3 to 7 percent capric acid. Although

the market for capric acid is smaller than for lauric acid,

capric acids fetch higher prices. Thus, varieties higher

in capric acid might be more attractive.

Social considerations: Cuphea is intended to be an

import substitute for tropical oils (coconut and palm

kernel oil). These crops are major exports of Indonesia,

Malaysia, and the Philippines, developing countries

that are of some strategic importance to the United

States. The possible impact that loss of these markets

might have on the economic stability of these countries

is not well-understood.

Extent of research conducted: Early research on Cuphea

was conducted at the University of Gottingen in

Germany. Beginning in 1983, breeding, genetics, and

agronomy research was undertaken in the United

States. Initial germplasm collections (267 accessions)

were made at the USDA/ARS Water Conservation Lab

in Phoenix, Arizona. Currently, the germplasm program has been moved to the ARS Laboratory in Ames,

Iowa, and has been expanded to include accessions

from 50 to 60 Cuphea species. A germplasm collection

expedition to South America is being planned. In

addition to germplasm collection, researchers at Ames,

in conjunction with Iowa State University, are attempting to improve the nutritional content of Cuphea seeds.

There may be some potential to use these seeds as food

supplements for infants and the elderly. Researchers at

Oregon State University are attempting to develop

cultural management practices, prevent seed shattering,

and increase the lauric acid content of the oil. Some

financial support for Cuphea research at Oregon State

University is being provided by the Glycerine and

Oleochemical Division of the Soap and Detergent

Association. The USDA is contributing approximately

$100,000 to the project. Some research is conducted at

the ARS Laboratory at Tifton, Georgia, to improve

agricultural and management practices, and some work

is being conducted at ARS Laboratory in Phoenix,

Arizona, to develop hybrids. It is estimated that there

are approximately four scientist-years total being

devoted to Cuphea research, Research hours are being

allocated among three USDA/ARS positions (one each

at 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 tetragonobla

Major compounds produced: The seeds produce a gum.

The meal is 35 to 50 percent protein, which contains

toxins and is low in lysine.

Replacement: Imported guar

Major uses: Currently used as a strengthening agent in

paper, and as a stabilizer in cosmetics, ice cream, salad

dressings and oil-drilling muds.

Agronomic characteristics: Guar is a leguminous herb

that grows well in semiarid regions, and can be grown

in areas of the Southwestern U.S. It tolerates alkaline

and saline conditions, and when it receives sufficient

rain (15.7 to 35.4 in or 40 to 90 cm) yields of 625 to 805

lb/acre (700 to 900 kg/ha) seed can be obtained. Guar

does not tolerate cold. The growing season ranges from

105 to 150 days. The plant itself could be used for

forage.

Technical considerations: A major difficulty with guar

is its susceptibility to a variety of pests and diseases

including the fungus Alternaria, the bacteria Xanthomonas, and root knot nematodes. There is also a need

to improve yields.

Economic considerations: U.S. imports of guar seeds

have been decreasing. This decrease may be in part

because production of guar is already occurring in the

United States and production needs of the country may

be close to being met. There may not be a need for

expansion of guar production, unless export markets or

new uses can be developed. (See table D-5 in app. D for

Us. imports of guar.)

Social considerations: Guar is a legume and has nitrogen-fixing qualities.

Extent of research conducted: Not extensive.

SOURCES: 43

Guayule

Scientific name: Parthenium argentatum

Major compounds produced: Guayule produces a

high-molecular-weight rubber and resins that are extracted from the whole plant.

Replacement: Imported Hevea rubber and synthetic

rubber

Major uses: High-molecular-weight rubber is particularly valuable in uses which require elasticity, resilience, tackiness, and low heat buildup such as in tires;

resins can be used in the chemical industry; extraction

residues could potentially be used as livestock feed.

Agronomic characteristics: The genus Parthenium includes 17 species, all native to North or South America.

Both annuals and perennials are known. Guayule is the

most studied species. It is native to the Chihuahua

desert region of the Southwestern United States and
80 ● Agricultural Commodities as Industrial Raw Materials

Northern Mexico and produces a high-quality rubber

similar to Hevea. In wild stands, rubber percentages

have ranged between 3.6 and 22.8 percent of the dry

weight, and resin yields have ranged between 2.5 and

9.8 percent by dry weight of plant tissue.

Technical considerations: The major difficulty with

guayule is the yield of rubber. Rubber accumulation

seems to be a factor of geoclimatic conditions, with

water and temperature stress stimulating rubber production. Recently researchers have found the enzyme

(rubber polymerase) responsible for synthesizing rubber. This enzyme can be stimulated to produce higher

levels by spraying certain chemicals on its leaves, so

some of the yield problems might be overcome.

Guayule has been crossed with other species of

Parthenium, most notably with P. fruticosum, to obtain

a hybrid. The hybrid contained a lower percentage of

rubber than guayule, but the biomass of the hybrid was

higher than that of guayule, indicating that total rubber

production of the hybrid might be greater than for

guayule. In addition, high-molecular-weight rubber

(high-quality natural rubber) dominates low-molecular-weight rubber, indicating that the hybrid can

produce high-quality natural rubber. Successive generations of crosses, however, displayed decreasing seed

germination percentage. Improving seed germination

and direct seeding procedures are needed.

Guayule differs from both Hevea and other latexproducing plants in that the rubber is contained in

single thin-walled cells located on the stems and

branches of the shrub. This results in the need for a

physical or chemical separation of the rubber from

other components in the harvested shrub. Excessive

handling results in decreased rubber quality. Improvements are needed in harvesting technology. In addition

to problems of yield, large-scale testing of the highmolecular-weight rubber in tires is needed, and uses for

coproducts, low-molecular-weight rubber, and other

chemical components need to be developed.

Economic considerations: Guayule is intended to replace natural rubber imports from Asia, primarily from

Malaysia and Indonesia. From 1983 to 1987, U.S.

imports of rubber have averaged 777,000 metric ton per

year, and price per pound was about $0.39. It is

estimated that for guayule to be competitive with

natural rubber, prices for rubber must double, or

guayule yields must increase to about 1,200 pounds of

rubber per acre. Markets for byproducts also must be

found, and production and processing costs must be

lowered by at least one-third their present levels. These

changes are expected to result in a positive cash flow

for farmers and to make guayule competitive with

natural rubber, but they may not necessarily make

guayule competitive with other crops that could be

grown.

Social considerations: Guayule tolerates arid conditions

and requires less irrigation than crops that are currently

grown in the Southwest. Guayule appears to be more

suited to large scale production than production on

small farms. Because of the volume involved, the

special processing needs, and the fact that natural

rubber is a strategic material, guayule may require

building new processing plants, which would create

new jobs.

Extent of research conducted: Guayule has been used

for centuries by native Americans, and by 1910,

guayule provided 10 percent of the world’s supply of

natural rubber. From 1910 to 1946, the United States

imported approximately 68 million kg of guayule

rubber from Mexico. During World War II, interest in

research and development of guayule rubber was high

in the United States. However, after the war ended,

shipments of Hevea rubber from Asia resumed, synthetic rubbers were developed, and interest in guayule

was 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 Indian

Community (GRIC) to grow several hundred acres of

guayule, develop a prototype rubber-processing plant,

and develop rubber to be tested. Due to several

problems encountered by GRIC, USDA took over the

project in 1986. The GRIC continued to grow the

guayule, and the Firestone Rubber & Tire Co. was

contracted to build an $8.3 million prototype processing plant. The plant was scheduled to begin operations

in August of 1989, following a 16-month delay due to

solvent leaking into the atmosphere. The pilot-plant

size is about 150 ton/yr and will provide rubber for

DoD testing and coproduct research. The plant is

intended to process 275 acres of guayule into 50 tons

of natural rubber, 100 tons of resins and low-molecularweight rubber, and 1,600 tons of plant residue. There

are approximately 300 acres of guayule available for

processing, but rubber yields may be low because the

plants ideally should be harvested at 3 to 5 years of age

and they are now 9 to 10 years old.

Agronomic and breeding research is being conducted at the University of Arizona, University of

California-Riverside, Texas A&M University, and

New Mexico State University. Coproduct research is

being conducted by the Institute of Polymer Science at

the University of Southern Mississippi. Investments

between 1978 and September 1986 have been about

$31.9 million, with the DoD providing $13.1 million,

USDA providing $13.2 million, other Federal agencies

providing $2.9 million, and the Firestone Tire & Co.

providing $2.7 million. Investments for 1987 to 1988

were $19.3 million, with $15 million from DoD and the

rest 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 Latex

Grants being administered by CSRS. The Latex Grants

are being spent as follows: $240,000 for breeding and

genetics research, $160,000 for germplasm collection

and research, $150,000 for coproduct research, and

$138,000 for unspecified research. It is estimated that

about $38 million will need to be spent between 1989

and 19% to establish a domestic natural rubber

industry.

SOURCES: 2,26,28,32,34,46,47

Gumweed

Scientific name: Grindelia camporum

Major 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 dry

weight are crude resins with highest concentration in

the flowers. After extraction, the bagasse residue is

nontoxic and contains 8 to 10 percent protein.

Replacement: Pine resins

Major uses: The resins are used in the naval stores

industry (generic name for large class of chemicals

including turpentine and wood rosins). Uses for these

resins include adhesives, varnishes, and paper sizings.

The residue could be used as livestock feed.

Agronomic characteristics: Grindelia (a member of the

Composite family) consists of about 195 species of

herbs and shrubs native to North and South America.

Many of the species are found in the Southwestern

United States. Commonly called gumweed, the genus

consists of annuals, biennials, and perennials.

Gumweed is xerophytic and halophytic. It is most

active during hot rainless summer months and can

flower and produce two crops in a single growing

season. It is probably unsuitable to the cooler climates

and shorter growing seasons found in more humid

regions of the United States. The species most studied

is Grindelia camporum, a native of the Central Valley

in California. Gumweed needs about 30 in (67.5 cm) of

precipitation to produce reasonable yields. Yields in

experimental plots have been about 2.2 to 2.5 tons of

biomass per acre and up to 5 tons/acre if harvested

twice.

Technical considerations: Grindelia are naturally outcrossing species and are self-incompatible. Genetic

selection for traits in outcrossing species often results

in problems of inbreeding depression. With Grindelia,

it maybe possible to increase resin yields, but it would

beat the expense of biomass, resulting in a total resin

yield that is not significantly higher. Increased yields

will be necessary for commercial feasibility, but may

be difficult to obtain.

Economic considerations: Currently, U.S. production of

rosin is about 600 million pounds. High-quality wood

rosin comes from aged pine stumps, but this supply is

diminishing. Tapping of live trees to obtain gum rosins

is very labor intensive and expensive, and production

of gum rosins from this source is declining. Currently,

U.S. production of rosins comes mainly from recovery

of tall oils, byproducts obtained from the manufacture

of chemical wood pulp. It is estimated that U.S.

consumption of resins will be 781 million pounds (355

million kg) by the year 1990.

The estimated cost of growing Grindelia is about

$380 per acre. This includes 30 inches of irrigation, a

quantity lower than the requirements of currently

grown crops in the production region. If the crop is

harvested twice, approximately 5 tons of biomass per

acre per year could be achieved. Assuming a double

harvest and a processing cost of $35 per ton, the total

cost of production is estimated to be $555 per acre.

Given a resin content of 10 percent, the break-even cost

would be about $0.56 per pound. The current cost of

wood rosin is about $0.40 per pound. The cost of the

Grindelia resin is higher than wood rosin. Grindelia

resin also is of a lower quality than wood rosin and

would have to be further refined to be similar in quality.

To achieve economic feasibility, yields will need to be

higher, production costs lower, and uses for the bagasse

byproduct, perhaps as livestock feed, would be needed.

Social considerations: Grindelia tolerates arid conditions and would require less irrigation than crops that

are currently grown in the Southwest.

Extent of research conducted: The National Science

Foundation funded the collection and evaluation of 10

to 15 species of Grindelia from the Southwestern

United States. In 1982, a population of 300 plants was

started at the University of Arizona’s Bioresources

Research Facility in Tucson. Private-sector funding

from the Diamond-Shamrock Corp. and from Hercules,

Inc. has supported product evaluation and development

research at the University of Arizona.

SOURCES: 16,25,29,44

Honesty (Money Plant)

Scientific name: Lunaria annua

Major compounds produced: The seeds are 30 to 40

percent oil, and contain approximately 48 percent

erucic acid, 24 percent C24 fatty acids, 18 percent oleic

acid, (all monounsaturated) and 10 percent other fatty

acids. The meal is high protein.

Replacement: Imported industrial rapeseed.

Major uses: Currently, erucic acid and its derivatives

erucamide and behenylamine are used in plastics, foam

suppressants, and lubricants. Potentially the oil can be

hydrogenated to yield a hard wax, which could be used

in cosmetics and candles. Oxidative ozonolysis of

erucic acid yields brassylic acid and pelargonic acid.

Brassylic acid can be transformed into a liquid wax for

292-865 0 - 91 - 4 QL:3
82 ● Agricultural Commodities as Industrial Raw Materials

use in high-pressure lubricants and industrial paints,

and it can be used to make industrial nylons, such as

nylon 1313, for use in electrical insulation, automobile

parts, and other high-temperature applications. Pelargonic acid can be used in lacquers and plastics. The

protein meal could be used as a livestock feed or as an

adhesive for plywood.

Agronomic characteristics: Honesty is a member of the

Cruciferae family and consists of both annual and

biennial varieties. Initiation of flowering requires long

daylight hours in the annual varieties and cold winters

in the biennials. Seed yield estimates are unavailable.

Technical considerations: This plant is still essentially

a wild plant and an extensive breeding effort is needed

before commercialization could even be contemplated.

The meal contains glucosinolates which have been

linked to several physiological problems.

Economic considerations: The potential oil markets are

essentially the same as for Crambe and winter rapeseed

(i.e., 40 million pounds of high-erucic acid oils used to

produce primarily erucamide).

Social considerations: It is a perennial that provides

ground cover and potential protection against erosion.

Extent of research conducted: Most research to date has

been at the Saskatchewan Research Council in Canada.

SOURCES: 21,22,36,46

Jojoba

Scientific name: Simmondsia chinensis

Major compounds produced: The seeds contain 45 to 55

percent oil, 95 percent of which is in the form of linear

wax esters (fatty acids connected directly to fatty

alcohols instead of to glycerol or glycerides). Eightyseven percent of the fatty acids are of chain length 20

or 22 (eicosanoic acid is C20 and docosanoic acid is

C22), and there are small quantities of palmitoleic acid

(C18) and oleic acid (C16). The fatty acids are monounsaturated. The meal that remains after oil extraction

is about 30 percent protein, reasonably high in lysine,

and deficient in methionine.

Replacement: Banned sperm oil and possibly petroleumderived products.

Major uses: Currently, jojoba oil is being used in the

cosmetics industry in a variety of uses ranging from

shampoos to moisturizers, lipsticks, and shaving

creams. It is apparently non-toxic and does not cause

eye irritations. Isomerization of jojoba oil yields a soft

opaque cream resembling face creams.

Hydrogenation produces a crystalline solid, which

has properties resembling beeswax, candelilla, carnauba, and spermaceti, all waxes that are commercially

used now. Crystallographically, hydrogenated jojoba

oil is similar to polyethylene and can be combined with

either polyethylene or polypropylene or both to yield

mixed plastics that have lower melting points and are

harder than the pure plastic, plus still retain the tensile

strength of the pure plastic.

Sulfurized jojoba oil is similar to sulfurized sperm

oil and could potentially be used as a high-pressure

lubricant. A major difficulty is that it solidifies at

temperatures below 50 0

F (10 ‘C) limiting it to

high-temperature applications. Before being banned,

sperm oil was used to prevent foaming in industrial

fermentation processes, such as the production of

penicillin G. Jojoba oil also has antifoaming properties

and could potentially be used in similar processes.

Reactions of jojoba oil with sulfur chloride forms

factice, which is used in manufacturing varnishes,

adhesives, printing ink, and flooring materials.

Jojoba waxes could possibly be used in floor

finishes, coatings, furniture polishes, candles, soaps,

crayons, and so forth. The seeds contain tannins that

could potentially be extracted and used in the leather

industry.

Agronomic characteristics: Jojoba is an evergreen

native to the Sonoran Desert region of the Southwestern United States and Mexico. It appears to live at least

40 years. Latitude and day length do not appear to be

limiting factors. Jojoba can grow with 8 to 18 inches

(20 to 46 cm) of annual precipitation, but for economic

production, jojoba should receive 18 to 24 inches (46

to 61 cm) of precipitation, which might require

irrigation. It requires porous soil with good drainage

and will not tolerate water logging. Jojoba grows in

soils ranging from pH 5 to 8 and appears to be tolerant

of salinity. In the wild state, jojoba plants are associated

with a symbiotic fungus (Glomus deserticola) found in

the roots. It is thought that this fungus aids in the uptake

of phosphorus, zinc, copper, and other elements.

Current average seed yields are approximately 200

pounds/acre (224 kg/ha) from 4-to 5-year-old-shrubs,

and 3,000 pounds/acre (3,360 kg/ha) from 11- to

12-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 male

or female and are wind pollinated. However, male and

female 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 of

female plants is needed. This can cause fields to be

nonuniform and creates problems with harvesting.

Today, most new fields are planted from cuttings or

tissue cultures rather than seeds, which helps to reduce

or eliminate the problems of identifying males and

females. Flowering is triggered by cold or drought

stress. A cool fall, followed by a warm wet winter can

cause early flowering. If the weather then turns cold (25 0

F or lower during the blooming season of January to

March), the crop could be lost. Jojoba can tolerate high

temperatures (greater than 100o

F), but not prolonged

temperatures of below 23 O

F. Weed control appears to
Appendix A--Selected New Industrial Crops . 83

be more of a problem than pests and diseases, but as

more 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 time

requiring multiple harvests. The meal contains simmondsins and tannins which are unpalatable to livestock and potentially toxic. Utilization research performed has been experimental; to be accepted for

industrial uses, full-scale utilization research must be

performed. Yields need to be improved.

Economic considerations: Currently, the United States

plants nearly 42,000 acres to jojoba and produces

between 100 to 300 tons of jojoba oil per year. Total

U.S exports have been 70 MT in 1985, 134 MT in 1986,

and 124 MT in 1987. Japan imports approximately 100

tons and West Germany and the Netherlands together

import another 100 tons for use in the cosmetics

industry. Value of exports per pound have been steadily

decreasing from approximately $8.50 in 1985 to about

$6.50 in 1987.

Social considerations: Jojoba grows in arid regions and

requires minimal irrigation. Since it is perennial with

long payoff times for investment, it may be better

suited to large-scale production than small-farm production.

Extent of research conducted: Research on jojoba is

conducted at university and ARS labs in the Southwest,

particularly the Arid Land Studies at the University of

Arizona.

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 in

lignin.

Replacement: Wood pulp

Major 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, nonwood fiber plant native to east-central Africa. It grows

to heights of 12 to 18 feet in approximately 150 days.

It can yield between 6 and 10 tons of dry matter per

acre. Seed germination requires soil temperatures of at

least 55 ‘F. It is somewhat tolerant of saline conditions.

Rainfall of about 5 inches is needed shortly after

germination to ensure good growth, but after that, kenaf

is relatively tolerant of dry conditions.

Technical considerations: Weeds generally are not

considered a problem because of kenaf’s rapid emergence and growth; the dense populations needed result

in shaded ground conditions. However, favorable

conditions are needed to promote this rapid growth, and

pre-emergent herbicides maybe needed. Kenaf thrives

in high temperatures when abundant soil moisture is

available, however, it will not tolerate standing water

or water-logged soils. The most serious pest kenaf faces

is root nematodes. Most kenaf cultivars are photoperiod

sensitive and do not flower until day length decreases

to about 12.5 hours of light in the fall. Kenaf may

require nitrogen, phosphorus, potassium, and calcium

inputs. In very dry areas, some irrigation may be

needed.

In the Southern Rio Grande Valley, initial experiences indicate that rain-fed kenaf produces about 75

percent of irrigated yields. Research to improve harvesting equipment is needed. Development of uniform

size and shape is still needed. Storage needs to be

improved. The system envisioned is a cross between

that used for wood chips and that used to store bagasse.

Because of heat buildup, added attention must be paid

to air circulation and/or water cooling.

Major research is still needed to develop products

that use kenaf. It has been shown that kenaf can be used

to make newsprint. The newsprint made from kenaf is

generally whiter and stronger than paper made from

wood pulp, and it does not yellow as badly. Kenaf can

be converted to pulp under high temperature and

pressure. Making newsprint from kenaf requires fewer

chemicals and about two-thirds the energy needed to

make wood pulp newsprint. Kenaf newsprint uses less

ink and does not smudge as much as wood pulp

newsprint. Kenaf improves the strength and brightness

of recycled paper.

Economic considerations: The United States imports

approximately 7 million tons (60 percent of total use)

of newsprint a year at a cost of about $4 billion.

Constructing this much production capacity would

require a large capital investment as it costs approximately $400 million to erect a 600 ton/day capacity

plant, which would produce about 0.2 million tons of

newsprint per year.

New technologies are opening the way for trees not

previously used for newsprint (i.e., aspen and fastgrowing eucalyptus) to now be converted to newsprint.

Increased recycling of newsprint will require less new

wood pulp. Additionally, paper mills are accustomed to

working with year-round crops, such as trees, and have

large investments in forests. Because of high transportation costs, paper mills generally process material in

the immediate area. Utilizing a seasonal crop such as

kenaf presents problems. Failure of a kenaf crop could

result in high transportation costs to supply adequate

processing materials. The potential for crop failure will

place a higher priority on storage facilities, which

increases the costs of using kenaf.

Kenaf can be used as a supplement to pine for pulp

mills already in existence. It is estimated that it will cost
84 ● Agricultural Commodities as Industrial Raw Materials

approximately $10 million to install equipment needed

to utilize kenaf in conjunction with softwood or

recycled newsprint pulp at current mills. For kenaf to

supply the entire U.S. newsprint market of 12.5 million

tons of newsprint per year, approximately 1 million

acres would need to be planted to kenaf.

Uses other than newsprint need to be found. Since

newsprint represents about 7 to 10 percent of the pulp

and paper industry, there are likely many other

opportunities that could potentially be developed. In

addition to uses as paper and cardboard, kenaf could

potentially be used as poultry litter (broiler producers

spend about 0.3 cents per pound live weight on litter,

and in 1987, poultry production was about 21.5 billion

pounds).

Production costs for kenaf average about $20 to $30

per ton, and the cost of harvesting is about $10 to $15

per ton. Currently it is anticipated that farmers will be

contracted to grow kenaf and that harvesting will be

custom done because of requirements for cleanliness of

the product. Kenaf is expected to sell for $50 to $60 per

ton. Comparison of estimated returns of kenaf and other

crops in Georgia indicate that kenaf (both irrigated and

non irrigated production) is expected to have lower net

returns than tobacco, cotton, and peanuts (irrigated and

nonirrigated) and higher net returns than sorghum,

wheat, and oats (irrigated and nonirrigated). Nonirrigated kenaf is expected to have slightly higher net

returns than nonirrigated corn, but irrigated kenaf is

estimated to have lower net returns than irrigated corn.

In the Rio Grande Valley region of Texas, kenaf is more

competitive with other crops, particularly the grains.

Deficiency payments for cotton decrease the competitiveness of kenaf, but nevertheless, it is felt that the

most likely area for initial production of kenaf on a

commercial basis will be in Texas.

Social considerations: There is potential for some new

mills to be built, particularly if production occurs in

Texas, and this has the potential to create new jobs and

economic activity in those areas. Kenaf stalks are

harvested free of leaves, with the leaves remaining in

the field. This could result in 1 to 2 tons of dry leaf

matter, which is rich in nitrogen, left on the field.

Potentially, 60 to 120 pounds of nitrogen per acre could

be returned to the soil in the form of organic matter.

Extent of research conducted: Research on kenaf began

in 1956 at the Northern Regional Research Center in

Peoria, Illinois (an ARS lab). Over 500 fiber crops were

screened, and kenaf was selected as the most promising

for further research. In 1978, ARS dropped its research

program on kenaf with the hope that private industry

would continue the research since it had been shown

that newsprint could be made from kenaf.

The American Newspaper Publishers Association

did continue some research and began commercial runs

of newspapers printed on kenaf paper. The kenaf

demonstration project was begun to commercialize

kenaf. The ARS and the CSRS in cooperation with

Kenaf International, Canadian Pacific Forest Products,

and CE Sprout-Bauer Co. joined to form the Joint

Kenaf Task Force (JKTF). Phase I of the demonstration

project began in 1986 with the USDA providing

$141,000 and the JKTF members providing $263,000

for growing, harvesting, fiber handling, pulping, and

papermaking trials. Phase II was begun in 1987 and

undertook commercial trials. The estimated cost to the

JKTF was $644,000, with the USDA providing

$300,000 of that support. Phase III is currently

underway and involves agricultural research and research to develop additional uses for kenaf.

Congress appropriated $675,000 in funds for fiscal

year 1989. The money is being spent as follows:

$150,000 each to the ARS labs in Weslaco, Texas, and

Lane, Oklahoma; $75,000 to Mississippi State University; $300,000 administered by the CSRS for fiber

separation ($200,000), harvest system modification

($20,000), dry-form fruit boxes ($50,000), recycling

research ($20,000), and poultry litter research ($10,000

to Texas A&M). The Kenaf Paper Co. of Texas

(consisting of Kenaf International, Bechtel Enterprises,

Inc., and Sequa Capital Corp.) has begun construction

on a $35 million plant in Willacy County, Texas. The

plant will handle 84 tons/day, produce approximately

30,000 tons of newsprint annually, and require 4,500

acres of kenaf. The plant is expected to begin full

operation is 1991 and to employ about 160 people.

SOURCES: 4,7,9,23,24,29,41,45,46,48,54

Meadowfoam

Scientific name: Limnanthes species

Major copounds produced: The seeds are 20 to 30

percent oil, containing 90 percent C2O and C22 fatty

acids, which are primarily monounsaturated. Of the

diunsaturated fatty acids, the double bonds are widely

separated, 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 to

liquid wax esters, which can be used in lubricants.

Reacting the oil with sulfur yields factice, a solid

chemical rubber. Meadowfoam could potentially be a

source of suberic acid, which is currently obtained from

castor oil.

Agronomic characteristics: Meadowfoam is native to

the Pacific Coast Region of North America.. It is planted

in the fall and harvested in June or July. Meadowfoam

is best suited to mild climates; seed germination occurs

in soil temperatures that range between 40 and 60 o

F.

Some meadowfoam species are insect-pollinated,

while others are self-pollinated.
Appendix A--Selected New Industrial Crops ● 85

Technical considerations: Self-pollinated meadowfoam

species are generally agronomically preferable, however those that have been examined have given lower

yields and display less genetic variation than insectpollinated species. No suitable self-pollinated species

have been found, thus attention is focused on insectpollinated species, such as Limnanthes alba, which

displays genetic variation for seed retention. Seed

shattering is a serious problem with several species.

Cool, wet weather may decrease insect activity, decreasing pollination. Yields need to be improved to

increase commercial potential.

The major constraint for meadowfoam is the lack of

a well-defined market. The fatty acids found in

meadowfoam oil are not a replacement for any fatty

acids currently being used. Initial tests of use in

lubricants have revealed problems of corrosion, foaming, and wear scarring. Extensive utilization research is

needed to develop meadowfoam. The meal contains

glucosinolates, which causes physiological problems

when ingested. The oil is colored and needs to be

cleaned, when desired. The lack of a large germplasm

collection has limited research.

Economic considerations: Limited attempts to grow

meadowfoam commercially have been made. In 1986

and 1987, approximately 1,000 acres of the meadowfoam variety Mermaid were planted in Oregon. Due to

the lack of appropriate processing facilities, the seeds

were shipped to Lubbock, Texas, for oil extraction,

then shipped to California for export to Japan.

In 1985 to 1986, the Oregon Meadowfoam Growers

Association sold 12 tons of oil to Nikko Chemical Ltd.

of Japan. An additional 3 tons of oil was shipped to the

same company in 1986 to 1987. Croda, Japan, an oil,

fats, and chemical supplier has also purchased approximately 3 tons of meadowfoam oil. In February 1989,

Croda, Japan received permission from the Japanese

Ministry of Health and Welfare to use meadowfoam oil

in cosmetics. Toxicology and skin-sensitivity tests

have been performed in the United States, and no major

problems have thus far been encountered.

Farmers appear unwilling to grow meadowfoam if

there is no well-defined market, and manufacturers are

unwilling to reformulate their procedures if there is not

a consistent high-quality supply. In addition to the

amounts of oil exported to Japan, samples have been

sent to Canadian firms and the European Economic

Community for market development. Currently the

Oregon Meadowfoam Growers Association has a 1

year stock of oil and seeds on hand.

Total processing and transportation costs are $0.55

per pound of oil (compared with about $0.03 per pound

for soybean oil). Production costs were about $440 per

acre.

Social considerations: Different species of Limnanthes

are adapted to poorer soils and some act as xerophytes

and require less water than other grains grown in the

same area.

Extent of research conducted: Most of the industrial

application research is performed at the Northern

Regional Research Center in Peoria. Researchers at

Oregon State University are working on varietal

improvement and commercial development. The ARS

is spending approximately $350,000 on meadowfoam

research at Peoria and Oregon State.

SOURCES: 5,22,31,36,43,46

Milkweed

Scientific name: Ascelepidaceae genus

Major compounds produced: Latex can be extracted

from the whole plant. The latex produced is mainly

cardiac glycosides, which are generally cytotoxic and

affect the heart, lungs, kidneys, gastrointestinal tract

and brain. Nonpolar (hexane) extracts constitute about

4 percent of the above-ground dry weight and consist

primarily (85 percent) of triterpenoids and derivatives

and 2 percent natural rubber. Polar (methanol) extracts

account for about 18 percent of the dry weight and

contain primarily sucrose (34 percent), polyphenolics

(6 percent) and inositol (5 percent). The remaining

residue after extraction contains pectin and is about 16

percent protein. The protein content of the residue is

comparable to that of alfalfa, and contains high levels

of lysine, but also contains toxic constituents.

Replacement: Petroleum-derived products

Major uses: The latex can be used in glue and chewing

gum. The floss fiber can potentially be used to replace

goosedown.

Agronomic characteristics: The Asclepiadaceae genus

contains about 140 species. Most of the species native

to North America are perennials, although a few

annuals are known. Asclepias curassavica is planted as

an ornamental plant in semitropical and semiarid

regions. Asclepias speciosa (showy milkweed) is

widely tolerant of habitat and could be grown in the

United States in most of the area west of the Mississippi

River. It produces more latex than A. curassavica.

Technical considerations: A major difficulty with establishing millkweed is that of weed control. During the

seedling stage, much energy is devoted to root establishment which aids in drought tolerance but results in

the slowly growing, above-ground portion being noncompetitive with faster growing weeds. The average

yields of the test plots were about 4.3 MT/ha, but

increasing the planting density is expected to increase

yields to about 7 to 9 MT/ha. Outdoor, uncovered

storage resulted in a significant decrease in methanol

(polar) extractable compounds, but the nonpolar (hexane) compounds remained stable. Better storage methods resulted in little loss of either extractable.
86 ● Agricultural Commodities as Industrial Raw Materials

Economic considerations: Experimental plots of milkweed, using wild milkweed seed, had variable production costs of $169 per acre ($418 per hectare). Highest

expenditures were for weed control. Reduction in the

costs of weed control would significantly reduce

production costs. In addition, harvesting costs were

high, but could potentially be lowered by growing on

larger plots to take advantage of economies of scale for

machinery. Both pectin and inositol are high-value

products produced by milkweed, but extraction and

purification is expensive and not commercially competitive at the present time.

Social considerations: Milkweed is itself considered a

weed and production may need to be carefully managed

to prevent it from becoming a pest.

Extent of research conducted: Native Plants, Inc.

conducted some initial research on milkweed, but has

discontinued research. The University of Nebraska

conducts research on the fiber floss,

SOURCES: 1,52

Rapeseed

Scientific name: Brassica napus

Major compounds produced: The seeds are approximately 42 percent oil, of which 45 to 57 percent is

erucic 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, foam

suppressants, and lubricants. Potentially, the oil could

be hydrogenated to yield a hard wax, which could be

used in cosmetics and candles. Oxidative ozonolysis of

erucic acid yields brassylic acid and pelargonic acid.

Brassylic acid can be transformed into a liquid wax for

use in high-pressure lubricants and industrial paints

and, can be used to make industrial nylons, such as

nylon 1313, for use in electrical insulation, automobile

parts, and other high-temperature applications. Pelargonic acid can be used in lacquers and plastics. The

protein meal could be used as a livestock feed, or as an

adhesive for plywood.

Agronomic characteristics: Rapeseed is a member of the

Cruciferae family. It can be grown either as a winter or

a spring crop and potentially could be double cropped

in the Southeast and southern Midwest regions. Generally, it can be grown anywhere that spring and winter

wheat is grown. Rapeseed cannot tolerate extreme cold,

and the winter varieties have a restricted planting

period. The seedlings must be 2 to 3 inches high before

the first frost if they are to survive. Rapeseed does not

tolerate poorly drained soils; high rainfall can reduce

yields. Expected average commercial yields of winter

rapeseed are about 2,000 lbs/acre under dryland

conditions and about 3,000 lbs/acre when irrigated.

Spring variety yields are about one-half that of the

winter varieties,

Technical considerations: Two types of rapeseed can be

grown: industrial-quality rapeseed and food-quality

rapeseed. Food-quality rapeseed is marketed as Canola

oil and generally contains less than 2 percent erucic

acid, while industrial-quality rapeseed generally contains at least 40 percent erucic acid. Canola-quality rape

and industrial-quality rape cross pollinate resulting in

a hybrid that is visually indistinguishable from the

parents, but that contains an intermediate level of erucic

acid (too high for food uses and too low for industrial

uses). Production of the two types of rapeseed must be

physically separated. To combat the problem, States

such as Washington and Idaho have established rapeseed production districts.

Rapeseed is highly susceptible to flea beetles,

cutworms, and various fungi. Asynchronous flowering

can result in variable seed maturity, with some mature

pods shattering while other pods are still green, causing

harvesting difficulties and yield loss. The meal contains glucosinolates and has restricted use as a livestock

feed.

Economic considerations: World production of rapeseed

oil has increased nearly 35 percent since 1984 (see table

C-2, app. C). Most of the rapeseed grown are low erucic

acid, low glucosinolate varieties used primarily for

edible oil (Canola), however Eastern Europe and

Canada produce significant amounts of industrialquality rapeseed also. The supply appears to be

relatively stable due to the large number of producers

so that adverse conditions in one country do not

necessarily result in a severe supply shock for rapeseed

oil. Current U.S. demand for industrial-quality rapeseed (approximately 40 million pounds) is mainly for

erucamide and would require an estimated 50,000 acres

of domestically produced rapeseed. Development of

markets for brassylic acid, such as for the industrial

nylon 1313, could increase the demand for high-erucic

acid oil sufficiently to require planting of nearly

300,000 acres.

Social considerations: About 3,000 to 8,000 acres of

winter rapeseed are annually grown in Idaho. The large

increase in imports of rapeseed oil over the last few

years is due mainly to increases in Canola-quality and

not industrial-quality rapeseed oil (table D-3, app. D).

Winter rapeseed provides ground cover over the winter

and may decrease soil erosion.

Extent of research conducted: The Office of Critical

Materials (OCM) is actively trying to commercialize

winter rapeseed. Congress has appropriated $325,000

for fiscal year 1989 to be used for this purpose. Eight

States (Missouri, Kansas, New Mexico, Idaho, Iowa,

Nebraska, North Dakota, and Illinois) have formed a

consortium in cooperation with the OCM to perform

research necessary to lead to commercialization. These
Appendix A--Selected New Industrial Crops ● 87

States are providing an estimated $2 for every $1 of

Federal support for this research.

SOURCES: 19,27,35,36,38,42,46,49,51

Stokes Aster

Scientific name: Stokesia laevis

Major compounds produced: The seeds contain 27 to 44

percent oil, with 64 to 79 percent of the oil consisting

of vernolic acid, a fatty acid that contains an epoxy

group. The meal is high protein.

Replacement: Conversion of oils containing nonepoxy

fatty acids, such as soybean, sunflower or linseed, into

epoxy fatty acids. Replacement for petroleum-derived

epoxy compounds.

Major uses: Currently, epoxy fatty acids are used

primarily in the plastics and coatings industries. The

epoxy groups of fatty acids act as plasticizers (to

provide flexibility) and as stabilizers (by inactivating

agents that might cause degradation). In general, the

epoxy sites are highly reactive sites where adjacent

triglyceride molecules attach to form interlocking

polymer networks.

Agronomic characteristics: Stokes aster is a member of

the Composite family. It is a perennial native to the

Southeastern U.S. and could potentially be grown in the

eastern half of the United States and the Pacific

Northwest. Potential seed yield has been estimated to

be 1,780 lb/acre (2,000 kg/ha).

Technical considerations: Very little agronomic work

has been done on stokes aster, and it is still essentially

a wild plant. A well-defined market for epoxy fatty

acids exists, but the epoxy fatty acids obtained from

stokes aster are not identical to those obtained by

conversion of sunflower, linseed, or soybean oil, or

those derived from petroleum. Quality control and

utilization research is needed.

Economic considerations: Approximately 100 to 180

million pounds of soybean and linseed oil are converted

to epoxy fatty acids annually. While the raw material is

relatively inexpensive, the chemical transformation of

the fatty acids contained in sunflower and soybean oil

to epoxy fatty acids is relatively expensive.

Social considerations: As a perennial, stokes aster has

potential implications for erosion control.

Extent of research conducted: Apparently little research

is being performed on this species.

SOURCES: 20,22,33,36,46

Vernonia

Scientific name: Vernonia anthelmintica and Vernonia

galamensis

Major compounds produced: Seeds from V anthelmintica 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 73

percent vernolic acid. Meal from V. galamensis contains 42.5 percent crude protein, 10.9 percent crude

fiber, and 9.5 percent ash.

Replacement: Conversion of oils containing nonepoxy

fatty acids, such as soybean, sunflower, or linseed, into

epoxy fatty acids. Replacement for petroleum-derived

epoxy compounds. Replacement for organic solvents

in paints.

Major uses: Currently epoxy fatty acids are used

primarily in the plastics and coatings industries. The

epoxy groups of fatty acids act as plasticizers (to

provide flexibility) and as stabilizers (by inactivating

agents that might cause degradation). In general, the

epoxy sites are highly reactive sites where adjacent

triglyceride moleeules attach to form interlocking

polymer networks. Research is being conducted to use

Vernonia as a diluent for alkyld resin paints.

Agronomic characteristics: Vernonia species are members of the Composite family. V. anthelmintica is

native to India, and V. galamensis is a herbaceous

annual from Africa. Attempts to grow V. anthelmintica

in the United States have thus far been unsuccessful,

causing researchers to begin focusing their attention on

V. galamensis. Yields of V. galamensis in Zimbabwe

have been as high as 2,290 pounds of seed/acre.

Technical considerations: Seed shattering has been a

problem with Vernonia, but recently a wild species has

been discovered with good seed retention, which may

alleviate this problem. Photoperiodism may limit

production in temperate regions. Short days are required for flowering, but in colder climates, short days

are soon followed by frost, which prevents seed

formation. A variety that flowers earlier has been

found, so this problem may be overcome, The meal

from Vernonia species contains antinutritional agents

such as vernolepin, which may limit use as a livestock

feed. The meal from V. anthelmintica was found to be

deficient in methionine and lysine and could no be used

as livestock feed without additional amino acid supplements. Meal from V. galamensis has higher levels of

lysine, methionine, and phenylalanine than meal from

V. anthelmintica, but feeding studies have not been

conducted.

Economic considerations: Approximately 100 to 180

million pounds of soybean and linseed oil are converted

to epoxy fatty acids annually. While the raw material is

relatively inexpensive, the chemical transformation of

the fatty acids contained in sunflower and soybean oil

to epoxy fatty acids is relatively expensive. About 325

million gallons of alkyld resin paints are used in the

United States each year. Vernonia oil could be used as

diluent in place of organic solvents in these paints.

Expected use is one pint of oil per gallon of paint.
88 . Agricultural Commodities as Industrial Raw Materials

Social considerations: Vernonia is a potential replacement for industrial uses of soybeans. It could be used

to reduce volatile organic compounds resulting from

solvents used in paint, with positive impact on air

quality.

Extent of research conducted: Vernonia was identified

by the original USDA/ARS screening in the 1950s. The

Northern Regional Research Center has conducted

some utilization research. Trial plantings of Vernonia

were made in Georgia in 1964, but little interest was

expressed in developing this species. Recent agronomic research has been conducted in East Africa and

the Carribean rather than in the United States. Utilization research is being conducted at the Coatings

Research Institute at Eastern Michigan University. The

California South Coast Air Quality District, the U.S.

Agency for International Development, the State of

Michigan, and Paint Research Associates (an industryfinanced research group) are providing $425,000 for

this research. Some research is also being conducted at

Lehigh University.

SOURCES: 8,18,33,36,37

Appendix A References

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

Adarns, Robert P., ‘‘Chemicals From Arid/Semiarid Land

Plants: Whole Plant Use of Milkweeds,” PZants: The

Potential for Extracting Proteins, Medicines, and Other

Use@l Chemicals—Workshop Proceedings (Washington,

DC: U.S. Congress, Office of Technology Assessment,

OTA-BP-F-23, September 1983).

AgBiotechnology News, ‘‘Breakthrough in Guayule Rubber

Production,” January/February 1990, pg. 19.

Arkcoll, David, “LaUric Oil Resources,” Economic Botany, vol. 42, No. 2, April-June 1988, pp. 195-205.

Bosisio, Matt, U.S. Department of Agriculture, Agricultural

Research Service, ‘Kenaf Paper: A Forest Saving Alternative,” Agricultural Research, October 1988, pp. 6-8.

Bosisio, Matt, U.S. Department of Agriculture, Agricultural

Research Service, “Meadowfoam: Pretty Flowers, Pretty

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Appendix A-Selected New Industrial Crops . 89

29.

30.

31.

32.

33.

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35.

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38.

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54

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TMPI Journal, November 1987, pp. 81-83.
Appendix B

Selected Industrial Uses for Traditional Crops

Diesel Fuel From Vegetable Oils

Crop: Sunflowers, soybeans, potential new crops such as

rapeseed

Major coproducts: Oil, meal, and potentially glycerol

Major uses: The oil can be used as diesel fuel, and the

meal as livestock feed. Glycerol is a widely used

chemical.

Replacement: Diesel fuel derived from petroleum products. The United States uses approximately 40 billion

gallons of diesel fuel yearly, with about 3 billion

gallons used for agricultural purposes.

Technical considerations: Chemical and physical composition of the oil determines fuel characteristics. In

general, highly unsaturated oils break down faster than

saturated oils, but increased saturation leads to solidification at near-room temperatures. Unsaturation is

desirable for maintaining liquidity at low temperatures,

but undesirable for stability. Ignition quality (cetane

number) generally is lower for vegetable oils than for

diesel fuels, and vegetable oils have lower heat of

combustion. The most serious problem related to using

vegetable oils as diesel fuel is their viscosity. Viscosity

is critically dependent on temperature, and the viscosity

of vegetable oils is more affected by temperature than

the viscosity of diesel fuels. The pour points of

vegetable oils are also higher than those of diesel fuels,

which could create problems in colder climates.

Vegetable oils can be used straight or blended with

diesel fuel. Short-term testing of oilseed fuels indicated

that these fuels were roughly equivalent to diesel fuel.

Fuel consumption was higher because vegetable oils

have a lower heat of combustion than diesel fuel.

Longer-term tests have had problems of deposit

buildup in the combustion chamber and injector nozzle

(due to the poor thermal stability of vegetable oils) and

piston ring sticking and engine failure (due to decreased fuel atomization and combustion efficiency),

particularly in direct-injection diesel engines, the most

common type of diesel engine used in the United

States. Problems have not been as serious in indirectinjection diesel engines.

Alternatively, vegetable oils can be converted to

monoesters, by reacting the oil with alcohol in the

presence of a catalyst. Three monoester molecules and

a glycerol molecule are obtained from each triglyceride

(the process is similar to deriving fatty acids from oils

to be used for plastics, soaps, lubricants, etc.). The

resulting ester fuels have viscosities similar to those of

diesel fuels and also tend to vaporize in a manner more

similar to diesel fuel. Short-term tests using methyl

esters of rapeseed oil in direct-injection diesel engines

appeared not to result in the carbon deposit buildup that

occurs with the blends or straight vegetable oils. Using

ethyl esters of various degrees of saturation in shortterm tests indicated that the unsaturated esters resulted

in more coking than the saturated esters. Longer term

testing of monoesters derived from soybean oil results

in a polymerization and varnish buildup in the cylinder

walls. Methyl esters tend to crystallize at 4 to 5° C,

requiring storage and transport in heated vessels. Ethyl

esters have better low-temperature properties but have

higher conversion costs due to water contamination

problems.

The land needed to supply enough oil for agricultural

diesel use alone could be a constraint. Oilseeds that are

high yielding and contain a high percent of oil are

preferable. Potential candidates are peanuts (40 to 45

percent 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 20

percent oil). Peanuts and cottonseed are unlikely

candidates for economic reasons. Safflower and rapeseed currently are grown only in small quantities;

production would need to be greatly expanded. Soybeans and sunflowers are the likely candidates. Average U.S. sunflower yields are about 600 pounds oil per

acre, while soybeans yield about 400 pounds per acre.

For sunflowers to supplant soybeans as a major oil

source, expansion of production is necessary.

Economic considerations: The value of soybeans and

sunflowers depends on the value of both the oil and the

protein meal produced. The ratio of oil to meal

produced, and the percent of the value of the oilseed

accounted for by the oil, will in large part determine the

supply response of the oilseed to an increased demand

for the oil and the economic competitiveness of using

that oil for fuel. Soybeans may be self-limiting because

more than 60 percent of the value is for the meal.

Supplying more soybean oil also results in a greater

supply of meal, which decreases the price of the meal.

Production will occur up to the point where the

increases in oil price offset the decreases in meal prices,

unless new markets for meal can be found. These

impacts may be more significant for on-farm rather

than off-farm processing.

For sunflowers, it is possible to produce enough oil

to replace diesel fuel use without producing excessive

meal for on-farm livestock use. Unfortunately, sunflower meal is low in lysine and cannot fully supply the

protein requirements of livestock particularly pork and

poultry. Farmers would still need to purchase higherlysine-protein meal, such as soybean meal, or amino

acid supplements. This to some extent decreases the

-90-
Appendix B--Selected Industrial Uses for Traditional Crops ● 91

attractiveness of on-farm extraction of sunflower seeds.

Whether a combination of sunflowers and soybeans is

possible is not clear.

The cost of converting sunflower oil to fuel-grade

methyl esters is about $1.00 per gallon. A 25 gallon/

hour plant can produce fuel-grade sunflower oil-methyl

ester for about $3.25 per gallon, a price about three

times higher than diesel fuel.

Social considerations: On-farm extraction of oils potentially could have negative impacts on employment,

particularly in the oil processing and transportation

industries. Increased centralized processing could potentially increase employment in these industries. Total

replacement of agricultural uses of diesel fuel would

result in small petroleum savings because this market

represents about 1 percent of total petroleum use.

Conversion of soybeans to fuel uses will decrease

agricultural exports unless increased markets for the

meal can be found. Edible-vegetable-oil prices will

likely increase. Vegetable oils are expected to burn

cleaner and cause less air pollution than diesel fuels.

SOURCES: 15,19,24,34

Soybean Uses

Crop: Soybeans

Major coproducts: Oil, flour, and protein

Major uses: The flour is used to make adhesives, mainly

for plywood. The oil is used in alkyd paints, as a

plasticizer and stabilizer in vinyl plastics, as an

antifoamant in fermentation processes, as a carrier for

printing ink, as a carrier for agricultural chemicals, and

to control grain dust in elevators. The protein is used to

make adhesives that bind pigment to paper in the

coating process. Historic uses, which are no longer

available, include the use of soybean fiber to make

blankets, upholstery, and other textiles (marketed as

Azlon), and the oil combined with lime and sprayed

through an aerator nozzle for extinguishing fires.

Replacement: Petroleum-derived products

Technical considerations: Historically, soybeans have

been used for all of the above uses, but have been

replaced by petroleum products primarily for economic

reasons. Some of the technical problems include a lack

of water resistance for the flour adhesives and poor

durability, peeling, and scaling of paints, which limits

them to indoor use. Today, about 7,000 tons of soy

flour and 8,000 tons of soy protein are used to make

adhesives. Each year, approximately 120 million

pounds of oil are used in the plastics and resins industry

and about 40 million pounds of oil are used in the paint

and varnish industry.

Soy inks were developed by the American Newspaper Publishers Association in 1985. Soy inks are clear

so the pigment shows better and they do not smudge as

much as petroleum inks. Newspaper publishers use

about 500 million pounds of ink each year which would

require approximately 350 million pounds of oil.

Approximately one-third of the U.S. newspapers are

using soy-based inks for color printing.

Soybean oil used in small volumes (0.02 percent by

weight) 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 appear

to affect odor, grade, drying characteristics, mold

growth, or milling and baking qualities, and there may

be some improvement in insect control.

Economic considerations: Food and livestock-feed uses

keep the price of soybeans high enough that use for

industrial purposes is often precluded. The situation

could change if the price of petroleum increases.

Soy oil ink cost 50 to 60 percent more than

petroleum-based ink, because more steps are involved

in its manufacture (i.e., it costs about 90 cents per

pound compared to petroleum-based inks, which cost

about 60 cents per pound). For color inks, however, the

cost of the color pigments is the major cost, and soy

inks have gained in this usage. Also, more papers can

be printed per pound of soy ink than convential ink

because the color pigments blend better with soy oil

than pretroleum-based oil and thus, can be applied in a

thinner layer.

SOURCES: 3,5,16,20,28,34,38

Road De-icers

Crop: Corn primarily, but potentially other starch or

lignocellulose sources

Major coproducts: Starch, oil, and protein feeds

Major uses: Road deicer

Replacement: Road salt

Technical considerations: Calcium magnesium acetate

(CMA) is made by reacting acetic acid with dolomitic

limestone. The acetic acid can be obtained by fermentation of corn, however, at present, no large-scale plants

exist. The Chevron Co. has marketed CMA. Determination of the optimal bacterial strain for acetic acid

production is needed. Approximately 60 bushels of

corn are needed to make 1 ton of CMA.

Economic considerations: Acetic acid can be obtained

from corn fermentation (or starch or cellulose from

other sources) or petroleum sources. Estimates are that

using corn priced at $2.80 per bushel would result in

production costs of 18 to 19 cents per pound of CMA.

This is 7 to 8 times the cost of road salt. CMA bound

to sand to increase traction costs about 10 times more

than road salt. Utilizing ground corn cobs as the feed

stock instead of corn kernels might lower the cost to 12

to 14 cents per pound of CMA. There does not appear

to be a significant difference in costs of production

utilizing anaerobic (without oxygen) or aerobic bacterial fermentation. It is estimated that an economical size
92 ● Agricultural Commodities as Industrial Raw Materials

plant would have a capacity of 500 tons/day and a

yearly capacity of about 150,000 tons. This size plant

would utilize 9 million bushels of corn per year, with

45,000 tons of distillers dried grain as a byproduct. The

U.S. uses about 10 million tons of salt per year.

Capturing 10 percent of this market would utilize 60

million bushels of corn.

Social considerations: Significant expanded production

could increase corn prices, and create dried distillers

grains that would compete with soybean meal in the

high-protein livestock feed market. A major attraction

of CMA is that it has less negative environmental

impacts than salt. It is less harmful to animals and the

soil than salt, and is 10 times less corrosive. Estimated

costs of vehicle corrosion and damage to roads and

bridges caused by salt are about $5 billion yearly.

SOURCES: 12,21

and the fact that ethanol derived from corn fermentation

varies greatly in price because of variability in corn and

byproduct prices will make widespread use of this

technology difficult at the current time. There is also

some concern that increased burning of coal will

increase carbon dioxide levels.

Research conducted: A joint venture is being conducted

by Southern Illinois University-Carbondale (SIU-C),

the Illinois State Geological Survey (ISGS), the

Univeristy of North Dakota Energy and Environmental

Research Center, Ohio University, and Eastern Illinois

University. Funding is provided by the Illinois and

Ohio Corn Marketing Boards, ISGS, SIU-C, the Illinois

Department of Energy and Natural Resources, and the

U.S. Department of Energy.

SOURCES: 21,45

Super Absorbants

Coal Desulfurization

Crop: Corn primarily, but potentially other starch or

cellulose sources

Major coproducts: Ethanol, oil, and protein feeds

Major uses: Coal desulfurization

Replacement: Scrubbers and other sulfur removers

Technical considerations: Carbon monoxide and either

ethanol or methanol can be used to remove sulfur from

coal. One ton of processed coal produces 1/2 barrel of

crude oil, 25 pounds of carbonyl sulfide (used in

agrichemicals and pharmaceuticals), 35 pounds of

hydrogen sulfide (used in pharmaceuticals), 8.3 gallons

of acetaldehyde (used to make either acetic acid or

acetone), and iron sulfide, which can be burned for

heat. Currently, testing at a 1 to 10 pound/hour scale is

occurring. The next stage will be to test at the 30 to 100

pound/hour scale and if the procedure continues to look

promising, construction of a pilot plant to process

2,000 pound/hour will begin. Funding will be sought

from the Clean Coal Technology Program (Department

of Energy) for plant construction.

Economic considerations: A 1986 study by the Center

for Research on Sulfur in coal estimated the cost of the

carbon monoxide ethanol method to be $134 per ton of

coal ($5.02 per million Btu). In 1986, the cost of

low-sulfur coal was $49.70 per ton. Improvements in

technology are needed to significantly lower the cost.

The ethanol used could potentially be derived from

corn. About 8 gallons of ethanol are required to process

one ton of coal (about 3 bushels of corn).

Social considerations: The United States has large

deposits of coal, which potentially could be used in

place of petroleum. However, much of the coal contains

sulfur, which can lead to acid rain when burned.

Removing the sulfur is expensive. An economical

method to remove sulfur would allow coal to be used

in place of petroleum. However, technical difficulties

Crop: Corn

Major 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 used

in disposable diapers (about 200 million pounds/year)

and as a burn treatment. They are also being used in fuel

filters to remove water. They could also be used as a

seed coating to increase germination, as an agricultural

chemical delivery system, and as a soil conditioner.

Technical considerations: As a soil conditioner, corn

starch polymers bind soil particles into stable aggregates, which results in better aeration and increased

water penetration and retention. There are two types of

polymers used: 1) hydrogels and 2) water-soluble

linear polymers. Hydrogels are polymers crosslinked to

adjacent molecules so that the structure is insoluble in

water. They act like a sponge, absorbing 50 to 400

times their weight in water and delivering 40 to 95

percent of the water to plant roots. They increase the

water-holding capacity of sandy soils and reduce

frequency of irrigation. Soil moisture supply is more

constant. Water-soluble linear polymers are large

chains of repeating units. They do not hold water.

Rather, they bind soil particles together to form lattices

and as such maintain soil in a loose and friable state.

The bound soil particles are stable in water. There is

less evaporative loss because the top layer of polymertreated soils acts like a mulch. Besides cornstarch, guar

polysaccharides and lignin can be used to make the

polymers.

Modified corn starch can be used as an encapsulating

agent for active ingredients such as herbicides. The

advantages of encapsulation are: 1) extension of

activity, 2) reduction of evaporative and degradative

loss, 3) reduction of leaching, and 4) decrease in the

dermal toxicity of the active agent. Encapsulation
Appendix B-Selected Industrial Uses for Traditional Crops . 93

involves dispersing the starch in aqueous alkali followed by crosslinking reactions after the active agent

has been interspersed. Corn starch can be used as an

entrapment agent for both solid and liquid active

agents. The efficiency of encapsulation and rate of

release of active agents depends on starch type,

temperature and concentration of starch during gelatinization, amount of active agent incorporated, and

method of drying. Preliminary data indicates that

herbicides encapsulated in corn starch are less mobile

in soil and could potentially reduce the possibilities of

groundwater pollution. One technical goal is the

elimination of chemicals used to form the matrix

because these chemicals prohibit using many encapsulated products for food or livestock feed.

Economic considerations: Byproducts of corn grown for

starch compete with soybeans in the livestock feed

market. Price for the starch-based products will fluctuate with the price of corn and the value of these feed

byproducts.

Social considerations: There is some potential to decrease groundwater contamination by using encapsulated pesticides. Livestock feed byproducts will compete with soybeans.

Research conducted: Northern Regional Research Center in Peoria, Ill.

SOURCES: 6,18,41,43

Ethanol

Crop: Corn primarily, but potentially other starch or

lignocellulose sources

Major coproducts: Two production methods are utilized: dry-mill and wet-mill corn processing. In dry-mill

processing, the corn is ground, slurried with water, and

cooked. Enzymes convert the starch to sugar, and yeast

ferments the sugars to a beer that contains water,

alcohol, and dissolved solids. The solids are dried and

sold as dried distillers grain (a livestock feed). The

remaining beer is distilled and dehydrated to form

anhydrous ethanol, with CO2 as a byproduct. One

bushel of corn produces approximately 2.5 to 2.6

gallons of ethanol and 18 pounds of dried distillers

grain.

In wet-mill processing, corn kernels are soaked in

water and sulfur dioxide, and the portions of the corn

kernel other than the starch are removed. These

portions are used to make corn oil, corn gluten feed (20

to 21 percent crude protein) and corn gluten meal (60

percent crude protein), which can be used as highprotein livestock feeds. The almost pure starch that is

left is converted to sugar, then fermented and distilled

to produce ethanol and CO2

. Because the wet-mill

production process is identical to the process used to

produce high-fructose corn syrup through the starch

phase, 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 of

ethanol, 2.5 pounds of gluten meal, 12.5 pounds of

gluten feed and 1.6 pounds of corn oil. In 1985,

approximately 60 percent of the nearly 800 million

gallons of ethanol produced came from wet-mill plants.

Major uses: Either as a fuel, a fuel extender, or as an

octane enhancer.

Replacement: Gasoline

Technical considerations: Vehicle problems have been

encountered with ethanol/gasoline blends. Altering the

volatility level is required to prevent warm-weather

stalling. First-time use in older cars can result in fuel

filter clogging because ethanol is a solvent that

dissolves built-up gums and deposits already in the

system. Blends might separate in the presence of water.

Use is not recommended for vehicles left idle for long

periods such as recreational vehicles. Most automobiles have now been adjusted to minimize such

problems.

Ethanol production needs to be improved. In the near

term, three new technologies show promise: 1) replacement of yeast with Zymomonous mobilis bacteria, 2)

membrane separation of solubles, and 3) yeast immobilization. Z. mobilis ferments faster than yeast, and

tolerates a greater temperature range. It also has a

higher selectivity for producing ethanol and gives

greater yields. Membrane separation of solids reduces

energy requirements by removing as much as 40

percent of the water prior to boiling. Membrane

clogging is a problem. Immobilization allows the sugar

or starch solution to be passed over the enzymes,

bacteria, or yeast. Use of the enzymes and yeast is

maximized, and contamination concerns are reduced

by eliminating yeast recycling. Immobilization is

applicable only to wet-milling because it requires a

clarified substrate.

If ethanol production is to be increased significantly,

feedstocks other than corn will be needed. Alternatives

are high-starch or cellulosic biomass. Potential cellulosic candidates include forage crops (e.g., alfalfa

stems or fescue), crop residues (e.g., corn stalks), or

municipal wastes (e.g., wood chips or sugar beet pulp).

Attempts are being made to identify microorganisms

that convert wood hemicellulose into high yields of

sugar and alpha cellulose. New processes that increase

the efficiency of converting cellulose to sugars are

being developed.

Economic considerations: Large plants (annual capacities of 100 to 150 million gallons) are able to capture

economies of scale in both the production and marketing of the fuel. Small plants (0.5 to 10 million gallons

annually) can be profitable under conditions such as: 1)

location in areas of limited local grain production and

high transportation costs to major grain markets, 2)

joint location with food processing or other industrial
94 ● Agricultural Commodities as Industrial Raw Materials

facilities where fermentable wastes are produced, or 3)

location near a feedlot where byproducts can be fed

directly to livestock without drying.

Costs of ethanol production are highly variable

because of fluctuating prices for corn and byproducts.

Feedstock costs (the net of the price paid for the corn

and the credit received for selling the byproducts) have

ranged from $0.10 to $0.79 per gallon of ethanol in

recent years. Other cash operating expenses, such as

labor, energy, and administration, have ranged from

$0.35 to $0.65 per gallon of ethanol depending on the

size of the plant. Energy costs average about 36 percent

of the cash operating expenses. Investment costs to

build an ethanol plant range from $1.00 to $2.50 per

gallon of installed capacity. Construction of a new

dry-mill plant with 40-million-gallon annual capacity

is about $2.00 to $2.50 per gallon capacity. Adding

ethanol production capacity to a wet mill already

producing high-fructose corn syrup costs about $1.00

to $1.50 per gallon capacity. It is estimated that the

capital charge per gallon of ethanol produced is $0.19

to $0.48. For a stand alone (ethanol production only)

plant, total production costs (feedstock costs, cash

operating costs, and capital costs) have ranged from a

low of $0.75 per gallon (in a year with exceptionally

high byproduct prices) to an average of $1.40 to $1.50

per gallon. Ethanol production at high-fructose corn

syrup production plants can reduce production costs by

as much as $0.20 per gallon.

Currently, gasoline/ethanol blends (required minimum of 10 percent ethanol) are exempted from 6 of the

9 cents Federal excise tax on gasoline, which is

equivalent to a 60 cent per gallon subsidy for ethanol.

Additionally, 28 states offer state fuel tax exemptions

or producer subsidies which average 20 to 30 cents/

gallon. Using corn priced at $2.00 per bushel, and

maintaining Federal subsidies, ethanol is competitive

with petroleum at $22 to $24 per barrel in plants using

the average technology available, at $20 per barrel in

new state-of-the-art wet-processing milks, and at $13

per barrel at extensions of high-fructose corn syrup

mills. Removal of the Federal excise tax exemption and

corn prices of $2.50 per bushel implies that petroleum

prices of about $40 per barrel are needed for ethanol to

be price competitive with gasoline.

Ethanol yields from cellulosic biomass have been

increased from about 40 gallon/ton of biomass to 60

gallon/ton. Approximate cost is $1.50 to $2.00 per

gallon. Wood used for energy is both lower valued and

more expensive to harvest because harvesting operations are geared to removing large logs. Improvements

in harvesting would lower costs. Collecting agricultural residues is also expensive. Municipal wastes may

offer the best feedstock source. Currently, ethanol

production 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 with

ethanol as an octane enhancer. Currently, MTBE sells

for about $0.70 per gallon. Ethanol sells for $1.20 per

gallon, but because of the 60 cents per gallon Federal

subsidy, ethanol is less expensive than MTBE. MTBE

production costs are sensitive to the price of methanol

and butanes. Most production expansion is likely to

occur in oil-producing regions, which can take advantage of low-cost methanol supplies. Refiners who have

already committed to internal production of MTBE are

likely to continue using it rather than ethanol. Use of

ethanol is further discouraged by the need to physically

separate it from gasoline to prevent phase separation.

Independent fuel distributors who do not use pipelines

for fuel transport and who must purchase high-octane

blending agents are likely to be the primary customers

of ethanol for octane enhancement. Passage of the

Clean Air Act which mandates use of oxygenates to

reduce pollution in some cities may enhance the

position of ethanol relative to MTBE.

Increased production of ethanol affects the corn

market, the oilseed market, and potentially the livestock and other grains markets. Ethanol production

raises corn prices and decreases the price of soybean

meal because of the high quantity of gluten feeds

produced as a byproduct of ethanol production. Falling

soybean prices and rising corn prices cause a shift of

acreage from soybean to corn production, particularly

in the Corn Belt. It is unlikely that livestock production

will be significantly affected unless ethanol production

exceeds 3 billion gallons annually because increased

corn prices would be offset by decreased proteinsupplement prices. Above 3 billion gallons, lower

byproduct-feed prices would possibly result in increased beef production. Large-scale expansion of

ethanol production is unlikely unless exemption from

federal excise taxes are guaranteed at least through the

year 2000 (the exemption is due to expire in September

1993). Without the continuation of the exemption,

ethanol production is not expected to exceed 1.1 billion

gallons. With the exemption continued through 2000,

ethanol production could expand to a level of 2.7

billion gallons by 1995, which would trigger higher

corn prices and use an additional 800 million bushels

of corn. Increased production of protein byproducts

would require finding export markets if the byproducts

are to maintain their value. Passage of the Clean Air Act

is expected to create additional incentives for the use

and expanded production of ethanol.

Social considerations: Environmental concerns have

renewed interest in alternative fuels. The Clean Air Act

mandates that states implement plans to control emissions 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 pollutants

are found in motor vehicle emissions. Because ethanol

contains oxygen, addition of ethanol to gasoline

increases the air-to-fuel ratio, and carbon monoxide

and hydrocarbon emissions are decreased. Nitrogen

oxide emission levels increase. Addition of ethanol to

gasoline increases fuel volatility and thus increases the

emission levels of volatile organic compounds, which

in the presence of sunlight form ozone. MTBE also

reduces carbon monoxide without increasing fuel

volatility.

Significant changes in aggregate farm income for

grain producers as a result of market price changes is

unlikely to occur because of the impact of the

commodity support programs. For corn producers,

ethanol production would need to increase to the 3 to

4 billion gallon range by 1995 to exceed corn target

prices if they remain at current levels. Large increases

in ethanol production would benefit corn producers,

and possibly other grain producers, but harm soybean

producers. Because of differences in regional production patterns, there could be significant interregional

impacts. The Corn Belt could gain, and the Delta

Region and Southeast could lose.

A U.S. Department of Agriculture Economic Research Service study found that if commodity programs

in the 1990 farm bill remain similar to those in the 1985

Food Security Act and the Federal excise tax exemption is extended through the year 2000, then expanding

ethanol production to the 2.7 billion gallon level would

result in Federal commodity program savings exceeding federal ethanol subsidies through 1994. After that,

ethanol subsidies exceed farm program savings. Furthermore, by the year 2000, the cumulative cost of the

ethanol subsidies exceeds the cumulative savings of the

commodity programs.

Estimates are that production of 3 billion gallons of

ethanol would increase direct employment by 3,000 to

9,000 jobs. No estimate was made for indirect employment impacts or for employment that may be lost in

other sectors of the economy.

SOURCES: 2,10,12,13,22,36,39,40,46

Degradable Plastics

Crop: Corn primarily, but other starch or cellulose

sources are possible

Major products: Starch, oil, and protein feeds

Major uses: Degradable plastics

Replacement: Nondegradable plastics

Technical considerations: First generation degradable

plastics are generally of two types; photodegradable

and/or biodegradable. Photodegradable plastics degrade in the presence of ultraviolet light and are

produced by adding photosensitive agents (e.g., photosensitive transition-metal salts or organometallic compounds) or by forming copolymers with photosynthetic

groups (e.g., carbonyl groups). Photodegradable sixpack rings, films, and bags are commercially available.

Biodegradable plastics are designed to degrade in the

presence of microorganisms. The most common

method used incorporates starch and usually some

autooxidants (i.e., compounds that form free radicals

that accelerate polymer chain break down) into the

plastic. Early products generally contained about 7

percent starch because this was the maximum loading

many plastic polymers could handle without processing or equipment changes. Newer methods are using

higher starch levels. The U.S. Department of Agriculture has, for instance, developed a method that mixes

dry starch or starch derivatives with dry synthetic

plastic, water, sodium hydroxide, and urea. Plastics

containing as much as 50 percent cornstarch can be

made, but durability decreases. Biodegradable plastic

bags and agricultural mulches are commercially available.

Another possible approach is the formation of starch

(or lignin or cellulose) copolymers with plastics.

Radiation or chemicals can be used to generate free

radicals (reactive sites) on the starch molecule. These

free radical sites are then reacted with a polymerizable

monomer (a building block for plastics), which is then

polymerized. Alternatively, in place of using free

radicals, a third polymer compatible with both the

synthetic plastic and the lignin, starch, or cellulose is

used. This third polymer links to each of the other two

polymers to forma stable bond. The physical properties

of these copolymers, particularly water volubility,

depend on the nature of the synthetic plastic used.

Hydrophilic polymers, such as polyacrylamide, will

disperse in water. Hydrophobic polymers, such as

polystyrene, will not. This method offers flexibility as

to the types of plastics that can be made.

The approaches described above to produce biodegradable plastics all use some combination of biological and petroleum based polymers. Second generation

biodegradable plastics are being developed that utilize

biological polymers (i.e., starch, cellulose, lactic acid,

etc). Under certain conditions, starch can be combined

with water to create a compound that is somewhat

similar to crystalline polystyrene, and that disintegrates

in water. Lactic acid-based biodegradable plastics are

being produced from raw materials such as potato and

cheese wastes. The bacteria Alicaligenes eutrophus can

use organic acids and sugar as a feedstock to produce

poly(hydroxybutyrate-hydro-xyvalerate) polymers

(PHBV) which can be injection molded and made into

films with conventional plastic processing equipment.

Other bacteria such as Klebsiella pneumonia convert

glycerol (potentially derived from vegetable oils) into

acrolein which can be used to make acrylic plastics.
94 ● Agricultural Commodities as Industrial Raw Materials

A major constraint to the acceptance of degradable

plastics is the lack of a clear definition of degradability.

It is not known under what conditions these plastics

degrade and what is contained in the residues left

behind. USDA is testing degradability of blended

plastics and beginning to develop assays to measure

degradability. The special strains of bacteria developed

for the assays were able to degrade the starch in the

blends within 20 to 30 days. However, after 60 days,

the plastic part of the blends was intact. The plastic

films used did not visually appear different, but pits

where the starch had been were found on electron

microscope scans. The plastic films had lost tensile

strength and were susceptible to mechanical breakup.

For films that will be used as agricultural mulches and

then plowed under the ground, this type of degradation

might be acceptable. For many other uses, it may not

be. Additionally, tests performed in soil showed that

the rate of degradation varied substantially among

different soil types.

Starch/plastic blends containing less than 30 percent

starch degrade slowly. Some studies have shown that

a threshold value exists at 59 percent starch loading.

Below 59 percent, only 16 percent of the starch

particles are accessible to each other; above 59 percent

loading, 77 percent of the starch particles are accessible

to each other which greatly accelerates degradation.

Most commercial degradable starch/plastic blends

contain about 6 percent starch. Enzyme digestion tests

carried out in controlled experiments on cellulose/

polymer grafts resulted in the cellulose in the grafts

being degraded faster than cellulose alone.

Economic considerations: Some degradable plastics are

currently on the market. Most of these products are

photodegradable six-pack yokes. Some starch blends

are used as lawn bags and agricultural mulches.

Estimates are that on average, they cost 5 to 15 percent

more than convential plastic products.

Estimated manufacturing costs for some of the

degradable plastics are high. For example, manufacture

of plastics with the A. eutrophus bacteria currently costs

about $15 per pound, but expanded production is

expected to lower to cost, possibly to half this level.

This compares to about $0.65 per pound for conventional plastics. The starch-based polymer plastics are

expected to sell at $2.20 per pound.

Because many of the degradable plastics utilize

cornstarch, there is potential to increase demand for

corn. The intended use for many of the degradable

plastics is in packaging, since the life span of these

products is very short. U.S. consumption of plastics for

packaging is expected to reach 18.8 billion pounds by

1992. As a rough approximation of how replacement of

these plastics with degradable plastics might affect

corn demand, assume that the entire volume of

packaging plastics is replaced by a 50 percent starchplastic blend. The amount of corn needed to supply the

starch is approximately 4 percent of the annual average

production of corn. The economic analysis for such an

increase would be similar to that for corn ethanol since

both ethanol and degradable plastics utilize the starch

portion of the grain. In both cases, coproducts produced

would be corn gluten meal and corn gluten feed, which

would compete with soybean meal in the high-protein

livestock feed markets. As with ethanol, production

costs of starch blends will depend somewhat on the

price of corn and the value of the corn products.

This analysis however, assumes that corn starch will

be the natural polymer of choice in natural polymer/

synthetic polymer blends and/or grafts. Other natural

polymers can be used such as cellulose and lignin. Both

could be derived from corn stalks. However, both can

also be derived from the paper and pulp manufacturing

industry. As an example, the United States paper

industry produces 33 million MT of Kraft lignin each

year, which is primarily used for fuel, silage, or

compost. Water-soluble graft copolymers can be made

from this lignin. Potentially, these copolymers could be

used in a variety of ways, including degradable plastics.

Social considerations: Each year the United States

produces about 320 billion pounds of municipal solid

waste, of which 7 percent (by weight) and 18 percent

(by volume) are plastics. In 1987,55 billion pounds of

plastic were produced and 22 billion pounds were

discarded. More than half of the plastics discarded are

in the form of packaging. Plastics are among the fastest

growing components of municipal waste.

Utilizing degradable plastics is one tool in dealing

with the large amounts of municipal waste produced in

the United States each year. But by itself, it is not going

to be enough. Other solutions will need to be found

also. Some environmentalists are concerned about

degradable plastics because of the lack of knowledge

about the residues that remain after degradation.

Additionally, there is concern that degradable plastics

will adversely affect attempts to increase the recycling

of plastics. Degradable plastics mixed with nondegradable plastics during recycling could contaminate

the recycled plastic product. A major use envisioned for

degradable plastics is in the food packaging arena.

However, the Food and Drug Administration has not

approved such use. Degradable plastics with high

starch contents under appropriate conditions become

moldy. Premature partial degradation might expose

food to harmful organisms. Leaching of chemicals

from the plastic might also occur. Considerable research is needed to determine the safety of degradable

plastics for food uses.

Extent of research conducted: The General Accounting

Office evaluated the extent of Federal support for

degradable 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 ($941,000

for 4 projects), Department of Defense ($575,000 for 4

projects), Department of Energy ($150,000 for 3

projects) and National Science Foundation ($63,000

for 1 project). The USDA projects are developing

degradable plastics utilizing corn starch and testing

degradable plastics already available. DOD research is

supporting research on bacterial production of plastics

and degradable plastics that can be used for marine

waste disposal. The DOE is supporting research mainly

on cellulose and lignin copolymers and somewhat on

starch copolymers. The NSF is supporting research on

lignin copolymers.

Research on lactic acid-based plastics is being

conducted at Battelle Memorial Institute (Columbus,

OH) and Argonne (IL) National Laboratory. Research

using K. pneumonia and vegetable oils is being

conducted at Northern Regional Research Laboratory

(Peoria, IL). Researchers at MIT, Univ. of Massachusetts, Office of Naval Research, Michigan State University, and University of Virginia are also working on

developing biopolymers. Japan and Europe also have

programs to produced biopolymers.

In addition to federally supported research, several

private firms are interested in degradable plastics.

Some already have products on the market. Some

examples, by no means exhaustive, are:

1. Rhone-Poulenc, Ecoplastics, Princeton Polymer

Laboratories, Du Pent, Union Carbide, Dow

Chemicals, Mobil Chemicals, First Brands, Webster Industries, and SunBag all produce photodegradable additives and products.

2. Archer Daniels Midland, St. Lawrence Starch,

Ampacet, AgriTech, Amko Plastics, Beresford

Packaging, Polytech, and Webster Industries make

starch-based masterbatch and products.

3. The Warner Lambert Company is producing starchbased polymers.

4. Montedison is producing thermoplastic starch resins that are alloys of cornstarch and synthetic resins.

5. ICI Biological Products is producing PHBV polymers.

SOURCES: 4789 11,14,21,25,26,29,30,31,32,33,35,36,42,44 977?

Biomass As a Chemical Feedstock Source

Crop: Corn primarily, but other starch and cellulose

sources are possible

Major coproducts: Starch, oil, and gluten meal

Major uses: The starch is used to make commodity

chemicals, the oil is used for edible purposes, and the

gluten meal is used as livestock feed.

Replacement: Commodity chemicals derived from petroleum

Technical considerations: Technically, it is possible to

produce fuel and most commodity chemicals from

biomass (organic material produced by photosynthesis). Development of biomass as a source of fuel is

impeded by: 1) the size of the United States fuel

industry, 2) low energy content, 3) seasonality, and 4)

the dispersed geographic locations of biomass. Use of

biomass for commodity-chemical production would

require fewer biomass resources and not put as much

pressure on food sources. As an example, production of

atypical commodity chemical at the rate of 0.5 million

metric ton/year would require less than 1 percent of the

United States corn crop. Thus, it seems reasonable to

expect the greatest potential for biomass conversion to

be for commodity-chemical production. Glucose is the

primary starting material, obtained from starch derived

from crops or Iignocellulose found in woody and

fibrous plants. The glucose can be converted via

chemical transformations into a variety of commodity

chemicals. Starch is easier to work with but competes

more directly with food uses for plants. Crops that

could serve as a starch source include corn, cassava,

and buffalo gourd (a potential new crop). Lignocellulose is more difficult to hydrolyze to sugars but maybe

more available in larger quantities. Potentially it could

be produced on land less suitable for good production

and therefore not compete as strongly with food uses.

Economic considerations: The major constraint is economics. The petrochemical industry is highly integrated with multiple byproducts being used to produce

other chemicals. In addition, large economies of scale

allow for the relatively inexpensive production of fuel

and many commodity chemicals. Some major commodity chemicals used in the United States will

probably continue to be produced from petrochemical

sources for some time. One example is ethylene.

Production of ethylene from starch is complex and

more expensive than cracking petroleum. Additionally,

it is a large market. It is estimated that to provide 100

percent of the yearly ethylene market from starch

derived from corn would require 50 percent of the corn

crop. 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, methyl

ethyl ketone, and tetrahydrofuran. These chemicals are

used in the production of other compounds. With some

reduction in price, they might be competitive with

petrochemical sources. Improvements in conversion

efficiencies are needed. Other likely candidates are

those chemicals that contain oxygen, since starch and

glucose both contain about 50 percent oxygen. Possibilities include sorbitol used in the food processing

industry, citric acid used in detergents, lactic acid used

in thermoplastics and possibly biodegradable plastics.

The ability of biomass to compete with petroleum as

a chemical feedstock hinges on rising petroleum prices.
98 ● Agricultural Commodities as Industrial Raw Materials

As long as petroleum is fairly cheap, biomass will not

be economically attractive. In addition, coal gasification and natural gas conversion can also be used to

produce many of the same chemicals as biomass or

petroleum cracking. Currently, natural gas is simply

flared off as a waste product in petroleum drilling and

processing in the Middle East. Potentially this could be

used to manufacture chemical feedstocks. The United

States is rich in coal. This coal is a more geographically

concentrated resource than biomass. It is unlikely that

as large a capital investment will be needed to fit

processed coal into petroleum feedstock schemes as

would be necessary for biomass. Additionally, many

U.S. oil companies already have large investments in

coal reserves. Environmental questions could have an

impact on use of coal as a chemical feedstock. Land-use

patterns and subsequent environmental impacts will be

important if biomass is used to produce fuel and

commodity chemicals.

Social considerations: Reasons given for using biomass

to produce commodity chemicals include sustained

production in many parts of the world, smaller and

more geographically dispersed production facilities,

conservation of nonrenewable resources, and the potential to use wastes that would otherwise need

disposal.

Extent of research conducted: The Tennessee Valley

Authority, in cooperation with the Department of

Energy, conducts research to convert lignocellulose to

chemicals.

SOURCES: 1,4,6,18,23,27,37,46

Appendix B References

1.

2.

3.

4.

5.

6.

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Appendix IA!$elected Industrial Uses for Traditional Crops . 99

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Agricultural Economic Report # 562, August 1986.

U.S. Department of Agriculture, “Ethanol: Economic and

Policy Tradeoffs,” January 1988.

Wallace, kthur and Wallace, Gam A., “Potential for

Starch-Based Water Soluble Copolymers as Conditioners

forlrnproving Physical Properties of Soil,’ paper presented

at the Second National Corn Utilization Conference,

Cohunbus, OH, NOV. 17-18, 1988.

Wall Street Journal, Oct. 13, 1988.

Wing, R. E., ‘Non-chemically Modified Corn Starch Serves

as Entrapment Agent,” paper presented at the Second

National Corn Utilization Conference, Columbus, OH,

NOV. 17-18, 1988.

Wool, Richard P., “Biodegradable Plastics from Cornstarch,” paper presented at the Second National Corn

Utilization Conference, Columbus, OH, Nov. 17-18,1988.

Wu, Lawrence and Shiley, Richard H., Illinois State

Geological Survey, ‘‘Removing Sulfur From Coal: Ethanol

DesuMurizaiton,” March 1990.

Zerbe, John I., “Biofuels: Production and Potential,”

Forum for Applied Research and Public Policy, Winter

1988, pp. 38-47.
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 oil

Blue corn Black turtle Carombola Cocoyam Chayote

Quinoa Chickpeas Lingonberry Groundnut Jimaca

Triticale Edible soybeans Mayhaw Sweet potato Tomatillo

White Iupin Mung Papaya Taro

Wild rice Persimmon

SOURCE: Office of Technology Assessment, 1991.

Biopharmaceuticals

U.S. research on plants as sources of medicinal

appears to be limited. Most major drug companies and the

National Cancer Institute have either reduced or eliminated plant screening for drug potential. One successful

plant-derived drug is anticancer alkaloids found in the

Madagascar periwinkle by Eli Lilly & Co. (9). The

National Cancer Institute is currently interested in testing

taxol recovered from the bark of the Pacific yew for

anticancer activity (5).

Difficulties in screening and characterizing compounds

have impeded research on biopharmaceuticals. It maybe

cheaper to synthesize the simple compounds than to

extract and purify them from plants. Highly complex

compounds are more difficult to synthesize, and in these

cases plant extraction might be competitive. Cell culturing is another alternative (9).

The United States does import plant-derived pharmaceuticals, including cinchona bark (quinine), belladonna,

coca leaves, and opium for medicinal use. Additionally,

the United States exports some plants that are used as

medicines in other countries. Ginseng (Panax ginseng) is

an example. It grows wild in deciduous hardwood forests

and is cultivated, with 90 percent of the domestic

production in Marathon County, Wisconsin. Average

per-acre yields are 3 tons of green ginseng root, which

dries to about 1 ton. Ginseng is risky to produce, highly

susceptible to fungi, and takes 6 to 7 years to mature.

Planting costs, seedbed preparation, weeding, and harvesting cost nearly $20,000 per acre. Prices of cultivated

ginseng have averaged around $50 per pound (1980-83)

(3).

Potential medicinal plants include Coleus barbatus, a

perennial from India. The diterpene forskolin, currently

used in research and potentially a hypertensive, has been

isolated from the root tubers. Attempts to grow this plant

in Michigan have been successful, but quality is highly

variable (10).

Biopesticides

Currently, plant-derived insecticides and synthetic

analogs are available for use. Some examples include

pyrethrum, rotenone, nicotine, and hellebore. Pyrethrum

is obtained from flowers grown in Kenya, Tanzania, and

Ecuador. Synthetic analogs, which are more stable and

effective in the field, have replaced much of the use of

pyrethrum. Rotenone comes from roots of Leguminosae

species and is used to control animal ectoparasites and in

home and garden uses. Nicotine is not widely used

because of high production costs, toxicity and limited

effectiveness (2). Powder from the roots of hellebore are

used to kill lice and caterpillars. Other plants suggested as

potential producers of insecticides include:

1.

2.

3.

4.

Sweetflag (Acorus calamus), a semiaquatic perennial that can be grown on dry land. An American

variety grows in the Southeastern United States.

Essential oils obtained from the roots of European

and Indian varieties produce B-asarone and asarylaldehyde, which attract and sterilize fruit flies, and

can be used as a fumigant for stored grains (4).

Big sagebrush (Artemesia tridentata), a perennial

that grows in the deserts of the Western United

States. Active ingredients include the antifeedant

deacetoxymatricarin, which acts against the Colorado potato beetle among other insects (4).

Heliopsis longipes, a perennial herb native to

Mexico. Active ingredients are found in the root and

include affinin which acts against mosquitoes and

houseflies (4).

Mamey apple (Mammea Americana), a tree native to

the West Indies and which can be grown in Florida.

The principal active ingredients are mammein and

its derivatives, which are obtained in the seeds and

fruit 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 as

an herb or spice and easily grown in the United

States. The oil contains many compounds that are

active against the larva of mites, aphids, and

mosquitoes (4).

Mexican marigold (Tagetes minuta), an annual

native to South America which can be grown in the

United States. Active ingredients include 5-

ocimenone and a-terthienyl, which are found in

many parts of the plant and act as nematocides to

kill mosquito larvae. Approximately 50 to 60

percent of the oil is tagetone, which acts as a

juvenilizing hormone (4).

Neem (Azadirachta indica), a tree native to India. It

thrives in hot dry areas and is salt tolerant. It is easy

to care for and fruits in about 5 years. One tree can

produce 30 to 50 kg of seeds per year. Thirty kg of

seeds yield about 6 kg of oil and 24 kg of meal.

Active ingredients include azadirachtin contained in

the seed oil, which acts as a growth regulator and

feeding deterrent against many beetles. Neem is a

broad-spectrum insecticide; only small amounts of

the active ingredients are required. Research on

neem is being conducted at the USDA Horticulture

Research Station in Miami. Recently, the horticulture products division of WR Grace & Co. acquired

trademarks and patents for the technology used to

produce insecticides from neem and will market an

insecticide under the name of Margosan-O

(1,4,6,7).

To be commercially viable, an insecticide needs to be

effective against a wide range of insects.

Active ingredients derived from plants could also be

used as herbicides. A potential plant with herbicidal

properties is Dyer’s Woad (Isates tinctoria). This plant

grows in the Western United States. The seed pods

contain 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 the

Neem T~e (Azadirachta indica) for Pest Control and Rural

Development,’ Economic Botany, vol. 40, No. 2, AprilJune 1986, pp. 201-209.

Balandrin, Manuel F., Klocke, James A., Wurtele, Eve

Syrkin, and Bollinger, Wm. Hugh, “Natural Plant Chemicals: Sources of Industrial and Medicinal Materials, ’

Science, vol. 228, June 1985, pp. 1154-1160.

Carlson, Alvar W., “Ginseng: America’s Botanical Drug

Comection to the Orient,” Economic Botany, vol. 40, No.

2, April-June 1986, pp. 233-249.

Jacobson, Martin, “Insecticides, Insect Repellents, and

Attractants From Arid/Semiarid Land Plants,’ Plants: The

Potential for Extracting Proteins, Medicines, and Other

Usefil Chemicals-Workshop Proceedings, OTA-BP-F-23

(Washington, DC: U.S. Congress, OffIce of Technology

Assessment, September 1983), pp. 138-146.

Meyer, Brian, “Manipulating Forest Trees Anything But

Simple,” Agricultural Biotechnology News, JanuaryFebruary 1989.

Naj, Amal Kumar, ‘‘ W.R. Grace Acquires Patents To Make

Natural Insecticide From Tropical Tree,” Wall Street

Journal, Technology Section, Tuesday, Jan. 31, 1989.

Naj, Amal Kurnar, “Can Biotechnology Control Farm

Pests?” Wall Street Journal, Thursday, May 11, 1989.

Sherman, Howard, U.S. Department of Agriculture, Agricultural Research Service, “Dyer’s Woad Wages Chemical

War in West,” Agricultural Research, vol. 36, No. 7,

August 1988.

Tyler, Varro E., “Plant Drugs in the Twenty-First Century,” Economic Botany, vol. 40, No. 3, July-September

1986, pp. 279-288.

Valdes, L.J., III, Mislankar, S. G., and Paul, A.G., “Coleus

barbatus (C. forskohleii Lamiaceae) and the Potential New

Drug 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 of

Imported 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 Launc

1,500 25 65 Hydroxy

1,500 35 70 Epoxy

1,500 25 70 Epoxy

1,500 40 55 Erucic

2,000 40 50 Erucic

500

7

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 2.64

Linseed . . . . . . . . . . . . . . . . 0.64 0.59 0.61 0.63

Palm kernel oil . . . . . . . . . . 0.96 1.11 1.09 1.14

Palm oil . . . . . . . . . . . . . . . 6.92 8.17 8.09 8.57

Rapeseed . . . . . . . . . . . . . 5.60 6.18 6.80 7.48

Soybean . . . . . . . . . . . . . . . 13.34 13.77 15.07 15.35

Sunflower . . . . . . . . . . . . . . 6.17 6.63 6.47 7.03

Tallow . . . . . . . . . . . . . . . . 6.52 6.40 6.39 6.23

aData 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 1986

Canada. . . . . . . . . . . . . . . . 2,102 3,228 3,508 3,809

North Europea 

. . . . . . . . . . 119 771 990 1,033

West Europeb 

. . . . . . . . . . . 298 2,892 3,026 2,517

East Europec 

. . . . . . . . . . . 447 1,526 1,668 1,955

China . . . . . . . . . . . . . . . . . 1,462 4,205 5,607 5,870

India . . . . . . . . . . . . . . . . . . 1,712 2,608 3,073 2,636

aNorth 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 Brazil

Coconut . . . . . . . . . . . . . . . 450,199 548,317 506,387 Philippines

Olive. . . . . . . . . . . . . . . . . . 43,959 54,010 63,736 Italy

Palm. . . . . . . . . . . . . . . . . . 225,410 279,597 187,899 Malaysia

Palm kernel . . . . . . . . . . . . 128,310 195,963 182,951 Malaysia

Rape . . . . . . . . . . . . . . . . . . 15,332 55,293 87,317 Canada, East Europe

Tang . . . . . . . . . . . . . . . . . . 6,939 5,575 5,895 Argentina

SOURCE: 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 1.27

Candelilla wax. . . . . . . . . . . . . 352 2,054 0.93

Carnauba wax. . . . . . . . . . . . . 4,015 1,854 0.84

a 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 83

1986 . . . . . . . . . . . . . . . . . . . . 301 25

1987 . . . . . . . . . . . . . . . . . . . . 12 4

SOURCE: 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-7—U.S. Imports of Rubber, 1986-87

Year Quantity (MT) Value ($1,000)

1986 . . . . . . . . . . . . . . . . . . . . 777,577 612,060

1987 . . . . . . . . . . . . . . . . . . . . 813,871 741,498

Note 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 of

the United States,” Calendar Year 1987 Supplement, June

1988.

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 acid

Laurie acid

C

18 acids

Palmitric/Laurie acid

Erucic acid

Linoleic acid

Linoleic acid

Stearic Acid

Multiunsaturated acids

0.39

0.23

0.25

0.17

0.64

0.15

0.16

0.15

0.53

0.33-0.73

0.16-0.60

0.25-0.33

0.14-0.33

0.55-0.64

0.15-0.31

0.16-0.34

0.09-0.15

0.39-1.19

a

1987 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 Printing

Office, 1988)
104 . Agricultural Commodities as Industrial Raw Materials

Table D-9—Oil Content of U.S. Oilseed Crops

Oilseed crop Percent oil

Table D-10-1987 Harvested Acreage and Value of

Major U.S. Crops

Cottonseed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-20

Peanut . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45-50

Rapeseed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40-45

Safflower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30-35

Soybean . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-20

Sunflower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35-45

SOURCE: Everett H. Pryde, “Chemicals and Fuels From Commercial

Oilseed Crops:’ Fuels and Chemicals From Oiiseeds:

T&nologyandPolioy Options, American Association forthe

Advancement 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 Vaule

Crop (millions of acres) (billions of dollars)

Barley . . . . . . . . . . . . . . 10 0.9

Corn . . . . . . . . . . . . . . . 65 12.1

Oats . . . . . . . . . . . . . . . 7 0.6

Sorghum . . . . . . . . . . . . 10 1.1

Soybeans . . . . . . . . . . . 56 10.4

Wheat . . . . . . . . . . . . . . 56 5.3

SOURCE: 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 Berg

Severna Park, MD

Donald Bills

Agricultural Research Service

U.S. Department of Agriculture

Beltsville, MD

Patrick Borich

Director

Cooperative Extension Service

University of Minnesota

St. Paul, MN

Lucas Calpouzos

School of Agriculture

California State University

Chico, CA

Mary Carter

Associate Administrator

Agricultural Research Service

U.S. Department of Agriculture

Washington, DC

Neville Clark

Texas Agricultural Experiment Station

Texas A&M University

College Station, TX

Arnold Denton

Senior Vice President

Campell Soup Company

Camden, NJ

Chester T. Dickerson

Director Agricultural Affairs

Monsanto Company

Washington, DC

Catherine Donnelly

Associate Director

Agriculture Experiment Station

College of Agriculture and Life Science

University of Vermont

Burlington, VT

Jeanne Edwards

Weston, MA

W.P. Flatt

Dean

College of Agriculture

University of Georgia

Athens, GA

Ray Frisbe

IPM Coordinator

Department of Entomology

Texas A&M University

College Station, TX

Paul Genho

National Cattlemen’s Association

Deseret Ranches of Florida

St. Cloud, FL

Robert Heil

Director

Agricultural Experiment Station

Colorado State University

Fort Collins, CO

Jim Hildreth

Managing Director

Farm Foundation

Oak Brook IL

Verner Hurt

Director

Agricultural and Forestry Experiment Station

Mississippi State University

Mississippi State, MS

Terry Kinney

York SC

Ronald Knutson

Professor

Department of Agricultural Economics

Texas A&M University

College Station, TX

William Marshall

President

Microbial Genetics Div.

Pioneer Hi-Bred International, Inc.

Johnston, IA

–l05–
106 . Agricultural Commodities as Industrial Raw Materials

Roger Mitchell

Director

Agricultural Experiment Station

University of Missouri

Columbia, MO

Lucinda Noble

Director

Cooperative Extension

Cornell University

Ithaca. NY

Susan Offutt

Office of Budget Management

New Executive Office Bldg.

Washington, DC

Dave Phillips

President

National Association of County Agents

Lewistown, MT

Jack Pincus

Director of Marketing

Michigan Biotechnology Institute

Lansing, MI

Dan Ragsdale

Research Director

National Corn Growers Association

St. Louis, MO

Roy Rauschkolb

Resident Director

Maricopa Agricultural Center

Maricopa, AZ

Alden Reine

Dean

Cooperative Agricultural Research Center

Praire View A&M University

Praire View, TX

Grace Ellen Rice

American Farm Bureau Federation

Washington, DC

Keith Smith

Director of Research

American Soybean Association

St. Louis, MO

William Stiles

Subcommittee Consultant

Subcommittee on Department Operations,

Research, and Foreign Agriculture

Committee on Agriculture

U.S. House of Representatives

Washington, DC

William Tallent

Assistant Administrator

Agricultural Research Service

U.S. Department of Agriculture

Washington, DC

Jim Tavares

Associate Executive Director

Board on Agriculture

National Research Council

Washington, DC

Luther Tweeten

Anderson Chair for Agricultural Trade

Department of Agricultural

Economics and Rural Sociology

Ohio State University

Columbus, OH

Walter Walla

Director

Extension Service

University of Kentucky

Tim Wallace

Extension Economist

Department of Agricultural Economics

University of California

Berkeley, CA

Fred Woods

Agricultural Programs

Extension Service

Robert Robinson U.S. Department of Agriculture

Associate Administrator Washington, DC

Economic Research Service

U.S. Department of Agriculture

John Woeste

Washington, DC

Director

Cooperative Extension Service

Jerome Seibert University of Florida

Economist Gainesville, FL

Department of Agricultural Economics

University of California

Berkeley, 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 full

responsibility for the report and the accuracy of its contents.
Appendix &Workshop Participants and Reviewers ● 107

Crop Technology Workshop

Michael Adang

Associate Professor

Department of Entomology

University of Georgia

Athens, GA

Garren O. Benson

Professor

Department of Agronomy

Iowa State University

Ames, IA

Norman Brown

President

FBS Systems Inc.

Aledo, IL

J.A. Browning

Professor

Department of Plant Pathology

Texas A&M University

College Station, TX

John Burke

Research Leader

Agricultural Research Service

U.S. Department of Agriculture

Lubbock TX

Raghavan Charudattan

Professor

Department of Plant Pathology

University of Florida

Gainesville, FL

Sharon K. Clark

President

Minnesota Corn Growers Assoc.

Madison, MN

Ken Cook

Center for Resource Economics

Washington, DC

James Davis

Vice-President of Development&

General Counsel

Crop Genetics International

Hanover, MD

Willard Downs

Professor

Oklahoma State University

Stillwater, OK

Lynn Forster

Professor

Department of Agricultural Economics

and Rural Sociology

Ohio State University

Columbus, OH

Nicholas Frey

Product Development Manager

Specialty Plant Products Division

Pioneer Hi-Bred International

Des Moines, IA

James Fuxa

Professor

Department of Entomology

Louisiana State University

Baton Rouge, LA

Robert Hall

Associate Professor

Department of Plant Science

South Dakota State University

Brookings, SD

Chuck Hassebrook

Center for Rural Affairs

Walthill, NE

Dale Hicks

Professor

Department of Agronomy and

Plant Genetics

University of Minnesota

St. Paul, MN

Donald Holt

Director

Agriculture Experiment Director

University of Illinois

Urbana, IL

Marjorie Hoy

Professor

Department of Entomology

University of California

Berekely, CA

Jeffrey Ihnen

Attorney-at-Law

Venable, Baetjer, Howard, and Civiletti

Washington, DC
108 . Agricultural Commodities as Industrial Raw Materials

George Kennedy

Professor

Department of Entomology

North Carolina State University

Raleigh, NC

John C. Kirschman

FSC Associates

Lewisville, NC

Ganesh Kishore

Research Manager

Monsanto Agricultural Products Co.

Chesterfield, MO

Jerry R. Lambert

Professor

Department of Agricultural Engineering

Extension Service /USDA

Clemson University

Clemson, SC

Sue Loesch-Fries

Department of Plant Pathology

University of Wisconsin

Madison, WI

Gaines E. Miles

Professor

Department of Agricultural Engineering

Purdue University

West Lafayette, IN

Kevin Miller

Farmer

Teutopolis, IL

Kent Mix

Farmer

Lamesa, TX

Philip Regal

Department of Ecology

and Behavioral Biology

University of Minnesota

Minneapolis, MN

Jane Rissler

National Wildlife Federation

Washington, DC

Douglas Schmale

Farmer

Lodgepole, NE

Dr. Allan Schmid

Professor

Department of Economics

Michigan State University

East Lansing, MI

Ronald H. Smith

Extension Specialist

Auburn University

Auburn, AL

Steve Sonka

Professor

Department of Ag. Economics

University of Illinois

Urbana, IL

Nicholas D. Stone

Assistant Professor

Department of Entomology

Virginia Polytechnic Institute and State University

Blacksburg, VA

Christen Upper

Professor/Research Chemist

ARS/USDA

Department of Plant Pathology

University of Wisconsin

Madison, WI

Ann Vidaver

Department of Plant Pathology

University of Nebraska

Lincoln, NE

William Wilson

Associate Professor

Department of Agricultural Economics

North Dakota State University

Fargo, ND

Paul Zorner

Director of Bioherbicide Research

Mycogen Corporation

San 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 full

responsibility for the report and the accuracy of its contents.
Appendix E-Workshop Participants and Reviewers ● 109

Emerson Babb

Eminent Scholar

Department of Food and Resource Economics

University of Florida

Gainesville, FL

Wm. Hugh Bollinger

Vice President Environmental Products

TerraTek

Salt Lake City, UT

Kenneth Carlson

Research Chemist

Northern Regional Research Center

Agricultural Research Service

U.S. Department of Agriculture

Peoria, IL

Daniel Kugler

Office of Critical Agricultural Materials

U.S. Department of Agriculture

Washington, DC

Reviewers

Norman Rask

Professor

Department of Agricultural Economics

and Rural Sociology

Ohio State University

Columbus, OH

Joseph Roethli

Office of Critical Agricultural Materials

U.S. Department of Agriculture

Washington, DC

Thomas Sporleder

Professor

Department of Agricultural Economics

and Rural Sociology

Ohio State University

Columbus, OH

NOTE: OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by the reviewers. The reviewers

do not, however, necessarily approve, disapprove, or endorse this report. OTA assumes full responsibility for the report and

the accuracy of its contents.

U.S. GOVERNMENT PRINTING OFFICE : 1991 0 - 292-865 QL:3