Description
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.
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 examin ation 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
11
1
..
.
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Research Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......"""" 2
Potential Impacts of Using Agricultural Commodities as Industrial Raw Materials . . . 3
Policy Issues . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
POLICY OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Technology Transfer and Commercialization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Adoption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Legislation Passed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Chapter 2. Introduction . . . . . . . . . . . . . . . ..... .. ..... . . . . . . . . . . . . . . . . . 11 q
INDUSTRIAL USES OFAGRICULTURAL COMMODITIES IN THE
UNITED STATES . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Oils
and Waxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Resins,
Gums, Rubbers, and Latexes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Fibers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Starches and Sugars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Proteins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........ ........ .16
NEW INDUSTRIAL CROPS AND USES OF TRADITIONAL CROPS . . . . . . . . . . . . . . 16
PROPOSED BENEFITS OF USING AGRICULTURAL COMMODITIES
AS INDUSTRIAL RAW MATERIALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Diversification of Agricultural Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Underutilization of Land Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Reduction of Commodity Surpluses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Enhanced International Competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Improved Environmental Adaptation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Rural Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Strategic Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........ 19
CHAPTER 2 REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Chapter 3. Analysis of Potential Impacts of Using Agricultural Commodities as
Industrial Raw Materials . . . . 0 . 0 q .00000... q .......0 .0..0.000 . . . . . . . . . 17
RURAL DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Impacts of Changing Farm Income and Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Rural Employment Potential in Agriculturally Related Industries . . . . . . . . . . . . . . . . . . . 24
Rural Employment Potential in Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
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.. . . . . . . . . . . q 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 q .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
vi
i
Interest in diversifying agriculture has been in-
creasing, due to changes affecting the industry.
Widely fluctuating farm incomes ($38 billion in1
1979,$13 billion in 1983, and $34 billion in 1986)
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 environ-
mental 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 deal-
ing 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 com-
modities, 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 chemi-
cals. 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. Addition-
ally, 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 agri-
cultural commodities will become a primary source of
industrial raw materials. Technical constraints
Chapter 1
Summary
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 chemi-
cals from crops can be used industrially. And, the
efficiency and productivity of new industrial use
processes must be increased. With sufficient re-
search 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 prod-
ucts 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 manufac-
turers, 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 govern-
ment 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 in-
l~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 q Agricultural Commodities as Industrial Raw Materials
elude primarily the Department of Defense, the to develop markets for processing byproducts. OTA
National Science Foundation, the Department of concludes that:
Energy, and the Department of Agriculture. Propo-
nents of developing agricultural commodities as
industrial raw materials perceive these programs as
being inadequate, and have called for new initia-
tives. 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 fam-
ily-farm incomes. Additionally, proponents hope
q
q
Development of new industrial crops and uses
of traditional crops offers future flexibility to
respond to changing political, economic, and
environmental conditions in supplying indus-
trial 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.
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:
It takes many years to develop a new use or crop,
and during that time political, economic, and envi-
ronmental conditions could change. Research and
development of new products and processes lays the
groundwork necessary to respond quickly and effec-
tively to these changing conditions. It is unlikely that
individual firms will be willing to make large
investments to develop substitutes for future hypo-
thetical changes. Arguments can be made, however,
that this may constitute a legitimate public-sector
investment.
The economic competitiveness of using agricul-
tural 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
q
q
q
q
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?
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, develop-
ment strategies must consider developing a package
Chemicals derived from agricultural commodities
have a potentially broad range of industrial applica-
tions, and many are technically promising. Techni-
cal feasibility, however, will not be sufficient for
widespread adoption. Chemicals derived from agri-
cultural 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
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 q3
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 proc-
esses, to develop new products, and to improve
the agronomic characteristics of agricultural
crops.
Market research is needed to identify commer-
cial 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 environ-
mental impacts of developing new industrial
crops and uses of traditional crops.
Germplasm collection and germplasm storage
and maintenance research is needed.
tiveness 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:
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 prod-
uct 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 I mpacts of Using Agricultural
Commodities as I ndustrial 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-effec-
q
q
q
q
q
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 nega-
tive 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 q Agricultural Commodities as Industrial Raw Materials
q
q
q
q
It cannot be unambiguously stated that new
industrial crops and uses of traditional crops
will improve the U.S. trade deficit or signifi-
cantly 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 agricul-
tural markets.
Premature attempts to commercialize the new
industrial crops and uses of traditional crops
may delay any further efforts to develop these
uses.
creased industrial demand for agricultural commodi-
ties. Over this period, rural employment in agricul-
turally related industries increased slowly. In gen-
eral, the agriculture processing industry is not
labor-intensive, has excess capacity, and has in-
creased 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 metro-
politan, rather than rural, areas. Need and availabil-
ity of skilled workers, institutions that provide
managerial and vocational education, natural re-
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, how-
ever, 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. Link-
ages 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 indus-
trial crops and uses, while containing industrial
elements, is still, however, essentially an agricul-
tural policy.
Proponents of new industrial crop and use devel-
opment 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 facili-
ties 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 in-
sources, 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 transporta-
tion requirements may make construction or expan-
sion 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 technolo-
gies. Small farm operators may lack financial
resources or the management skills needed. Adop-
tion 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 partici-
pate, 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 q5
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, com-
mercialization 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 pur-
poses. 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 im-
ports. 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 flex-
ible system that can change the type, amount, and
price of chemicals it produces to respond to market
conditions, the use of agriculturally derived chemi-
cals is not currently economically competitive in
most of these markets.
Large-scale development of agricultural com-
modities 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 petro-
leum 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 discour-
age 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 re-
sult 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 poten-
tially serve as a repository for crop diseases. Many
crops may be genetically engineered, and the envi-
ronmental release of these crops raises many envi-
ronmental 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 imperfec-
tions (i.e., lack of complete markets and asymetric
information between buyers and sellers) and macro-
economic policy (primarily U.S. Government defi-
cits and money supply policies). Globalization of the
goods and financial markets magnifies these im-
pacts.
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 macro-
economic 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 institu-
tions, or greater use of available market instruments
that reduce risks (i.e., futures markets, forward
contracts, crop insurance, etc.) could improve agri-
cultural stability. Improvements in market institu-
tions and reduction of U.S. deficits are needed to help
stabilize agriculture.
6 q 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 indus-
trial 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 sec-
tor/private sector interaction now, can greatly reduce
the lead time necessary should conditions change
and commercialization becomes attractive.
Premature Commercialization
Premature commercialization attempts could po-
tentially halt, or at least delay, the development of a
new industrial crop or use. As an example, public
disillusionment with degradable plastics has re-
sulted in lawsuits against companies making de-
gradable 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 commerciali-
zation 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 produc-
tion 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 Mid-
west 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. Substi-
tutes 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 develop-
ment, 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 q7
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 unpre-
dictable, 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, bio-
logical, and social sciences is needed, multidiscipli-
nary research will be essential. Because of the
diffuse geographical nature of agricultural produc-
tion and industry distribution, multiregional re-
search 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 mul-
tidisciplinary 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 develop-
ment 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 ad-
dress 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 adop-
tion of new crops also are important.
Additional questions exist as to the most appropri-
ate institutional structure for administering policies
and developing new technologies using agricultural
commodities: is the establishment of a new institu-
tion (within but independent of USDA) necessary, or
might a reassessment of how USDA sets priorities
and allocates resources for research and develop-
ment 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 Agricul-
ture. Proponents of new industrial crop and use
commercialization feel that USDA provides inade-
quate research funding and insufficient interaction
with the private sector. Similar frustrations are often
voiced with respect to other agricultural technolo-
gies. In terms of research, development, and com-
mercialization, new industrial crops and uses of
traditional crops are no different from other agricul-
tural 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 prob-
lem, 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 q 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 adop-
tion.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 commerciali-
zation. 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 interdis-
ciplinary 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 environ-
mental impacts must be evaluated; this is particu-
larly 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 character-
istics and to screen for useful, and as yet unidenti-
fied, 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 private- sector
cooperative agreements with Federal labora-
tories. There is still a need to provide adequate
funding for these activities and to provide profes-
sional 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 labora-
tory 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 trans-
fer, 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, agricul-
tural 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, tech-
nology 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 indus-
trial crops and uses of traditional crops.
@or the purposes of this report, commercialization is being defined as the actual production and sale of products. The process leading to that stage is referred
to as research and development.
Chapter 1--Summary q 9
q
q
q
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 Re-
view Board was created within USDA to
review current and emerging agricultural re-
search issues and to provide a technical assess-
ment of new technologies.
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 effec-
tively reduce price levels.
Agricultural Science and Technology
Review Board
This board consists of 11 representatives from
ARS, CSRS, Extension Service, Land Grant Univer-
sities, private foundations, and firms involved in
agricultural research, technology transfer, or educa-
tion. The purpose of the Board is to provide a
technology assessment of current and emerging
Alternative Agricultural Research and
Commercialization Act
This Act creates an Alternative Agricultural
Research and Commercialization Center, an inde-
pendent 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 Commercial-
ization 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. Acre-
age 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
public and private agricultural research and technol-
ogy 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 prob-
lems existing in the USDA research and extension
system.
The legislation enacted addresses some research,
development, technology transfer, and farm adop-
tion 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 com-
munities, 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 q 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 environ-
ment, 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 commerciali-
zation might be useful. The European community is
taking this approach by first establishing a pre-
commercialization program to determine feasibility,
and then following up with a later program to
encourage commercialization. The U.S. Small Busi-
ness 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 precommer-
cialization 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 envi-
ronmental 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, pos-
sible impacts of new technologies, and further
research or policy actions needed.
Interdisciplinary, and in appropriate cases, mul-
tiregional research should be given the highest
funding priority. This could include: chemical,
physical, and biological research needed to improve
production yields and chemical conversion efficien-
cies, and to establish quality control and perform-
ance 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 laboratory-
industrial 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 exten-
sion 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 commodi-
ties as industrial raw materials.
Industrial Uses of Agricultural
Commodities in the United States
Chapter 2
Introduction
Table 2-1—industrial Fatty Acids
Most
Class Fatty acid common sources
Currently, the United States uses chemicals de-
Saturated . . . . . . . . C
1z
(Iauric) Coconut oil
rived from agricultural commodities for a wide C
16
(palmitric) Palm oil
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
C
18
(stearic)
Monounsaturated. . C
18
(oleic)
C
22
(erucic)
Diunsaturated. . . . . C
t8
(Iinoleic)
Multiunsaturated . . C
18
Tallow, hydrogenated oil
Olive, tall oils
Rapeseed oil
Sunflower, soybean oil
Linseed, tung, fish oil
more than 2 percent of the total U.S. production of
vegetable oils (12). Industrially useful compounds
derived from renewable resources, including agri-
cultural commodities include:
1. oils and waxes;
2. resins, gums, rubbers, and latexes;
Hydroxy. . . . . . . . . . C
18
(ricinoleic) Castor oil
SOURCE: L.H. Princen and J.A. Rothus, "Development of New Crops for
Industrial RawMaterials," J ourrra/oftheArnerimn 0"/Chernists'
Society, vol. 61, 1984, pp. 281-289.
Table 2-2—Fats and Oils: Use in Selected Industrial
Products (million pounds)
3. fibers;
4. starches and sugars; and
5. proteins.
Oils and Waxes
Lipids (fats and oils) are water-insoluble com-
Soap . . . . . . . . . . . . . . . . . . . . .
Paints/varnish . . . . . . . . . . . . .
Resins/plastics . . . . . . . . . . . .
Lubricants . . . . . . . . . . . . . . . .
Fatty acids . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . .
1987
918
261
199
109
2,195
597
4,279
1988
807
176
202
111
2,181
501
3,978
pounds found in the cells of plants and animals. They
serve as structural components of membranes, and as
metabolic fuel. Lipids are composed of triglyc-
erides 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), deter-
mine 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
1990
0
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
-11-
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, poly-
tran, gullan, and pulludan) currently used are derived
from seaweeds and kelps or are produced by
microbial bioprocessing. These polysaccharide bio-
polymers are used primarily as viscosifiers (thicken-
12 . Agricultural Commodities as Industrial Raw Materials
Table 2-3-industrial Uses of Selected Oils,
April/May 1990 (thousand pounds)
Use
Table 2-5-industrial Uses of Rosin
Percent
total consumption
Oil Industrial use April 1990 May 1990
Rubber and chemicals. . . . . . . . . . . . . . . . . . 35.2
Soybean . . . . . Soap . . . . . . . . . . . . .
Paints/varnish. . . . . .
Resins/plastics . . . . .
Fatty acids . . . . . . . .
D
3,038
9,599
D
D
3,442
9,981
D
Paper sizing . . . . . . . . . . . . . . . . . . . . . . . . .
Ester gums and synthetic resins. . . . . . . . . .
Paints, varnishes, and lacquers . . . . . . . . . .
Other uses. . . . . . . . . . . . . . . . . . . . . . . . . . .
33.5
22.7
2.2
6.7
Othera . . . . . . . . . . . .
Total a . . . . . . . . . .
Coconut. . . . . . Soap . . . . . . . . . . . . .
Paints/varnish. . . . . .
Resins/plastics . . . . .
Lubricants. . . . . . . . .
Fatty acids . . . . . . . .
8,020
22,819
13,849
D
175
D
11,642
8,725
25,320
10,255
D
104
D
12,112
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.
Table 2-6-Use of Pulp in Paper and
Paperboard Production
Othera . . . . . . . . . . . .
Total a . . . . . . . . . .
Castor . . . . . . . Soap . . . . . . . . . . . . .
Paints/varnish. . . . . .
Resins/plastics . . . . .
Lubricants. . . . . . . . .
5,200
31,224
D
831
398
471
5,903
28,932
D
410
501
418
Use
Newsprint . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tissue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Printing and writing . . . . . . . . . . . . . . . . . . . .
Packaging and industrial . . . . . . . . . . . . . . .
Paperboard. . . . . . . . . . . . . . . . . . . . . . . . . . .
Percent total
8.5
7.5
26.0
8.5
49.5
Palm . . . . . . . .
Other . . . . . . . . . . . . .
Total . . . . . . . . . . .
Total . . . . . . . . . . .
D
4,385
5,573
D
4,438
5,600
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.
Palm kernel . . . . . . . . . . . . . . . . . . . . . .
Rapeseed. . . . . . . . . . . . . . . . . . . . . . .
D
D
D
D
Starches and Sugars
KEY: (D) Data withheld to avoid disclosing figures for individual companies.
a
Total and other industrial uses indudes the addition of oil to livestock feed.
Starch is composed of hundreds of glucose (sugar)
SOURCE: James Schaub, U.S. Department of Agriculture, Economic
Research Service, 1990.
Table 2-4-1987 U.S. Wax Imports
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.
Beeswax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Candelilla wax. . . . . . . . . . . . . . . . . . . . . . . .
Carnauba wax. . . . . . . . . . . . . . . . . . . . . . . .
832 MT
352 MT
4.015 MT
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,
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 (aggregating agents), and
lubricants (11).
Natural rubber used in the United States is Hevea
rubber imported primarily from Malaysia and Indo-
nesia. 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).
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).
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.
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 intro-
duced from other countries. Cuphea, an oilseed that
could replace coconut oil, is an example of an
attempt to domesticate a wild species. Industrial
rapeseed, an oilseed that produces a chemical used
Chapter 2-Introduction q 13
Table 2-7—Potential New industrial Crops
Compound
as a slip agent in some plastics, is cultivated in many
countries and is now being adapted to U.S. produc-
tion.
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
Crop
OilSeed:
Buffalo gourd . . . .
Chinese tallow . . .
Crambe . . . . . . . . .
Cuphea . . . . . . . . .
Honesty . . . . . . . .
Jojoba . . . . . . . . . .
Lesquerella . . . . . .
Meadowfoam . . . .
Rapeseed . . . . . . .
Stokes aster . . . . .
Vernonia . . . . . . . .
of interest
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
Replacement
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
jojoba), one new rubber, guayule, and one new fiber,
kenaf, are in relatively advanced stages of develop-
ment. 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
Gums, resins, etc.:
Baccharis . . . . . . . Resins
Grindelia . . . . . . . . Resins
Guar . . . . . . . . . . . Gum
Guayule . . . . . . . . Rubber
Milkweed . . . . . . . . Latex
Fibers:
Kenaf . . . . . . . . . . Pulp similar to
wood
Wood rosins, tall oils
Wood rosins, tall oils
Imported guar
Imported hevea rubber
Petroleum derivatives
Imported newsprint
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
SOURCE: Office of Technology Assessment, 1991.
Table 2-8-Potential industrial Uses for
Traditional Crops
B: Selected Industrial Uses for Traditional Crops.
Research is also being conducted to develop new
food crops, forage crops, horticultural and ornament- al
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.
Use
Adhesives, matings . . . . . . . . . . . . . . .
Coal *sulfurization . . . . . . . . . . . . . . .
Diesel fuel . . . . . . . . . . . . . . . . . . . . . . .
Ethanol . . . . . . . . . . . . . . . . . . . . . . . . . .
Degradable plastics . . . . . . . . . . . . . . . Ink
carrier . . . . . . . . . . . . . . . . . . . . . . . . Road
de-icer . . . . . . . . . . . . . . . . . . . . .
Super absorbants . . . . . . . . . . . . . . . . .
Crop
Soybeans
Corn
Soybeans, sunflowers
Corn
Corn
Soybeans
Corn
Corn
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
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 poten-
tially high-volume markets that could use excess
agricultural capacity. Development of new edible
14 q 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 diversi-
fication and increased farm income, improved agri-
cultural resource utilization, reduced commodity
surpluses and support payments, enhanced interna-
tional competitiveness, reduced negative environ-
mental impacts, revitalized rural economies, a do-
mestic supply of strategic and essential materials,
and decreased dependency on petroleum.
Diversification of Agricultural Markets
Currently, U.S. agriculture relies on the produc-
tion of a limited number of crops, many of which 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 agricul-
ture 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 prod-
ucts, is key to economic growth, and is necessary to
avoid stagnation in mature industries such as agri-
culture.
Because the agricultural industry represents
approximately 18 percent of the U.S. Gross National
Product, the report concluded that a stronger agricul-
tural 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. Be-
cause of these possibilities, the task force recom-
mended the development of new agricultural prod-
ucts 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 acre-
age that could potentially be used for crop produc-
tion 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). Accord-
ing to proponents, alternative and more profitable
markets for the crops most heavily supported could
decrease Federal commodity payments and reduce
storage needs.
Enhanced I nternational Competitiveness
In 1989, agricultural exports represented approxi-
mately 12 percent of the value of total U.S. exports
(13). However, the United States has lost market
share in the international trade of several commodi-
ties, 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 q15
I mproved 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 impor-
tant. An added advantage of some of these drought-
tolerant 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, gum- weed, 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 deliv-
ery systems, road de-icers), among other potential
benefits.
Rural Development
Proponents of development of industrial users of
agricultural commodities indicate that such develop-
ment 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 process-
ing 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 cur-
rently 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 in-
clude 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 man-
dated 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 Commercializa-
tion 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 com-
modities.
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 q Agricultural Commodities as Industrial Raw Materials
to provide information Congress can use to assess the
potential benefits of, and constraints to, develop-
ing 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.
Chapter 2 References
1. Babey, John, U.S. Department of Defense, personal
communication, January 1991.
2. Council for Agricultural Science and Technology,
Development of New Crops: Needs, Procedures,
Strategies, and Options (Ames, IA), Report No. 102,
October 1984.
3. Deane, William M., "New Industrial Markets for
Starch," paper presented at The Second National
Corn Utilization Conference, Columbus, OH, Nov.
17-18, 1988.
4. Hoffmann, Joseph J., and McLaughlin, Steven P.,
"Grindelia Camporum: Potential Cash Crop for the
Arid Southwest," Economic Botany 40(2), April-
June 1986, pp. 162-169.
5. 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.
6. 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.
7 Schaub, James, U.S. Department of Agriculture,
Economic Research Service, personal communica-
tion, July 1990.
8. Tankersley, Howard C., and Wheaton, E. Richard,
"Strategic and Essential Industrial Materials From
Plants—Thesis and Uncertainties," PZants: The Po-
tential for Extracting Protein, Medicines, and Other
Use@l Chemicals—Workshop Proceedings, OTA-
BP-F-23 (Washington, DC: U.S. Congress, Office of
Technology Assessment, September 1983), pp. 170-
177.
9. Theisen, A. A., Knox, E. G., and Mann, F. L., Feasibil-
ity of Introducing Food Crops Better A&zpted to
Environmental Stress (Washington, DC: U.S. Gov-
ernment Printing Office, March 1978).
10. Twner, Steve, and Stegelin, Forrest, Symposia Co-
organizers, "Market and Economic Research in
Ornamental Horticulture," American Journal of
Agricultural Economics, vol. 71, No. 5, December
1989, p. 1329.
11. U.S. Congress, Office of Technology Assessment,
Commercial Biotechnology: An International Analy-
sis, OTA-BA-218 (Washington, DC: U.S. Govern-
ment Printing Office, January 1984).
12. U.S. Department of Agriculture, Agricultural Statis-
tics, 1988 (Washington, DC: U.S. Government
Printing Office, 1988).
13. U.S. Department of Agriculture, Economic Research
Service, Agricultural Outlook, AO-170, December
1990.
14. U.S. Department of Agriculture, Economic Research
Service, Agriculutral Resources: Cropland, Water,
and Conservation Situation and Outlook Report,
AR-19, September 1990.
15. U.S. Department of Agriculture, Economic Research
Service, Foreign Agricultural Trade of the United
States, Calendar Year 1987 Supplement (Washing-
ton, DC: U.S. Government Printing Office, June
1988).
16. 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.
17. U.S. Department of Agriculture, New Farm and
Forest Products Task Force, "New Farm and Forest
Products: Responses to the Challenges and Opportu-
nities Facing American Agriculture, ' A Report to the
Secretary, June 25, 1987.
18. 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
utilization of processing and manufacturing facili- ties.
I mpacts of Changing Farm I ncome 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, be-
cause increasing off-farm income helped compen-
sate for decreased farm income (table 3-1).2 The
value of farm assets, however, declined signifi-
cantly. Lower land values decrease local govern-
ment 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)
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
Year
1960 . . . . . . . . . . . . . . .
1970 . . . . . . . . . . . . . . .
1975 . . . . . . . . . . . . . . .
1980 . . . . . . . . . . . . . . .
1981 . . . . . . . . . . . . . . .
1982 . . . . . . . . . . . . . . .
Net farm
incomea
2,729
4,869
8,785
9,233
8,378
9,997
Off-farm
income
2,140
5,974
9,481
14,263
14,709
15,175
Total farm
family income
4,869
10,843
18,266
23,486
23,087
25,172
increase farmland prices and hence the tax base of
many rural communities. Increased levels of produc-
1983 . . . . . . . . . . . . . . . 10,074
1984 . . . . . . . . . . . . . . . 11,345
1985 . . . . . . . . . . . . . . . 13,881
15,619
16,265
17,945
25,693
27,610
31,826
tion require increased inputs, transportation, and
a
Before inventory adjustment.
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
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-famil
y
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 q Agricultural Commodities as Industrial Raw Materials
While farm-family income remained relatively
stable, farm3 numbers continued to decline through-
out the 1970s and 1980s (table 3-2). Impacts of
Year
Table 3-2—Farm Numbers
Number
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
1960 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1970 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1980 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1981 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1986a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1989 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,963,000
2,949,000
2,433,000
2,434,000
2,328,000
2,214,000
2,172,920
affect community employment levels. Multiplier
effects for agriculture are generally estimated to be
a
Preliminary estimation obtained from U.S. Department of Agriculture,
Agricultural Statistic 1989
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, 5and an additional 23 percent are farming
important. These counties are concentrated in the
Plains Region (North Dakota, South Dakota, Ne-
braska, 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 com-
modities 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).
SOURCE: Dorm Reimund and Mindy Petrulis, U.S. Department of Agricul-
ture, Economic Research Service, "Performance of the Agricul-
tural Sector," Rural Change and the Rural Economic 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 employ-
ment 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 re-
sponse to increased world demand for food and
favorable economic conditions. The effects of in-
creased production on rural employment in agri-
culturally related industries provides insight into the
potential employment impacts in these industries of
increased industrial demand for agricultural com-
modities.
Between 1974 and 1981, U.S. agricultural pro-
duction expanded by 45 million acres of crops
harvested (table 3-4). Employment in rural agricul-
turally related industries also increased during this
3A farm is an establishment that sold or would normally have sold $1,000 or more of agricultural products dtig the Y~.
4Farming dependent counties are defined as those counties for which farming contributed a weighted annual average of 20 percent or more of total
labor and proprietor income over a 5-year time period. Based on the years 1975 to 1979 and on the 1974 nonmetropolitan county definition (2,443
counties), there were 716 farmin g dependent counties. Using income from the years 1981, 1982, 1984, 1985, 1986, and the 1983 definition of
nonmetropolitan counties (2,357 counties) there were512farming 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 q19
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 Table 3-5—Employment Changes in 1975-81 and
Productionb, Selected Years 1981-84 (percent change per annum)
a
1973 1981 1984 1975-81 1981 -84b
Corn: Total U.S. employment . . . . . . . . . . +2.9 +1.1
Acreage . . . . . . . . . . . . . . . . . . . 62.1 74.5 71.9 Total nonmetro employment . . . . . . +2.9 (1,992) +1.9 (759)
Production . . . . . . . . . . . . . . . . . 5.67 8.12 7.67 Nonmetro agriculturally related
Wheat: industries (total) . . . . . . . . . . . . +1.2 (414) -0.2 (48)
Acreage . . . . . . . . . . . . . . . . . . . 54.1 80.6 66.9 Farm sectorc . . . . . . . . . . . . . . . . . -0.9 (158) -1.3 (107)
Production . . . . . . . . . . . . . . . . . 1.71 2.79 2.59 Input industry . . . . . . .d. . . . . . . . . +1.6 (22) -5.8 (45)
Soybeans: Processing/marketing . . . . . . . . . +1.2 (84) -1.5 (53)
Acreage . . . . . . . . . . . . . . . . . . . 55.7 e66.2 66.1 Retail/wholesale . . . . . . . . . . . . . +5.7
(400) +3.3 (157)
Production . . . . . . . . . . . . . . . . .
Major crops:c
1.55 1.99 1.86
a,b
Numbers in parentheses are the change in total jobs for entire time
period (in 1,000's).
a
Acreage . . . . . . . . . . . . . . . . . . . 310 354 335
c
Farm sector includes agricultural services, farm proprietors, and agricul-
Harvested acreage in million acres.
d ture wage and salary workers.
b
Production is in billion bushels. processing and marketing includes those related to food processing and
c
Major crops include corn, sorghum, oats, barley, wheat, rice, rye,
e
the textile industry.
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 serv-
ices, 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). Employ-
ment 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 in-
dustry 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
Retail and wholesale includes restaurants, groceries, dothing stores, etc.
SOURCE: Dorm Reimund and Mindy Petrulis, U.S. Department of Agricul-
ture, Economic Research Service, "Performance of the Agricul-
tural Sector," Rural Change and the Rural Economic Po/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 po-
tential 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
Table 3-6-Distribution of Jobs in Agriculturally
Related Industries
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). Econo-
Metro
Farm sector . . . . . . . . . . . . . . . . . . . . . 36
Input supply . . . . . . . . . . . . . . . . . . . . 51
Processing/marketing . . . . . . . . . . . . 65
Food . . . . . . . . . . . . . . . . . . . . . . . . 71
Textiles . . . . . . . . . . . . . . . . . . . . . . 60
Retail/wholesale . . . . . . . . . . . . . . . . . 82
Nonmetro
(percent)
64
49
35
29
40
18
mies 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 produc-
tion workers plus management, maintenance work-
ers, etc.) in soybean processing facilities is approxi-
mately 9,000 to 10,000 (2,41).
A majority of the jobs in several agriculturally
related industries are in fact located in metropolitan,
rather than rural, areas (table 3-6); expanding
employment in these industries may benefit metro-
politan regions more than rural areas. Commodity-
processing 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 fre-
quently 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 rubber7
quality (28). Kenaf is a bulky product to transport.
SOURCE: Dorm Reimund and Mindy Petrulis, U.S. Department of Agricul-
ture, Economic Research Serviee, "Performance of the Agricul-
tural Sector," Rural Change and the Rural Economic 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 agricul-
tural commodities on rural manufacturing employ-
ment 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 techni-
cal change, or other conditions that require innova-
tive 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.
Table 3-7—Nonmetro Share of Manufacturing Jobs
by Job Type
The importance of resource availability and low- Metro Nonmetro
cost labor relative to the need for highly skilled labor
will largely determine the type of personnel em-
ployed, and whether a firm locates in a metropolitan
or rural area (5). Urban companies have a higher
proportion of managerial and professional-technical
Managerial . . . . . . . . . . . . . . . . . . . . .
Professional/technical . . . . . . . . . . . .
Sales/administrative support . . . . . . .
Precision production jobs . . . . . . . . . .
Machine operators . . . . . . . . . . . . . . .
Laborers . . . . . . . . . . . . . . . . . . . . . . .
90
90
75
77
70
65
10
10
25
23
30
35
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
SOURCE: David A, MeGranahan, "Rural Workers in the National Econ-
omy," 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
products are more concentrated in metropolitan Metro Nonmetro of nonmetro
areas, because they require technically skilled labor Type of industry (million jobs) employment
(table 3-8). High tech companies are an example.
These firms employ relatively more scientific and
technical personnel, have higher levels of research
Total manufacturing. . .
Top of the cycle . . . . .
Bottom of the cycle . .
Resource . . . . . . . . . .
15.2
. 7.4
. 5.6
. 2.2
4.2
1.2
2.0
1.1
21.7
13.7
25.9
33.3
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-the-
cycle. The latter tend to use highly standardized
production methods and employ relatively less-
skilled labor (5).
Although rural manufacturing is characterized by
a higher percentage of bottom-of-the-cycle and
natural resource based industries, some top-of-the-
cycle firms do locate in rural areas. In recent years,
rural employment in these firms has increased,
primarily in the South and West. Rural 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 chemi-
cals derived from agricultural commodities are
considered to be top-of-the-cycle industries, al-
though 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 high-
tech industry that uses agriculturally derived chemi-
SOURCE: Leonard E. Bloomquist, U.S. Department of Agriculture, Eco-
nomic Researeh Serviee, "Performance of the Rural Manufac-
turing Sector," Rurai Change and the Rural Economic 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 capac-
ity 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 manufac-
turing employment in nonmetropolitan areas aver-
Efioduct &velOprnent g~s through many phases, from conception to routine manufacturing. Products at the top of the cycle are in the eflfierp~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 qAgricultural Commodities as Industrial Raw Materials
Table 3-9-Manufacturing Employment Trends of
Industries Potentially Using Industrial
Agricultural Commodities
Trend
cannot be made. Historically, however, social re-
turns to agricultural research investments have been
high, ranging from an estimated 45 to 135 percent
(30).
1989 (1979-89)
employment percent per Regional Specialization
Plastics and synthetic materials. .
Paints and allied products. . . . . . .
Soaps, cleaners, toilet goods . . . .
Rubber and miscellaneous
products . . . . . . . . . . . . . . . . . . .
Petroleum and coal products . . . .
level
187,000
63,000
161,000
840,000
163.000
annum change
-1
-1
+1
+1
-3
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
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 de-
pendent 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 concen-
trate 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 econo-
mies.
Proponents of industrial crops and use commer-
cialization 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
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 advan-
tages 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 uncer-
tainty (e.g., such as weather and assymetric informa-
tion 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 mar-
keting of industrial crops and uses of traditional
Chapter 3--Analysis of Potential Impacts of Using Agricultural Commodities as Industrial Raw Materials q23
Table 3-10—Likely Production Locations of that segment of the economy to macroeconomic
New Crops policy (3,42). Several industries that would use
chemicals derived from agriculture are also suscepti-
Crop
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 . . . . . . . . . . . . . . . . . . .
Location
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
ble 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 oppor-
tunities 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. Develop-
ment of new risk-reducing marketing arrangements,
SOURCE: Office of Technology Assessment, 1991.
crops. Diversifying agricultural production poten-
tially 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
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. Cup-
hea, 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 consid-
ered 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 qAgricultural 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 produc-
tion) 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 interna-
tional 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 tradi-
tional 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 byprod-
uct 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 soy-
beans. 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 sun-
flower 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). Addition-
ally, potential byproducts of glycerol and high-
protein 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, particu-
larly soybeans. The distilled dried grains and gluten
meal compete directly with soybean meal as high-
protein 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 rela-
tively 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 invest-
ment. 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 q25
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
Table 3-n-Participation in Federal Farm Programs
by Farm Size, 1987a
Percent participating
Harvested acres
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
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
producers of commodities not covered by commod-
ity programs. Participation rates are lowest among
a
Note that 1987 was a year characterized by Iow commodity prices, and
participation rates in agricultural programs were high.
b
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 etha-
nol 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
Participants 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 Con-
servation Situation and Out/ook Report September 1990, pp.
48-54.
likelihood of new crops and uses benefiting small-
farm operators.
The question also arises of who captures the value
added 11 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 commodi-
ties are needed.
?For farms to beclsssifkd as a particular specialty, it must derive 50 percent or more of its salestiom 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 q Agricultural Commodities as Industrial Raw Materials
Table 3-12—Participation in Federal Farm Programs Table 3-13-Income Sources by Sales Category, 1988
by Crop Acres, 1987a
Percent total Percent gross
Crop
Feed grainsc . . . . . . . . . . . . . . . . . . . . . . . . . .
Percent
participatingb
83.0
Sales category
income from
off-farma
sources
cash farm
income from Percent of
government total farms
Soybeans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85.8 Less than $10,000 . . . . 89 4 45
Wheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88.6 $10,000 to $19,999 . . . 74 7 12
Cotton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89.5 $20,000to $39,999 . . . 49 10 11
Rice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91.1 $40,000 to $99,999 . . . 24 11 14
Peanuts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75.7 $100,000 to $249,999. 13 11 12
Tobacco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47.9 $250,000 to $499,999, 6 9 4
a
Note that l987 was a year characterized by low commodity prices and
Greater than $500,000. 3
a
4 2
participation rates in farm programs were high. Total income is the sum of total off-farm income and total gross cash farm
b
Participants 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.
income.
SOURCE: Office of Technology Assessment, 1991. Calculated from data
contained in U.S. Department of Agriculture, Economic Re-
search Service, "Financial Characteristics of U.S. Farms,
January 1, 1989," Agriculture Information Bulletin No. 579,
December 1989.
ing more expensive, these new crops could be
c
lncludes acres of corn for grain and silage, and sorghum, barley, and oats
for grain.
attractive. Additionally, several crops provide good
ground cover and possibly could reduce soil erosion.
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 Con-
servation 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 environ-
mental impacts. Replacing salt with calcium magne-
sium acetate (a new product) as a road de-icer could
reduce the soil and water contamination problems
associated with salt. Use of starch, or starch-
vegetable oil mixtures as a delivery system for
herbicides and pesticides potentially could mitigate
rapid leaching of these chemicals. Degradable plas-
tics may in the future help alleviate waste disposal
problems, but at the present time, too many ques-
tions 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 vola-
tile 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 becom-
For many potential new crops, information con-
cerning 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 disincen-
tives, some of which stem from agricultural com-
modity programs, rather than, lack of crop options.
Development of new crops is unlikely to increase
crop rotation significantly without changes in eco-
nomic 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 q27
is an example. Originally and purposely introduced
into U.S. agriculture as a superior forage crop, it is
Table 3-14-Commodity Stocks
(million bushels)
today a serious weed requiring widespread use of
Wheat Corn Soybeans
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
1985/86 a . . . . . . . . . . . . . . . . . . . . 1,905
1986/87 . . . . . . . . . . . . . . . . . . . . . 1,821
1987/88 . . . . . . . . . . . . . . . . . . . . . 1,261
4,040
4,882
4,259
536
436
302
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
1988/89 . . . . . . . . . . . . . . . . . . . . .
1989/90bb . . . . . . . . . . . . . . . . . . . .
1990/91 . . . . . . . . . . . . . . . . . . . .
702
536
945
1,930
1,344
1,236
182
239
255
for wheat stem rust, a fungus that debilitates wheat.
Marketing year beginning June 1 for wheat, and September 1 for corn and
soybeans.
A national eradication program was needed to
b
Based on Nov. 8, 1990 estimates.
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 biotechnol-
ogy; 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.
SOURCE: U.S. Department of Agriculture, Economic Research Service,
Agriwltural Outlook, July 1990.
The development of new crops can reduce sur-
pluses if farmers shift acreage from the 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 unambigu-
ously 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 competi-
tive (without subsidies) with available alternatives
could possibly lower Federal expenditures.
An additional consideration is the potential im-
pact that new uses of one crop may have on other
crops covered by commodity programs. For exam-
ple, increased ethanol production from cornstarch is
12A rewnt GAO study (U.S. Congress, Gene~ Accounting Office, Alcohol Fuels: fmpacts From Increased Use of Ethanol Blended Fuels,
GAO/RCED-90156 (Gaithersburg, MD: U.S. General Accounting Office, July 1990)examinin g this issue indicated that there would be a net 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 paymentsmm-red late in the time frame used by the USDA study.
28 qAgricultural Commodities as Industrial Raw Materials
expected to decrease the price of soybeans. Soy-
beans are covered by nonrecourse loans. Tradition-
ally, 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 condi-
tions, 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 in-
creased 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 econom-
ically competitive with available alternatives. De-
velopment 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 environ-
ments.
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 impor-
tance, the Department of Defense has stated in a
Memorandum of Understanding with the Depart-
ment 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 miscella-
neous 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 poten-
tially 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. Con-
version of carbohydrates (sugars and starches) to
ethanol, for example, conserves energy, but mass is
lost (CO
2
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 contam-
ination. 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 dis-
persed geographic location of supply, and lack of
supply infrastructure (22,53). Potential fuel replace-
ments derived from agricultural commodities in-
clude 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 q29
At this time, corn is the least expensive biomass
feedstock to use for ethanol production. Current
ethanol production replaces less than 141 percent of
Table 3-15-Major Primary Feedstocks Derived
From Petroleum
U.S production, 1989
total U.S. gasoline consumption (62). 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,
Feedstock
Benzene . . . . . . . . . . . . . . . . . . . . . . . . . .
Ethylene . . . . . . . . . . . . . . . . . . . . . . . . . .
Propylene . . . . . . . . . . . . . . . . . . . . . . . . .
Toluene . . . . . . . . . . . . . . . . . . . . . . . . . .
Xvlene . . . . . . . . . . . . . . . . . . . . . . . . . . . .
billion Ibs)
11.7
35.0
20.0
5.8
5.8
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 con-
version of lignocellulose to ethanol, instead of starch
to ethanol, might improve the economics of ethanol
use for transportation fuels. These technical ad-
vances 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 de-
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 com-
pounds 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 commodi-
ties 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 substitu-
tion involves the replacement of a petroleum-
derived 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 plant-
derived chemicals to compete economically because
the petroleum chemical industry is highly inte-
grated, 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 devel-
oping plant-derived chemicals that have a slightly
different chemical composition, but the same func-
tions as petroleum-derived chemicals. In this case,
benefits in terms of superior performance, improved
storage or supply characteristics, or improved envi-
IdOne bushel of corn produces appro
xirnately
2.5 gallons of ethanol. U.S. production of ethanol uses appro xirnately 350 to 400 million bushels of
com (approximately 5 percent of com production).
30 q 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.
CommodityPrices—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
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
potential substitution opportunities lie with chemi
cals with high oxygen ;&tents, since plant-derived
chemicals usually contain oxygen, while petroleum-
derived 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 com-
bination with other compounds such as plastics.
Currently, biomass-derived plastics are not econom-
ically competitive except in a few specialty high-
value markets (e.g., surgical sutures). Major techni-
cal advances are still needed (10).
Chapter 3--Analysis of Potential Impacts of Using Agricultural Commodites as Industrial Raw Materials q31
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 glyc-
erin, 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 q 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).
FarmProgramCosts—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--Theethanol 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
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 glyc-
erin, 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 q33
potentially cultivate an additional 100 to 140 million
acres. Some of this land is planted to pasture used for
Table 3-18-Estimated Acreage Neededa To Supply
One Billion Gallons of Fuel
livestock grazing. Some is held in small or frag-
Crop
Fuel replaced Acreage
mented holdings and faces competition from non-
agricultural uses; conversion to crop production will
be relatively expensive and expected returns need to
be high enough to offset the conversion costs (4,44).
Soybeans . . . . . . . . . . . . . . . Diesel
Sunflowers . . . . . . . . . . . . . . Diesel
Rapeseed . . . . . . . . . . . . . . . Diesel
Ethanol . . . . . . . . . . . . . . . . . Gasoline
22 million
16 million
8 million
3.5 million
a
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
oestimate 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
be substantial (table 3-18). To replace U.S. petro-
leum-derived ethylene with cornstarch-derived eth-
ylene, would require production of approximately 27
million acres of corn.17 Current U.S. production
New crop
Cuphea . . . . . . . . . . .
Cuphea . . . . . . . . . . .
Lesquerella . . . . . . .
Imported crop
Coconut oil
Palm kernel oil
Castor oil
(million of acres)
1.40
0.56
0.33
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 agricul-
tural uses of diesel fuel would require increasing
soybean production by nearly 10 million acres over
Stokes aster . . . . . . .
Vernonia . . . . . . . . . .
Crambe . . . . . . . . . . .
Rapeseed. . . . . . . . .
Guayule . . . . . . . . . .
Kenaf . . . . . . . . . . . .
Soybean oil. . . . . . . .
Converted soybean oil
Converted soybean oil
Rapeseed oil
Rapeseed oil
Hevea rubber
Newsprint
Printing inks
0.49
0.68
0.29
0.24
3.60
1.00
1.01
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 poten-
tial. 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
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). Ifthese 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 q 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 ap-
Table 3-20-Estimated Acreage Needed To Replace
World Supplies
World production Acres needed
proximate export potential (table 3-20).
These estimates represent upper levels based on
current world demand. Total acreage needs would
Imported crop
Coconuta . . .a. .
Palm kernel . .
Rubber . . . . . .
New crop
Cuphea
Cuphea
Guayule
(million Ibs.)
2.77
1.48
9,250
(millions)
7.6
4.5
18.5
depend on the potential to expand demand for these
commodities beyond current levels, and the ability
c
Castor . . .d. . . .
Newsprint . . . .
Lesquerella
Kenaf
1,705
a
33
1.1
4.7
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
a
world 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.
b
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 commodi-
ties.
c
World 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.
World 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.
Increasing global capacity to produce, process
and manufacture products from agricultural com-
modities will affect the potential for U.S. exports of
d
world 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.
these products. Other countries (e.g., Argentina and
Brazil for soybeans and Canada and the European
Community for edible quality rapeseed) have dem-
onstrated 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 in-
creasing 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 domes-
tic 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 industrial-
ized 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
SOURCE: Office of Technology Assessment, 1991.
raw and processed products derived from agricul-
tural 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 news-
print 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.
Determin ation of the acreage needed to produce
agricultural crops for industrial uses has implica-
tions 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 q35
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 success-
ful marketing. The development of degradable
plastics to alleviate solid waste and litter problems
illustrates this point. In the early stages, environ-
mentalists supported these products for some spe-
cific uses, such as six-pack beverage rings. How-
ever, as product types and claims of 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 de-
gradable plastics has been continuing, but confusion
and doubts about the appropriateness of these
technologies remain with the public and environ-
mental 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 establish-
ing 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, com-
bined 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 prod-
ucts (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 tradi-
tional 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. Agricul-
turally 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. Addi-
tionally, 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 indus-
trial materials. Technically, biomass-derived chemi-
cals could also potentially replace many petroleum-
derived chemicals. The major constraint is econom-
ics. The chemical industry is highly integrated,
flexible, and has large economies of scale. Penetra-
tion of many of these markets is difficult. Addition-
ally, some of these markets are large (i.e. fuel and
primary chemical feedstocks) and significant re-
placement 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 technolo-
gies will improve the chances of these farmers
benefiting from new industrial crops and uses of
traditional crops.
The development and production of new indus-
trial crops and uses in the United States could, in
some cases, replace major exports of some develop-
ing nations, some of which are considered to be of
strategic importance to the United States. Addition-
ally, attempts to increase exports of some of the
products has the potential to increase trade frictions
between the United States and the European Com-
munity.
The United States currently has excess agricul-
tural production capacity. Large scale replacement
of U.S. fuel use or primary chemical feedstocks
would require significant acreage for crop produc-
tion, however, economics do not favor these devel-
opments 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 cur-
rent 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. Poten-
tially, 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 tradi-
tional 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 q37
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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 im-
pacts. Governments can affect the rate of technical
change by influencing the general economic envi-
ronment (fiscal and monetary policy as well as
regulatory policy can enhance or inhibit technical
change), and by specific policies designed to encour-
age 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 legisla-
tion 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. Involve-
ment of the public and private sectors is needed. The
extent of this involvement, and the speed at which
new technologies will be developed and commer-
cialized will be influenced by many factors. This
chapter analyzes many of these factors, and de-
scribes some Federal and State programs available
to encourage the research, development, and com-
mercialization of new technologies. Chapter 5 will
discuss important factors involved in the adoption of
new technologies.
-41-
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 technology-
oriented 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 moti-
vated by profit-seeking and will tend to occur
whenever profit and risk conditions create compara-
tively 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 out-
puts (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 mini-
mize 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 public-
sector funding for research that they believe will
42 . Agricultural Commodities as Industrial Raw Materials
bring a payoff to themselves. They commit their own
resources in a similar fashion. Federal fiscal con-
straints tend to reinforce the passive approach to
public research by intensifying the search by scien-
tists 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 public-
sector 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 (rela-
tive to the cost of other inputs), or whose market is
affected by regulation. Situations where these fac-
tors 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 containin g 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 coat-
ings. 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).
I ndustrial Use Research Funding and
Institutional Involvement
The Federal institution most involved in agricul-
tural 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, McIntyre-
Stennis, Animal Health, etc.), special grants, educa-
tion and facilities grants, and competitive grants.
Total CSRS funding to the State Experiment Sta-
tions for fiscal year 1990 was approximately $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 re-
search 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 re-
search 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 estab-
lished 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 rep-
resentatives from the Department of Agriculture, the
Department of Commerce, the Bureau of Indian
Affairs, the National Science Foundation, the De-
partment of State, the Department of Defense, and
the Federal Emergency Management Agency, over-
sees the activities of the Office of Critical Materials.
This office is trying to commercialize many of the
new industrial crops discussed in this report. Com-
mercialization efforts have been greatest for
guayule, kenaf, jojoba, Crambe, and industrial
rapeseed. Some efforts have been made to commer-
cialize 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 Table 4-l—USDA Fiscal Year 1989 Expenditures for
appropriated $1,968,000 for FY 1991 to fund Selected New Crops (dollars)
research on guayule ($668,000), Crambe and rape-
seed ($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 prod-
ucts. Other Federal agencies such as the Department
Crop
Cuphea . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meadowfoam . . . . . . . . . . . . . . . . . . . . . .
Lesquerella . . . . . . . . . . . . . . . . . . . . . . .
Crambe/rapeseed . . . . . . . . . . . . . . . . . .
Guayule . . . . . . . . . . . . . . . . . . . . . . . . . .
Kenaf . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
$ 100,000
350,000
20,000
325,000
1,168,000
675,000
2.638,000
of Defense (DoD), the Department of Commerce,
the Department of Energy, the National Science
Foundation, and the Agency for International Devel-
opment provide some funding for industrial uses of
agricultural commodities. The States, as well as the
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)
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
Year
1978-86 . . . . . . . . . .
1987-88 . . . . . . . . . .
Amount
$13.1
13.2
2.9
2.7
15.0
4.3
Agency
Department of Defense
U.S. Department of Agriculture
Other Federal
Firestone Tire & Rubber
Department of Defense
U.S. Department of Agriculture
USDA expenditures for selected new crops for
1989 . . . . . . . . . . . . .
1989-96 estimated . .
1.168 U.S. Departrnent of Agriculture
38.0
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 consor-
tium 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 devel-
opment. 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 com-
mercialize kenaf. The program consists of three
phases. Phase I, begun in 1986, involved agronomic
and papermaking research. Phase II, begun in 1987,
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 expendi-
tures (3,1 1,12).
The California South Coast Air Quality Manage-
ment District, the State of Michigan, the U.S.
Agency for International Development, and 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, con-
ducts research on the conversion of lignocellulose to
chemicals. Funding levels for other crops are una-
vailable, 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 degrad-
able plastic research (28). Their findings for fiscal
year 1988 are summarized in table 4-4. Several
private firms are also interested in degradable
44 q Agricultural Commodities as Industrial Raw Materials
Table 4-3—Expenditures for Kenaf Research
(dollars)
tion, purification, and chemical transformation
mechanisms that are economically competitive will
Research
Phase I
Phase II
Phase III
Amount
141,000
263,000
300,000
644,000
675,000
Agency
U.S. Department of Agriculture
Joint Kenaf Task Force
U.S. Department of Agriculture
Joint Kenaf Task Force
U.S. Department of Agriculture
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 devel-
oped, and for many uses, performance standards
must be established. In some situations, waste
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
disposal procedures must be developed. Commer-
cialization efforts by private firms will follow their
research and development efforts and will be driven
by the same economic factors.
Agency
U.S. Department of Agriculture . .
Department of Defense . . . . . . . .
Department of Energy . . . . . . . . .
National Science Foundation . . . .
Total . . . . . . . . . . . . . . . . . . . . .
No. of projects
4
4
3
1
12
Funding
$ 941,000
575,000
150,000
63,000
$1,729,000
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
SOURCE: U.S. Congress, General Accounting Office, "Degradable Plas-
tics: Standards, Research and Development," RCED-88-208
(Gaithersburg, MD: September 1988).
plastics, and have products on the market, many 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 Re-
sources, the Illinois and Ohio Corn Marketing
Boards, and the U.S. Department of Energy. Ex-
penditures 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. Commercial- ization
will require considerable research and devel-
opment effort on the part of companies. For new
crops and uses, commercial-scale extraction, separa-
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 trans-
fer of legal rights and the informal movement of
information, knowledge, and skills. Private-sector
awareness, interest, and capacity to utilize public-
sector research effectively will be critical to the
successful commercialization of new uses of agri-
cultural commodities.
I ndustrial I nterest 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 private-
sector demand for technology developed in the
public sector. Many new crops being developed are
intended to substitute for chemicals that are cur-
rently 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 q 45
Box 4-A—European Research Program To Develop New I ndustrial Crops and
Uses of Traditional Crops
I n 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
anticipation 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
quality, price, and quantity of the resources (primar-
ily land and labor) needed to produce the commodi-
ties (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. De-
mand 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 tech-
niques used, purification requirements, waste dis-
posal, and volume. Frequently there are returns to
scale in the processing of agricultural commodities,
which leads to lower per-unit processing costs for
46 q 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 commodi-
ties.
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). De-
mand 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 illus-
trates 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 in-
creases, the price of corn increases and the value of
the byproducts decreases (oil, protein meals), effec-
tively 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 struc-
ture 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 sup-
plies 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 com-
pounds 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 high-
yielding 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 variabil-
ity, 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 proc-
esses 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 de-
velopment of consumer products. New industrial
crops and uses of traditional crops that fill well-
defined 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 perti-
nent 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 q47
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), con-
sisting of a small central staff and volunteer repre-
sentatives 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 possi-
ble 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 eco-
nomical means for companies to search for technolo-
gies 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 coopera-
tion 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 univer-
sity.
Technology Transfer Mechanisms
Technology transfer between Federal and univer-
sity laboratories and industry can be facilitated in
many ways, including personnel exchange between
laboratories and industry, private-firm use of spe-
cialized 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, indus-
try 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 agree-
ments exist between Federal laboratories and indus-
try, and between universities and industry. The
cooperative agreements that seem to be most effec-
tive are those made at a scientist-to-scientist level,
rather than at the administrative level (13).
Incentives for collaboration in Federal laborato-
ries are sometimes weak or even negative. Technol-
ogy-transfer activities sometimes do not count in 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 theR&D budgets of the Federal laboratories.
48 q 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 Competitive-
ness 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 public-
sector researchers is possible; however, it is uncom-
mon for industry researchers to take visiting posi-
tions, particularly at Federal laboratories. The re-
verse is also quite rare. In the place of formal
personnel exchange, visitor programs of just a few
hours or days can provide an informal technology-
transfer mechanism. Such programs provide oppor-
tunities for firms to stay in touch with the latest
developments, particularly those in the government
laboratories (29).
Startup firms are new firms established specifi-
cally to commercialize new technologies. The proc-
ess 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 labo-
ratory 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 trans-
fer between Federal laboratories and industry. The
Stevenson-Wydler Act provided Federal laborato-
ries with a mandate to undertake technology transfer
activities, while the Technology Transfer Act cre-
ated an organizational structure to meet this man-
date.
Federal laboratories are allowed to participate in
cooperative R&D agreements and to grant exclusive
licenses for resulting patents to the private busi-
nesses 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 possibili-
ties, patenting, finding firms that might be inter-
ested, 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 full-
time staff, and a sustained financial commitment.
Firms may hesitate to pledge themselves to multi-
year 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 laborato-
ries 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 commercial-
izing 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) pro-
gram 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 q49
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 prog-
ress 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 com-
mercial application (SBIR does not fund the final
stages of bringing a product to market, but the Small
Business Administration does help firms find pri-
vate 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 Environ-
mental 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 re-
search 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 univer-
sity 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, Ver-
mont, 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, Mon-
tana, New York, and Wisconsin) have venture
capital programs although none are aimed specifi-
cally 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 pro-
grams, 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 busi-
nesses. 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 qAgricultural 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, impedi-
ments, 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 technol-
ogies will be discussed in chapter 5.
The United States has several policies and pro-
grams to encourage research and development.
Currently, public- and private-sector funding 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 feasibil-
ity, 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. Prod-
ucts 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 develop-
ment 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 develop-
ment. 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 commerciali-
zation 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 informa-
tion could prove quite beneficial. A successful
policy must be able to address these differing needs.
Chapter 4 References
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Botany, vol. 42, No. 2, April-June 1988, pp. 195-205.
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Induced Innovation: Technology, Institutions, and
Development (Baltimore, MD: John Hopkins
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3. Bosisio, Matt, U.S. Department of Agriculture,
"Kenaf Paper: A Forest Saving Alternative," Agri-
cultural Research, October 1988.
4. Cleland, Charles, U.S. Department of Agriculture,
Small Business Innovation Research Program, per-
sonal communication, February 1990.
5. Commission of the European Communities, Direc-
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ment, ECLAIR Information Package, 1989.
6. Drabenstott, Mark, and Moore, Charles, "New
Source of Financing for Rural Development," Amer-
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8. Hauer, Charles, National Science Foundation, Coop-
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personal communication, April 1990.
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cussion, ' American Journal of Agricultural Eco-
nomics, vol. 71, No. 5, December 1989, pp. 1324-
1326.
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Structure and Innovation: A Survey," Journal of
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Kugler, Daniel E., U.S. Department of Agriculture, Change (NewYork, NY: Oxford University Press,
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and Program Systems, "KenafNewsprint: Realizing
Commercialization of a New Crop After Four
Decades of Research and Development, A Report on
the Kenaf Demonstration Project," June 1988.
12. Kugler, Daniel E., U.S. Department of Agriculture,
Cooperative State Research Service, Special Projects
and Program Systems, Office of Critical Materials,
personal communication, June 1989.
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University Cooperative Research-and the Reali-
ties, ' Research-Technology Management, May-
June 1990, pp. 4042.
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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, Sep-
tember 1988, pp. 307-331.
15. O'Connell, Paul, U.S. Department of Agriculture,
Cooperative State Research Service, Special Projects
Director, personal communication, June, 1989.
16. Rausser, Gordon C., de Janvry, Alain, Schrnitz,
Andrew, and Zilberman, David, California Agricul-
tural Experiment Station, Giannini Foundation of
Agricultural Economics, "Principal Issues in the
Evaluation of Publish Research in Agriculture,' May
1980.
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Research Service, "New Crops and New Farm
Products: A Briefing, " 88-771 ENR, December
1988.
18. Raymond, W. F., and Larvar, P. (eds.), Alternative
Uses for Agricultural Surpluses (Ixmdon, England
and New York, NY: Elsevier Applied Science, 1986).
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Record Levels," Chemical and Engineering News, vol.
67, No. 44, Oct. 30, 1989, pp. 29-56.
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for Waste Management," R & D Magazine, March
1990.
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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
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and Coproducts, American Oil Chemists Society
Annual Meeting, May 1989.
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Small Business Innovation Research Program, per-
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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 ma-
terials, processes, and technologies into the manu-
facturing 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 equip-
ment, 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 eco-
nomic considerations that influence a firm to allo-
cate 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 de-
pend 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
-53-
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 evaluat-
ing 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, operat-
ing 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 technol-
ogy use in strategic applications where acceptable
performance variation is narrowly limited. Inter-
mediate materials containing agriculturally derived
rather than petroleum-derived chemicals, for exam- ple,
may have slightly altered chemical characteris- tics and
behave differently in the same manufactur-
ing procedure. Lack of familiarity with this variation is a
significant constraint to use in strategic applica-
tions, and new materials and processes may first be
adopted by firms for use in non-strategic applica-
tions. 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
54 q 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, pro-
duce photodegradable rather than biodegradable
plasticsl (13). This is because of cost considerations
associated with methods of production: photode-
gradable 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. Starch-
based 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 prod-
ucts 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 prod-
ucts, 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 produc-
tion procedures are those that will be adopted frost.
Products that have clear cost or quality advantages, even if
new procedures are needed, may also 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 commer-
cialization of new technologies; technology adop-
tion 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 tech-
nologies. 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 commodity-
based 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 manufactur-
ers, choose and manage new technologies and
equipment, and provide advice on trainin g require-
ments. 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, demon-
strate advanced production technologies, and make
short-term loans of advanced manufacturing equip-
ment 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 mod-
ernization plans customized to fit the needs of
individual fins. The Act also authorized $1.3
million for fiscal year 1990 to expand State technol-
ogy 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 prob-
lems, 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 exist-
ing 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 as-
sistance (17). Specialists in rural development rec-
ognize 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 com-
modities, 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 technolo-
gies 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 signifi-
cant 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, self-
pollination, low yields, and photoperiodism (5,7).
Seed dormancy (lack of germin ation) and poor
seedling vigor not only are undesirable agricultural
qualities, but diminish the opportunities for scien-
tists to continue research on that species. Asynchro-
nous flowering (flowering of individual plants at
different times) allows a wild plant species to
survive periods of adverse weather, but in commer-
cial 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 be-
cause of improved control. Photoperiodism is im-
portant 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 q Agricultural Commodities as Industrial Raw Materials
include meadowfoam (insect pollination), Cuphea
(seed shattering, seed dormancy), Vernonia (photo-
periodism), 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 equip-
ment. 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
determin ant 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 adop-
tion 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 surround-
ing the production of a new crop. Culturing and
harvesting practices, handling procedures, markets
etc. are not well-established. This uncertainty in-
creases 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 pro-
grams. At harvest time, farmers enrolled in com-
modity 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 q57
(whichever is higher) is called the deficiency pay-
ment. Deficiency payments are made on a certain
percent of the base acres and yields of the eligible
commodities. Because some of the eligible com-
modities 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 soy-
beans is significantly reduced (20). In the Corn Belt,
the two major crops grown are corn and soybeans.
An acreage reduction requirement for corn has 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. Addition-
ally, 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 acre-
age 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 higher-
than-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. Desig-
nated 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 q 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 commer-
cial 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 multi-
ple markets for new crop products is imperative.
s~e~e crops my be eligible for nonrecourse and mmkefig loam.
Use of Existing Infrastructure
Adoption of new industrial crops will be facili-
tated if the new crop can readily be accommodated,
with minor adjustment, by existing transportation,
storage, processing, and marketing infrastructure.
Individuals or firms maybe unwilling to make 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 educa-
tional programs to help farmers and agribusiness
firms use the results of agricultural research. Histor-
ically, 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 market-
ing 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 commerciali-
zation, 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. Sub-
sector 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
Chapter 5--Factors Involved in the Adoption of New Technologies by Industry and Agricultural Producers q 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-
ing-Consumption (PMC) system developed by the
University of Missouri.4
The long history and extensive influence of
agricultural commodity programs significantly af-
fects the competitiveness of new industrial crops,
and possibly new uses of traditional crops. Changes
in agricultural commodity programs may help to
remove some of the disincentives to new industrial
crops.
Chapter 5 References
1.
Becker,
Geoffrey S., U.S. Congress, Congressional
Research Service, "Fundamentals of Domestic Farm
Programs, " 88-311 ENR, Mar. 31, 1988.
2. Drabenstott, Mark, and Moore, Charles, "New
Source of Financing for Rural Development,' Amer-
4Some of the subsectors identified inthisframework 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 q Agricultural Commodities as Industrial Raw Materials
ican Journal of Agricultural Economics, vol. 71, No. 13. Thayer, Ann, "Degradable Plastics Generate Contro- 5,
December 1989, pp. 1315-1328. versy in Solid Waste Issues, ' Chemical and Engi-
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
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 Devel-
opment Finance: Keys to Rural Revitalization: Dis-
cussion, American Journal of Agricultural Eco-
nomics, vol. 71, No. 5, December 1989, pp. 1324-
1326.
Kaplin, Kim, U.S. Department of Agriculture, Agri-
cultural Research Service, "Vernonia, New Indus-
trial Oil Crop," Agricultural Research, April 1989, pp.
10-11.
Keith, David, American Soybean Association, per-
sonal communication, July 1989.
Knapp, Steven J., "New Temperate Industrial Oilseed
Crops," paper presented at the First National
New Crops Symposium, Indianapolis, IN, October
1988.
he, David R., and Helrnberger, Peter G., "Estimat-
ing Supply Response in the Presence of Farm
Programs," American Journal of Agricultural Eco-
nomics, vol. 67, May 1985, pp. 193-203.
Milkove, Daniel L., and Sullivan, Patrick J., U.S.
Department of Agriculture, Economic 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, Sep-
tember 1988, pp. 307-331.
Schaub, James, McArthur, W. C., Hacklander,
Duane, Glauber, Joseph, Leath, Mack, and Doty,
Harry, U.S. Department of Agriculture, 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.
neering News, June 25, 1990, pp. 7-14.
14. Theisen, A.A., Knox, E. G., and Mann, F. L., Feasibil-
ity of Introducing Food Crops Better Adapted to
Environmental Stress (Washington, DC: U.S. Gov-
ernment Printing Office, March 1978).
15. 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.
16. 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).
17. 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).
18. 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).
19. U.S. Department of Agriculture, AgricuZturaZ Statis-
tics, 1988 (Washington, DC: U.S. Government
Printing Office, 1988).
20. Westcott, Paul C., U.S. Department of Agriculture,
Economic Research Service, "Winter Wheat Plant-
ings and Soybean Double Cropping, ' Oil Crops,
Situation and Outlook Report, OCS-20, January
1989.
21. 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 competitive-
ness, Congress wishes to accelerate cooperation
between the public and private sector to commercial-
ize new agricultural technologies. The perceived
lack of interest by the U.S. Department of Agricul-
ture (USDA) in developing new industrial crops and
uses spawned the introduction of legislation in the
100th and 101st Congresses. Several policy recom-
mendations proposed by the Task Force have been
incorporated in the legislation. The House of Repre-
sentatives bill is titled the Alternative Agricultural
Products Act of 1990. The Senate bill is titled the
Alternative Agricultural Research and Commercial-
ization 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 pro-
duce 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 technologi-
cal 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 informa-
tion technology will increase productivity, but at the
-61-
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 diversifica-
tion needed is reasonable.
Proposed Legislation
Goals
Effective policy must articulate clear and achiev-
able 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 technolo-
gies. 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 in-
come, 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
62 q Agricultural Commodities as Industrial Raw Materials
Box 6-A—Alternative Agricultural Products Act of 1990: House Proposal
Purpose
q 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.
q 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.
I nstitutional Structure-proposes theestablishment 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-Atleast 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 q 63
Box 6-B—Alternative Agricultural Research and Commercialization Act of 1990: Senate Proposal
Purpose
qTo authorize plant research in order to develop and produce marketable products other than food, feed, or
traditional forest or fiber products.
q To comm ercialize such new uses in order to create jobs, enhance rural economic development, and diversify
markets for agricultural raw materials.
. To encourage cooperative public/private development and marketing efforts and thus accelerate
commercialization.
. To direct commercialization efforts toward products from crops that can be raised by family-sized producers.
Institutional Structure-Proposes the creation of the Alternative Agricultural Research and Commercializa-
tion Corporation, an independent, nonprofit entity within USDA, and headed by a nine-member board, 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-TheCorporation 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-Fundingis 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 q 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 com-
modities as an industrial raw material source will
have a significant impact on rural economic devel-
opment. Clearly, developing new crops and uses of
traditional crops can be a component of a compre-
hensive 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 partici-
pation to small firms (for research and cooperative
agreements) and to firms that will locate manufac-
turing 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 in-
vested 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 proc-
esses, are large rather than small firms. The eligibil-
ity restrictions in the legislation are such that in the
attempt to achieve one goal (that of rural develop-
ment), 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, com-
mercialization, 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 develop-
ment can only be accomplished with the establish-
ment of a new corporation. Rather, the impetus for
an independent institution arises because of percep-
tions 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 Tech-
nology 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 signifi-
cantly 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 q65
each agency's continuance (8). It could be argued that
creation of an agricultural corporation to com-
mercialize new crops and uses continues this trend.
Reauthorization of the Office of Critical Materials
(OCM) is an alternative to making 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 estab-
lished 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 Innova-
tion 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 ex-
panded. Historically, the Extension Service has
transferred information about new production tech-
nologies to farmers. Recently, the Extension Service
has begun to develop a strategic marketing orienta-
tion 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 proc-
esses, many small firms may need a detailed
evaluation of their management and production
strategies. Effective State technical assistance pro-
grams 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 avail-
able in the proposed legislation. One possibility
might be to provide block grants to effective State
programs.
Proposed legislation provides funding for com-
mercialization. The legislation defines commerciali-
zation 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 devel-
opment 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 commercial-
ization, and not the problems of industrial technol-
ogy adoption.
In addition to commercialization funding and
technical assistance, there may also be a need for
assistance in financing capital investment and oper-
ating expenses, particularly in rural areas. Some
studies indicate that debt financing markets in rural
66 q Agricultural Commodities as Industrial Raw Materials
communities operate efficiently, and that operating and research and development strategy; social-
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 sec-
ondary 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 commercializa-
tion opportunities is an important component of
generating industrial interest in developing new
products using agricultural commodities. There is
growing participation of industry in Federal labora-
tory 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 Agricul-
tural Materials Act specifically provided for the
establishment of a database regarding new industrial
crops and use development at the National Agricul-
tural 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. Con-
gress may wish to consider provisions for database
maintenance.
A strategic approach is needed for the develop-
ment of industrial products from agricultural com-
modities. 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 contingen-
cies 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 develop-
ment time frame is desired; some research must
focused. A priority of new crop and use commercial-
ization should be the development of a marketing
science 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 indus-
trial uses of agricultural commodities.
Policy Options
Policy options presented are in three categories:
1. commodity programs options;
2. research, development, and commercialization
proposals; and
3. additional options that require further study.
Commodity Program Options
Agricultural commodity programs, as they cur-
rently 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 (defi-
ciency 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 pro-
grams:
. changes in the commodity base acreage for-
mula to increase planting flexibility, referred to
hereafter as "Normal Crop Acreage";
Chapter 6--Proposed Legislation and Policy Options . 67
q changes in the commodity base acreage for- groups generally oppose this option because they
mula to increase planting flexibility, referred to feel it is motivated not by a desire to provide
hereafter as "Triple Base Option"; flexibility, but rather to reduce payments to farmers
q changes in the target prices, referred to here- because of budget constraints. It is also argued that
after as ''Target Prices"; and this plan is inequitable because not all farmers can q
continuation of commodity programs similar to grow more than one crop profitably due to weather
those contained in the 1985 Food Security Act, and soil constraints (2).
referred to hereafter as ''Status Quo. Target Prices
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 acre-
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 commod-
ity 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. De-
creasing 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:
age. Because the planting decisions made for the q continuation of the current policy including
third base (that which receives no deficiency pay- appropriations for the Office of Critical Materi-
ments) are based more on market price signals than als, referred to hereafter as the "Status Quo";
on target prices, this option presumably would q establishment of institutions outlined in the
remove some disincentives to planting new crops, House and Senate bills referred to hereafter as
assuming that these new crops are permitted under the "Agricultural Corporation Alternative";
the terms of the commodity program. However, farm and
68 q Agricultural Commodities as Industrial Raw Materials
qreorganization of the agricultural research and and that are currently obtained via imports or
extension system to be more responsive to from petroleum. The emphasis is on supplying
end-user needs, referred to hereafter as the a relatively well-defined market rather than on
"National Research and Extension Policy Al- achieving broad social goals, although one
ternative. ' could argue that the security gained by having
a domestic source of strategic and essential
Status Quo
The status quo option calls for maintaining the
Office of Critical Materials as the main office to
coordinate the research, development, and commer-
cialization 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. 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.
2. Continuation of the Office of Critical Materi-
als will not address the underlying problems of
priority setting, planning, and resource alloca- tion
within USDA.
3. Coordination of USDA programs will be by
5.
6.
7.
8.
9.
materials is a worthwhile social goal.
Financial selection criteria is not limited to
small firms only. The broader range of poten-
tial participants, compared to proposed legisla-
tion, may increase the commercialization pros-
pects for some products.
Small business technical assistance and com-
mercialization loans are not part of the pro-
gram. However, there is a strong technology-
transfer component in the form of demonstra-
tion programs with industry, and provision 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; tech-
nology-transfer finding is strictly for indus-
trial uses of new and traditional crops.
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 land-
grant universities to develop the new crops
they have identified as potential candidates for
commercialization. Coordination between
OCM and the USDA Small Business Innova-
tion Program, however, is informal.
4. The goals of the Critical Agricultural Material
Act are more modest than proposed legisla-
tion. The focus is on the development of a
domestic capacity to supply industrial materi-
als that the United States uses on a daily basis
Agricultural Corporation Alternative
This alternative involves the passage of a compro-
mise version of the House and Senate bills. Its
features and likely consequences include the follow-
ing:
1. There will be a significant expansion of the
Federal role in research, development, and
commercialization of new industrial crops
and uses of traditional crops.
2. There will be an additional administrative
layer added to USDA, but Department prob-
lems of priority setting, research planning,
and resource allocation will not be addressed.
Furthermore, a new administrative compo-
nent could potentially add to the difficulties
already facing USDA in its efforts to coordi-
Chapter 6-Proposed Legislation and Policy Options q69
3.
4.
5.
6.
7.
8.
9.
10,
nate cross-cutting problems across multiple
agencies.
No explicit provision exists for the develop-
ment 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 incorpo-
rate 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 ap-
proaches increase the likelihood of duplica-
tion and neglect of important elements. How-
ever, 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. Agricul-
tural policy and rural policy are not synony-
mous, and aiming production at small farms
will be difficult to achieve.
Financial selection criteria may be too restric-
tive and diminish opportunities for commer-
cialization. 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 equity-
capital 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 re-
search 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; fund-
ing is strictly for new industrial crops and
uses of traditional crops.
11. There will be no funding for new food crops;
this potential avenue for diversification is
excluded.
12. No explicit consideration exists for database
needs. Some projects may automatically be
covered by USDA research databases, but
others will not. This could potentially in-
crease the difficulty of information dissemi-
nation.
13. 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.
14. 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 corpo-
ration 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 respon-
siveness 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 representa-
tives from farmer organizations, agribusiness orga-
nizations, public interest organizations, foundations,
and government action agencies. The council identi-
fies problems, recommends goals and funding lev-
els, coordinates industry support, and evaluates
progress. The council works closely with the Agri-
cultural Science and Education Policy Board
(ASEPB), which will be the research and technol-
ogy-transfer planning center for USDA. The 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 q Agricultural Commodities as Industrial Raw Materials
from NIH, NSF, non-land grant universities, and
1890 universities. The board, with the active in-
volvement of the User Advisory Council, sets goals,
establishes priorities, assigns agency research re-
sponsibilities, and evaluates results, among 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 con-
text. User input is an integral component of the
proposal. Allocation of funding is to priority pro-
grams rather than agencies. Features and likely
impacts of this proposal include the following:
1. USDA's fundamental problems with priority
setting, planning, resource allocation, and
technology transfer will be addressed.
ing for commercialization or prototype plant
development.
6. Explicit funding for technology transfer pro-
grams 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 agen-
cies sit on the Board.
7. Increased funding for new food crops is
possible but not guaranteed.
8. 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
2.
3.
4.
5.
New crop and new use research and develop-
ment 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 prior-
ity area by the current User's Advisory Board.
Funding will depend on whether new indus-
trial 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 multidisci-
plinary systems approach to agricultural re-
search, development, and extension that cuts
across USDA agencies, will be established.
This approach would allow, for instance, for
the collection of germplasm and for social-
science 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 market-
ing strategy and provide for the assessment of
likely impacts of the new technology.
This proposal is a research and technology-
transfer proposal and would not provide fund-
Rural debt markets seem to be working effi-
ciently, 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 im-
provement 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 com-
modities is needed.
Technical Assistance
Technical assistance, particularly in rural commu-
nities 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 technol-
ogies 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 mainte-
nance technologies is needed.
Chapter -reposed Legislation and Policy Options q71
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 bene-
fiting 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 Com-
mercialization 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, milk-
weed, 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 com-
modities 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 addi-
tional 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 founda-
tions 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. Establish-
ment 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 environ- ment, 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 commerciali-
zation might be useful. The European community is taking
this approach by first establishing a pre-
commercialization program to determine feasibility, and
then following up with a later program to encourage
commercialization. The U.S. Small Busi-
ness 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 prod-
ucts and processes to analyze potential markets,
socioeconomic and environmental impacts, techni-
cal 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, mul-
tiregional research should be given the highest
funding priority. This could include: chemical, physical,
and biological research needed to improve production
yields and chemical conversion efficien-
cies, and to establish quality control and perform-
ance 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 laboratory-
industrial 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 exten-
sion 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.
Chapter 6 References
1. 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.
2. Ek, Carl, U.S. Congress, Congressional Research
Service, "The Triple Base Plan," 89-381 ENR, June
1989.
3. Ek, Carl, U.S. Congress, Congressional Research
Service, "Normal Crop Acreage," 89-467 ENR,
August 1989.
Chapter 6-Proposed Legislation and Policy Options q73
4. 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-
ization, ' American Journal of Agricultural Eco-
nomics, vol. 71, No. 5, December 1989, pp. 1305-
1323.
5. John, DeWitt, "Keys to Rural Revitalization in the
1990's: Discussion, ''American Journal of Agricul-
turaZ Economics, vol. 71, No. 5, December 1989, pp.
1327-1328.
6. New Farm and Forest Products Task Force, "New
Farm and Forest Products-Responses to the Chal-
lenges and Opportunities Facing American Agricul-
contractor report prepared for the Office of Technol-
ogy Assessment, September 1989.
8. 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).
9. 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 Technology-
Issues for the 1990s, OTA-F-448 (Washington, DC:
U.S. Government Printing Office, March 1990).
ture,' A Report to the Secretary of Agriculture, 10. U.S. Congress, Office of Technology Assessment,
Washington, DC, June 25, 1987. Makhg Things Better: Competing in Manufacturing,
7. Tweeten, Luther, ''The Competitive Environment for OTA-ITE-443 (Washington, DC: U.S. Government
Agricultural Research and Technology Transfer," Printing Office, February 1990).
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 Lesquer-
ella 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 varia-
tion leading to easier selection for agronomic charac-
teristics. However, L. fendleri suffers from seed dor-
mancy 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.
Appendix A
Selected New Industrial Crops
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 identi-
fied 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 Agri-
cultural 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 per-
cent, 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 experimen-
tally.
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 produc-
tion.
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 genet-
ics), the NRRC (oil characterization), and the Short
Rotation Woody Crops Program of the Department of
Energy (agronomic) have provided research funding.
SOURCES: 29,39,46
Coyote Bush/Desert Broom
Scientific name: Baccharis pilularis (coyote bush),
Baccharis sarothroides (desert broom).
Major compounds produced: Approximately 10 per-
cent of the dry weight of the plant are resins.
Replacement: Wood 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 pilu-
laris is native to Baja and southern California, where it
Appendix A--Selected New Industrial Crops q77
is often grown as a landscape plant. Attempts to grow it
in Tucson, Arizona, were unsuccessful due appar- ently
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 environ-
ment.
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. pro-
duction 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 expen-
sive, 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 condi-
tions 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 30to 45
percent oil, 50 to 60 percent of which is erucic acid, a
C
22
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. Leak- proof
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 q 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 esti-
mated to be $2 for every $1 of Federal support.
SOURCES: 15,20,35,36,42,46,49,51,53
Cuphea
Scientific name: Cuphea 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 C
12
saturated
fatty acid. Other species contain high levels of C
IO
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, primar-
ily 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. Experimen-
tal plots have yielded 250 to 2,000 lb/acre of seed (280
to 2,240 kg/ha). There are both insect and self-
pollinated 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 at-
tempted. 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 pro-
duction 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 de-
mand. 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.
Oversupply would result in depressed prices for these
oils and for potential domestic substitutes such as
Cuphea. Higher lauric acid yields for Cuphea (80
Appendix A-Selected New Industrial Crops
Guar
Scientific name: Cyanopsis tetragonobla
q
79
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 pro-
gram 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 attempt-
ing 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
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 Xantho-
monas, 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. importsof guar.)
Social considerations: Guar is a legume and has nitro-
gen-fixing qualities.
Extent of research conducted: Not extensive.
SOURCES: 43
Guayule
Scientific name: Parthenium argentatum
Major compounds produced: Guayule produces a
high-molecular-weight rubber and resins that are ex-
tracted from the whole plant.
Replacement: Imported Hevea rubber and synthetic
rubber
Major uses: High-molecular-weight rubber is particu-
larly valuable in uses which require elasticity, resil-
ience, tackiness, and low heat buildup such as in tires;
resins can be used in the chemical industry; extraction
residues could potentially be used as livestock feed.
Agronomic characteristics: The genus Parthenium in-
cludes 17 species, all native to North or South America.
Both annuals and perennials are known. Guayule is the
most studied species. It is native to the Chihuahua
desert region of the Southwestern United States and
80 q 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 pro-
duction. Recently researchers have found the enzyme
(rubber polymerase) responsible for synthesizing rub-
ber. 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-molecu-
lar-weight rubber, indicating that the hybrid can
produce high-quality natural rubber. Successive gener-
ations of crosses, however, displayed decreasing seed
germination percentage. Improving seed germination
and direct seeding procedures are needed.
Guayule differs from both Hevea and other latex-
producing 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. Improve-
ments are needed in harvesting technology. In addition
to problems of yield, large-scale testing of the high-
molecular-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 re-
place 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, syn-
thetic 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 process-
ing 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-molecular-
weight 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 con-
ducted 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 q81
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 out-
crossing 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
292-865 0 - 91 - 4 QL:3
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 condi-
tions 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 C
24
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
82 q 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. Pelar-
gonic 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
J ojoba
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). Eighty-
seven percent of the fatty acids are of chain length 20
or 22 (eicosanoic acid is C
20
and docosanoic acid is
C
22
), and there are small quantities of palmitoleic acid
(C
18
) and oleic acid (C
16
). The fatty acids are mono-
unsaturated. 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 petroleum-
derived 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, car-
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 0F (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 Southwest-
ern 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
nauba, and spermaceti, all waxes that are commercially cause early flowering. If the weather then turns cold (25 0
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
F or lower during the blooming season of January to
March), the crop could be lost. Jojoba can tolerate high
temperatures (greater thanO 100oF), but not prolonged
temperatures of below 23 F. Weed control appears to
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 sim-
mondsins and tannins which are unpalatable to live-
stock and potentially toxic. Utilization research per-
formed 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 pro-
duction.
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, non-
wood 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 emer-
gence and growth; the dense populations needed result
in shaded ground conditions. However, favorable
Appendix A--Selected New Industrial Crops . 83
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 experi-
ences indicate that rain-fed kenaf produces about 75
percent of irrigated yields. Research to improve har-
vesting 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 approxi-
mately $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 fast-
growing 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 transpor-
tation 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 q 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). Nonirri-
gated 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 competi-
tiveness 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 re-
search 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 Uni-
versity; $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 C
2O
and C
22
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 oF.
Some meadowfoam species are insect-pollinated,
while others are self-pollinated.
Appendix A--Selected New Industrial Crops q85
Technical considerations: Self-pollinated meadowfoam
species are generally agronomically preferable, how-
ever those that have been examined have given lower
yields and display less genetic variation than insect-
pollinated species. No suitable self-pollinated species
have been found, thus attention is focused on insect-
pollinated 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, de-
creasing 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, foam-
ing, 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 meadow-
foam 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 approx-
imately 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 estab-
lishing millkweed is that of weed control. During the
seedling stage, much energy is devoted to root estab-
lishment which aids in drought tolerance but results in
the slowly growing, above-ground portion being non-
competitive 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 (hex-
ane) compounds remained stable. Better storage meth-
ods resulted in little loss of either extractable.
86 q Agricultural Commodities as Industrial Raw Materials
Economic considerations: Experimental plots of milk-
weed, using wild milkweed seed, had variable produc-
tion 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 com-
petitive 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 approxi-
mately 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. Pelar-
gonic 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. Gener- ally,
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 con-
tains 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 rape-
seed 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 con-
tains 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 industrial-
quality 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 rape-
seed (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
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 anthelmin-
tica are 23 to 31 percent oil, 68 to 75 percent of which
Appendix A--Selected New Industrial Crops q 87
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 con-
tains 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 mem-
bers 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 re-
quired 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 supple-
ments. 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 replace- 12. Food Chemical News, May 15, 1989, p. 10.
ment 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
13. Goldstein, Barry, Carr, Patrick M., Darby, William P., De
Veaux, Jennie S., Icerman, Larry, and Shultz Jr., Eugene B.,
"Roots of the Buffalo Gourd: A Novel Source of Fuel
Ethanol," American Assoctition for the Advancement of
Science Selected Symposium No. 91, Eugene B. Shultz, Jr.,
and Robert P. Morgan (eds.) (Boulder, CO: WestView Press,
hlC., 1984), pp. 895-906.
Northern Regional Research Center has conducted
some utilization research. Trial plantings of Vernonia
14. Gunstone, Frank D., 'Jojoba Oil,' Endeavour, New Series,
vol. 14, No. 1, 1990.
were made in Georgia in 1964, but little interest was
expressed in developing this species. Recent agro-
nomic research has been conducted in East Africa and
the Carribean rather than in the United States. Utiliza-
tion 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 industry-
financed research group) are providing $425,000 for
this research. Some research is also being conducted at
Lehigh University.
SOURCES: 8,18,33,36,37
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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).
2. AgBiotechnology News, ''Breakthrough in Guayule Rubber
Production," January/February 1990, pg. 19.
3. Arkcoll, David, "LaUric Oil Resources," Economic Bot-
any, vol. 42, No. 2, April-June 1988, pp. 195-205.
4. Bosisio, Matt, U.S. Department of Agriculture, Agricultural
Research Service, 'Kenaf Paper: A Forest Saving Alterna-
tive," Agricultural Research, October 1988, pp. 6-8.
5. Bosisio, Matt, U.S. Department of Agriculture, Agricultural
Research Service, "Meadowfoam: Pretty Flowers, Pretty
Possibilities," Agricultural Research, February 1989, pp.
10-11.
6. Broadway, Regian, "Kenaf Making Progress in Missis-
sippi," Ag Biotechnology News, January/February 1990,
pp.17-18.
7. Brody, Jane E., "Scientists Eye Ancient African Plant as
Better Source of Pulp for Paper," New York Times, The
Environment Section, Tuesday, Dec. 13, 1988.
8. Chemical and Engineering News, "Vernonia Oil Shows
promise as Reactive Monomer," May 7, 1990, p. 62.
9. Dempsey, James M., "Kenaf," Fiber Crops (Gainesville,
FL: University Presses of Florida, 1975).
10. De Veaux,Jennie S., and Schultz, Jr., Eugene B., 'Develop-
ment of Buffalo Gourd (Cucurbita foetidissirna) as a
Semiarid Land Starch and Oil Crop," Economic Botany, vol.
39, No. 4, October-December 1985, pp. 454-472.
11. Dvoskin, Dan, U.S. Department of Agriculture, Economic
Research Service, "Potential Utilization of Agricultural
Resources, The Case of Jojoba," August 1987.
15. Hinrnan, C. Wiley, "Potential New Crops," Scientific
American, vol. 255, No. 1, July 1986.
16. Hoffmann, Joseph J., and McLaughlin, Stephen P., "Grin-
delia Camporurn: Potential Cash Crop for the Arid South-
west," Economic Botany, VO1.40, No. 2, April-June 1986, pp.
162-169.
17. Jordan, Wayne R., Newton, Ronald J., and Rains, D.W.,
''Biological Water Use Efficiency in Dryland Agriculture,'
contractor report prepared for the Office of Technology
Assessment, 1983.
18. Kaplin, Kim, U.S. Department of Agriculttue, Agricultural
Research Service, "Vemonia, New Industrial Oil Crop,"
Agricultural Research, April 1989, pp. 10-11.
19. Kephart, K. D., Rice, M.E., McCaffrey, J.P., and Murray,
G.A., "Spring Rapeseed Culture in Idaho," University of
Idaho Cooperative Extension Service, Bulletin No. 681,
1988.
20. Kleiman, Robert, U.S. Department of Agriculture, Agricul-
tural Research Service, NorthernRegional Research Center,
Peoria, IL, personal communication, 1989.
21. Knapp, Steven, Oregon State University, Crop Sciences
Department, Corvalis, OR, personal communication, 1989.
22. Knapp, Steven J., "New Temperate Industrial Oilseed
Crops," paper presented at the First National New Crops
Symposium, Indianapolis, IN, October 1988.
23. Kugler, Daniel E., U.S. Department of Agriculture, Cooper-
ative State Research Service, Special Projects and Program
Systems, "KenafNewsprint: Realizing Commercialization
of a New Crop After Four Decades of Research and
Development, A Report on the Kenaf Demonstration
Project, " June 1988.
24. Lasley, Floyd A., Jones, Jr., Harold B., Easterling, Edward
H., and Christensen, he A., U.S. Department of Agricul- ture,
Economic Research Service, ''The U.S. Broiler
Industry,' Agricultural Economic Report No. 591, Novem- ber
1988.
25, McLaughlin, Steven P., "Mass Selection for Incnmsed
Resin Yield in Grindelia Camporuom (Composhae),"
Economic Botany, vol. 40, No. 2, April-June 1986, pp.
155-161.
26. Miller, John M., and Backhaus, Ralph A., "Rubber Content
in Diploid Guayule (Parthenium argentatum): Chromo-
somes, Rubber Variation, and Implications for Economic
Use," Economic Botany, vol. 40, No. 3, July-September
1986, pp. 366-374.
27< Murray, G.A., AuId, D. L., O'Keeffej L.E., and Thin, D.C.,
"Winter Rape Production Practices in Northern Idaho,"
University of Idaho Agricultural Experiment Station, Bulle- tin
No. 634, 1984.
28 Naqvi, H.H., Hasherni, A., Davey, J.R., and Wa.i.nes, J.G.,
''Morphological, Chemical, and Cytogenetic Characters of
F1 Hybrids Between Parthenium argentatum (Guayule) and
Appendix A-Selected New Industrial Crops . 89
P. fruticosum var. fruticosum (Asteraceae) and Their 42. Smathers, Robert, Withers, Russell, and Sunderland, Dave,
Potential in Rubber Improvement,' Economic Botany, vol. "1987 Northern Idaho Crop Enterprise Budgets," Univer-
41, No. 1, January-March 1987, pp. 66-77. sity of Idaho, MS 101-3, September 1987.
29. National Research Council, Saline Agriculture: Salt-
Tolerant Plants For Developing Countries, (Washington,
DC: National Academy Press, 1990).
30. National Research Council, .lojoba: New Crop for Arid
Lands, New Material for Industry, (Washington, DC:
National Academy Press, 1985).
31. Nelson, Dave, Oregon Meadowfoam Growers Association,
Salem, OR, personal communication, 1989.
32. O'Connell, Paul, U.S. Department of Agriculture, Coopera-
tive State Research Service, Special Projects and Program
Systems, testimony at hearing before the Subcommittee on
Agricultural Research and General bgislation of the
Committee on Agriculture, Nutrition, and Forestry, United
States Senate, June 26, 1987.
43.
44.
45.
46.
Theisen, A.A., Knox, E.G., and Mann, F. L., Soil and Land
Use Technology, Inc., "Feasibility of Introducing Food Crops
Better Adapted to Environmental Stress," National Science
Foundation, NSF/RA-780289 (Washington, DC: U.S.
Government Printing Office, March 1978).
Thompson, Anson E., "New Native Crops for the Arid
Southwest," Economic Botany, vol. 39, No. 4, October-
December 1985, pp. 436453.
U.S. Department of Agriculture, Agriculture Research
Service, "Cultural and Harvesting Methods for Kenaf: An
AMual Crop Source of pulp in the Southeast," Production
Research Report No. 113, 1970.
U.S. Department of Agriculture, Cooperative State Re-
search Service, Office of Critical Materials, "Growing
33
.
34
.
35
.
36
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37
.
Perdue, Robert E. Jr., Carlson, Kenneth D., and Gilbert,
Michael G., "Vernonia galamensis, Potential New Crop
Source of Epoxy Acid," Economic Botany, vol. 40, No. 1,
January-March 1986, pp. 54-68.
Plowman, R. Dean, "USDA Research in New Industrial
Crops," EZGuayufero, vol. 10, No. 3 & 4, Fall-Winter 1988,
pp. 6-9.
Prato, Tony, 'Production, Processing and Marketing Poten- tial
for Rapeseed in the Pacii3c Northwest," University of
Idaho Curnmt Information, Series No. 818, February 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, February 1984, pp. 281-
289.
Reisch, Marc S., "Demand Puts Paint Sales at Record
hwels," Chemical and Engineering News, vol. 67, No. 44,
Oct. 30, 1989, pp. 29-56.
47.
48.
49.
50
.
Industrial Materials," February 1989.
U.S. Department of Agriculture, Cooperative State Re-
search Service, "Guayule Research and Development:
Establishing a Domestic Natural Rubber Industry,' Febru-
ary 1988.
U.S. Department of Agriculture, Critical Materials Task
Force on the Role of American Agriculture and Forestry in
Maintaining Supplies of Critical Materials, "Growing
Industrial Materials: Renewable Resources From Agricul-
ture and Forestry," October 1984.
U.S. Department of Agriculture, Economic Research Serv-
ice, "World Indices of Agricultural and Food Production,
1977 -86," Statistical Bulletin No. 759, March 1988.
U.S. Department of Agriculture, Foreign Agricultural
Service, "World Oilseed Situation and Market High-
lights," Circular Series FOP 2-89, February 1989.
38. Schaub, James, McArthur, W.C., Hacklander, Duane,
Glauber, Joseph, bath, Mack, and Doty, Harry, U.S.
Department of Agricuhure, Economic Research Service,
"The U.S. Soybean Industry," Agricultural Economic
Report No. 588, May 1988.
51
.
Van Dyne, Donald L., Blase, Melvin G., and Carlson,
Kenneth D., 'Industrial Feedstock and Products From High
Erucic Acid Oil: Crambe and Industrial Rapeseed," Uni-
versity of Missouri-Columbia Printing Services, March
1990.
39
.
40
<
41
.
Scheld, H.W., 'Production of Chinese Tallow: The Fuel Oil
Seed Crop," AAAS Selected Symposium # 91, Eugene B.
Shultz, Jr., and Robert P. Morgan (eds.), 1984, pp. 177-186.
Senft, Dennis, U.S. Department of Agriculture, Agricultural
Research Service, 'Homegrown Lubricants and Plastics,'
Agricultural Research, October 1988.
Sheets, Kenneth R., "How To Turn a New ki.f in the
Papermaking Business, " U.S. News and World Report,
May 8, 1989.
52
<
53
<
5
4
Van Emon, Jeanette, and Seiber, James N., "Chemical
Constituents and Energy Content of Two Milkweeds,
Asclepias speciosa and A. curassavica,' Economic Botany,
vol. 39, No. 1, Januaxy-March 1985, pp. 47-55.
Woolley, Donald G., and Lovely, Walt, "Crambe Produc-
tion,' Iowa State University Extension, Pm-1333, October
1988.
Young, Jim, "KenafNewsprint is a Proven Commodity,"
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 prod-
ucts. 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 com-
position of the oil determines fuel characteristics. In
general, highly unsaturated oils break down faster than
saturated oils, but increased saturation leads to solidifi-
cation 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 de-
creased 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 indirect-
injection 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
-90-
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 short-
term 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 rape-
seed currently are grown only in small quantities;
production would need to be greatly expanded. Soy-
beans and sunflowers are the likely candidates. Aver-
age U.S. sunflower yields are about 600 pounds oil 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, sun-
flower meal is low in lysine and cannot fully supply the
protein requirements of livestock particularly pork and
poultry. Farmers would still need to purchase higher-
lysine-protein meal, such as soybean meal, or amino
acid supplements. This to some extent decreases the
Appendix B--Selected Industrial Uses for Traditional Crops q91
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 poten-
tially could have negative impacts on employment,
particularly in the oil processing and transportation
industries. Increased centralized processing could po-
tentially 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 Newspa-
per 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 fermen-
tation of corn, however, at present, no large-scale plants
exist. The Chevron Co. has marketed CMA. Determi-
nation 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 bacte-
rial fermentation. It is estimated that an economical size
92 qAgricultural 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
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
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
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 aggre-
gates, 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 polymer-
treated 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 fol-
lowed 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 gelati-
nization, 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 encapsu-
lated 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 fluctu-
ate with the price of corn and the value of these feed
byproducts.
Social considerations: There is some potential to de-
crease groundwater contamination by using encapsu-
lated pesticides. Livestock feed byproducts will com-
pete with soybeans.
Research conducted: Northern Regional Research Cen-
ter in Peoria, Ill.
SOURCES: 6,18,41,43
Ethanol
Crop: Corn primarily, but potentially other starch or
lignocellulose sources
Major coproducts: Two production methods are util-
ized: 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 CO
2
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 high-
protein livestock feeds. The almost pure starch that is
left is converted to sugar, then fermented and distilled
to produce ethanol and CO
2
. 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 automo-
biles have now been adjusted to minimize such
problems.
Ethanol production needs to be improved. In the near
term, three new technologies show promise: 1) replace-
ment of yeast with Zymomonous mobilis bacteria, 2)
membrane separation of solubles, and 3) yeast immobi-
lization. Z. mobilis ferments faster than yeast, 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 cellu-
losic 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 capaci-
ties of 100 to 150 million gallons) are able to capture
economies of scale in both the production and market-
ing 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 q 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 mini-
mum 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 opera-
tions are geared to removing large logs. Improvements
in harvesting would lower costs. Collecting agricul-
tural 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 advan-
tage 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 live-
stock 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 protein-
supplement prices. Above 3 billion gallons, lower
byproduct-feed prices would possibly result in in-
creased 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 emis-
sions when concentrations of lead, sulfur dioxide,
nitrogen dioxide, ozone, carbon monoxide, and partic-
Appendix B-Selected Industrial Uses for Traditional Crops . 95
ulate matter exceed standards. Many of these 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 produc-
tion 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 Re-
search 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 exemp-
tion is extended through the year 2000, then expanding
ethanol production to the 2.7 billion gallon level would
result in Federal commodity program savings exceed-
ing federal ethanol subsidies through 1994. After that,
ethanol subsidies exceed farm program savings. Fur-
thermore, by the year 2000, the cumulative cost of 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 employ-
ment 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 de-
grade in the presence of ultraviolet light and are
produced by adding photosensitive agents (e.g., photo-
sensitive transition-metal salts or organometallic com-
pounds) or by forming copolymers with photosynthetic
groups (e.g., carbonyl groups). Photodegradable six-
pack 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 process- ing
or equipment changes. Newer methods are using higher
starch levels. The U.S. Department of Agricul-
ture 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 avail-
able.
Another possible approach is the formation of starch
(or lignin or cellulose) copolymers with plastics.
Radiation or chemicals can be used to generate 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 biode-
gradable plastics all use some combination of biologi-
cal 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 q 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 conven-
tional 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 starch-
plastic 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 nonde-
gradable 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 re- search 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 q97
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 Massachu-
setts, Office of Naval Research, Michigan State Uni-
versity, 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, Web-
ster Industries, and SunBag all produce photode-
gradable 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 starch-
based polymers.
4. Montedison is producing thermoplastic starch res-
ins that are alloys of cornstarch and synthetic resins.
5. ICI Biological Products is producing PHBV poly-
mers.
biomass (organic material produced by photosynthe-
sis). 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). Lignocellu-
lose 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 eco-
nomics. The petrochemical industry is highly inte-
grated 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 com-
modity 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,
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 pe-
troleum
Technical considerations: Technically, it is possible to
produce fuel and most commodity chemicals from
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. Possi-
bilities 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 q Agricultural Commodities as Industrial Raw Materials
As long as petroleum is fairly cheap, biomass will not be
economically attractive. In addition, coal gasifica- tion
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 po-
tential 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. Bajpai, Rakesh, Frisby, Jim, Hsieh, Fu-Hung, Iannotti,
Gene, Kerley, Monty, Miles, John, Mueller, Rick, Vande-
populiere, Joe, and Van Dyne, Don, "Evaluation and
Production of Feedstock Chemicals,' paper presented at the
Second National Corn Utilization Conference, Columbus,
OH, NOV. 17-18, 1988.
2. Barrier, John W., "Alcohol Fuels and TVA's Biomass
Research,' Forum for Applied Research and Public Policy,
Winter 1988, pp. 60-62.
3. Burnett, R.S., "Soy Protein Industrial Products," Soybean
and Soybean Products, vol. II, K.S. Markley (cd.) (New
York, NY: Inner Science Publishers Inc., 1951), pp.
1003-1053.
4. Curlee, T. Randall, "Biomass-Derived Plastics: Viable
Economic Alternatives to Petrochemical Plastics?," h4a-
terials and Society, vol. 13, No. 4, 1989, pp. 381409.
5. Dicks, Michael R., and Buckley, Katharine C., "Alternative
Opportunities in Agriculture: Expanding Output Through
Diversification,' U.S. Department of Agriculture, Eco-
nomic Research Service, Agricultural Economic Report No.
633, May 1990.
6. Deane, William M., ''New Industrial Markets for Starch,'
paper p~sented at the Second National Corn Utilization
Confenmce, Columbus, OH, Nov. 17-18, 1988.
7. Fanta, G. F., "Starch-Thermoplastic Polymer Composites
by Graft Polymerization," paper presented at the Second
National Corn Utilization Conference, Columbus, OH, NOV.
17-18, 1988.
8. Gibbons, Ann, "Making Plastics That Biodegrade," Tech-
nology Review, February/March 1989, pp. 69-73.
9. Gilbert, Richard D., hmikar, S.V., Fornes, R.E., and
Rhodes, N., "Synthesis and Characterization of Biodegrad- able
Polysaccharide Block Copolymers," paper presented
at the Second National Corn Utilization Conference,
Cohunbus, OH, NOV. 17-18, 1988.
10. Goldstein, Barry, Carr, Patrick M., Darby, William P.,
DeVeaux, Jennie S., Icerman, Larry, Shultz Jr., Eugene B.,
"Roots of the Buffalo Gourd: A Novel Source of Fuel
Ethanol,' Fuels and Chemicalsji-om Oilseeds: Technology
and Policy Options, American Association for the Advanee-
rnent of Science Selected Symposium No. 91, Eugene B.
Shultz, Jr., and Robert P. Morgan (eds.) (Boulder, CO:
Wesmiew Mess, Inc., 1984), pp. 895-906.
11. Gould, J. Michael, Gordon, S.H., Dexter, L.B., and Swan-
son, C.L., "Microbial Degradation of Plastics Containing
Starch," paper presented at the Second National Corn
Utilization Conference, Columbus, OH, Nov. 17-18,1988.
12. Grethlein, Hans and Datta, Rathin, "Economic Analysis of
Alternative Fermentation Route for the Production of Road
Deicer from Corn," poster paper at the Second NationaI Corn
Utilization Conference, Columbus, OH, Nov. 17-18,
1988,
13. GrinneIl, Gerald E., "Ethanol Fuel: The Policy Issues,"
Forum for Applied Research and Public Policy, Winter 1988,
pp. 48-49.
14. Hardin, Ben, "Farm Surpluses: Sources for Plastics,"
Agricultural Research,October 1986, pp. 12-13.
15. Hassett, David J., "Diesel Fuel From chemically Modifkd
Vegetable Oils," Fuels and Chemicals From Oilseeds:
Technology and Policy Options, American Association for the
Advancement of Science Selected Symposium No. 91,
Eugene B. Shuhz, Jr., and Robeti P. Morgan (eds.) (Boulder,
CO: Westview Press, Inc., 1984), pp. 855-864.
16. Johnson, Dale W., "Non-food Uses of Soy Protein Prod-
ucts," World Soybean Research Conference III Proceed-
ings (Boulder, CO: West View Press, Inc., 1985).
17. Jordan, Wayne R., Newton, Ronald J., and Rains, D.W.,
"Biological Water Use Efficiency in Dryland Agriculture,"
contractor report prepared for the Office of Technology
Assessment, 1983.
18. Kaplan, Kim, and Adarns, Sean, "New Uses for Starch
From Surplus Corn, " AgriculturalResearch, October 1987,
pg. 11.
19. Kautinan, Kenton R. "Testing of Vegetable Oils in Diesel
Engines, " Fuels and Chemicals From Oilseeds: Technol-
ogy and Policy Options, American Association for the
Advancement of Science Selected Symposium No. 91,
Eugene B. Shuhz,Jr., and Robert P. Morgan (eds.) (Boulder,
CO: Westview Press, Inc., 1984), pp. 143-175.
20, Keith, David, American Soybean Association, persomil
communication, 1989.
21. Kelly Harrison Associates, "A Survey of Potential New
Corn Uses," August 1986.
22, Lambefi, Russ, Tennessee Valley Authority, personal
communication, February 1991.
Appendix IA!$elected Industrial Uses for Traditional Crops . 99
23. Lipinsky, E.S., "Chemicals from Biomass: Petrochemical
Substitution Option,' Science, vol. 212, June 26,1981, pp.
1465-1471.
24. Imckem, William, "Seed Oils as Diesel Fuel: Economics
of Centralized and On-Farm Extraction,' Fuels and Chem-
icals From Oilseeds: Technology and Policy Options,
American Association for the Advancement of Science
Selected Symposium No. 91, Eugene B. Shuhz, Jr., and
Robert P. Morgan (eds.) (Boulder, CO: Westview Press,
hlC., 1984), pp. 177-203.
25. Meister, John J., "Biodegradable Polymers and Plastics
from the Corn Plant," paper presented at the Second
National Corn Utilization Conference, Columbus, OH, NOV.
17-18, 1988.
26. Meister, John J., Patil, Damodar R., Augustin, Cesar,
Channell, Harvey, Li, Chin Tia, and Lai, James Z.,
"Utilization of the Polymer Content of the Corn Plant:
Water-Soluble Lignin Graft Copolymers,' paper presented
at the Second National Corn Utilization Conference,
Columbus, OH, NOV. 17-18, 1988.
27. Palsson, B. O., Fathi-Afshar, S., Rudd, D. F., Lightfoot, E.N.
"Biomass as a Source of Chemical Feedstocks: An
Economic Evaluation," Science, vol. 213, July 31, 1981, pp.
513-517.
28. Science of Food and Agriculture,Soybean Oil Inks, vol. 2,
No. 2, Jtiy 1990.
29. Stiak, Jim, "The Down Side of Plastics," National
Gardening, vol. 11, No. 12, December 1988, pp. 43-47.
30 Studt, Tim. "Degradable Plastics: New Technologies for
Waste Management," R & D Magazine, March 1990, pp.
50-56.
31. Swanson, C. L., Westhoff, R. P., Deane, W.M., "Modified
Starches in Plastic Films," paper presented at the Second
National Corn Utilization Conference, Columbus, OH, NOV.
17-18, 1988.
32. Thayer, Ann M., "Degradable Plastics Generate Contro-
versy in Solid Waste Issues," Chemical and Engineering
News, June 25, 1990, pp. 7-14.
33. Thayer, Ann M., "Solid Waste Concerns Spur Plastic
Recycling Efforts,' Chemical and Engineering News, Jan.
30, 1989, pp. 7-15.
34. Thompson, James and Smith, Keith, "History of Industrial
Use of Soybeans," paper presentation at American Oil
Chemists Society Annual Meeting, Symposium on Value-
-added Products from Protein and Co-Products, May 1989.
35. U.S. Congress, General Accounting Office, Degradable
Plastics: Standards, Research and Development, GAOI
RCED-88-208, (Gaithersburg, MD: U.S. General Account-
ing Office, September 1988).
36. U.S. Congress, General Accounting Office, Alcohol Fuels:
Impacts porn Increased Use of Ethanol Blended Fuels,
GAO/RCED-90-156, (Gaithersburg, MD: U.S. General
Accounting Offke, July 1990).
37. U.S. Congress, Office of Technology Assessment, Com-
mercial Biotechnology: An International Analysis, OTA- BA-
218, January 1984.
38. U.S. Department of Agriculture, "Marketing Potential for
Oilseed Protein Materials In Industrial Uses," Technical
Bulletin No. 1043, 1951.
39, U.S. Department of Agriculture, Offke of Energy, "Fuel
Ethanol and Agriculture: An Economic Assessment,"
Agricultural Economic Report # 562, August 1986.
40, U.S. Department of Agriculture, "Ethanol: Economic and
Policy Tradeoffs," January 1988.
41
<
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.
42. Wall Street Journal, Oct. 13, 1988.
43. 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.
44. Wool, Richard P., "Biodegradable Plastics from Corn-
starch," paper presented at the Second National Corn
Utilization Conference, Columbus, OH, Nov. 17-18,1988.
45. Wu, Lawrence and Shiley, Richard H., Illinois State
Geological Survey, ''Removing Sulfur From Coal: Ethanol
DesuMurizaiton," March 1990.
46. 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 elimi-
nated 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 cultur-
ing is another alternative (9).
The United States does import plant-derived pharma-
ceuticals, including cinchona bark (quinine), belladonna,
coca leaves, and opium for medicinal use. Additionally,
the United States exports some plants that are used 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 har-
vesting 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. Sweetflag (Acorus calamus), a semiaquatic peren-
nial 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 asaryl-
aldehyde, which attract and sterilize fruit flies, and
can be used as a fumigant for stored grains (4).
2. 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 Colo-
rado potato beetle among other insects (4).
3. 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).
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 q101
5. 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).
6. 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).
7. 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 horticul-
ture 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).
Appendix C References
1. 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, April- June
1986, pp. 201-209.
2. Balandrin, Manuel F., Klocke, James A., Wurtele, Eve
Syrkin, and Bollinger, Wm. Hugh, "Natural Plant Chemic-
als: Sources of Industrial and Medicinal Materials, '
Science, vol. 228, June 1985, pp. 1154-1160.
3. Carlson, Alvar W., "Ginseng: America's Botanical Drug
Comection to the Orient," Economic Botany, vol. 40, No. 2,
April-June 1986, pp. 233-249.
4. 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.
5. Meyer, Brian, "Manipulating Forest Trees Anything But
Simple," Agricultural Biotechnology News, January-
February 1989.
6. Naj, Amal Kumar, '' W.R. Grace Acquires Patents To Make
Natural Insecticide From Tropical Tree," Wall Street
Journal, Technology Section, Tuesday, Jan. 31, 1989.
7. Naj, Amal Kurnar, "Can Biotechnology Control Farm
Pests?" Wall Street Journal, Thursday, May 11, 1989.
8. Sherman, Howard, U.S. Department of Agriculture, Agri-
cultural Research Service, "Dyer's Woad Wages Chemical
War in West," Agricultural Research, vol. 36, No. 7,
August 1988.
9. Tyler, Varro E., "Plant Drugs in the Twenty-First Cen-
tury," Economic Botany, vol. 40, No. 3, July-September
1986, pp. 279-288.
10. 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
Importb,c Percent ofd Yield/e,f Percent Percent ofd
Imported crops Ieve!s fatty acid New crops acre of oild fatty acids
Coconut oil . . . . . . . . . . . . 1,120 45 Lauric Cuphea . . . . . . . 1,500 30 80 Launc
Palm kernel oil . . . . . . . . . . 403 50 Laurie Lesquerella . . . . 1,500 25 65 Hydroxy
Castor oil . . . . . . . . . . . . . . 94 85 Hydroxy Stokes Aster . . . 1,500 35 70 Epoxy
Soybean oil . . . . . . . . . . . . 180 Converted to epoxy Vernonia . . . . . . 1,500 25 70 Epoxy
Rapeseed oil . . . . . . . . . . . 191 50 Erucic Crambe . . . . . . . 1,500 40 55 Erucic
Hevea rubber . . . . . . . . . . . 1,790 Rapeseed . . . . . 2,000 40 50 Erucic
Newsprint . . . . . . . . . . . . . . 7 Guayule . . . . . . 500
Kenaf. . . . . . . . . 7
NOTE: See table 5-2.
awhereapplicable; 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
a
Data 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. . . . . .a. . . . . . . . . . 2,102 3,228 3,508 3,809
North Europe . . . . . . . . . . 119 771 990 1,033 b
West Europec . . . . . . . . . . . 298 2,892 3,026 2,517
East Europe . . . . . . . . . . . 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.
b
West Europe includes France, United Kingdom, and West Germany.
c
East 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 q103
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 Table D-7—U.S. Imports of Rubber, 1986-87
Year Quantity (MT) Value ($1,000) Year Quantity (MT) Value ($1,000)
1985 . . . . . . . . . . . . . . . . . . . . 804 83 1986 . . . . . . . . . . . . . . . . . . . . 777,577 612,060
1986 . . . . . . . . . . . . . . . . . . . . 301 25 1987 . . . . . . . . . . . . . . . . . . . . 813,871 741,498
1987 . . . . . . . . . . . . . . . . . . . . 12 4
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.
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
Castor oil . . . . . . . . . . . . . . . . . . . . . . .
Coconut . . . . . . . . . . . . . . . . . . . . . . .
Linseed . . . . . . . . . . . . . . . . . . . . . . . .
Palm . . . . . . . . . . . . . . . . . . . . . . . . . .
Rapeseed . . . . . . . . . . . . . . . . . . . . . .
Soybean . . . . . . . . . . . . . . . . . . . . . . .
Sunflower . . . . . . . . . . . . . . . . . . . . . .
Tallow . . . . . . . . . . . . . . . . . . . . . . . . .
Tung . . . . . . . . . . . . . . . . . . . . . . . . . .
Fatty acid
Ricinoleic acid
Laurie acid
18
C acids
Palmitric/Laurie acid
Erucic acid
Linoleic acid
Linoleic acid
Stearic Acid
Multiunsaturated acids
Dollar/lba
0.39
0.23
0.25
0.17
0.64
0.15
0.16
0.15
0.53
Rangeb
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 Table D-10-1987 Harvested Acreage and Value of
Major U.S. Crops
Oilseed crop
Cottonseed . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percent oil
18-20
Acreage
Vaule
Peanut . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45-50 Crop (millions of acres) (billions of dollars)
Rapeseed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Safflower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Soybean . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sunflower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40-45
30-35
18-20
35-45
Barley . . . . . . . . . . . . . .
Corn . . . . . . . . . . . . . . .
Oats . . . . . . . . . . . . . . .
Sorghum . . . . . . . . . . . .
10
65
7
10
0.9
12.1
0.6
1.1
SOURCE: Everett H. Pryde, "Chemicals and Fuels From Commercial Soybeans . . . . . . . . . . . 56 10.4
Oilseed Crops:' Fuels and Chemicals From Oiiseeds: Wheat . . . . . . . . . . . . . . 56 5.3
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.
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
Robert Robinson
Associate Administrator
Economic Research Service
U.S. Department of Agriculture
Washington, DC
Jerome Seibert
Economist
Department of Agricultural Economics
University of California
Berkeley, CA
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
U.S. Department of Agriculture
Washington, DC
John Woeste
Director
Cooperative Extension Service
University of Florida
Gainesville, FL
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 q107
Crop Technology Workshop
Michael Adang Lynn Forster
Associate Professor Professor
Department of Entomology Department of Agricultural Economics
University of Georgia and Rural Sociology
Athens, GA Ohio State University
Columbus, OH
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
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.
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
Appendix E-Workshop Participants and Reviewers
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
q 109
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
doc_676122052.pdf
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.
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 examin ation 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
11
1
..
.
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Research Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......"""" 2
Potential Impacts of Using Agricultural Commodities as Industrial Raw Materials . . . 3
Policy Issues . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
POLICY OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Technology Transfer and Commercialization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Adoption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Legislation Passed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Chapter 2. Introduction . . . . . . . . . . . . . . . ..... .. ..... . . . . . . . . . . . . . . . . . 11 q
INDUSTRIAL USES OFAGRICULTURAL COMMODITIES IN THE
UNITED STATES . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Oils
and Waxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Resins,
Gums, Rubbers, and Latexes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Fibers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Starches and Sugars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Proteins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........ ........ .16
NEW INDUSTRIAL CROPS AND USES OF TRADITIONAL CROPS . . . . . . . . . . . . . . 16
PROPOSED BENEFITS OF USING AGRICULTURAL COMMODITIES
AS INDUSTRIAL RAW MATERIALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Diversification of Agricultural Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Underutilization of Land Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Reduction of Commodity Surpluses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Enhanced International Competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Improved Environmental Adaptation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Rural Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Strategic Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........ 19
CHAPTER 2 REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Chapter 3. Analysis of Potential Impacts of Using Agricultural Commodities as
Industrial Raw Materials . . . . 0 . 0 q .00000... q .......0 .0..0.000 . . . . . . . . . 17
RURAL DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Impacts of Changing Farm Income and Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Rural Employment Potential in Agriculturally Related Industries . . . . . . . . . . . . . . . . . . . 24
Rural Employment Potential in Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
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.. . . . . . . . . . . q 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 q .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
vi
i
Interest in diversifying agriculture has been in-
creasing, due to changes affecting the industry.
Widely fluctuating farm incomes ($38 billion in1
1979,$13 billion in 1983, and $34 billion in 1986)
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 environ-
mental 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 deal-
ing 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 com-
modities, 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 chemi-
cals. 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. Addition-
ally, 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 agri-
cultural commodities will become a primary source of
industrial raw materials. Technical constraints
Chapter 1
Summary
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 chemi-
cals from crops can be used industrially. And, the
efficiency and productivity of new industrial use
processes must be increased. With sufficient re-
search 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 prod-
ucts 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 manufac-
turers, 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 govern-
ment 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 in-
l~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 q Agricultural Commodities as Industrial Raw Materials
elude primarily the Department of Defense, the to develop markets for processing byproducts. OTA
National Science Foundation, the Department of concludes that:
Energy, and the Department of Agriculture. Propo-
nents of developing agricultural commodities as
industrial raw materials perceive these programs as
being inadequate, and have called for new initia-
tives. 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 fam-
ily-farm incomes. Additionally, proponents hope
q
q
Development of new industrial crops and uses
of traditional crops offers future flexibility to
respond to changing political, economic, and
environmental conditions in supplying indus-
trial 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.
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:
It takes many years to develop a new use or crop,
and during that time political, economic, and envi-
ronmental conditions could change. Research and
development of new products and processes lays the
groundwork necessary to respond quickly and effec-
tively to these changing conditions. It is unlikely that
individual firms will be willing to make large
investments to develop substitutes for future hypo-
thetical changes. Arguments can be made, however,
that this may constitute a legitimate public-sector
investment.
The economic competitiveness of using agricul-
tural 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
q
q
q
q
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?
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, develop-
ment strategies must consider developing a package
Chemicals derived from agricultural commodities
have a potentially broad range of industrial applica-
tions, and many are technically promising. Techni-
cal feasibility, however, will not be sufficient for
widespread adoption. Chemicals derived from agri-
cultural 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
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 q3
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 proc-
esses, to develop new products, and to improve
the agronomic characteristics of agricultural
crops.
Market research is needed to identify commer-
cial 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 environ-
mental impacts of developing new industrial
crops and uses of traditional crops.
Germplasm collection and germplasm storage
and maintenance research is needed.
tiveness 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:
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 prod-
uct 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 I mpacts of Using Agricultural
Commodities as I ndustrial 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-effec-
q
q
q
q
q
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 nega-
tive 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 q Agricultural Commodities as Industrial Raw Materials
q
q
q
q
It cannot be unambiguously stated that new
industrial crops and uses of traditional crops
will improve the U.S. trade deficit or signifi-
cantly 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 agricul-
tural markets.
Premature attempts to commercialize the new
industrial crops and uses of traditional crops
may delay any further efforts to develop these
uses.
creased industrial demand for agricultural commodi-
ties. Over this period, rural employment in agricul-
turally related industries increased slowly. In gen-
eral, the agriculture processing industry is not
labor-intensive, has excess capacity, and has in-
creased 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 metro-
politan, rather than rural, areas. Need and availabil-
ity of skilled workers, institutions that provide
managerial and vocational education, natural re-
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, how-
ever, 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. Link-
ages 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 indus-
trial crops and uses, while containing industrial
elements, is still, however, essentially an agricul-
tural policy.
Proponents of new industrial crop and use devel-
opment 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 facili-
ties 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 in-
sources, 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 transporta-
tion requirements may make construction or expan-
sion 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 technolo-
gies. Small farm operators may lack financial
resources or the management skills needed. Adop-
tion 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 partici-
pate, 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 q5
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, com-
mercialization 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 pur-
poses. 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 im-
ports. 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 flex-
ible system that can change the type, amount, and
price of chemicals it produces to respond to market
conditions, the use of agriculturally derived chemi-
cals is not currently economically competitive in
most of these markets.
Large-scale development of agricultural com-
modities 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 petro-
leum 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 discour-
age 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 re-
sult 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 poten-
tially serve as a repository for crop diseases. Many
crops may be genetically engineered, and the envi-
ronmental release of these crops raises many envi-
ronmental 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 imperfec-
tions (i.e., lack of complete markets and asymetric
information between buyers and sellers) and macro-
economic policy (primarily U.S. Government defi-
cits and money supply policies). Globalization of the
goods and financial markets magnifies these im-
pacts.
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 macro-
economic 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 institu-
tions, or greater use of available market instruments
that reduce risks (i.e., futures markets, forward
contracts, crop insurance, etc.) could improve agri-
cultural stability. Improvements in market institu-
tions and reduction of U.S. deficits are needed to help
stabilize agriculture.
6 q 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 indus-
trial 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 sec-
tor/private sector interaction now, can greatly reduce
the lead time necessary should conditions change
and commercialization becomes attractive.
Premature Commercialization
Premature commercialization attempts could po-
tentially halt, or at least delay, the development of a
new industrial crop or use. As an example, public
disillusionment with degradable plastics has re-
sulted in lawsuits against companies making de-
gradable 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 commerciali-
zation 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 produc-
tion 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 Mid-
west 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. Substi-
tutes 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 develop-
ment, 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 q7
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 unpre-
dictable, 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, bio-
logical, and social sciences is needed, multidiscipli-
nary research will be essential. Because of the
diffuse geographical nature of agricultural produc-
tion and industry distribution, multiregional re-
search 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 mul-
tidisciplinary 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 develop-
ment 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 ad-
dress 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 adop-
tion of new crops also are important.
Additional questions exist as to the most appropri-
ate institutional structure for administering policies
and developing new technologies using agricultural
commodities: is the establishment of a new institu-
tion (within but independent of USDA) necessary, or
might a reassessment of how USDA sets priorities
and allocates resources for research and develop-
ment 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 Agricul-
ture. Proponents of new industrial crop and use
commercialization feel that USDA provides inade-
quate research funding and insufficient interaction
with the private sector. Similar frustrations are often
voiced with respect to other agricultural technolo-
gies. In terms of research, development, and com-
mercialization, new industrial crops and uses of
traditional crops are no different from other agricul-
tural 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 prob-
lem, 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 q 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 adop-
tion.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 commerciali-
zation. 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 interdis-
ciplinary 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 environ-
mental impacts must be evaluated; this is particu-
larly 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 character-
istics and to screen for useful, and as yet unidenti-
fied, 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 private- sector
cooperative agreements with Federal labora-
tories. There is still a need to provide adequate
funding for these activities and to provide profes-
sional 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 labora-
tory 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 trans-
fer, 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, agricul-
tural 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, tech-
nology 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 indus-
trial crops and uses of traditional crops.
@or the purposes of this report, commercialization is being defined as the actual production and sale of products. The process leading to that stage is referred
to as research and development.
Chapter 1--Summary q 9
q
q
q
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 Re-
view Board was created within USDA to
review current and emerging agricultural re-
search issues and to provide a technical assess-
ment of new technologies.
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 effec-
tively reduce price levels.
Agricultural Science and Technology
Review Board
This board consists of 11 representatives from
ARS, CSRS, Extension Service, Land Grant Univer-
sities, private foundations, and firms involved in
agricultural research, technology transfer, or educa-
tion. The purpose of the Board is to provide a
technology assessment of current and emerging
Alternative Agricultural Research and
Commercialization Act
This Act creates an Alternative Agricultural
Research and Commercialization Center, an inde-
pendent 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 Commercial-
ization 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. Acre-
age 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
public and private agricultural research and technol-
ogy 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 prob-
lems existing in the USDA research and extension
system.
The legislation enacted addresses some research,
development, technology transfer, and farm adop-
tion 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 com-
munities, 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 q 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 environ-
ment, 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 commerciali-
zation might be useful. The European community is
taking this approach by first establishing a pre-
commercialization program to determine feasibility,
and then following up with a later program to
encourage commercialization. The U.S. Small Busi-
ness 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 precommer-
cialization 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 envi-
ronmental 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, pos-
sible impacts of new technologies, and further
research or policy actions needed.
Interdisciplinary, and in appropriate cases, mul-
tiregional research should be given the highest
funding priority. This could include: chemical,
physical, and biological research needed to improve
production yields and chemical conversion efficien-
cies, and to establish quality control and perform-
ance 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 laboratory-
industrial 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 exten-
sion 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 commodi-
ties as industrial raw materials.
Industrial Uses of Agricultural
Commodities in the United States
Chapter 2
Introduction
Table 2-1—industrial Fatty Acids
Most
Class Fatty acid common sources
Currently, the United States uses chemicals de-
Saturated . . . . . . . . C
1z
(Iauric) Coconut oil
rived from agricultural commodities for a wide C
16
(palmitric) Palm oil
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
C
18
(stearic)
Monounsaturated. . C
18
(oleic)
C
22
(erucic)
Diunsaturated. . . . . C
t8
(Iinoleic)
Multiunsaturated . . C
18
Tallow, hydrogenated oil
Olive, tall oils
Rapeseed oil
Sunflower, soybean oil
Linseed, tung, fish oil
more than 2 percent of the total U.S. production of
vegetable oils (12). Industrially useful compounds
derived from renewable resources, including agri-
cultural commodities include:
1. oils and waxes;
2. resins, gums, rubbers, and latexes;
Hydroxy. . . . . . . . . . C
18
(ricinoleic) Castor oil
SOURCE: L.H. Princen and J.A. Rothus, "Development of New Crops for
Industrial RawMaterials," J ourrra/oftheArnerimn 0"/Chernists'
Society, vol. 61, 1984, pp. 281-289.
Table 2-2—Fats and Oils: Use in Selected Industrial
Products (million pounds)
3. fibers;
4. starches and sugars; and
5. proteins.
Oils and Waxes
Lipids (fats and oils) are water-insoluble com-
Soap . . . . . . . . . . . . . . . . . . . . .
Paints/varnish . . . . . . . . . . . . .
Resins/plastics . . . . . . . . . . . .
Lubricants . . . . . . . . . . . . . . . .
Fatty acids . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . .
1987
918
261
199
109
2,195
597
4,279
1988
807
176
202
111
2,181
501
3,978
pounds found in the cells of plants and animals. They
serve as structural components of membranes, and as
metabolic fuel. Lipids are composed of triglyc-
erides 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), deter-
mine 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
1990
0
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
-11-
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, poly-
tran, gullan, and pulludan) currently used are derived
from seaweeds and kelps or are produced by
microbial bioprocessing. These polysaccharide bio-
polymers are used primarily as viscosifiers (thicken-
12 . Agricultural Commodities as Industrial Raw Materials
Table 2-3-industrial Uses of Selected Oils,
April/May 1990 (thousand pounds)
Use
Table 2-5-industrial Uses of Rosin
Percent
total consumption
Oil Industrial use April 1990 May 1990
Rubber and chemicals. . . . . . . . . . . . . . . . . . 35.2
Soybean . . . . . Soap . . . . . . . . . . . . .
Paints/varnish. . . . . .
Resins/plastics . . . . .
Fatty acids . . . . . . . .
D
3,038
9,599
D
D
3,442
9,981
D
Paper sizing . . . . . . . . . . . . . . . . . . . . . . . . .
Ester gums and synthetic resins. . . . . . . . . .
Paints, varnishes, and lacquers . . . . . . . . . .
Other uses. . . . . . . . . . . . . . . . . . . . . . . . . . .
33.5
22.7
2.2
6.7
Othera . . . . . . . . . . . .
Total a . . . . . . . . . .
Coconut. . . . . . Soap . . . . . . . . . . . . .
Paints/varnish. . . . . .
Resins/plastics . . . . .
Lubricants. . . . . . . . .
Fatty acids . . . . . . . .
8,020
22,819
13,849
D
175
D
11,642
8,725
25,320
10,255
D
104
D
12,112
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.
Table 2-6-Use of Pulp in Paper and
Paperboard Production
Othera . . . . . . . . . . . .
Total a . . . . . . . . . .
Castor . . . . . . . Soap . . . . . . . . . . . . .
Paints/varnish. . . . . .
Resins/plastics . . . . .
Lubricants. . . . . . . . .
5,200
31,224
D
831
398
471
5,903
28,932
D
410
501
418
Use
Newsprint . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tissue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Printing and writing . . . . . . . . . . . . . . . . . . . .
Packaging and industrial . . . . . . . . . . . . . . .
Paperboard. . . . . . . . . . . . . . . . . . . . . . . . . . .
Percent total
8.5
7.5
26.0
8.5
49.5
Palm . . . . . . . .
Other . . . . . . . . . . . . .
Total . . . . . . . . . . .
Total . . . . . . . . . . .
D
4,385
5,573
D
4,438
5,600
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.
Palm kernel . . . . . . . . . . . . . . . . . . . . . .
Rapeseed. . . . . . . . . . . . . . . . . . . . . . .
D
D
D
D
Starches and Sugars
KEY: (D) Data withheld to avoid disclosing figures for individual companies.
a
Total and other industrial uses indudes the addition of oil to livestock feed.
Starch is composed of hundreds of glucose (sugar)
SOURCE: James Schaub, U.S. Department of Agriculture, Economic
Research Service, 1990.
Table 2-4-1987 U.S. Wax Imports
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.
Beeswax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Candelilla wax. . . . . . . . . . . . . . . . . . . . . . . .
Carnauba wax. . . . . . . . . . . . . . . . . . . . . . . .
832 MT
352 MT
4.015 MT
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,
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 (aggregating agents), and
lubricants (11).
Natural rubber used in the United States is Hevea
rubber imported primarily from Malaysia and Indo-
nesia. 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).
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).
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.
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 intro-
duced from other countries. Cuphea, an oilseed that
could replace coconut oil, is an example of an
attempt to domesticate a wild species. Industrial
rapeseed, an oilseed that produces a chemical used
Chapter 2-Introduction q 13
Table 2-7—Potential New industrial Crops
Compound
as a slip agent in some plastics, is cultivated in many
countries and is now being adapted to U.S. produc-
tion.
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
Crop
OilSeed:
Buffalo gourd . . . .
Chinese tallow . . .
Crambe . . . . . . . . .
Cuphea . . . . . . . . .
Honesty . . . . . . . .
Jojoba . . . . . . . . . .
Lesquerella . . . . . .
Meadowfoam . . . .
Rapeseed . . . . . . .
Stokes aster . . . . .
Vernonia . . . . . . . .
of interest
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
Replacement
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
jojoba), one new rubber, guayule, and one new fiber,
kenaf, are in relatively advanced stages of develop-
ment. 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
Gums, resins, etc.:
Baccharis . . . . . . . Resins
Grindelia . . . . . . . . Resins
Guar . . . . . . . . . . . Gum
Guayule . . . . . . . . Rubber
Milkweed . . . . . . . . Latex
Fibers:
Kenaf . . . . . . . . . . Pulp similar to
wood
Wood rosins, tall oils
Wood rosins, tall oils
Imported guar
Imported hevea rubber
Petroleum derivatives
Imported newsprint
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
SOURCE: Office of Technology Assessment, 1991.
Table 2-8-Potential industrial Uses for
Traditional Crops
B: Selected Industrial Uses for Traditional Crops.
Research is also being conducted to develop new
food crops, forage crops, horticultural and ornament- al
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.
Use
Adhesives, matings . . . . . . . . . . . . . . .
Coal *sulfurization . . . . . . . . . . . . . . .
Diesel fuel . . . . . . . . . . . . . . . . . . . . . . .
Ethanol . . . . . . . . . . . . . . . . . . . . . . . . . .
Degradable plastics . . . . . . . . . . . . . . . Ink
carrier . . . . . . . . . . . . . . . . . . . . . . . . Road
de-icer . . . . . . . . . . . . . . . . . . . . .
Super absorbants . . . . . . . . . . . . . . . . .
Crop
Soybeans
Corn
Soybeans, sunflowers
Corn
Corn
Soybeans
Corn
Corn
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
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 poten-
tially high-volume markets that could use excess
agricultural capacity. Development of new edible
14 q 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 diversi-
fication and increased farm income, improved agri-
cultural resource utilization, reduced commodity
surpluses and support payments, enhanced interna-
tional competitiveness, reduced negative environ-
mental impacts, revitalized rural economies, a do-
mestic supply of strategic and essential materials,
and decreased dependency on petroleum.
Diversification of Agricultural Markets
Currently, U.S. agriculture relies on the produc-
tion of a limited number of crops, many of which 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 agricul-
ture 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 prod-
ucts, is key to economic growth, and is necessary to
avoid stagnation in mature industries such as agri-
culture.
Because the agricultural industry represents
approximately 18 percent of the U.S. Gross National
Product, the report concluded that a stronger agricul-
tural 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. Be-
cause of these possibilities, the task force recom-
mended the development of new agricultural prod-
ucts 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 acre-
age that could potentially be used for crop produc-
tion 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). Accord-
ing to proponents, alternative and more profitable
markets for the crops most heavily supported could
decrease Federal commodity payments and reduce
storage needs.
Enhanced I nternational Competitiveness
In 1989, agricultural exports represented approxi-
mately 12 percent of the value of total U.S. exports
(13). However, the United States has lost market
share in the international trade of several commodi-
ties, 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 q15
I mproved 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 impor-
tant. An added advantage of some of these drought-
tolerant 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, gum- weed, 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 deliv-
ery systems, road de-icers), among other potential
benefits.
Rural Development
Proponents of development of industrial users of
agricultural commodities indicate that such develop-
ment 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 process-
ing 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 cur-
rently 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 in-
clude 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 man-
dated 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 Commercializa-
tion 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 com-
modities.
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 q Agricultural Commodities as Industrial Raw Materials
to provide information Congress can use to assess the
potential benefits of, and constraints to, develop-
ing 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.
Chapter 2 References
1. Babey, John, U.S. Department of Defense, personal
communication, January 1991.
2. Council for Agricultural Science and Technology,
Development of New Crops: Needs, Procedures,
Strategies, and Options (Ames, IA), Report No. 102,
October 1984.
3. Deane, William M., "New Industrial Markets for
Starch," paper presented at The Second National
Corn Utilization Conference, Columbus, OH, Nov.
17-18, 1988.
4. Hoffmann, Joseph J., and McLaughlin, Steven P.,
"Grindelia Camporum: Potential Cash Crop for the
Arid Southwest," Economic Botany 40(2), April-
June 1986, pp. 162-169.
5. 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.
6. 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.
7 Schaub, James, U.S. Department of Agriculture,
Economic Research Service, personal communica-
tion, July 1990.
8. Tankersley, Howard C., and Wheaton, E. Richard,
"Strategic and Essential Industrial Materials From
Plants—Thesis and Uncertainties," PZants: The Po-
tential for Extracting Protein, Medicines, and Other
Use@l Chemicals—Workshop Proceedings, OTA-
BP-F-23 (Washington, DC: U.S. Congress, Office of
Technology Assessment, September 1983), pp. 170-
177.
9. Theisen, A. A., Knox, E. G., and Mann, F. L., Feasibil-
ity of Introducing Food Crops Better A&zpted to
Environmental Stress (Washington, DC: U.S. Gov-
ernment Printing Office, March 1978).
10. Twner, Steve, and Stegelin, Forrest, Symposia Co-
organizers, "Market and Economic Research in
Ornamental Horticulture," American Journal of
Agricultural Economics, vol. 71, No. 5, December
1989, p. 1329.
11. U.S. Congress, Office of Technology Assessment,
Commercial Biotechnology: An International Analy-
sis, OTA-BA-218 (Washington, DC: U.S. Govern-
ment Printing Office, January 1984).
12. U.S. Department of Agriculture, Agricultural Statis-
tics, 1988 (Washington, DC: U.S. Government
Printing Office, 1988).
13. U.S. Department of Agriculture, Economic Research
Service, Agricultural Outlook, AO-170, December
1990.
14. U.S. Department of Agriculture, Economic Research
Service, Agriculutral Resources: Cropland, Water,
and Conservation Situation and Outlook Report,
AR-19, September 1990.
15. U.S. Department of Agriculture, Economic Research
Service, Foreign Agricultural Trade of the United
States, Calendar Year 1987 Supplement (Washing-
ton, DC: U.S. Government Printing Office, June
1988).
16. 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.
17. U.S. Department of Agriculture, New Farm and
Forest Products Task Force, "New Farm and Forest
Products: Responses to the Challenges and Opportu-
nities Facing American Agriculture, ' A Report to the
Secretary, June 25, 1987.
18. 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
utilization of processing and manufacturing facili- ties.
I mpacts of Changing Farm I ncome 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, be-
cause increasing off-farm income helped compen-
sate for decreased farm income (table 3-1).2 The
value of farm assets, however, declined signifi-
cantly. Lower land values decrease local govern-
ment 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)
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
Year
1960 . . . . . . . . . . . . . . .
1970 . . . . . . . . . . . . . . .
1975 . . . . . . . . . . . . . . .
1980 . . . . . . . . . . . . . . .
1981 . . . . . . . . . . . . . . .
1982 . . . . . . . . . . . . . . .
Net farm
incomea
2,729
4,869
8,785
9,233
8,378
9,997
Off-farm
income
2,140
5,974
9,481
14,263
14,709
15,175
Total farm
family income
4,869
10,843
18,266
23,486
23,087
25,172
increase farmland prices and hence the tax base of
many rural communities. Increased levels of produc-
1983 . . . . . . . . . . . . . . . 10,074
1984 . . . . . . . . . . . . . . . 11,345
1985 . . . . . . . . . . . . . . . 13,881
15,619
16,265
17,945
25,693
27,610
31,826
tion require increased inputs, transportation, and
a
Before inventory adjustment.
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
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-famil
y
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 q Agricultural Commodities as Industrial Raw Materials
While farm-family income remained relatively
stable, farm3 numbers continued to decline through-
out the 1970s and 1980s (table 3-2). Impacts of
Year
Table 3-2—Farm Numbers
Number
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
1960 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1970 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1980 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1981 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1986a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1989 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,963,000
2,949,000
2,433,000
2,434,000
2,328,000
2,214,000
2,172,920
affect community employment levels. Multiplier
effects for agriculture are generally estimated to be
a
Preliminary estimation obtained from U.S. Department of Agriculture,
Agricultural Statistic 1989
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, 5and an additional 23 percent are farming
important. These counties are concentrated in the
Plains Region (North Dakota, South Dakota, Ne-
braska, 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 com-
modities 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).
SOURCE: Dorm Reimund and Mindy Petrulis, U.S. Department of Agricul-
ture, Economic Research Service, "Performance of the Agricul-
tural Sector," Rural Change and the Rural Economic 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 employ-
ment 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 re-
sponse to increased world demand for food and
favorable economic conditions. The effects of in-
creased production on rural employment in agri-
culturally related industries provides insight into the
potential employment impacts in these industries of
increased industrial demand for agricultural com-
modities.
Between 1974 and 1981, U.S. agricultural pro-
duction expanded by 45 million acres of crops
harvested (table 3-4). Employment in rural agricul-
turally related industries also increased during this
3A farm is an establishment that sold or would normally have sold $1,000 or more of agricultural products dtig the Y~.
4Farming dependent counties are defined as those counties for which farming contributed a weighted annual average of 20 percent or more of total
labor and proprietor income over a 5-year time period. Based on the years 1975 to 1979 and on the 1974 nonmetropolitan county definition (2,443
counties), there were 716 farmin g dependent counties. Using income from the years 1981, 1982, 1984, 1985, 1986, and the 1983 definition of
nonmetropolitan counties (2,357 counties) there were512farming 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 q19
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 Table 3-5—Employment Changes in 1975-81 and
Productionb, Selected Years 1981-84 (percent change per annum)
a
1973 1981 1984 1975-81 1981 -84b
Corn: Total U.S. employment . . . . . . . . . . +2.9 +1.1
Acreage . . . . . . . . . . . . . . . . . . . 62.1 74.5 71.9 Total nonmetro employment . . . . . . +2.9 (1,992) +1.9 (759)
Production . . . . . . . . . . . . . . . . . 5.67 8.12 7.67 Nonmetro agriculturally related
Wheat: industries (total) . . . . . . . . . . . . +1.2 (414) -0.2 (48)
Acreage . . . . . . . . . . . . . . . . . . . 54.1 80.6 66.9 Farm sectorc . . . . . . . . . . . . . . . . . -0.9 (158) -1.3 (107)
Production . . . . . . . . . . . . . . . . . 1.71 2.79 2.59 Input industry . . . . . . .d. . . . . . . . . +1.6 (22) -5.8 (45)
Soybeans: Processing/marketing . . . . . . . . . +1.2 (84) -1.5 (53)
Acreage . . . . . . . . . . . . . . . . . . . 55.7 e66.2 66.1 Retail/wholesale . . . . . . . . . . . . . +5.7
(400) +3.3 (157)
Production . . . . . . . . . . . . . . . . .
Major crops:c
1.55 1.99 1.86
a,b
Numbers in parentheses are the change in total jobs for entire time
period (in 1,000's).
a
Acreage . . . . . . . . . . . . . . . . . . . 310 354 335
c
Farm sector includes agricultural services, farm proprietors, and agricul-
Harvested acreage in million acres.
d ture wage and salary workers.
b
Production is in billion bushels. processing and marketing includes those related to food processing and
c
Major crops include corn, sorghum, oats, barley, wheat, rice, rye,
e
the textile industry.
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 serv-
ices, 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). Employ-
ment 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 in-
dustry 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
Retail and wholesale includes restaurants, groceries, dothing stores, etc.
SOURCE: Dorm Reimund and Mindy Petrulis, U.S. Department of Agricul-
ture, Economic Research Service, "Performance of the Agricul-
tural Sector," Rural Change and the Rural Economic Po/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 po-
tential 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
Table 3-6-Distribution of Jobs in Agriculturally
Related Industries
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). Econo-
Metro
Farm sector . . . . . . . . . . . . . . . . . . . . . 36
Input supply . . . . . . . . . . . . . . . . . . . . 51
Processing/marketing . . . . . . . . . . . . 65
Food . . . . . . . . . . . . . . . . . . . . . . . . 71
Textiles . . . . . . . . . . . . . . . . . . . . . . 60
Retail/wholesale . . . . . . . . . . . . . . . . . 82
Nonmetro
(percent)
64
49
35
29
40
18
mies 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 produc-
tion workers plus management, maintenance work-
ers, etc.) in soybean processing facilities is approxi-
mately 9,000 to 10,000 (2,41).
A majority of the jobs in several agriculturally
related industries are in fact located in metropolitan,
rather than rural, areas (table 3-6); expanding
employment in these industries may benefit metro-
politan regions more than rural areas. Commodity-
processing 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 fre-
quently 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 rubber7
quality (28). Kenaf is a bulky product to transport.
SOURCE: Dorm Reimund and Mindy Petrulis, U.S. Department of Agricul-
ture, Economic Research Serviee, "Performance of the Agricul-
tural Sector," Rural Change and the Rural Economic 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 agricul-
tural commodities on rural manufacturing employ-
ment 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 techni-
cal change, or other conditions that require innova-
tive 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.
Table 3-7—Nonmetro Share of Manufacturing Jobs
by Job Type
The importance of resource availability and low- Metro Nonmetro
cost labor relative to the need for highly skilled labor
will largely determine the type of personnel em-
ployed, and whether a firm locates in a metropolitan
or rural area (5). Urban companies have a higher
proportion of managerial and professional-technical
Managerial . . . . . . . . . . . . . . . . . . . . .
Professional/technical . . . . . . . . . . . .
Sales/administrative support . . . . . . .
Precision production jobs . . . . . . . . . .
Machine operators . . . . . . . . . . . . . . .
Laborers . . . . . . . . . . . . . . . . . . . . . . .
90
90
75
77
70
65
10
10
25
23
30
35
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
SOURCE: David A, MeGranahan, "Rural Workers in the National Econ-
omy," 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
products are more concentrated in metropolitan Metro Nonmetro of nonmetro
areas, because they require technically skilled labor Type of industry (million jobs) employment
(table 3-8). High tech companies are an example.
These firms employ relatively more scientific and
technical personnel, have higher levels of research
Total manufacturing. . .
Top of the cycle . . . . .
Bottom of the cycle . .
Resource . . . . . . . . . .
15.2
. 7.4
. 5.6
. 2.2
4.2
1.2
2.0
1.1
21.7
13.7
25.9
33.3
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-the-
cycle. The latter tend to use highly standardized
production methods and employ relatively less-
skilled labor (5).
Although rural manufacturing is characterized by
a higher percentage of bottom-of-the-cycle and
natural resource based industries, some top-of-the-
cycle firms do locate in rural areas. In recent years,
rural employment in these firms has increased,
primarily in the South and West. Rural 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 chemi-
cals derived from agricultural commodities are
considered to be top-of-the-cycle industries, al-
though 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 high-
tech industry that uses agriculturally derived chemi-
SOURCE: Leonard E. Bloomquist, U.S. Department of Agriculture, Eco-
nomic Researeh Serviee, "Performance of the Rural Manufac-
turing Sector," Rurai Change and the Rural Economic 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 capac-
ity 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 manufac-
turing employment in nonmetropolitan areas aver-
Efioduct &velOprnent g~s through many phases, from conception to routine manufacturing. Products at the top of the cycle are in the eflfierp~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 qAgricultural Commodities as Industrial Raw Materials
Table 3-9-Manufacturing Employment Trends of
Industries Potentially Using Industrial
Agricultural Commodities
Trend
cannot be made. Historically, however, social re-
turns to agricultural research investments have been
high, ranging from an estimated 45 to 135 percent
(30).
1989 (1979-89)
employment percent per Regional Specialization
Plastics and synthetic materials. .
Paints and allied products. . . . . . .
Soaps, cleaners, toilet goods . . . .
Rubber and miscellaneous
products . . . . . . . . . . . . . . . . . . .
Petroleum and coal products . . . .
level
187,000
63,000
161,000
840,000
163.000
annum change
-1
-1
+1
+1
-3
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
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 de-
pendent 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 concen-
trate 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 econo-
mies.
Proponents of industrial crops and use commer-
cialization 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
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 advan-
tages 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 uncer-
tainty (e.g., such as weather and assymetric informa-
tion 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 mar-
keting of industrial crops and uses of traditional
Chapter 3--Analysis of Potential Impacts of Using Agricultural Commodities as Industrial Raw Materials q23
Table 3-10—Likely Production Locations of that segment of the economy to macroeconomic
New Crops policy (3,42). Several industries that would use
chemicals derived from agriculture are also suscepti-
Crop
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 . . . . . . . . . . . . . . . . . . .
Location
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
ble 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 oppor-
tunities 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. Develop-
ment of new risk-reducing marketing arrangements,
SOURCE: Office of Technology Assessment, 1991.
crops. Diversifying agricultural production poten-
tially 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
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. Cup-
hea, 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 consid-
ered 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 qAgricultural 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 produc-
tion) 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 interna-
tional 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 tradi-
tional 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 byprod-
uct 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 soy-
beans. 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 sun-
flower 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). Addition-
ally, potential byproducts of glycerol and high-
protein 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, particu-
larly soybeans. The distilled dried grains and gluten
meal compete directly with soybean meal as high-
protein 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 rela-
tively 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 invest-
ment. 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 q25
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
Table 3-n-Participation in Federal Farm Programs
by Farm Size, 1987a
Percent participating
Harvested acres
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
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
producers of commodities not covered by commod-
ity programs. Participation rates are lowest among
a
Note that 1987 was a year characterized by Iow commodity prices, and
participation rates in agricultural programs were high.
b
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 etha-
nol 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
Participants 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 Con-
servation Situation and Out/ook Report September 1990, pp.
48-54.
likelihood of new crops and uses benefiting small-
farm operators.
The question also arises of who captures the value
added 11 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 commodi-
ties are needed.
?For farms to beclsssifkd as a particular specialty, it must derive 50 percent or more of its salestiom 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 q Agricultural Commodities as Industrial Raw Materials
Table 3-12—Participation in Federal Farm Programs Table 3-13-Income Sources by Sales Category, 1988
by Crop Acres, 1987a
Percent total Percent gross
Crop
Feed grainsc . . . . . . . . . . . . . . . . . . . . . . . . . .
Percent
participatingb
83.0
Sales category
income from
off-farma
sources
cash farm
income from Percent of
government total farms
Soybeans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85.8 Less than $10,000 . . . . 89 4 45
Wheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88.6 $10,000 to $19,999 . . . 74 7 12
Cotton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89.5 $20,000to $39,999 . . . 49 10 11
Rice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91.1 $40,000 to $99,999 . . . 24 11 14
Peanuts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75.7 $100,000 to $249,999. 13 11 12
Tobacco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47.9 $250,000 to $499,999, 6 9 4
a
Note that l987 was a year characterized by low commodity prices and
Greater than $500,000. 3
a
4 2
participation rates in farm programs were high. Total income is the sum of total off-farm income and total gross cash farm
b
Participants 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.
income.
SOURCE: Office of Technology Assessment, 1991. Calculated from data
contained in U.S. Department of Agriculture, Economic Re-
search Service, "Financial Characteristics of U.S. Farms,
January 1, 1989," Agriculture Information Bulletin No. 579,
December 1989.
ing more expensive, these new crops could be
c
lncludes acres of corn for grain and silage, and sorghum, barley, and oats
for grain.
attractive. Additionally, several crops provide good
ground cover and possibly could reduce soil erosion.
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 Con-
servation 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 environ-
mental impacts. Replacing salt with calcium magne-
sium acetate (a new product) as a road de-icer could
reduce the soil and water contamination problems
associated with salt. Use of starch, or starch-
vegetable oil mixtures as a delivery system for
herbicides and pesticides potentially could mitigate
rapid leaching of these chemicals. Degradable plas-
tics may in the future help alleviate waste disposal
problems, but at the present time, too many ques-
tions 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 vola-
tile 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 becom-
For many potential new crops, information con-
cerning 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 disincen-
tives, some of which stem from agricultural com-
modity programs, rather than, lack of crop options.
Development of new crops is unlikely to increase
crop rotation significantly without changes in eco-
nomic 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 q27
is an example. Originally and purposely introduced
into U.S. agriculture as a superior forage crop, it is
Table 3-14-Commodity Stocks
(million bushels)
today a serious weed requiring widespread use of
Wheat Corn Soybeans
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
1985/86 a . . . . . . . . . . . . . . . . . . . . 1,905
1986/87 . . . . . . . . . . . . . . . . . . . . . 1,821
1987/88 . . . . . . . . . . . . . . . . . . . . . 1,261
4,040
4,882
4,259
536
436
302
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
1988/89 . . . . . . . . . . . . . . . . . . . . .
1989/90bb . . . . . . . . . . . . . . . . . . . .
1990/91 . . . . . . . . . . . . . . . . . . . .
702
536
945
1,930
1,344
1,236
182
239
255
for wheat stem rust, a fungus that debilitates wheat.
Marketing year beginning June 1 for wheat, and September 1 for corn and
soybeans.
A national eradication program was needed to
b
Based on Nov. 8, 1990 estimates.
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 biotechnol-
ogy; 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.
SOURCE: U.S. Department of Agriculture, Economic Research Service,
Agriwltural Outlook, July 1990.
The development of new crops can reduce sur-
pluses if farmers shift acreage from the 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 unambigu-
ously 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 competi-
tive (without subsidies) with available alternatives
could possibly lower Federal expenditures.
An additional consideration is the potential im-
pact that new uses of one crop may have on other
crops covered by commodity programs. For exam-
ple, increased ethanol production from cornstarch is
12A rewnt GAO study (U.S. Congress, Gene~ Accounting Office, Alcohol Fuels: fmpacts From Increased Use of Ethanol Blended Fuels,
GAO/RCED-90156 (Gaithersburg, MD: U.S. General Accounting Office, July 1990)examinin g this issue indicated that there would be a net 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 paymentsmm-red late in the time frame used by the USDA study.
28 qAgricultural Commodities as Industrial Raw Materials
expected to decrease the price of soybeans. Soy-
beans are covered by nonrecourse loans. Tradition-
ally, 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 condi-
tions, 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 in-
creased 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 econom-
ically competitive with available alternatives. De-
velopment 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 environ-
ments.
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 impor-
tance, the Department of Defense has stated in a
Memorandum of Understanding with the Depart-
ment 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 miscella-
neous 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 poten-
tially 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. Con-
version of carbohydrates (sugars and starches) to
ethanol, for example, conserves energy, but mass is
lost (CO
2
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 contam-
ination. 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 dis-
persed geographic location of supply, and lack of
supply infrastructure (22,53). Potential fuel replace-
ments derived from agricultural commodities in-
clude 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 q29
At this time, corn is the least expensive biomass
feedstock to use for ethanol production. Current
ethanol production replaces less than 141 percent of
Table 3-15-Major Primary Feedstocks Derived
From Petroleum
U.S production, 1989
total U.S. gasoline consumption (62). 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,
Feedstock
Benzene . . . . . . . . . . . . . . . . . . . . . . . . . .
Ethylene . . . . . . . . . . . . . . . . . . . . . . . . . .
Propylene . . . . . . . . . . . . . . . . . . . . . . . . .
Toluene . . . . . . . . . . . . . . . . . . . . . . . . . .
Xvlene . . . . . . . . . . . . . . . . . . . . . . . . . . . .
billion Ibs)
11.7
35.0
20.0
5.8
5.8
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 con-
version of lignocellulose to ethanol, instead of starch
to ethanol, might improve the economics of ethanol
use for transportation fuels. These technical ad-
vances 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 de-
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 com-
pounds 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 commodi-
ties 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 substitu-
tion involves the replacement of a petroleum-
derived 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 plant-
derived chemicals to compete economically because
the petroleum chemical industry is highly inte-
grated, 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 devel-
oping plant-derived chemicals that have a slightly
different chemical composition, but the same func-
tions as petroleum-derived chemicals. In this case,
benefits in terms of superior performance, improved
storage or supply characteristics, or improved envi-
IdOne bushel of corn produces appro
xirnately
2.5 gallons of ethanol. U.S. production of ethanol uses appro xirnately 350 to 400 million bushels of
com (approximately 5 percent of com production).
30 q 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.
CommodityPrices—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
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
potential substitution opportunities lie with chemi
cals with high oxygen ;&tents, since plant-derived
chemicals usually contain oxygen, while petroleum-
derived 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 com-
bination with other compounds such as plastics.
Currently, biomass-derived plastics are not econom-
ically competitive except in a few specialty high-
value markets (e.g., surgical sutures). Major techni-
cal advances are still needed (10).
Chapter 3--Analysis of Potential Impacts of Using Agricultural Commodites as Industrial Raw Materials q31
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 glyc-
erin, 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 q 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).
FarmProgramCosts—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--Theethanol 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
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 glyc-
erin, 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 q33
potentially cultivate an additional 100 to 140 million
acres. Some of this land is planted to pasture used for
Table 3-18-Estimated Acreage Neededa To Supply
One Billion Gallons of Fuel
livestock grazing. Some is held in small or frag-
Crop
Fuel replaced Acreage
mented holdings and faces competition from non-
agricultural uses; conversion to crop production will
be relatively expensive and expected returns need to
be high enough to offset the conversion costs (4,44).
Soybeans . . . . . . . . . . . . . . . Diesel
Sunflowers . . . . . . . . . . . . . . Diesel
Rapeseed . . . . . . . . . . . . . . . Diesel
Ethanol . . . . . . . . . . . . . . . . . Gasoline
22 million
16 million
8 million
3.5 million
a
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
oestimate 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
be substantial (table 3-18). To replace U.S. petro-
leum-derived ethylene with cornstarch-derived eth-
ylene, would require production of approximately 27
million acres of corn.17 Current U.S. production
New crop
Cuphea . . . . . . . . . . .
Cuphea . . . . . . . . . . .
Lesquerella . . . . . . .
Imported crop
Coconut oil
Palm kernel oil
Castor oil
(million of acres)
1.40
0.56
0.33
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 agricul-
tural uses of diesel fuel would require increasing
soybean production by nearly 10 million acres over
Stokes aster . . . . . . .
Vernonia . . . . . . . . . .
Crambe . . . . . . . . . . .
Rapeseed. . . . . . . . .
Guayule . . . . . . . . . .
Kenaf . . . . . . . . . . . .
Soybean oil. . . . . . . .
Converted soybean oil
Converted soybean oil
Rapeseed oil
Rapeseed oil
Hevea rubber
Newsprint
Printing inks
0.49
0.68
0.29
0.24
3.60
1.00
1.01
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 poten-
tial. 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
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). Ifthese 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 q 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 ap-
Table 3-20-Estimated Acreage Needed To Replace
World Supplies
World production Acres needed
proximate export potential (table 3-20).
These estimates represent upper levels based on
current world demand. Total acreage needs would
Imported crop
Coconuta . . .a. .
Palm kernel . .
Rubber . . . . . .
New crop
Cuphea
Cuphea
Guayule
(million Ibs.)
2.77
1.48
9,250
(millions)
7.6
4.5
18.5
depend on the potential to expand demand for these
commodities beyond current levels, and the ability
c
Castor . . .d. . . .
Newsprint . . . .
Lesquerella
Kenaf
1,705
a
33
1.1
4.7
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
a
world 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.
b
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 commodi-
ties.
c
World 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.
World 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.
Increasing global capacity to produce, process
and manufacture products from agricultural com-
modities will affect the potential for U.S. exports of
d
world 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.
these products. Other countries (e.g., Argentina and
Brazil for soybeans and Canada and the European
Community for edible quality rapeseed) have dem-
onstrated 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 in-
creasing 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 domes-
tic 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 industrial-
ized 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
SOURCE: Office of Technology Assessment, 1991.
raw and processed products derived from agricul-
tural 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 news-
print 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.
Determin ation of the acreage needed to produce
agricultural crops for industrial uses has implica-
tions 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 q35
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 success-
ful marketing. The development of degradable
plastics to alleviate solid waste and litter problems
illustrates this point. In the early stages, environ-
mentalists supported these products for some spe-
cific uses, such as six-pack beverage rings. How-
ever, as product types and claims of 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 de-
gradable plastics has been continuing, but confusion
and doubts about the appropriateness of these
technologies remain with the public and environ-
mental 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 establish-
ing 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, com-
bined 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 prod-
ucts (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 tradi-
tional 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. Agricul-
turally 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. Addi-
tionally, 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 indus-
trial materials. Technically, biomass-derived chemi-
cals could also potentially replace many petroleum-
derived chemicals. The major constraint is econom-
ics. The chemical industry is highly integrated,
flexible, and has large economies of scale. Penetra-
tion of many of these markets is difficult. Addition-
ally, some of these markets are large (i.e. fuel and
primary chemical feedstocks) and significant re-
placement 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 technolo-
gies will improve the chances of these farmers
benefiting from new industrial crops and uses of
traditional crops.
The development and production of new indus-
trial crops and uses in the United States could, in
some cases, replace major exports of some develop-
ing nations, some of which are considered to be of
strategic importance to the United States. Addition-
ally, attempts to increase exports of some of the
products has the potential to increase trade frictions
between the United States and the European Com-
munity.
The United States currently has excess agricul-
tural production capacity. Large scale replacement
of U.S. fuel use or primary chemical feedstocks
would require significant acreage for crop produc-
tion, however, economics do not favor these devel-
opments 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 cur-
rent 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. Poten-
tially, 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 tradi-
tional 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 q37
Chapter 3 References
1. Arkcoll, David, "Laurie Oil Resources," Economic
Botany, VO1.42, No. 2, April-June 1988, pp. 195-205.
2. Baker, Allen, and Ash, Mark, U.S. Department of
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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 im-
pacts. Governments can affect the rate of technical
change by influencing the general economic envi-
ronment (fiscal and monetary policy as well as
regulatory policy can enhance or inhibit technical
change), and by specific policies designed to encour-
age 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 legisla-
tion 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. Involve-
ment of the public and private sectors is needed. The
extent of this involvement, and the speed at which
new technologies will be developed and commer-
cialized will be influenced by many factors. This
chapter analyzes many of these factors, and de-
scribes some Federal and State programs available
to encourage the research, development, and com-
mercialization of new technologies. Chapter 5 will
discuss important factors involved in the adoption of
new technologies.
-41-
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 technology-
oriented 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 moti-
vated by profit-seeking and will tend to occur
whenever profit and risk conditions create compara-
tively 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 out-
puts (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 mini-
mize 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 public-
sector funding for research that they believe will
42 . Agricultural Commodities as Industrial Raw Materials
bring a payoff to themselves. They commit their own
resources in a similar fashion. Federal fiscal con-
straints tend to reinforce the passive approach to
public research by intensifying the search by scien-
tists 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 public-
sector 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 (rela-
tive to the cost of other inputs), or whose market is
affected by regulation. Situations where these fac-
tors 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 containin g 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 coat-
ings. 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).
I ndustrial Use Research Funding and
Institutional Involvement
The Federal institution most involved in agricul-
tural 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, McIntyre-
Stennis, Animal Health, etc.), special grants, educa-
tion and facilities grants, and competitive grants.
Total CSRS funding to the State Experiment Sta-
tions for fiscal year 1990 was approximately $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 re-
search 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 re-
search 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 estab-
lished 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 rep-
resentatives from the Department of Agriculture, the
Department of Commerce, the Bureau of Indian
Affairs, the National Science Foundation, the De-
partment of State, the Department of Defense, and
the Federal Emergency Management Agency, over-
sees the activities of the Office of Critical Materials.
This office is trying to commercialize many of the
new industrial crops discussed in this report. Com-
mercialization efforts have been greatest for
guayule, kenaf, jojoba, Crambe, and industrial
rapeseed. Some efforts have been made to commer-
cialize 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 Table 4-l—USDA Fiscal Year 1989 Expenditures for
appropriated $1,968,000 for FY 1991 to fund Selected New Crops (dollars)
research on guayule ($668,000), Crambe and rape-
seed ($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 prod-
ucts. Other Federal agencies such as the Department
Crop
Cuphea . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meadowfoam . . . . . . . . . . . . . . . . . . . . . .
Lesquerella . . . . . . . . . . . . . . . . . . . . . . .
Crambe/rapeseed . . . . . . . . . . . . . . . . . .
Guayule . . . . . . . . . . . . . . . . . . . . . . . . . .
Kenaf . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
$ 100,000
350,000
20,000
325,000
1,168,000
675,000
2.638,000
of Defense (DoD), the Department of Commerce,
the Department of Energy, the National Science
Foundation, and the Agency for International Devel-
opment provide some funding for industrial uses of
agricultural commodities. The States, as well as the
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)
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
Year
1978-86 . . . . . . . . . .
1987-88 . . . . . . . . . .
Amount
$13.1
13.2
2.9
2.7
15.0
4.3
Agency
Department of Defense
U.S. Department of Agriculture
Other Federal
Firestone Tire & Rubber
Department of Defense
U.S. Department of Agriculture
USDA expenditures for selected new crops for
1989 . . . . . . . . . . . . .
1989-96 estimated . .
1.168 U.S. Departrnent of Agriculture
38.0
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 consor-
tium 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 devel-
opment. 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 com-
mercialize kenaf. The program consists of three
phases. Phase I, begun in 1986, involved agronomic
and papermaking research. Phase II, begun in 1987,
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 expendi-
tures (3,1 1,12).
The California South Coast Air Quality Manage-
ment District, the State of Michigan, the U.S.
Agency for International Development, and 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, con-
ducts research on the conversion of lignocellulose to
chemicals. Funding levels for other crops are una-
vailable, 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 degrad-
able plastic research (28). Their findings for fiscal
year 1988 are summarized in table 4-4. Several
private firms are also interested in degradable
44 q Agricultural Commodities as Industrial Raw Materials
Table 4-3—Expenditures for Kenaf Research
(dollars)
tion, purification, and chemical transformation
mechanisms that are economically competitive will
Research
Phase I
Phase II
Phase III
Amount
141,000
263,000
300,000
644,000
675,000
Agency
U.S. Department of Agriculture
Joint Kenaf Task Force
U.S. Department of Agriculture
Joint Kenaf Task Force
U.S. Department of Agriculture
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 devel-
oped, and for many uses, performance standards
must be established. In some situations, waste
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
disposal procedures must be developed. Commer-
cialization efforts by private firms will follow their
research and development efforts and will be driven
by the same economic factors.
Agency
U.S. Department of Agriculture . .
Department of Defense . . . . . . . .
Department of Energy . . . . . . . . .
National Science Foundation . . . .
Total . . . . . . . . . . . . . . . . . . . . .
No. of projects
4
4
3
1
12
Funding
$ 941,000
575,000
150,000
63,000
$1,729,000
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
SOURCE: U.S. Congress, General Accounting Office, "Degradable Plas-
tics: Standards, Research and Development," RCED-88-208
(Gaithersburg, MD: September 1988).
plastics, and have products on the market, many 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 Re-
sources, the Illinois and Ohio Corn Marketing
Boards, and the U.S. Department of Energy. Ex-
penditures 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. Commercial- ization
will require considerable research and devel-
opment effort on the part of companies. For new
crops and uses, commercial-scale extraction, separa-
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 trans-
fer of legal rights and the informal movement of
information, knowledge, and skills. Private-sector
awareness, interest, and capacity to utilize public-
sector research effectively will be critical to the
successful commercialization of new uses of agri-
cultural commodities.
I ndustrial I nterest 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 private-
sector demand for technology developed in the
public sector. Many new crops being developed are
intended to substitute for chemicals that are cur-
rently 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 q 45
Box 4-A—European Research Program To Develop New I ndustrial Crops and
Uses of Traditional Crops
I n 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
anticipation 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
quality, price, and quantity of the resources (primar-
ily land and labor) needed to produce the commodi-
ties (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. De-
mand 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 tech-
niques used, purification requirements, waste dis-
posal, and volume. Frequently there are returns to
scale in the processing of agricultural commodities,
which leads to lower per-unit processing costs for
46 q 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 commodi-
ties.
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). De-
mand 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 illus-
trates 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 in-
creases, the price of corn increases and the value of
the byproducts decreases (oil, protein meals), effec-
tively 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 struc-
ture 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 sup-
plies 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 com-
pounds 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 high-
yielding 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 variabil-
ity, 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 proc-
esses 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 de-
velopment of consumer products. New industrial
crops and uses of traditional crops that fill well-
defined 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 perti-
nent 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 q47
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), con-
sisting of a small central staff and volunteer repre-
sentatives 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 possi-
ble 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 eco-
nomical means for companies to search for technolo-
gies 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 coopera-
tion 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 univer-
sity.
Technology Transfer Mechanisms
Technology transfer between Federal and univer-
sity laboratories and industry can be facilitated in
many ways, including personnel exchange between
laboratories and industry, private-firm use of spe-
cialized 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, indus-
try 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 agree-
ments exist between Federal laboratories and indus-
try, and between universities and industry. The
cooperative agreements that seem to be most effec-
tive are those made at a scientist-to-scientist level,
rather than at the administrative level (13).
Incentives for collaboration in Federal laborato-
ries are sometimes weak or even negative. Technol-
ogy-transfer activities sometimes do not count in 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 theR&D budgets of the Federal laboratories.
48 q 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 Competitive-
ness 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 public-
sector researchers is possible; however, it is uncom-
mon for industry researchers to take visiting posi-
tions, particularly at Federal laboratories. The re-
verse is also quite rare. In the place of formal
personnel exchange, visitor programs of just a few
hours or days can provide an informal technology-
transfer mechanism. Such programs provide oppor-
tunities for firms to stay in touch with the latest
developments, particularly those in the government
laboratories (29).
Startup firms are new firms established specifi-
cally to commercialize new technologies. The proc-
ess 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 labo-
ratory 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 trans-
fer between Federal laboratories and industry. The
Stevenson-Wydler Act provided Federal laborato-
ries with a mandate to undertake technology transfer
activities, while the Technology Transfer Act cre-
ated an organizational structure to meet this man-
date.
Federal laboratories are allowed to participate in
cooperative R&D agreements and to grant exclusive
licenses for resulting patents to the private busi-
nesses 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 possibili-
ties, patenting, finding firms that might be inter-
ested, 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 full-
time staff, and a sustained financial commitment.
Firms may hesitate to pledge themselves to multi-
year 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 laborato-
ries 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 commercial-
izing 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) pro-
gram 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 q49
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 prog-
ress 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 com-
mercial application (SBIR does not fund the final
stages of bringing a product to market, but the Small
Business Administration does help firms find pri-
vate 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 Environ-
mental 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 re-
search 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 univer-
sity 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, Ver-
mont, 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, Mon-
tana, New York, and Wisconsin) have venture
capital programs although none are aimed specifi-
cally 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 pro-
grams, 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 busi-
nesses. 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 qAgricultural 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, impedi-
ments, 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 technol-
ogies will be discussed in chapter 5.
The United States has several policies and pro-
grams to encourage research and development.
Currently, public- and private-sector funding 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 feasibil-
ity, 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. Prod-
ucts 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 develop-
ment 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 develop-
ment. 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 commerciali-
zation 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 informa-
tion could prove quite beneficial. A successful
policy must be able to address these differing needs.
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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, per-
sonal communication, February 1990.
Tomek, WilLiam G,, and Robinson, Kenneth L.,
AgricuZturaZ Product Prices (Ithaca, NY and I.mn-
don, England: Cornell University Press, 1981).
U.S. Congress, General Accounting Office, Re-
sources, Community, and Economic 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).
U.S. Department of Agriculture, Economic Research
Service, "Ethanol: Economic and Policy Tradeoffs,"
January 1988.
U.S. Department of Agriculture, Office of Agricul-
tural Biotechnology, Biotechnology Notes, vol. 3,
No. 7, August 1990.
Wu, Lawrence, Illinois State Geological Survey,
"Ethanol Desulfurization Project," July 1990.
Chapter 5
Factors Involved in the Adoption of New 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 ma-
terials, processes, and technologies into the manu-
facturing 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 equip-
ment, 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 eco-
nomic considerations that influence a firm to allo-
cate 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 de-
pend 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
-53-
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 evaluat-
ing 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, operat-
ing 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 technol-
ogy use in strategic applications where acceptable
performance variation is narrowly limited. Inter-
mediate materials containing agriculturally derived
rather than petroleum-derived chemicals, for exam- ple,
may have slightly altered chemical characteris- tics and
behave differently in the same manufactur-
ing procedure. Lack of familiarity with this variation is a
significant constraint to use in strategic applica-
tions, and new materials and processes may first be
adopted by firms for use in non-strategic applica-
tions. 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
54 q 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, pro-
duce photodegradable rather than biodegradable
plasticsl (13). This is because of cost considerations
associated with methods of production: photode-
gradable 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. Starch-
based 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 prod-
ucts 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 prod-
ucts, 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 produc-
tion procedures are those that will be adopted frost.
Products that have clear cost or quality advantages, even if
new procedures are needed, may also 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 commer-
cialization of new technologies; technology adop-
tion 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 tech-
nologies. 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 commodity-
based 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 manufactur-
ers, choose and manage new technologies and
equipment, and provide advice on trainin g require-
ments. 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, demon-
strate advanced production technologies, and make
short-term loans of advanced manufacturing equip-
ment 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 mod-
ernization plans customized to fit the needs of
individual fins. The Act also authorized $1.3
million for fiscal year 1990 to expand State technol-
ogy 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 prob-
lems, 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 exist-
ing 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 as-
sistance (17). Specialists in rural development rec-
ognize 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 com-
modities, 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 technolo-
gies 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 signifi-
cant 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, self-
pollination, low yields, and photoperiodism (5,7).
Seed dormancy (lack of germin ation) and poor
seedling vigor not only are undesirable agricultural
qualities, but diminish the opportunities for scien-
tists to continue research on that species. Asynchro-
nous flowering (flowering of individual plants at
different times) allows a wild plant species to
survive periods of adverse weather, but in commer-
cial 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 be-
cause of improved control. Photoperiodism is im-
portant 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 q Agricultural Commodities as Industrial Raw Materials
include meadowfoam (insect pollination), Cuphea
(seed shattering, seed dormancy), Vernonia (photo-
periodism), 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 equip-
ment. 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
determin ant 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 adop-
tion 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 surround-
ing the production of a new crop. Culturing and
harvesting practices, handling procedures, markets
etc. are not well-established. This uncertainty in-
creases 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 pro-
grams. At harvest time, farmers enrolled in com-
modity 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 q57
(whichever is higher) is called the deficiency pay-
ment. Deficiency payments are made on a certain
percent of the base acres and yields of the eligible
commodities. Because some of the eligible com-
modities 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 soy-
beans is significantly reduced (20). In the Corn Belt,
the two major crops grown are corn and soybeans.
An acreage reduction requirement for corn has 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. Addition-
ally, 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 acre-
age 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 higher-
than-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. Desig-
nated 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 q 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 commer-
cial 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 multi-
ple markets for new crop products is imperative.
s~e~e crops my be eligible for nonrecourse and mmkefig loam.
Use of Existing Infrastructure
Adoption of new industrial crops will be facili-
tated if the new crop can readily be accommodated,
with minor adjustment, by existing transportation,
storage, processing, and marketing infrastructure.
Individuals or firms maybe unwilling to make 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 educa-
tional programs to help farmers and agribusiness
firms use the results of agricultural research. Histor-
ically, 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 market-
ing 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 commerciali-
zation, 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. Sub-
sector 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
Chapter 5--Factors Involved in the Adoption of New Technologies by Industry and Agricultural Producers q 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-
ing-Consumption (PMC) system developed by the
University of Missouri.4
The long history and extensive influence of
agricultural commodity programs significantly af-
fects the competitiveness of new industrial crops,
and possibly new uses of traditional crops. Changes
in agricultural commodity programs may help to
remove some of the disincentives to new industrial
crops.
Chapter 5 References
1.
Becker,
Geoffrey S., U.S. Congress, Congressional
Research Service, "Fundamentals of Domestic Farm
Programs, " 88-311 ENR, Mar. 31, 1988.
2. Drabenstott, Mark, and Moore, Charles, "New
Source of Financing for Rural Development,' Amer-
4Some of the subsectors identified inthisframework 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 q Agricultural Commodities as Industrial Raw Materials
ican Journal of Agricultural Economics, vol. 71, No. 13. Thayer, Ann, "Degradable Plastics Generate Contro- 5,
December 1989, pp. 1315-1328. versy in Solid Waste Issues, ' Chemical and Engi-
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
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 Devel-
opment Finance: Keys to Rural Revitalization: Dis-
cussion, American Journal of Agricultural Eco-
nomics, vol. 71, No. 5, December 1989, pp. 1324-
1326.
Kaplin, Kim, U.S. Department of Agriculture, Agri-
cultural Research Service, "Vernonia, New Indus-
trial Oil Crop," Agricultural Research, April 1989, pp.
10-11.
Keith, David, American Soybean Association, per-
sonal communication, July 1989.
Knapp, Steven J., "New Temperate Industrial Oilseed
Crops," paper presented at the First National
New Crops Symposium, Indianapolis, IN, October
1988.
he, David R., and Helrnberger, Peter G., "Estimat-
ing Supply Response in the Presence of Farm
Programs," American Journal of Agricultural Eco-
nomics, vol. 67, May 1985, pp. 193-203.
Milkove, Daniel L., and Sullivan, Patrick J., U.S.
Department of Agriculture, Economic 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, Sep-
tember 1988, pp. 307-331.
Schaub, James, McArthur, W. C., Hacklander,
Duane, Glauber, Joseph, Leath, Mack, and Doty,
Harry, U.S. Department of Agriculture, 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.
neering News, June 25, 1990, pp. 7-14.
14. Theisen, A.A., Knox, E. G., and Mann, F. L., Feasibil-
ity of Introducing Food Crops Better Adapted to
Environmental Stress (Washington, DC: U.S. Gov-
ernment Printing Office, March 1978).
15. 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.
16. 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).
17. 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).
18. 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).
19. U.S. Department of Agriculture, AgricuZturaZ Statis-
tics, 1988 (Washington, DC: U.S. Government
Printing Office, 1988).
20. Westcott, Paul C., U.S. Department of Agriculture,
Economic Research Service, "Winter Wheat Plant-
ings and Soybean Double Cropping, ' Oil Crops,
Situation and Outlook Report, OCS-20, January
1989.
21. 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 competitive-
ness, Congress wishes to accelerate cooperation
between the public and private sector to commercial-
ize new agricultural technologies. The perceived
lack of interest by the U.S. Department of Agricul-
ture (USDA) in developing new industrial crops and
uses spawned the introduction of legislation in the
100th and 101st Congresses. Several policy recom-
mendations proposed by the Task Force have been
incorporated in the legislation. The House of Repre-
sentatives bill is titled the Alternative Agricultural
Products Act of 1990. The Senate bill is titled the
Alternative Agricultural Research and Commercial-
ization 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 pro-
duce 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 technologi-
cal 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 informa-
tion technology will increase productivity, but at the
-61-
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 diversifica-
tion needed is reasonable.
Proposed Legislation
Goals
Effective policy must articulate clear and achiev-
able 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 technolo-
gies. 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 in-
come, 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
62 q Agricultural Commodities as Industrial Raw Materials
Box 6-A—Alternative Agricultural Products Act of 1990: House Proposal
Purpose
q 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.
q 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.
I nstitutional Structure-proposes theestablishment 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-Atleast 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 q 63
Box 6-B—Alternative Agricultural Research and Commercialization Act of 1990: Senate Proposal
Purpose
qTo authorize plant research in order to develop and produce marketable products other than food, feed, or
traditional forest or fiber products.
q To comm ercialize such new uses in order to create jobs, enhance rural economic development, and diversify
markets for agricultural raw materials.
. To encourage cooperative public/private development and marketing efforts and thus accelerate
commercialization.
. To direct commercialization efforts toward products from crops that can be raised by family-sized producers.
Institutional Structure-Proposes the creation of the Alternative Agricultural Research and Commercializa-
tion Corporation, an independent, nonprofit entity within USDA, and headed by a nine-member board, 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-TheCorporation 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-Fundingis 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 q 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 com-
modities as an industrial raw material source will
have a significant impact on rural economic devel-
opment. Clearly, developing new crops and uses of
traditional crops can be a component of a compre-
hensive 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 partici-
pation to small firms (for research and cooperative
agreements) and to firms that will locate manufac-
turing 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 in-
vested 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 proc-
esses, are large rather than small firms. The eligibil-
ity restrictions in the legislation are such that in the
attempt to achieve one goal (that of rural develop-
ment), 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, com-
mercialization, 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 develop-
ment can only be accomplished with the establish-
ment of a new corporation. Rather, the impetus for
an independent institution arises because of percep-
tions 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 Tech-
nology 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 signifi-
cantly 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 q65
each agency's continuance (8). It could be argued that
creation of an agricultural corporation to com-
mercialize new crops and uses continues this trend.
Reauthorization of the Office of Critical Materials
(OCM) is an alternative to making 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 estab-
lished 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 Innova-
tion 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 ex-
panded. Historically, the Extension Service has
transferred information about new production tech-
nologies to farmers. Recently, the Extension Service
has begun to develop a strategic marketing orienta-
tion 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 proc-
esses, many small firms may need a detailed
evaluation of their management and production
strategies. Effective State technical assistance pro-
grams 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 avail-
able in the proposed legislation. One possibility
might be to provide block grants to effective State
programs.
Proposed legislation provides funding for com-
mercialization. The legislation defines commerciali-
zation 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 devel-
opment 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 commercial-
ization, and not the problems of industrial technol-
ogy adoption.
In addition to commercialization funding and
technical assistance, there may also be a need for
assistance in financing capital investment and oper-
ating expenses, particularly in rural areas. Some
studies indicate that debt financing markets in rural
66 q Agricultural Commodities as Industrial Raw Materials
communities operate efficiently, and that operating and research and development strategy; social-
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 sec-
ondary 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 commercializa-
tion opportunities is an important component of
generating industrial interest in developing new
products using agricultural commodities. There is
growing participation of industry in Federal labora-
tory 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 Agricul-
tural Materials Act specifically provided for the
establishment of a database regarding new industrial
crops and use development at the National Agricul-
tural 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. Con-
gress may wish to consider provisions for database
maintenance.
A strategic approach is needed for the develop-
ment of industrial products from agricultural com-
modities. 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 contingen-
cies 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 develop-
ment time frame is desired; some research must
focused. A priority of new crop and use commercial-
ization should be the development of a marketing
science 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 indus-
trial uses of agricultural commodities.
Policy Options
Policy options presented are in three categories:
1. commodity programs options;
2. research, development, and commercialization
proposals; and
3. additional options that require further study.
Commodity Program Options
Agricultural commodity programs, as they cur-
rently 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 (defi-
ciency 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 pro-
grams:
. changes in the commodity base acreage for-
mula to increase planting flexibility, referred to
hereafter as "Normal Crop Acreage";
Chapter 6--Proposed Legislation and Policy Options . 67
q changes in the commodity base acreage for- groups generally oppose this option because they
mula to increase planting flexibility, referred to feel it is motivated not by a desire to provide
hereafter as "Triple Base Option"; flexibility, but rather to reduce payments to farmers
q changes in the target prices, referred to here- because of budget constraints. It is also argued that
after as ''Target Prices"; and this plan is inequitable because not all farmers can q
continuation of commodity programs similar to grow more than one crop profitably due to weather
those contained in the 1985 Food Security Act, and soil constraints (2).
referred to hereafter as ''Status Quo. Target Prices
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 acre-
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 commod-
ity 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. De-
creasing 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:
age. Because the planting decisions made for the q continuation of the current policy including
third base (that which receives no deficiency pay- appropriations for the Office of Critical Materi-
ments) are based more on market price signals than als, referred to hereafter as the "Status Quo";
on target prices, this option presumably would q establishment of institutions outlined in the
remove some disincentives to planting new crops, House and Senate bills referred to hereafter as
assuming that these new crops are permitted under the "Agricultural Corporation Alternative";
the terms of the commodity program. However, farm and
68 q Agricultural Commodities as Industrial Raw Materials
qreorganization of the agricultural research and and that are currently obtained via imports or
extension system to be more responsive to from petroleum. The emphasis is on supplying
end-user needs, referred to hereafter as the a relatively well-defined market rather than on
"National Research and Extension Policy Al- achieving broad social goals, although one
ternative. ' could argue that the security gained by having
a domestic source of strategic and essential
Status Quo
The status quo option calls for maintaining the
Office of Critical Materials as the main office to
coordinate the research, development, and commer-
cialization 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. 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.
2. Continuation of the Office of Critical Materi-
als will not address the underlying problems of
priority setting, planning, and resource alloca- tion
within USDA.
3. Coordination of USDA programs will be by
5.
6.
7.
8.
9.
materials is a worthwhile social goal.
Financial selection criteria is not limited to
small firms only. The broader range of poten-
tial participants, compared to proposed legisla-
tion, may increase the commercialization pros-
pects for some products.
Small business technical assistance and com-
mercialization loans are not part of the pro-
gram. However, there is a strong technology-
transfer component in the form of demonstra-
tion programs with industry, and provision 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; tech-
nology-transfer finding is strictly for indus-
trial uses of new and traditional crops.
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 land-
grant universities to develop the new crops
they have identified as potential candidates for
commercialization. Coordination between
OCM and the USDA Small Business Innova-
tion Program, however, is informal.
4. The goals of the Critical Agricultural Material
Act are more modest than proposed legisla-
tion. The focus is on the development of a
domestic capacity to supply industrial materi-
als that the United States uses on a daily basis
Agricultural Corporation Alternative
This alternative involves the passage of a compro-
mise version of the House and Senate bills. Its
features and likely consequences include the follow-
ing:
1. There will be a significant expansion of the
Federal role in research, development, and
commercialization of new industrial crops
and uses of traditional crops.
2. There will be an additional administrative
layer added to USDA, but Department prob-
lems of priority setting, research planning,
and resource allocation will not be addressed.
Furthermore, a new administrative compo-
nent could potentially add to the difficulties
already facing USDA in its efforts to coordi-
Chapter 6-Proposed Legislation and Policy Options q69
3.
4.
5.
6.
7.
8.
9.
10,
nate cross-cutting problems across multiple
agencies.
No explicit provision exists for the develop-
ment 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 incorpo-
rate 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 ap-
proaches increase the likelihood of duplica-
tion and neglect of important elements. How-
ever, 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. Agricul-
tural policy and rural policy are not synony-
mous, and aiming production at small farms
will be difficult to achieve.
Financial selection criteria may be too restric-
tive and diminish opportunities for commer-
cialization. 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 equity-
capital 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 re-
search 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; fund-
ing is strictly for new industrial crops and
uses of traditional crops.
11. There will be no funding for new food crops;
this potential avenue for diversification is
excluded.
12. No explicit consideration exists for database
needs. Some projects may automatically be
covered by USDA research databases, but
others will not. This could potentially in-
crease the difficulty of information dissemi-
nation.
13. 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.
14. 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 corpo-
ration 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 respon-
siveness 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 representa-
tives from farmer organizations, agribusiness orga-
nizations, public interest organizations, foundations,
and government action agencies. The council identi-
fies problems, recommends goals and funding lev-
els, coordinates industry support, and evaluates
progress. The council works closely with the Agri-
cultural Science and Education Policy Board
(ASEPB), which will be the research and technol-
ogy-transfer planning center for USDA. The 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 q Agricultural Commodities as Industrial Raw Materials
from NIH, NSF, non-land grant universities, and
1890 universities. The board, with the active in-
volvement of the User Advisory Council, sets goals,
establishes priorities, assigns agency research re-
sponsibilities, and evaluates results, among 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 con-
text. User input is an integral component of the
proposal. Allocation of funding is to priority pro-
grams rather than agencies. Features and likely
impacts of this proposal include the following:
1. USDA's fundamental problems with priority
setting, planning, resource allocation, and
technology transfer will be addressed.
ing for commercialization or prototype plant
development.
6. Explicit funding for technology transfer pro-
grams 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 agen-
cies sit on the Board.
7. Increased funding for new food crops is
possible but not guaranteed.
8. 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
2.
3.
4.
5.
New crop and new use research and develop-
ment 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 prior-
ity area by the current User's Advisory Board.
Funding will depend on whether new indus-
trial 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 multidisci-
plinary systems approach to agricultural re-
search, development, and extension that cuts
across USDA agencies, will be established.
This approach would allow, for instance, for
the collection of germplasm and for social-
science 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 market-
ing strategy and provide for the assessment of
likely impacts of the new technology.
This proposal is a research and technology-
transfer proposal and would not provide fund-
Rural debt markets seem to be working effi-
ciently, 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 im-
provement 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 com-
modities is needed.
Technical Assistance
Technical assistance, particularly in rural commu-
nities 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 technol-
ogies 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 mainte-
nance technologies is needed.
Chapter -reposed Legislation and Policy Options q71
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 bene-
fiting 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 Com-
mercialization 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, milk-
weed, 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 com-
modities 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 addi-
tional 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 founda-
tions 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. Establish-
ment 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 environ- ment, 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 commerciali-
zation might be useful. The European community is taking
this approach by first establishing a pre-
commercialization program to determine feasibility, and
then following up with a later program to encourage
commercialization. The U.S. Small Busi-
ness 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 prod-
ucts and processes to analyze potential markets,
socioeconomic and environmental impacts, techni-
cal 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, mul-
tiregional research should be given the highest
funding priority. This could include: chemical, physical,
and biological research needed to improve production
yields and chemical conversion efficien-
cies, and to establish quality control and perform-
ance 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 laboratory-
industrial 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 exten-
sion 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.
Chapter 6 References
1. 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.
2. Ek, Carl, U.S. Congress, Congressional Research
Service, "The Triple Base Plan," 89-381 ENR, June
1989.
3. Ek, Carl, U.S. Congress, Congressional Research
Service, "Normal Crop Acreage," 89-467 ENR,
August 1989.
Chapter 6-Proposed Legislation and Policy Options q73
4. 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-
ization, ' American Journal of Agricultural Eco-
nomics, vol. 71, No. 5, December 1989, pp. 1305-
1323.
5. John, DeWitt, "Keys to Rural Revitalization in the
1990's: Discussion, ''American Journal of Agricul-
turaZ Economics, vol. 71, No. 5, December 1989, pp.
1327-1328.
6. New Farm and Forest Products Task Force, "New
Farm and Forest Products-Responses to the Chal-
lenges and Opportunities Facing American Agricul-
contractor report prepared for the Office of Technol-
ogy Assessment, September 1989.
8. 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).
9. 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 Technology-
Issues for the 1990s, OTA-F-448 (Washington, DC:
U.S. Government Printing Office, March 1990).
ture,' A Report to the Secretary of Agriculture, 10. U.S. Congress, Office of Technology Assessment,
Washington, DC, June 25, 1987. Makhg Things Better: Competing in Manufacturing,
7. Tweeten, Luther, ''The Competitive Environment for OTA-ITE-443 (Washington, DC: U.S. Government
Agricultural Research and Technology Transfer," Printing Office, February 1990).
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 Lesquer-
ella 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 varia-
tion leading to easier selection for agronomic charac-
teristics. However, L. fendleri suffers from seed dor-
mancy 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.
Appendix A
Selected New Industrial Crops
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 identi-
fied 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 Agri-
cultural 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 per-
cent, 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 experimen-
tally.
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 produc-
tion.
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 genet-
ics), the NRRC (oil characterization), and the Short
Rotation Woody Crops Program of the Department of
Energy (agronomic) have provided research funding.
SOURCES: 29,39,46
Coyote Bush/Desert Broom
Scientific name: Baccharis pilularis (coyote bush),
Baccharis sarothroides (desert broom).
Major compounds produced: Approximately 10 per-
cent of the dry weight of the plant are resins.
Replacement: Wood 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 pilu-
laris is native to Baja and southern California, where it
Appendix A--Selected New Industrial Crops q77
is often grown as a landscape plant. Attempts to grow it
in Tucson, Arizona, were unsuccessful due appar- ently
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 environ-
ment.
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. pro-
duction 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 expen-
sive, 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 condi-
tions 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 30to 45
percent oil, 50 to 60 percent of which is erucic acid, a
C
22
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. Leak- proof
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 q 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 esti-
mated to be $2 for every $1 of Federal support.
SOURCES: 15,20,35,36,42,46,49,51,53
Cuphea
Scientific name: Cuphea 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 C
12
saturated
fatty acid. Other species contain high levels of C
IO
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, primar-
ily 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. Experimen-
tal plots have yielded 250 to 2,000 lb/acre of seed (280
to 2,240 kg/ha). There are both insect and self-
pollinated 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 at-
tempted. 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 pro-
duction 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 de-
mand. 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.
Oversupply would result in depressed prices for these
oils and for potential domestic substitutes such as
Cuphea. Higher lauric acid yields for Cuphea (80
Appendix A-Selected New Industrial Crops
Guar
Scientific name: Cyanopsis tetragonobla
q
79
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 pro-
gram 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 attempt-
ing 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
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 Xantho-
monas, 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. importsof guar.)
Social considerations: Guar is a legume and has nitro-
gen-fixing qualities.
Extent of research conducted: Not extensive.
SOURCES: 43
Guayule
Scientific name: Parthenium argentatum
Major compounds produced: Guayule produces a
high-molecular-weight rubber and resins that are ex-
tracted from the whole plant.
Replacement: Imported Hevea rubber and synthetic
rubber
Major uses: High-molecular-weight rubber is particu-
larly valuable in uses which require elasticity, resil-
ience, tackiness, and low heat buildup such as in tires;
resins can be used in the chemical industry; extraction
residues could potentially be used as livestock feed.
Agronomic characteristics: The genus Parthenium in-
cludes 17 species, all native to North or South America.
Both annuals and perennials are known. Guayule is the
most studied species. It is native to the Chihuahua
desert region of the Southwestern United States and
80 q 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 pro-
duction. Recently researchers have found the enzyme
(rubber polymerase) responsible for synthesizing rub-
ber. 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-molecu-
lar-weight rubber, indicating that the hybrid can
produce high-quality natural rubber. Successive gener-
ations of crosses, however, displayed decreasing seed
germination percentage. Improving seed germination
and direct seeding procedures are needed.
Guayule differs from both Hevea and other latex-
producing 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. Improve-
ments are needed in harvesting technology. In addition
to problems of yield, large-scale testing of the high-
molecular-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 re-
place 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, syn-
thetic 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 process-
ing 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-molecular-
weight 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 con-
ducted 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 q81
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 out-
crossing 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
292-865 0 - 91 - 4 QL:3
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 condi-
tions 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 C
24
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
82 q 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. Pelar-
gonic 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
J ojoba
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). Eighty-
seven percent of the fatty acids are of chain length 20
or 22 (eicosanoic acid is C
20
and docosanoic acid is
C
22
), and there are small quantities of palmitoleic acid
(C
18
) and oleic acid (C
16
). The fatty acids are mono-
unsaturated. 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 petroleum-
derived 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, car-
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 0F (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 Southwest-
ern 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
nauba, and spermaceti, all waxes that are commercially cause early flowering. If the weather then turns cold (25 0
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
F or lower during the blooming season of January to
March), the crop could be lost. Jojoba can tolerate high
temperatures (greater thanO 100oF), but not prolonged
temperatures of below 23 F. Weed control appears to
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 sim-
mondsins and tannins which are unpalatable to live-
stock and potentially toxic. Utilization research per-
formed 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 pro-
duction.
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, non-
wood 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 emer-
gence and growth; the dense populations needed result
in shaded ground conditions. However, favorable
Appendix A--Selected New Industrial Crops . 83
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 experi-
ences indicate that rain-fed kenaf produces about 75
percent of irrigated yields. Research to improve har-
vesting 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 approxi-
mately $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 fast-
growing 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 transpor-
tation 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 q 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). Nonirri-
gated 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 competi-
tiveness 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 re-
search 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 Uni-
versity; $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 C
2O
and C
22
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 oF.
Some meadowfoam species are insect-pollinated,
while others are self-pollinated.
Appendix A--Selected New Industrial Crops q85
Technical considerations: Self-pollinated meadowfoam
species are generally agronomically preferable, how-
ever those that have been examined have given lower
yields and display less genetic variation than insect-
pollinated species. No suitable self-pollinated species
have been found, thus attention is focused on insect-
pollinated 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, de-
creasing 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, foam-
ing, 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 meadow-
foam 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 approx-
imately 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 estab-
lishing millkweed is that of weed control. During the
seedling stage, much energy is devoted to root estab-
lishment which aids in drought tolerance but results in
the slowly growing, above-ground portion being non-
competitive 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 (hex-
ane) compounds remained stable. Better storage meth-
ods resulted in little loss of either extractable.
86 q Agricultural Commodities as Industrial Raw Materials
Economic considerations: Experimental plots of milk-
weed, using wild milkweed seed, had variable produc-
tion 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 com-
petitive 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 approxi-
mately 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. Pelar-
gonic 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. Gener- ally,
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 con-
tains 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 rape-
seed 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 con-
tains 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 industrial-
quality 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 rape-
seed (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
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 anthelmin-
tica are 23 to 31 percent oil, 68 to 75 percent of which
Appendix A--Selected New Industrial Crops q 87
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 con-
tains 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 mem-
bers 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 re-
quired 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 supple-
ments. 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 replace- 12. Food Chemical News, May 15, 1989, p. 10.
ment 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
13. Goldstein, Barry, Carr, Patrick M., Darby, William P., De
Veaux, Jennie S., Icerman, Larry, and Shultz Jr., Eugene B.,
"Roots of the Buffalo Gourd: A Novel Source of Fuel
Ethanol," American Assoctition for the Advancement of
Science Selected Symposium No. 91, Eugene B. Shultz, Jr.,
and Robert P. Morgan (eds.) (Boulder, CO: WestView Press,
hlC., 1984), pp. 895-906.
Northern Regional Research Center has conducted
some utilization research. Trial plantings of Vernonia
14. Gunstone, Frank D., 'Jojoba Oil,' Endeavour, New Series,
vol. 14, No. 1, 1990.
were made in Georgia in 1964, but little interest was
expressed in developing this species. Recent agro-
nomic research has been conducted in East Africa and
the Carribean rather than in the United States. Utiliza-
tion 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 industry-
financed research group) are providing $425,000 for
this research. Some research is also being conducted at
Lehigh University.
SOURCES: 8,18,33,36,37
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DC: U.S. Congress, Office of Technology Assessment,
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Production," January/February 1990, pg. 19.
3. Arkcoll, David, "LaUric Oil Resources," Economic Bot-
any, vol. 42, No. 2, April-June 1988, pp. 195-205.
4. Bosisio, Matt, U.S. Department of Agriculture, Agricultural
Research Service, 'Kenaf Paper: A Forest Saving Alterna-
tive," Agricultural Research, October 1988, pp. 6-8.
5. Bosisio, Matt, U.S. Department of Agriculture, Agricultural
Research Service, "Meadowfoam: Pretty Flowers, Pretty
Possibilities," Agricultural Research, February 1989, pp.
10-11.
6. Broadway, Regian, "Kenaf Making Progress in Missis-
sippi," Ag Biotechnology News, January/February 1990,
pp.17-18.
7. Brody, Jane E., "Scientists Eye Ancient African Plant as
Better Source of Pulp for Paper," New York Times, The
Environment Section, Tuesday, Dec. 13, 1988.
8. Chemical and Engineering News, "Vernonia Oil Shows
promise as Reactive Monomer," May 7, 1990, p. 62.
9. Dempsey, James M., "Kenaf," Fiber Crops (Gainesville,
FL: University Presses of Florida, 1975).
10. De Veaux,Jennie S., and Schultz, Jr., Eugene B., 'Develop-
ment of Buffalo Gourd (Cucurbita foetidissirna) as a
Semiarid Land Starch and Oil Crop," Economic Botany, vol.
39, No. 4, October-December 1985, pp. 454-472.
11. Dvoskin, Dan, U.S. Department of Agriculture, Economic
Research Service, "Potential Utilization of Agricultural
Resources, The Case of Jojoba," August 1987.
15. Hinrnan, C. Wiley, "Potential New Crops," Scientific
American, vol. 255, No. 1, July 1986.
16. Hoffmann, Joseph J., and McLaughlin, Stephen P., "Grin-
delia Camporurn: Potential Cash Crop for the Arid South-
west," Economic Botany, VO1.40, No. 2, April-June 1986, pp.
162-169.
17. Jordan, Wayne R., Newton, Ronald J., and Rains, D.W.,
''Biological Water Use Efficiency in Dryland Agriculture,'
contractor report prepared for the Office of Technology
Assessment, 1983.
18. Kaplin, Kim, U.S. Department of Agriculttue, Agricultural
Research Service, "Vemonia, New Industrial Oil Crop,"
Agricultural Research, April 1989, pp. 10-11.
19. Kephart, K. D., Rice, M.E., McCaffrey, J.P., and Murray,
G.A., "Spring Rapeseed Culture in Idaho," University of
Idaho Cooperative Extension Service, Bulletin No. 681,
1988.
20. Kleiman, Robert, U.S. Department of Agriculture, Agricul-
tural Research Service, NorthernRegional Research Center,
Peoria, IL, personal communication, 1989.
21. Knapp, Steven, Oregon State University, Crop Sciences
Department, Corvalis, OR, personal communication, 1989.
22. Knapp, Steven J., "New Temperate Industrial Oilseed
Crops," paper presented at the First National New Crops
Symposium, Indianapolis, IN, October 1988.
23. Kugler, Daniel E., U.S. Department of Agriculture, Cooper-
ative State Research Service, Special Projects and Program
Systems, "KenafNewsprint: Realizing Commercialization
of a New Crop After Four Decades of Research and
Development, A Report on the Kenaf Demonstration
Project, " June 1988.
24. Lasley, Floyd A., Jones, Jr., Harold B., Easterling, Edward
H., and Christensen, he A., U.S. Department of Agricul- ture,
Economic Research Service, ''The U.S. Broiler
Industry,' Agricultural Economic Report No. 591, Novem- ber
1988.
25, McLaughlin, Steven P., "Mass Selection for Incnmsed
Resin Yield in Grindelia Camporuom (Composhae),"
Economic Botany, vol. 40, No. 2, April-June 1986, pp.
155-161.
26. Miller, John M., and Backhaus, Ralph A., "Rubber Content
in Diploid Guayule (Parthenium argentatum): Chromo-
somes, Rubber Variation, and Implications for Economic
Use," Economic Botany, vol. 40, No. 3, July-September
1986, pp. 366-374.
27< Murray, G.A., AuId, D. L., O'Keeffej L.E., and Thin, D.C.,
"Winter Rape Production Practices in Northern Idaho,"
University of Idaho Agricultural Experiment Station, Bulle- tin
No. 634, 1984.
28 Naqvi, H.H., Hasherni, A., Davey, J.R., and Wa.i.nes, J.G.,
''Morphological, Chemical, and Cytogenetic Characters of
F1 Hybrids Between Parthenium argentatum (Guayule) and
Appendix A-Selected New Industrial Crops . 89
P. fruticosum var. fruticosum (Asteraceae) and Their 42. Smathers, Robert, Withers, Russell, and Sunderland, Dave,
Potential in Rubber Improvement,' Economic Botany, vol. "1987 Northern Idaho Crop Enterprise Budgets," Univer-
41, No. 1, January-March 1987, pp. 66-77. sity of Idaho, MS 101-3, September 1987.
29. National Research Council, Saline Agriculture: Salt-
Tolerant Plants For Developing Countries, (Washington,
DC: National Academy Press, 1990).
30. National Research Council, .lojoba: New Crop for Arid
Lands, New Material for Industry, (Washington, DC:
National Academy Press, 1985).
31. Nelson, Dave, Oregon Meadowfoam Growers Association,
Salem, OR, personal communication, 1989.
32. O'Connell, Paul, U.S. Department of Agriculture, Coopera-
tive State Research Service, Special Projects and Program
Systems, testimony at hearing before the Subcommittee on
Agricultural Research and General bgislation of the
Committee on Agriculture, Nutrition, and Forestry, United
States Senate, June 26, 1987.
43.
44.
45.
46.
Theisen, A.A., Knox, E.G., and Mann, F. L., Soil and Land
Use Technology, Inc., "Feasibility of Introducing Food Crops
Better Adapted to Environmental Stress," National Science
Foundation, NSF/RA-780289 (Washington, DC: U.S.
Government Printing Office, March 1978).
Thompson, Anson E., "New Native Crops for the Arid
Southwest," Economic Botany, vol. 39, No. 4, October-
December 1985, pp. 436453.
U.S. Department of Agriculture, Agriculture Research
Service, "Cultural and Harvesting Methods for Kenaf: An
AMual Crop Source of pulp in the Southeast," Production
Research Report No. 113, 1970.
U.S. Department of Agriculture, Cooperative State Re-
search Service, Office of Critical Materials, "Growing
33
.
34
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35
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36
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37
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Perdue, Robert E. Jr., Carlson, Kenneth D., and Gilbert,
Michael G., "Vernonia galamensis, Potential New Crop
Source of Epoxy Acid," Economic Botany, vol. 40, No. 1,
January-March 1986, pp. 54-68.
Plowman, R. Dean, "USDA Research in New Industrial
Crops," EZGuayufero, vol. 10, No. 3 & 4, Fall-Winter 1988,
pp. 6-9.
Prato, Tony, 'Production, Processing and Marketing Poten- tial
for Rapeseed in the Pacii3c Northwest," University of
Idaho Curnmt Information, Series No. 818, February 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, February 1984, pp. 281-
289.
Reisch, Marc S., "Demand Puts Paint Sales at Record
hwels," Chemical and Engineering News, vol. 67, No. 44,
Oct. 30, 1989, pp. 29-56.
47.
48.
49.
50
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Industrial Materials," February 1989.
U.S. Department of Agriculture, Cooperative State Re-
search Service, "Guayule Research and Development:
Establishing a Domestic Natural Rubber Industry,' Febru-
ary 1988.
U.S. Department of Agriculture, Critical Materials Task
Force on the Role of American Agriculture and Forestry in
Maintaining Supplies of Critical Materials, "Growing
Industrial Materials: Renewable Resources From Agricul-
ture and Forestry," October 1984.
U.S. Department of Agriculture, Economic Research Serv-
ice, "World Indices of Agricultural and Food Production,
1977 -86," Statistical Bulletin No. 759, March 1988.
U.S. Department of Agriculture, Foreign Agricultural
Service, "World Oilseed Situation and Market High-
lights," Circular Series FOP 2-89, February 1989.
38. Schaub, James, McArthur, W.C., Hacklander, Duane,
Glauber, Joseph, bath, Mack, and Doty, Harry, U.S.
Department of Agricuhure, Economic Research Service,
"The U.S. Soybean Industry," Agricultural Economic
Report No. 588, May 1988.
51
.
Van Dyne, Donald L., Blase, Melvin G., and Carlson,
Kenneth D., 'Industrial Feedstock and Products From High
Erucic Acid Oil: Crambe and Industrial Rapeseed," Uni-
versity of Missouri-Columbia Printing Services, March
1990.
39
.
40
<
41
.
Scheld, H.W., 'Production of Chinese Tallow: The Fuel Oil
Seed Crop," AAAS Selected Symposium # 91, Eugene B.
Shultz, Jr., and Robert P. Morgan (eds.), 1984, pp. 177-186.
Senft, Dennis, U.S. Department of Agriculture, Agricultural
Research Service, 'Homegrown Lubricants and Plastics,'
Agricultural Research, October 1988.
Sheets, Kenneth R., "How To Turn a New ki.f in the
Papermaking Business, " U.S. News and World Report,
May 8, 1989.
52
<
53
<
5
4
Van Emon, Jeanette, and Seiber, James N., "Chemical
Constituents and Energy Content of Two Milkweeds,
Asclepias speciosa and A. curassavica,' Economic Botany,
vol. 39, No. 1, Januaxy-March 1985, pp. 47-55.
Woolley, Donald G., and Lovely, Walt, "Crambe Produc-
tion,' Iowa State University Extension, Pm-1333, October
1988.
Young, Jim, "KenafNewsprint is a Proven Commodity,"
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 prod-
ucts. 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 com-
position of the oil determines fuel characteristics. In
general, highly unsaturated oils break down faster than
saturated oils, but increased saturation leads to solidifi-
cation 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 de-
creased 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 indirect-
injection 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
-90-
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 short-
term 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 rape-
seed currently are grown only in small quantities;
production would need to be greatly expanded. Soy-
beans and sunflowers are the likely candidates. Aver-
age U.S. sunflower yields are about 600 pounds oil 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, sun-
flower meal is low in lysine and cannot fully supply the
protein requirements of livestock particularly pork and
poultry. Farmers would still need to purchase higher-
lysine-protein meal, such as soybean meal, or amino
acid supplements. This to some extent decreases the
Appendix B--Selected Industrial Uses for Traditional Crops q91
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 poten-
tially could have negative impacts on employment,
particularly in the oil processing and transportation
industries. Increased centralized processing could po-
tentially 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 Newspa-
per 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 fermen-
tation of corn, however, at present, no large-scale plants
exist. The Chevron Co. has marketed CMA. Determi-
nation 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 bacte-
rial fermentation. It is estimated that an economical size
92 qAgricultural 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
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
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
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 aggre-
gates, 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 polymer-
treated 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 fol-
lowed 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 gelati-
nization, 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 encapsu-
lated 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 fluctu-
ate with the price of corn and the value of these feed
byproducts.
Social considerations: There is some potential to de-
crease groundwater contamination by using encapsu-
lated pesticides. Livestock feed byproducts will com-
pete with soybeans.
Research conducted: Northern Regional Research Cen-
ter in Peoria, Ill.
SOURCES: 6,18,41,43
Ethanol
Crop: Corn primarily, but potentially other starch or
lignocellulose sources
Major coproducts: Two production methods are util-
ized: 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 CO
2
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 high-
protein livestock feeds. The almost pure starch that is
left is converted to sugar, then fermented and distilled
to produce ethanol and CO
2
. 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 automo-
biles have now been adjusted to minimize such
problems.
Ethanol production needs to be improved. In the near
term, three new technologies show promise: 1) replace-
ment of yeast with Zymomonous mobilis bacteria, 2)
membrane separation of solubles, and 3) yeast immobi-
lization. Z. mobilis ferments faster than yeast, 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 cellu-
losic 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 capaci-
ties of 100 to 150 million gallons) are able to capture
economies of scale in both the production and market-
ing 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 q 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 mini-
mum 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 opera-
tions are geared to removing large logs. Improvements
in harvesting would lower costs. Collecting agricul-
tural 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 advan-
tage 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 live-
stock 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 protein-
supplement prices. Above 3 billion gallons, lower
byproduct-feed prices would possibly result in in-
creased 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 emis-
sions when concentrations of lead, sulfur dioxide,
nitrogen dioxide, ozone, carbon monoxide, and partic-
Appendix B-Selected Industrial Uses for Traditional Crops . 95
ulate matter exceed standards. Many of these 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 produc-
tion 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 Re-
search 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 exemp-
tion is extended through the year 2000, then expanding
ethanol production to the 2.7 billion gallon level would
result in Federal commodity program savings exceed-
ing federal ethanol subsidies through 1994. After that,
ethanol subsidies exceed farm program savings. Fur-
thermore, by the year 2000, the cumulative cost of 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 employ-
ment 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 de-
grade in the presence of ultraviolet light and are
produced by adding photosensitive agents (e.g., photo-
sensitive transition-metal salts or organometallic com-
pounds) or by forming copolymers with photosynthetic
groups (e.g., carbonyl groups). Photodegradable six-
pack 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 process- ing
or equipment changes. Newer methods are using higher
starch levels. The U.S. Department of Agricul-
ture 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 avail-
able.
Another possible approach is the formation of starch
(or lignin or cellulose) copolymers with plastics.
Radiation or chemicals can be used to generate 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 biode-
gradable plastics all use some combination of biologi-
cal 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 q 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 conven-
tional 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 starch-
plastic 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 nonde-
gradable 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 re- search 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 q97
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 Massachu-
setts, Office of Naval Research, Michigan State Uni-
versity, 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, Web-
ster Industries, and SunBag all produce photode-
gradable 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 starch-
based polymers.
4. Montedison is producing thermoplastic starch res-
ins that are alloys of cornstarch and synthetic resins.
5. ICI Biological Products is producing PHBV poly-
mers.
biomass (organic material produced by photosynthe-
sis). 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). Lignocellu-
lose 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 eco-
nomics. The petrochemical industry is highly inte-
grated 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 com-
modity 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,
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 pe-
troleum
Technical considerations: Technically, it is possible to
produce fuel and most commodity chemicals from
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. Possi-
bilities 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 q Agricultural Commodities as Industrial Raw Materials
As long as petroleum is fairly cheap, biomass will not be
economically attractive. In addition, coal gasifica- tion
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 po-
tential 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. Bajpai, Rakesh, Frisby, Jim, Hsieh, Fu-Hung, Iannotti,
Gene, Kerley, Monty, Miles, John, Mueller, Rick, Vande-
populiere, Joe, and Van Dyne, Don, "Evaluation and
Production of Feedstock Chemicals,' paper presented at the
Second National Corn Utilization Conference, Columbus,
OH, NOV. 17-18, 1988.
2. Barrier, John W., "Alcohol Fuels and TVA's Biomass
Research,' Forum for Applied Research and Public Policy,
Winter 1988, pp. 60-62.
3. Burnett, R.S., "Soy Protein Industrial Products," Soybean
and Soybean Products, vol. II, K.S. Markley (cd.) (New
York, NY: Inner Science Publishers Inc., 1951), pp.
1003-1053.
4. Curlee, T. Randall, "Biomass-Derived Plastics: Viable
Economic Alternatives to Petrochemical Plastics?," h4a-
terials and Society, vol. 13, No. 4, 1989, pp. 381409.
5. Dicks, Michael R., and Buckley, Katharine C., "Alternative
Opportunities in Agriculture: Expanding Output Through
Diversification,' U.S. Department of Agriculture, Eco-
nomic Research Service, Agricultural Economic Report No.
633, May 1990.
6. Deane, William M., ''New Industrial Markets for Starch,'
paper p~sented at the Second National Corn Utilization
Confenmce, Columbus, OH, Nov. 17-18, 1988.
7. Fanta, G. F., "Starch-Thermoplastic Polymer Composites
by Graft Polymerization," paper presented at the Second
National Corn Utilization Conference, Columbus, OH, NOV.
17-18, 1988.
8. Gibbons, Ann, "Making Plastics That Biodegrade," Tech-
nology Review, February/March 1989, pp. 69-73.
9. Gilbert, Richard D., hmikar, S.V., Fornes, R.E., and
Rhodes, N., "Synthesis and Characterization of Biodegrad- able
Polysaccharide Block Copolymers," paper presented
at the Second National Corn Utilization Conference,
Cohunbus, OH, NOV. 17-18, 1988.
10. Goldstein, Barry, Carr, Patrick M., Darby, William P.,
DeVeaux, Jennie S., Icerman, Larry, Shultz Jr., Eugene B.,
"Roots of the Buffalo Gourd: A Novel Source of Fuel
Ethanol,' Fuels and Chemicalsji-om Oilseeds: Technology
and Policy Options, American Association for the Advanee-
rnent of Science Selected Symposium No. 91, Eugene B.
Shultz, Jr., and Robert P. Morgan (eds.) (Boulder, CO:
Wesmiew Mess, Inc., 1984), pp. 895-906.
11. Gould, J. Michael, Gordon, S.H., Dexter, L.B., and Swan-
son, C.L., "Microbial Degradation of Plastics Containing
Starch," paper presented at the Second National Corn
Utilization Conference, Columbus, OH, Nov. 17-18,1988.
12. Grethlein, Hans and Datta, Rathin, "Economic Analysis of
Alternative Fermentation Route for the Production of Road
Deicer from Corn," poster paper at the Second NationaI Corn
Utilization Conference, Columbus, OH, Nov. 17-18,
1988,
13. GrinneIl, Gerald E., "Ethanol Fuel: The Policy Issues,"
Forum for Applied Research and Public Policy, Winter 1988,
pp. 48-49.
14. Hardin, Ben, "Farm Surpluses: Sources for Plastics,"
Agricultural Research,October 1986, pp. 12-13.
15. Hassett, David J., "Diesel Fuel From chemically Modifkd
Vegetable Oils," Fuels and Chemicals From Oilseeds:
Technology and Policy Options, American Association for the
Advancement of Science Selected Symposium No. 91,
Eugene B. Shuhz, Jr., and Robeti P. Morgan (eds.) (Boulder,
CO: Westview Press, Inc., 1984), pp. 855-864.
16. Johnson, Dale W., "Non-food Uses of Soy Protein Prod-
ucts," World Soybean Research Conference III Proceed-
ings (Boulder, CO: West View Press, Inc., 1985).
17. Jordan, Wayne R., Newton, Ronald J., and Rains, D.W.,
"Biological Water Use Efficiency in Dryland Agriculture,"
contractor report prepared for the Office of Technology
Assessment, 1983.
18. Kaplan, Kim, and Adarns, Sean, "New Uses for Starch
From Surplus Corn, " AgriculturalResearch, October 1987,
pg. 11.
19. Kautinan, Kenton R. "Testing of Vegetable Oils in Diesel
Engines, " Fuels and Chemicals From Oilseeds: Technol-
ogy and Policy Options, American Association for the
Advancement of Science Selected Symposium No. 91,
Eugene B. Shuhz,Jr., and Robert P. Morgan (eds.) (Boulder,
CO: Westview Press, Inc., 1984), pp. 143-175.
20, Keith, David, American Soybean Association, persomil
communication, 1989.
21. Kelly Harrison Associates, "A Survey of Potential New
Corn Uses," August 1986.
22, Lambefi, Russ, Tennessee Valley Authority, personal
communication, February 1991.
Appendix IA!$elected Industrial Uses for Traditional Crops . 99
23. Lipinsky, E.S., "Chemicals from Biomass: Petrochemical
Substitution Option,' Science, vol. 212, June 26,1981, pp.
1465-1471.
24. Imckem, William, "Seed Oils as Diesel Fuel: Economics
of Centralized and On-Farm Extraction,' Fuels and Chem-
icals From Oilseeds: Technology and Policy Options,
American Association for the Advancement of Science
Selected Symposium No. 91, Eugene B. Shuhz, Jr., and
Robert P. Morgan (eds.) (Boulder, CO: Westview Press,
hlC., 1984), pp. 177-203.
25. Meister, John J., "Biodegradable Polymers and Plastics
from the Corn Plant," paper presented at the Second
National Corn Utilization Conference, Columbus, OH, NOV.
17-18, 1988.
26. Meister, John J., Patil, Damodar R., Augustin, Cesar,
Channell, Harvey, Li, Chin Tia, and Lai, James Z.,
"Utilization of the Polymer Content of the Corn Plant:
Water-Soluble Lignin Graft Copolymers,' paper presented
at the Second National Corn Utilization Conference,
Columbus, OH, NOV. 17-18, 1988.
27. Palsson, B. O., Fathi-Afshar, S., Rudd, D. F., Lightfoot, E.N.
"Biomass as a Source of Chemical Feedstocks: An
Economic Evaluation," Science, vol. 213, July 31, 1981, pp.
513-517.
28. Science of Food and Agriculture,Soybean Oil Inks, vol. 2,
No. 2, Jtiy 1990.
29. Stiak, Jim, "The Down Side of Plastics," National
Gardening, vol. 11, No. 12, December 1988, pp. 43-47.
30 Studt, Tim. "Degradable Plastics: New Technologies for
Waste Management," R & D Magazine, March 1990, pp.
50-56.
31. Swanson, C. L., Westhoff, R. P., Deane, W.M., "Modified
Starches in Plastic Films," paper presented at the Second
National Corn Utilization Conference, Columbus, OH, NOV.
17-18, 1988.
32. Thayer, Ann M., "Degradable Plastics Generate Contro-
versy in Solid Waste Issues," Chemical and Engineering
News, June 25, 1990, pp. 7-14.
33. Thayer, Ann M., "Solid Waste Concerns Spur Plastic
Recycling Efforts,' Chemical and Engineering News, Jan.
30, 1989, pp. 7-15.
34. Thompson, James and Smith, Keith, "History of Industrial
Use of Soybeans," paper presentation at American Oil
Chemists Society Annual Meeting, Symposium on Value-
-added Products from Protein and Co-Products, May 1989.
35. U.S. Congress, General Accounting Office, Degradable
Plastics: Standards, Research and Development, GAOI
RCED-88-208, (Gaithersburg, MD: U.S. General Account-
ing Office, September 1988).
36. U.S. Congress, General Accounting Office, Alcohol Fuels:
Impacts porn Increased Use of Ethanol Blended Fuels,
GAO/RCED-90-156, (Gaithersburg, MD: U.S. General
Accounting Offke, July 1990).
37. U.S. Congress, Office of Technology Assessment, Com-
mercial Biotechnology: An International Analysis, OTA- BA-
218, January 1984.
38. U.S. Department of Agriculture, "Marketing Potential for
Oilseed Protein Materials In Industrial Uses," Technical
Bulletin No. 1043, 1951.
39, U.S. Department of Agriculture, Offke of Energy, "Fuel
Ethanol and Agriculture: An Economic Assessment,"
Agricultural Economic Report # 562, August 1986.
40, U.S. Department of Agriculture, "Ethanol: Economic and
Policy Tradeoffs," January 1988.
41
<
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.
42. Wall Street Journal, Oct. 13, 1988.
43. 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.
44. Wool, Richard P., "Biodegradable Plastics from Corn-
starch," paper presented at the Second National Corn
Utilization Conference, Columbus, OH, Nov. 17-18,1988.
45. Wu, Lawrence and Shiley, Richard H., Illinois State
Geological Survey, ''Removing Sulfur From Coal: Ethanol
DesuMurizaiton," March 1990.
46. 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 elimi-
nated 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 cultur-
ing is another alternative (9).
The United States does import plant-derived pharma-
ceuticals, including cinchona bark (quinine), belladonna,
coca leaves, and opium for medicinal use. Additionally,
the United States exports some plants that are used 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 har-
vesting 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. Sweetflag (Acorus calamus), a semiaquatic peren-
nial 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 asaryl-
aldehyde, which attract and sterilize fruit flies, and
can be used as a fumigant for stored grains (4).
2. 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 Colo-
rado potato beetle among other insects (4).
3. 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).
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 q101
5. 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).
6. 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).
7. 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 horticul-
ture 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).
Appendix C References
1. 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, April- June
1986, pp. 201-209.
2. Balandrin, Manuel F., Klocke, James A., Wurtele, Eve
Syrkin, and Bollinger, Wm. Hugh, "Natural Plant Chemic-
als: Sources of Industrial and Medicinal Materials, '
Science, vol. 228, June 1985, pp. 1154-1160.
3. Carlson, Alvar W., "Ginseng: America's Botanical Drug
Comection to the Orient," Economic Botany, vol. 40, No. 2,
April-June 1986, pp. 233-249.
4. 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.
5. Meyer, Brian, "Manipulating Forest Trees Anything But
Simple," Agricultural Biotechnology News, January-
February 1989.
6. Naj, Amal Kumar, '' W.R. Grace Acquires Patents To Make
Natural Insecticide From Tropical Tree," Wall Street
Journal, Technology Section, Tuesday, Jan. 31, 1989.
7. Naj, Amal Kurnar, "Can Biotechnology Control Farm
Pests?" Wall Street Journal, Thursday, May 11, 1989.
8. Sherman, Howard, U.S. Department of Agriculture, Agri-
cultural Research Service, "Dyer's Woad Wages Chemical
War in West," Agricultural Research, vol. 36, No. 7,
August 1988.
9. Tyler, Varro E., "Plant Drugs in the Twenty-First Cen-
tury," Economic Botany, vol. 40, No. 3, July-September
1986, pp. 279-288.
10. 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
Importb,c Percent ofd Yield/e,f Percent Percent ofd
Imported crops Ieve!s fatty acid New crops acre of oild fatty acids
Coconut oil . . . . . . . . . . . . 1,120 45 Lauric Cuphea . . . . . . . 1,500 30 80 Launc
Palm kernel oil . . . . . . . . . . 403 50 Laurie Lesquerella . . . . 1,500 25 65 Hydroxy
Castor oil . . . . . . . . . . . . . . 94 85 Hydroxy Stokes Aster . . . 1,500 35 70 Epoxy
Soybean oil . . . . . . . . . . . . 180 Converted to epoxy Vernonia . . . . . . 1,500 25 70 Epoxy
Rapeseed oil . . . . . . . . . . . 191 50 Erucic Crambe . . . . . . . 1,500 40 55 Erucic
Hevea rubber . . . . . . . . . . . 1,790 Rapeseed . . . . . 2,000 40 50 Erucic
Newsprint . . . . . . . . . . . . . . 7 Guayule . . . . . . 500
Kenaf. . . . . . . . . 7
NOTE: See table 5-2.
awhereapplicable; 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
a
Data 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. . . . . .a. . . . . . . . . . 2,102 3,228 3,508 3,809
North Europe . . . . . . . . . . 119 771 990 1,033 b
West Europec . . . . . . . . . . . 298 2,892 3,026 2,517
East Europe . . . . . . . . . . . 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.
b
West Europe includes France, United Kingdom, and West Germany.
c
East 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 q103
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 Table D-7—U.S. Imports of Rubber, 1986-87
Year Quantity (MT) Value ($1,000) Year Quantity (MT) Value ($1,000)
1985 . . . . . . . . . . . . . . . . . . . . 804 83 1986 . . . . . . . . . . . . . . . . . . . . 777,577 612,060
1986 . . . . . . . . . . . . . . . . . . . . 301 25 1987 . . . . . . . . . . . . . . . . . . . . 813,871 741,498
1987 . . . . . . . . . . . . . . . . . . . . 12 4
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.
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
Castor oil . . . . . . . . . . . . . . . . . . . . . . .
Coconut . . . . . . . . . . . . . . . . . . . . . . .
Linseed . . . . . . . . . . . . . . . . . . . . . . . .
Palm . . . . . . . . . . . . . . . . . . . . . . . . . .
Rapeseed . . . . . . . . . . . . . . . . . . . . . .
Soybean . . . . . . . . . . . . . . . . . . . . . . .
Sunflower . . . . . . . . . . . . . . . . . . . . . .
Tallow . . . . . . . . . . . . . . . . . . . . . . . . .
Tung . . . . . . . . . . . . . . . . . . . . . . . . . .
Fatty acid
Ricinoleic acid
Laurie acid
18
C acids
Palmitric/Laurie acid
Erucic acid
Linoleic acid
Linoleic acid
Stearic Acid
Multiunsaturated acids
Dollar/lba
0.39
0.23
0.25
0.17
0.64
0.15
0.16
0.15
0.53
Rangeb
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 Table D-10-1987 Harvested Acreage and Value of
Major U.S. Crops
Oilseed crop
Cottonseed . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percent oil
18-20
Acreage
Vaule
Peanut . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45-50 Crop (millions of acres) (billions of dollars)
Rapeseed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Safflower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Soybean . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sunflower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40-45
30-35
18-20
35-45
Barley . . . . . . . . . . . . . .
Corn . . . . . . . . . . . . . . .
Oats . . . . . . . . . . . . . . .
Sorghum . . . . . . . . . . . .
10
65
7
10
0.9
12.1
0.6
1.1
SOURCE: Everett H. Pryde, "Chemicals and Fuels From Commercial Soybeans . . . . . . . . . . . 56 10.4
Oilseed Crops:' Fuels and Chemicals From Oiiseeds: Wheat . . . . . . . . . . . . . . 56 5.3
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.
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
Robert Robinson
Associate Administrator
Economic Research Service
U.S. Department of Agriculture
Washington, DC
Jerome Seibert
Economist
Department of Agricultural Economics
University of California
Berkeley, CA
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
U.S. Department of Agriculture
Washington, DC
John Woeste
Director
Cooperative Extension Service
University of Florida
Gainesville, FL
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 q107
Crop Technology Workshop
Michael Adang Lynn Forster
Associate Professor Professor
Department of Entomology Department of Agricultural Economics
University of Georgia and Rural Sociology
Athens, GA Ohio State University
Columbus, OH
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
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.
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
Appendix E-Workshop Participants and Reviewers
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
q 109
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
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