INDUSTRIAL USES OF AGRICULTURAL MATERIALSOctober 20, 1995Approved by the World Agricultural Outlook Board INDUSTRIAL USES OF AGRICULTURAL MATERIALS Situation and Outlook is published once a year by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. IUS-5. Please note that this release contains only the text of INDUSTRIAL USES OF AGRICULTURAL MATERIALS--tables and graphics are not included. Industrial Uses of Agricultural Materials Situation and Outlook. Commercial Agriculture Division, Economic Research Service, U.S. Department of Agriculture, September 1995, IUS-5. Contents Summary Introduction Current Macroeconomic and Industrial Outlook Starches and Sugars Fats and Oils Natural Fibers Animal Products Forest Products Specialty Plant Products Special Article Life-Cycle Costs of Alternative Fuels: Is BiodieselCost Competitive for Urban Buses? List of Tables Coordinator Lewrene Glaser Voice (202) 219-0091, Fax (202) 219-0035 Contributors Ron Buckhalt, Alternative Agricultural Research and Commercialization Center Wilda Martinez, Agricultural Research Service James Duffield, Office of Energy and New Uses Carmela Bailey, Cooperative State Research, Education,and Extension Service Gloria Kulesa, U.S. Department of Energy David Torgerson, ERS Irshad Ahmed, Booz, Allen & Hamilton, Inc. Charles Plummer, ERS Allen Baker, ERS John McClelland, Office of Energy and New Uses Donald Van Dyne, University of Missouri Anton Raneses, ERS Alan Weber, National Biodiesel Board Maryanne Normile, ERS Edward Glade, Jr., ERS Thomas Marcin, Forest Service Nicolas Ahouissoussi, University of Georgia Michael Wetzstein, University of Georgia Statistical Support Anton Raneses, (202) 219-0742 Approved by the World Agricultural Outlook Board. Summary released September 26, 1995. The next summary of Industrial Uses of Agricultural Materials Situation and Outlook Report is scheduled for release on September 24, 1996. Summaries and text may be accessed electronically through the USDA CID System; for details, call (202) 720-9045. Acknowledgements This report was made possible through the active support of many people and organizations. This issue was primarily funded by contributions from the U.S. Department of Energy's Office of Industrial Technologies and USDA's Alternative Agricultural Research and Commercialization Center. Donald Van Dyne, Professor of Economics at the University of Missouri; Irshad Ahmed, Director of Renewable Energy and Biotechnology at Booz, Allen & Hamilton, Inc.; and Harry Parker, Professor of Chemical Engineering at Texas Tech University; contributed time and expertise to this report. Mention of private firms or products does not indicate endorsement by USDA. Summary Research and Market Demand Open New Opportunities for Agriculturally Based Industrial Materials USDA's Alternative Agricultural Research and Commercialization Center has begun receiving royalty payments from two companies. The Center makes repayable investments in private firms to commercialize new industrial (nonfood, nonfeed) uses for agricultural and forestry materials and animal byproducts. Center funding was $6.5 million in fiscal 1995, and 10 projects are scheduled to receive funds. USDA's Agricultural Research Service signed its 500th Cooperative Research and Development Agreement (CRADA). CRADA's allow joint collaboration between government scientists and industry to develop particular discoveries. USDA's Cooperative State Research, Education, and Extension Service continues to work with the U.S. Department of Defense on the Advanced Materials from Renewable Resources Program. Coordinated by USDA's Office of Energy and New Uses, USDA and the U.S. Department of Energy (DOE) plan biomass demonstration projects for fiscal 1996. As part of its Alternative Feedstocks Program, DOE has signed agreements, including CRADA's, with private firms to develop polyols, a plastics monomer, and long- chain dicarboxylic acid monomers from renewable materials. If biodiesel is approved as a certified technology for the Urban Bus Retrofit Rebuild Program, U.S. transit operations would be able to use it to meet air-quality regulations without any change in operability and maintenance. In the European Union, biodiesel production and commercial use expanded in 1994 and is expected to intensify in 1995. A special article examines the expected costs of operating a transit bus fleet on three different alternative fuels-- biodiesel, compressed natural gas (CNG), and methanol--with petroleum diesel as the base fuel. New fuel storage, delivery, and operating systems would be needed to use methanol or CNG, but no infrastructure changes or engine modifications would be necessary for biodiesel. Using a discounted present-value analysis, the total cost per bus per mile was estimated for the 30-year life of a transit fleet. Diesel buses had the lowest cost at 24.7 cents per mile. As biodiesel is blended with diesel, the cost per mile ranged from 27.9 to 47.5 cents, depending on the amount of biodiesel used and its estimated price. CNG's cost varied from 37.5 to 42 cents per mile, while methanol's cost was 73.6 cents per mile. This analysis indicates that, although biodiesel and biodiesel blends have higher total costs than diesel fuel, they have the potential to compete with CNG and methanol as fuels for urban transit buses. The U.S. Gross Domestic Product (GDP) is expected to grow between 2.8 and 3.2 percent in 1995, down from 1994's increase of 4.1 percent. GDP growth for 1996 will range from 2.0 to 2.6 percent over 1995, with manufacturing output rising 2.6 to 3.0 percent during the year. Industrial markets for agricultural materials should grow somewhat slower than overall manufacturing for the next 6 quarters. Industrial uses of corn are expected to total 780 million bushels in 1995/96, up 4 percent from the current forecast of 753 million for 1994/95. Most of the increase is expected to be in the production of fuel alcohol, up 4 percent, versus only a 2-percent rise in industrial starch. Ethanol sales in the reformulated gasoline market have been strong, despite the court-ordered elimination of the renewable oxygenate requirement. Several companies are manufacturing biobased polymers using starch, polyhydroxybutyrate/valerate, and polylactic acid. Cornstarch also is used to make xanthan gum, a popular ingredient in food, pharmaceuticals, and industrial products. About 90 percent of collected cotton linters and motes are transformed by chemical or mechanical means into hundreds of diverse products, while only about 5 percent of cotton lint is used in industrial applications. In 1994, an estimated supplyof 10.8 billion pounds of cotton lint, linters, motes, and textile wastes were available for industrial purposes. Immunized dairy cows are producing antibodies that can be used to treat gastrointestinal tract infections. Transgenic goats and cattle are being developed to produce proteins--such as antithrombin III, human-serum albumin, alpha-1 proteinase inhibitor, and human lactoferrin--used in the treatment of infections and diseases. Dairy products also are used to produce low-cost, optically pure chiral intermediates for the pharmaceutical, food, and agricultural chemical industries. The use of wood for energy is projected to reach between 2.8 and 3 quadrillion BTU's in 2000. The forest products industries themselves are the major users of wood for fuel, accounting for 71 percent of wood fuel consumed in 1992. Residential use, utilities, and other industries consume the remaining 29 percent. Production of liquid fuels from woody biomass is not economical at this time, but research is being conducted to lower costs. Essential oils and their derivatives are widely used as flavors and fragrances, a market estimated to be worth $9 billion. In 1994, the United States exported essential oils valued at $176.1 million, while importing $206.7 million. U.S. production of peppermint and spearmint oils in 1994 were 7.4 and 2.2 million pounds, respectively. Supplies of orange oil and d-limonene, which are highly dependent upon orange juice production in Brazil and the United States, could continue to be tight into 1996. Introduction USDA Works With DOE and DOD To Develop Biobased Materials USDA's Alternative Agricultural Research and Commercialization Center has received royalty payments from two companies. USDA's Agricultural Research Service signed its 500th Cooperative Research and Development Agreement. Coordinated by USDA's Office of Energy and New Uses, USDA and the U.S. Department of Energy (DOE) plan biomass demonstration projects for fiscal 1996. USDA's Cooperative State Research, Education, and Extension Service continues to work with the U.S. Department of Defense on the Advanced Materials from Renewable Resources Program. As part of its Alternative Feedstocks Program, DOE has signed agreements with private firms to develop polyols, a plastics monomer, and long-chain dicarboxylic acid monomers from renewable materials. AARC Center Begins Receiving Paybacks USDA's Alternative Agricultural Research and Commercialization (AARC) Center has begun receiving royalty payments from two companies. The AARC Center makes repayable investments in private firms to commercialize new industrial (nonfood, nonfeed) uses for agricultural and forestry materials and animal byproducts. The Center requires at least a 50-percent match in funds and negotiates a payback arrangement for each project. Repayments are placed in a revolving fund to be reinvested with other firms. The Leahy-Wolf Company of Franklin Park, Illinois, has made three royalty payments since March 1995. AARC Center funds were used to help Leahy-Wolf market a biodegradable release agent for concrete forms made from crambe or rapeseed oils for use in the construction industry. The company has established new distributors and is negotiating with a nationwide construction supply business to manufacture the product under license. Natural Fibers Corporation of Ogallala, Nebraska, is the second firm to begin making royalty payments to the AARC Center. The company uses milkweed floss and goose down to make comforters and pillows. Sales are expected to reach over $1 million in 1995. The AARC Center is governed by a nine-member Board of Directors, eight of whom represent producer, processing, financial, and scientific interests outside the Federal Government. Seven new members have been appointed since December 1994. Funding for fiscal 1995 was $6.5 million. Ten projects are to receive funding this year. Some of the projects are: o The Enbiomass Group, Inc., of Wilmington, North Carolina, is developing biodegradable foodservice packaging, with the functional characteristics of molded polystyrene, for use as plates, cups, and serving packages such as hamburger clamshells. The raw material is popcorn. Binders used in the process are also of agricultural origin--corn, potatoes, sugar, soybeans, and animal glue. o Scientific Ag Industries of Atlanta, Georgia, is building a plant in Blakely, Georgia, adjacent to one of the world's largest peanut shelling operations, to produce high-grade activated carbon from pelletized peanut hulls. Activated carbon is usedas filter material, removing contaminants from air and water. o PhytoLife Sciences of Dublin, Ohio, is using proprietary electromembrane fractionation separation technology to isolate biologically active compounds from plants, flowers, seeds, aquatic plants, and algae in commercial volumes. The resulting valuable compounds can be used in pharmaceuticals, cosmetics, bioinsecticides, and fungicides. o Environmental Composite Products, Inc., of Sullivan's Island, South Carolina, is planning to build a manufacturing plant near Barnwell and Aiken, South Carolina, to produce flooring for the intermodal transportation industry (dry containers for ocean freight, vans and flatbed trailers, and railroad cars) and cross arms for the utility industry. The raw materials used in the bonding process are various combinations of paper, paper sludge, nonrecyclable paper and other wood-processing residues. Veneers from under-utilized tree species, such as yellow poplar and sweet gum, are also used. Currently, flooring is made from U.S. hardwoods and scarce tropical rain-forest hardwoods. o Clean Green Polymers of Golden Valley, Minnesota, a wholly owned subsidiary of Environmental Technologies, USA, Inc., will blend 80 percent corn or wheat starch with recycled polymers to create a starch-plastic composite material. The material, which has the appearance and performance of standard plastics, will be injection molded to produce products such as disposable overcaps for bottles, plastic packaging for environmentally friendly products, and plastic parts for ammunition. o Biorecycling Technologies, Inc. (BTI), of Fontanna, California, will be improving the groundwater around Chino, California, while converting agricultural waste into marketable products. Chino, which is about 50 miles east of Los Angeles, has what is probably the largest concentration of dairy cows in the world, 300,000 head within a 10-mile radius. About 30 BTI plants will use cow manure to produce organic plant-growth media and potting soils, liquid organic fertilizers, and biogas, which will be used to produce heat or generate electricity. o Stramit USA of Perryton, Texas, is using wheat and other cereal straws to manufacture insulated construction panels, primarily for nonload-bearing walls. The company is using machines and technology imported from Europe. ARS Signs 500th Research Agreement With Industry USDA's Agricultural Research Service (ARS) reached a technology- partnership milestone in fiscal 1995 with the signing of its 500th Cooperative Research and Development Agreement (CRADA). Authorized under the Technology Transfer Act of 1986, CRADA's allow joint collaboration between government scientists and industry to develop particular discoveries. The 500th CRADA, with Mycotech Corporation of Butte, Montana, enlists bioengineers and fermentation experts from ARS' National Center for Agricultural Utilization Research in Peoria, Illinois, to develop delivery systems incorporating a Mycotech-developed fungus for biological control of the sweetpotato whitefly, Bemisia tobaci. At the same time, the partnership is helping stimulate economic growth in rural America. The agency's long standing record of developing new uses for starch and other carbohydrates continues. ARS scientists in Albany, California, entered into a CRADA with Mobil Chemical Company of Canadaigua, New York, for developing disposable starch-based products. ARS and Mobil are evaluating unique ways of processing starch to improve its adaptability to conventional plastic-processing equipment with the goal of producing low-cost, single-use items. ARS scientists in Peoria, Illinois, have filed a patent application for the production of unique starch-encapsulated lipid spheres. The spheres have potential uses as fat substitutes, seed coatings, and protective coatings for young roots and shoots, as well as potential uses in wood adhesives and a great variety of other food and nonfood applications. In many instances, the spheres also can serve as vehicles for carrying active ingredients and other beneficial compounds. In addition, ARS scientists at Wyndmoor, Pennsylvania, entered into a CRADA with Michigan Biotechnology Institute (MBI) of Lansing, Michigan, to develop specific end-use products from plasticized pectin/starch films first discovered and studied by ARS scientists. The films can be made in edible form and have potential in many food and nonfood applications. Under the CRADA, ARS and MBI researchers are working together to fabricate various articles from these films for evaluation. Also in fiscal 1995, ARS filed a patent application on a method to process chicken feathers into fibers that can be used in a variety of ways, such as making paper-like products, textiles, filters, and seedling cups. This invention helps add value toa waste material from poultry processing that traditionally has been used in feed. A patent has been issued to ARS for a process to manufacture nonallergenic rubber latex from domestic plant species such as guayule, milkweed, and goldenrod. Licensing negotiations arenow underway. These nonallergenic rubber polymers have important applications in the production of products that come in contact with human skin, such as the rubber gloves used by medical professionals. ARS scientists and engineers in Beltsville, Maryland, are collaborating with companies in several industries to convert urban and industrial wastes into useful products, such as soil amendments and wallboard. The objective is to eliminate these waste materials from landfills and other disposal sites and turn them to productive use. Partnerships with industry were not the only alliances formed in fiscal 1995. ARS led a team of USDA agencies in negotiating a formal agreement with the U.S. Department of Energy (DOE) on new and creative measures to solve agricultural problems using the combined talents and scientific disciplines of both departments. The USDA agencies involved include the Agricultural Marketing Service; Animal and Plant Health Inspection Service; Cooperative State Research, Education, and Extension Service (CSREES); Food Safety and Inspection Service; Forest Service; and Natural Resources Conservation Service. USDA Secretary Dan Glickman and DOE Secretary Hazel O'Leary are scheduled to sign a Memorandum of Understanding with the goal of facilitating cooperative technology, research, development, transfer, utilization, and commercialization efforts. To further enhance technology transfer, ARS' Office of Technology Transfer and the State of Florida began working as partners in fiscal 1995 to develop an infrastructure to support economic development that would benefit, not only Florida's companies, but its farmers as well. Florida's network of 67 county-wide economic development field offices will provide ARS with enhanced information and access to the State's industries. Similar partnerships are being forged with 17 other States. OENU Involved in Joint Energy Projects USDA, in an effort coordinated by the Office of Energy and New Uses (OENU), will help DOE launch a series of biomass demonstration projects beginning in fiscal 1996. USDA participated as a full partner in designing the Request for Proposals (RFP), entitled Biomass Power for Rural Development, and will participate in awarding project funding. Over 350 groups have requested the RFP. DOE's funding for the selected projects is anticipated to be $80 million over a 6-year period with up to five awards expected. USDA indicated a willingnessto leverage DOE's funds with existing USDA programs and authorities where appropriate. A panel was held to determine leading candidates. Final announcement of winners is awaiting clarification of DOE's 1996 budget. Workshops were held in Vermont, Minnesota, and Alabama to offer and receive comments on biomass energy. Follow-up meetings were held in California, Missouri, and Florida. These forums took place in areas likely to apply for funding. USDA experts, ledby OENU, discussed how existing USDA authorities could be used in the context of the forthcoming RFP. The response from utilities, farm groups, and environmentalists was very favorable. Based on an economic analysis OENU conducted with the White House, DOE, and the U.S. Environmental Protection Agency (EPA), production of liquid fuel and electricity from biomass is possible in several areas of the country. If technology development and feedstock yield improvements are successful, biomass energy could provide farmers with new market opportunities and rural America with a new industrial base. OENU teamed up with DOE's Biofuels Systems Division to conduct a life-cycle study of biodiesel production in the United States. The main purpose of the study is to produce an analytical framework for evaluating energy use, environmental effects, and input costs of biodiesel production in the United States on a life-cycle basis. Life-cycle analysis evaluates a product or activity through all of its stages--from raw material access through manufacturing to consumer use and waste management (recycling or disposal). This concept is often referred to asa cradle-to-grave assessment. The study will require detailed data on farm production, extraction and processing of raw materials, manufacturing, transportation, and distribution. An industry/government working group--including USDA, DOE, EPA, Ecobalance, Inc., and the National Biodiesel Board--was established to collect data, develop assumptions, create scenarios, and define boundary conditions for the life-cycle analysis. This study also includes a parallel effort to develop a life-cycle model for petroleum diesel. The two models willbe used to compare net energy use, environmental effects, and life-cycle costs of petroleum diesel versus biodiesel. CSREES Continues Collaborations With DOD In 1991, the U.S. Department of Defense (DOD) began working with CSREES on a program to develop biodegradable polymers. DOD interest stemmed from the 1987 Marpol Treaty, which stipulated that, beginning in 1995, ocean dumping of plastic is prohibited unless it is marine degradable. This research expanded on a decade-old alliance to develop a domestic source of natural rubber for aircraft and land-based-vehicle tires. Three yearsof funding yielded a new generation of degradable polymers with functionality that mimics petroleum-based plastics. However, their purchase price is two to three times higher than petroleum- based products. In 1993, DOD began exploring the possibility of moving beyond rubber and starch polymers to a full range of industrial products made from plant and animal materials. The Advanced Materials from Renewable Resources (AMRR) program was established to focus on applied research, development, and precommercial work in seven areas: engineering nylons, biodiesel fuel, functional fluids, oil-selective adsorbents, flexible paints and coatings, natural biocides and biocidal coatings, and vegetable-oil epoxides. This program opened a broad interaction between USDA and DOD. For example, CSREES is working with the U.S. Army Tank Automotive Command's Technical Insertion Program, which will test agriculturally based industrial products for military acceptability. A number of products developed or improved under the AMRR Program are undergoing testing; for example: . o The Mobility Technology Center at Fort Belvoir, Virginia, is evaluating environmentally acceptable hydraulic fluids, most of which are based on vegetable oils. Laboratory testing shouldbe completed in fiscal 1996. Field testing in fiscal 1997 and revision of military specifications will allow military procurement of these products. o Fort Belvoir also is evaluating potential replacements for P-D-680 solvents, which are used for dry cleaning and degreasing. Many candidates are based on renewable resources such as terpenes, limonene, and vegetable-oil methyl esters. Revised specifications are expected by the end of fiscal 1996. o An evaluation of biodiesel by the Tank Automotive Research, Development, and Engineering Center (TARDEC) in Warren, Michigan, at the Army's proving ground in Yuma, Arizona, has been completed. When mixed as a 20-percent blend with JP-8 fuel, biodiesel reduced emissions and improved acceleration in five types of trucks. Other tests have shown that biodiesel servesas a lubricant when blended with low-sulfur diesel. Laboratory testing at Fort Belvoir is ongoing. o The University of Arizona has signed a nonexclusive agreement with Merck and Company to test a guayule-resin fraction for activity against a pathogenic fungus. o Field studies, conducted at Virginia State University to evaluate glucosinolates in rapeseed meal as a pesticide for black rot in peanuts, show that best results were achieved when the meal was used as an extender for the conventional pesticide, thereby, reducing the amount of chemical required and enhancing its efficacy. o Through TARDEC, Wright-Patterson Air Force base is testing urethane-type packaging foam made from lesquerella oil. The foam, developed at the University of Southern Mississippi, showed excellent shock absorbing properties. o Through TARDEC, the Army is testing a guayule, epoxy-amine, peelable coating on metal panels at Cape Kennedy, Florida, for corrosion protection during exposure to fog and salt. The coating was developed at the University of Southern Mississippi. o TARDEC testing of guayule-rubber truck tires at the Yuma Proving Ground is expected to be completed this fall. Results thus far show guayule tires to be comparable to tires made from hevea rubber. In July 1995, a USDA team headed by CSREES held discussions with officials at the U.S. Army Environmental Center (AEC) in Edgewood, Maryland, to explore scientific collaboration in industrial products, remediation of contaminated soils, and other areas. AEC is a technology testing and demonstration center that specializes in heavy metals, ground water quality, unexploded ordnance, and numerous other environmental problems. During the discussions, the USDA team was looking for possible applications of agricultural technology to solve defense mission needs and for applications of defense technology to solve agricultural mission needs. DOE's Alternative Feedstocks Program Is a Collaborative Effort The Alternative Feedstocks Program, administered by DOE's Office of Industrial Technologies, is comprised of various industrial partners and five DOE laboratories: Argonne National Laboratory (ANL), Idaho National Engineering Laboratory (INEL), National Renewable Energy Laboratory (NREL), Oak Ridge National Laboratory (ORNL), and Pacific Northwest Laboratories (PNL). The program's mission is to promote cost-effective utilization of renewable biomass resources as feedstocks in the manufacture of high-volume chemicals and high-value products through cost sharing of research. Within the last 9 months, the program has achieved significant growth. Some recent projects include: o PNL is in the last year of a 3-year CRADA with International Polyol Chemicals, Inc. (IPCI), a small business located in Redmond, Washington. The goal is to complete sufficient process development to allow commercialization of IPCI's process for production of polyols--propylene glycol, ethylene glycol, and other diols--from glucose. PNL is providing expertise in selective catalytic processing. USDA's AARC Center also is involved with the project. o ANL, NREL, ORNL, and PNL continue their joint research and development project, with assistance from MBI, to demonstrate the feasibility of producing succinic acid from cornstarch. The succinic acid could then be used as a feedstock for manufacture of commodity plastics, synthetic fibers, food additives, and solvents for paints and paint removers. The consortium is currently evaluating several opportunities to collaborate with private industry. o In July 1995, INEL entered a CRADA with General Electric (GE) to explore opportunities to develop an alternate method of producing a plastics monomer. GE is a world class developer, producer, and marketer of engineering thermoplastics. INEL has expertise in engineering, selecting, and optimizing microorganisms to maximize chemical activity. Together, this team hopes to commercialize a novel approach to polymer production, based on renewable feedstocks. o Recently, DOE entered into a cooperative agreement with GEfor biosynthesis of long-chain dicarboxylic acid monomers from renewable feedstocks. GE will use molecular biology techniques to construct gene banks and select genes needed to produce an improved biocatalyst. Bioprocess development also will be performed to identify substrates, optimize bioprocess conversion conditions, screen product separation technologies, and determine overall process economics. In developing applications, GE will determine the suitability of monomers prepared from different substrates for the preparation of target polymers and characterize the resulting polymer properties. o NREL's clean fractionation process has attracted a major industrial partner who is interested in cellulosic material applications. A formal signing of a CRADA is expected in the near future. This project will focus on the separation of woody biomass into separate fractions--lignin, cellulose, and hemicellulose--with little or no cross contamination. The fractions can then serve as starting materials for chemicals production. Potential products include a wide range of cellulose-based materials, such as rayon and acetate fibers, thermoplastics, laminates and films, coatings, and additives to paint and drilling muds. o NREL is nearing a formal CRADA with a state agency, a small business, and a university to develop biobased levulinic acid. The industrial partner will build a 1-ton-per-day pilot plant to convert paper mill sludge into levulinic acid. The consortium, lead by the New York State Energy Resources Development Authority, will explore opportunities to improve and commercialize the conversion of the levulinic acid into commodity and specialty chemicals, such as fuel and polymer additives and agrochemicals. [Ron Buckhalt (AARC Center), (202) 690-1633; Wilda Martinez (ARS), (301) 504-6275; James Duffield (OENU), (202) 501-6255; Carmela Bailey (CSREES), (202) 401-4640; and Gloria Kulesa (DOE), (202) 586-8091] Current Macroeconomic and Industrial Outlook Modest U.S. Economic Growth Expected in 1995 and 1996 The U.S. Gross Domestic Product (GDP) is expected to grow between 2.8 and 3.2 percent in 1995, down from 1994's increase of 4.1 percent. GDP growth for 1996 will range from 2.0 to 2.6 percent over 1995, with manufacturing output rising 2.6 to 3.0 percent during the year. Industrial markets for agricultural materials should grow somewhat more slowly than overall manufacturing for the next 6 quarters. The U.S. Gross Domestic Product (GDP) grew 4.1 percent from the fourth quarter of 1993 to the fourth quarter of 1994. The robust growth benefitted goods relative to services and durables relative to nondurables. Of nine major industries using agricultural materials (lumber and products, furniture and fixtures, industrial machinery and equipment, transportation equipment, textile-mill products, paper and products, chemicals and products, rubber and plastic products, and leather and products), six expanded output faster than GDP. Industrial machinery and equipment led the way with 13.2 percent growth. Rubber and plastic products had a 10.1-percent rise in output, as real (adjusted for inflation) sales in automobiles and auto parts and business equipment grew 6 and 18 percent, respectively. Real spending on housing and consumer durables increased more than 8 percent. As a result, manufacturing prospered, with lumber and textile mill production up sharply. Only leather product output declined in 1994, by 1.5 percent. Strong growth in employment, real income, and industrial output worked together in 1994 to overcome the negative effects of increasing short- and long-term interest rates, declining government spending, and an increasing trade deficit. The economy expanded so rapidly that capacity utilization in December 1994 reached 85.5 percent, well above the rate historically associated with rising inflation. Yet, by any measure, inflation was below 3 percent. Manufacturing Output Declines in the Second Quarter To prevent higher inflation, the Federal Reserve Board (Fed) raised short-term interest rates six times from February 1994 to February 1995. The resulting slowdown in the U.S. economy in 1995 was most pronounced in the second quarter. In the first quarter of 1995, GDP grew 2.7 percent, likely buoyed by an almost 150 basis-point drop in long-term interest rates. In the second quarter, GDP rose only 1.1 percent and inventory accumulation declined sharply, which in turn hit the industrial sectors of the economy particularly hard. From automobiles to building materials, factory output was cut. Industries using agricultural materials saw their production decline more than the 3.4-percent fall in overall manufacturing output (table 1). Lumber-and- products and furniture-and-fixtures output dropped 13.4 and 10.3 percent, respectively, reflecting a sharp drop in the demand for housing and home furnishings. Transportation equipment output decreased 15.0 percent in the second quarter, reflecting a decline in car and light truck sales and lower inventories. The chance of higher inflation abated in the second quarter of 1995 due to the declines in employment and industrial production and the sharp decrease in capacity utilization to 83.3 percent in June 1995. As a result, the Fed lowered the Federal funds rate (the rate at which banks borrowed from each other to meet reserve requirements) by 0.25 percent in July 1995. The bank prime rate went from 9.0 percent to 8.75 percent. Growth Should Rebound in the Rest of 1995 and 1996 Lower interest rates, slowing retail and manufacturing inventory accumulations, and good consumer and business balance sheets suggest 2.0- to 2.6-percent annualized growth in the last 2 quarters of 1995. In an environment of continued low interest rates, housing and plant spending will ordinarily pick up. Car sales will increase some, but much of the replacement demand was satisfied in 1994. The boom in business-equipment spending should continue, but at a slower pace than in the first 8 months of 1995. August's preliminary industrial production estimate was up 1.1 percent on top of July's 0.3-percent increase, which was largely due to high electricity usage during the month's unusually hot weather. Manufacturing was flat during July. August showeda dramatic upturn with manufacturing up 1.0 percent. Except for paper and products, which was constrained by the highest capacity utilization rate in the economy, every major industrial user of agricultural materials took part in the growth. Because of sales incentives, automobile and light truck output, the largest component of transportation equipment, rose 6.0 percent in August. Other sectors showed less dramatic turnarounds. August's pace of industrial recovery, while not sustainable because of large inventories, is evidence of an overall pickup in manufacturing. Nonetheless, the sectoral pattern and modest level of growth for the rest of 1995 yield a mixed outlook for industries using agricultural materials. Housing and housing-related durable spending should grow moderately, as excess housing and durable inventories decline. This in turn will stimulate output in lumber and products, furniture, and textile-mill products in the third and fourth quarters. The small growth expected in domestic car sales, aided by a weak dollar, should modestly boost output of transportation equipment. The continued drawing down of excess inventories will keep growth and inflation modest. GDPis expected to grow between 2.8 and 3.2 percent in 1995. The annual growth rate for 1996 over 1995 is expected to be between 2.0 and 2.6 percent. Interest rates should fall slightly below current levels. A weak but appreciating dollar and stronger growth in Europe, Japan, and Mexico will lead to strong export gains in 1996. Moderate construction growth will be supported by low interest rates and a modest 3.5-percent inflation rate. Export and construction growth should increase manufacturing output 2.6 to 3.0 percent. Lumber and furniture output is expected to rise more than 3 percent in 1996. Moderate Growth Seen in Crude Oil Pricing Despite a runup in the price of crude oil starting in early 1995- -the refiner's acquisition cost was close to $19 per barrel during May--oil prices are likely to move down in the second half of 1995. Slow growth rates in developed countries will keep crude oil prices down. The second quarter of 1995 saw an average crude oil price of $18.20 per barrel, which will fall to about $16.75 in the third quarter because of a very slow recovery in world industrial production. The U.S. Department of Energy's Energy Information Administration (EIA) expects oil prices to average about $17.60 per barrel for the last quarter of 1995 and all of 1996. Gasoline prices are expected to average $1.21 per gallon in 1995, up from $1.17 in 1994. The price is expected to hit $1.25 per gallon in 1996. Because of weak industrial production, diesel prices in 1995 probably will go up only 2 cents above 1994's $1.11 per gallon. Reflecting a moderate improvement in industrial output, diesel prices are expected to be up 5 cents per gallon in 1996. Some analysts, who expect some stronger U.S. and world growth, expect crude oil prices to average about $18.50 per barrel for the last quarter of 1995 and all of 1996. Gasoline and diesel prices would then be about 3 cents higher than those expected by EIA in 1996. In either case, real crude and product prices are expected to be quite low for the near term. [David Torgerson, (202) 501-8447] Starches and Sugars Ethanol, Biopolymers, and Xanthan Gum Use Corn as a Feedstock Industrial uses of corn are expected to total 780 million bushels in 1995/96, up 4 percent from 1994/95. Ethanol sales in the reformulated gasoline market have been strong, despite the court- ordered elimination of the renewable oxygenate requirement. Several companies are manufacturing biobased polymers using polyhydroxybutyrate/valerate, starch, and polylactic acid. Cornstarch also is used to make xanthan gum, a popular ingredient in food, pharmaceuticals, and industrial products. Industrial uses of corn are expected to total 780 million bushels in 1995/96, up 4 percent from the current forecast of 753 million for 1994/95 (table 2). Most of the increase is expected to bein the production of fuel alcohol, up 4 percent, versus only a 2- percent rise in industrial starch. In 1995/96, industrial uses are expected to account for 9 percent of total corn use, up from 8 percent in 1994/95. Industrial use of starch tends to follow the economy. Thus, the slower economic growth expected in 1995/96 will likely slow starch use. In 1994/95, industrial starch is expected to account for 213 million bushels of corn, up 3 percent from 1993/94. The expanding economy late in 1994 and early 1995 helped increase starch use. However, the recent slowdown in economic growth will likely hold corn use for industrial starch to a 2-percent rise over the year before. Preliminary prices for cornstarch, f.o.b. Midwest, are expected to average $12.18 per hundredweight (cwt) in 1994/95, down from $12.61 in 1993/94. Producers appear to be able to pass along higher raw material costs, because when corn prices rise, so do starch prices. For example, cash corn prices in central Illinois went up 9 cents from April to May 1995 and starch prices increased 24 cents per cwt. By August, starch prices had climbed another $1.20 to $13.85 per cwt, while corn prices were up 18 cents per bushel. As starch prices increase, industrial users are likely to begin searching for lower cost alternatives and, to the extent possible, shift away from starch. The expected increase in production of fuel ethanol in 1995/96 is tied to the announced expansion of plants in Minnesota and Nebraska. These States have provided incentives to encouragethe production of alcohol. On the other hand, current high prices for corn have made dry-milled alcohol production less profitable than in the past. Two companies announced they are stopping production at two plants, one in Ohio and one in North Dakota, where the State legislatures have limited funding for ethanol subsidies. In 1994/95, corn used to make fuel alcohol is expected to increase 18 percent from 1993/94, as the industry expanded to meet demands for oxygenates for reformulated gasolines and the winter oxygenated program. Ethanol Use Up Despite Court Ruling The reformulated gasoline program began on January 1, 1995, as mandated by the Clean Air Act Amendments of 1990. The program's renewable oxygenate requirement (ROR) was held up by a stay issued by the U.S. District Court of Appeals for the District of Columbia on September 13, 1994. The Court reversed the ROR ina unanimous decision by a three judge panel in early June 1995. The Administration immediately appealed the decision to the full Court, but that appeal was rejected at the end of July. The Administration is considering a final appeal to the U.S. Supreme Court. (For more information on the ROR and the court case, see the December 1994 issue of this report.) Despite these unfavorable Court rulings, ethanol sales in the reformulated gasoline market have been strong. In the Chicago and Milwaukee markets, ethanol's market share was as high as 70 percent. Ethanol also fared well in the winter oxygenated fuel markets, capturing virtually 100 percent of the market in the Colorado front range, and maintaining significant market share in other oxygenated fuel markets. On the other hand, ethanol has not gained significant market share in the Northeast reformulated gasoline market due to heavy competition from methyl tertiary butyl ether. While ethanol's market share in conventional gasoline, oxygenated fuel, and reformulated gasoline have grown, ethanol is used primarily in the Midwest. Many analysts believe the costs of using ethanol in other markets, particularly the reformulated gasoline markets of the Northeast and California, is uncompetitive because of transportation and other distribution logistics. A possible solution is converting ethanol into ethyl tertiary butyl ether (ETBE) or other ethers at the refinery, blending ETBE with gasoline, and shipping the finished reformulated gasoline to market in common carrier pipelines. On August 4, 1995, the Internal Revenue Service announced a new regulation that allows ETBE access to the excise tax exemption for ethanol blenders. The rule also allows refiners to claimthe tax credit at the refinery, which means they no longer have to keep fuels that qualify for the tax exemption separate from other fuels in the pipeline and at the terminal. If this rule is effective in reducing the costs of using ethanol in reformulated gasoline, significant quantities of ETBE-blended fuels could be sold in the Northeast and California within the next year. Biodegradable Polymer Technologies Continue To Improve As environmental concerns regarding waste management continue to mount, biodegradable polymers could become an increasingly important piece of the waste management puzzle. The three main types of biobased-polymers--made using starch, polyhydroxybutyrate/valerate (PHB/V), and polylactic acid (PLA)-- fit the "cradle to grave" design concept, which calls for the material to be recyclable and/or degradable. Several companies claim to have developed 100 percent biodegradable resins using starch or starch-derived compounds in combination with other biodegradable additives and naturally occurring minerals. However, full biodegradability can occur only when these materials are disposed of properly in a biologically active environment, such as municipal composting or sewage treatment facilities. (For more information on biodegradability, see the special article on biopolymers in the June 1993 issue of this report.) In addition, not all claimsof biodegradability are founded on accepted standards. The Institute for Local Self-Reliance (ILSR) is in the process of completing a study of various degradable polymers. The studyis examining the commercial status of various technologies and evaluating the biodegradability claims made by various companies. PHB/V Targets Markets in Europe Polyhydroxybutyrate/valerate copolymers are being produced by Zeneca Bio Products of Wilmington, Delaware, a spin-off company from International Chemicals, Inc. Zeneca's plant is locatedin the United Kingdom and has capacity of about 600 metric tons (1.3 million pounds) of resin per year. PHB/V copolymers are produced by fermentation of a sugar feedstock (glucose is currently being used) by a naturally occurring microorganism. Zeneca's resulting BIOPOL resin can be designed to have many different physical properties, depending on the hydroxyvalerate content. PHB/V completely degrades in a biologically active environment to carbon dioxide and water. Zeneca is currently working with USDA's Agricultural Research Service in modifying the polymer matrix with various additives and testing degradability of the resulting polymers. BIOPOL resins can be converted into various types of plastic products, depending on the physical properties of the resin used. The first major product was a biodegradable shampoo bottle, which was developed about 5 years ago. However, because BIOPOL resin prices, which range from $3 to $6 per pound, are somewhat higher than prices for other degradable resins, the number of markets for BIOPOL may be limited. According to a Zeneca representative, major target products are likely to be plastic films and coatings. The major markets for BIOPOL currently are in Europe and, to some extent, Japan. Environmental regulations in several European countries, particularly Germany, favor biodegradable products. Starch-Based Technology Benefits from Corporate Mergers Recent corporate mergers and technology improvements are helping starch-based polymers to overcome some of the previous difficulties faced by the industry. Moisture sensitivity has been a major concern for starch-based polymers. Developmentsin various additives have helped many companies create resins that are water resistant. Some of the additives, known as masterbatch additives, incorporate starch, synthetic linear polymers, plasticizers, and other additives that trigger and/or accelerate the degradation process. A careful study of degradability and toxicity must be made when evaluating resins containing these particular additives. Many starch-based resins can be processed on conventional plastic-molding equipment and, depending on the properties of the specific resin, can be converted into virtually all types of plastic products. These include but are not necessarily limited to: compost bags (lawn and leaf), disposable foodservice items (cutlery, plates, cups, etc.), packaging materials (loosefill, films, etc.), coatings (lamination, paper coatings, etc.), and specialty items, such as golf tees, agricultural films, and various medical products. The amounts of starch and other additives used in the polymer generally depends on the desired properties of the end product. There have been many corporate developments in the starch-based polymer industry since pharmaceutical giant Warner-Lambert closed its Novon division in November 1993. At the time, Novon was the leading U.S. producer of starch-based biopolymers, with a 100- million-pound-per-year capacity. In January 1995, EcoStar International, a company with a background in biodegradable compounds and additives, acquired Novon from Warner-Lambert and formed Novon International, Inc. In February 1995, Novon International was in turn acquired by Churchill Technology, Inc., a British company that owns patents on nonagriculturally based, biodegradable resins. All three corporate entities have been consolidated into the Novon International facilities in Buffalo, New York, and will continue to be known as Novon International, Inc. The starch-based polymer currently available from Novon International is called Novon, and it is manufactured primarily from corn or potato starch, along with smaller amounts of foodgrade additives (although not intended for human consumption). This resin is suitable for manufacturing nearly all plastic products, and is currently priced around $2.25 to $2.50 per pound. Also available from Novon International is a starch-based masterbatch additive called Novon-Plus. Novon-Plus is intended to be mixed with synthetic polymers to create nearly any plastic product, while making the product more degradable than the traditional synthetic plastic. A typical product maybe about 43 percent starch, 50 percent synthetic polymer, and 7 percent proprietary ingredients. Current pricing for Novon-Plus additives are about $1.60 to $1.70 per pound. Other companies are developing starch-based polymers as well. Founded in February 1995, BioPlastics, Inc., is using technology from Michigan State University, licensed through the Michigan Biotechnology Institute (MBI), to create a resin called ENVAR. A for-profit subsidiary of MBI, Grand River Technologies, Inc., also is entering the starch-based resins market. Grand Riverhas joined with Japan Corn Starch Company, Ltd., to form EverCorn, Inc., to market cornstarch-based EverCorn resin. EverCorn completed a $1.8-million research and development phase in July 1995, and has a pilot-scale operation in place to provide customers with samples in 1,000-pound quantities. The company hopes to have a 10-million-pound, semi-works plant operating by late 1996, and plans for a 250- to 500-million-pound commercial plant in 1998. Cargill Leads the Way in PLA-Based Resins The third major biobased polymer technology is based on polylactic acid. PLA polymers are generally derived by fermenting carbohydrate crops, such as corn, wheat, barley, cassava, and sugar cane. Companies such as Archer Daniels Midland and Cargill produce lactic acid (via starch fermentation) as a coproduct of corn wet milling, which can be converted to PLA. PLA-based polymer resins are completely biodegradable under compost conditions. PLA can be hydrolyzed using only water back to lactic acid, and can be repolymerized if desired. PLA-based resin also can be degraded by marine microbes into water and carbon dioxide. However, PLA is not water soluble. PLA-based polymers can be modified to suit nearly all plastic applications from disposable foodservice items to coatings for paper. The largest producer of PLA-based polymers is Cargill. The company's PLA-based resins, called EcoPLA, are commercially available from its plant in Savage, Minnesota. This plant hasan annual capacity of about 10 million pounds of resin, but Cargill plans to open a larger facility with a capacity of 100 to 300 million pounds in Blair, Nebraska, by 1998. Current prices for EcoPLA resins range from $2 to $5 per pound, depending on grade, but, with the larger facility, future prices are expected to be around $1 per pound. Two other U.S. firms and several Japanese firms also have been developing PLA-based polymers for the past few years. The U.S. firms are Ecochem, a joint venture between DuPont and ConAgra, and the Chronopol Company, a subsidiary of ACX Technologies, which is headquartered in Golden, Colorado. Ecochem and Chronopol have formed a patent-holding venture called EcoPol L.L.C., but the companies will continue to operate independently. Chronopol is currently at the pilot-plant stage and does not have commercial quantities of resin available, and Ecochem is not pursuing resin production at this time. According to industry sources, three Japanese firms--Dainipon Ink and Chemicals, Inc.; Mitsui Toatsu Chemicals, Inc.; and Shimadzu Corporation--are planning pilot plants. ILSR estimates that only 1.1 percent of the plastics produced in 1996 will be partly or wholly derived from plant matter. This means that, for the near future, companies making PHB/V-, starch- , and PLA-based polymers will continue to focus on niche markets. These markets will serve customers who are willing to pay a higher price for products that are environmentally friendly, or specialty uses where a higher price is not a limiting factor. PLA technology, for example, has been used for years in specialty medical applications, such as bioabsorbable sutures and bone implants. However, PLA's high price compared with petroleum- based resins has prevented its use in vast commercial applications. Though recent advances in production technology have helped lower some resin prices and make biobased polymers function more like traditional petroleum-based products, prices of biodegradable resins are still significantly higher than those for petroleum- based plastics. In addition, companies and communities must be willing to provide the proper composting facilities for biodegradable polymers. Otherwise, they will end up in the solid waste stream with other trash and will not degrade as designed. The long-term outlook for biobased polymers is still uncertain, but is likely dependent on future worldwide regulatory developments and continued improvements in cost-lowering technologies. Xanthan Gum Popular in Food and Industrial Applications Discovered in 1963 at USDA's Northern Regional Research Center (now called the National Center for Agricultural Utilization Research), xanthan is now one of the most popular commercially produced gums. It was first derived from the bacterial actionof Xanthomonas campestris on plants, primarily those in the cabbage family. With the advent of viscous fermentation technology in the early 1970's, this high-molecular-weight polysaccharide is now produced from cornstarch. Gums is the common term for hydrocolloidal gels--polysaccharides that have an affinity for water and exhibit binding properties with water and other organic/inorganic materials. Traditionally, gums have been derived from a wide variety of plants. More recently, however, other valuable polysaccharides have been identified that are produced from microbial sources (table 3). Hydrocolloidal gums also can be produced from marine plants and cellulosic materials. Kelco (San Diego, California), a division of Monsanto Company, and Archer Daniels Midland Company (Decatur, Illinois) are the two U.S. producers of xanthan gum. U.S. capacity in 1994 was estimated at 57 million pounds. Based on trade data and new- plant construction information, U.S. production capacity in 1995 is estimated at 77 million pounds. (Producers will not verify actual capacities; plant capacity and production volumes are considered proprietary.) If the companies' four plants are operating at full capacity, an estimated 5 million bushels of corn will be used to produce xanthan gum in 1995. Xanthan gum also is imported from a Kelco plant in the United Kingdom, a Jungbunzlauer plant in Austria, and several French plants operated by Rhone-Poulenc and Sandfi Bio-Industries. Both Jungbunzlauer and Rhone-Poulenc have expressed interest in producing xanthan gum in the United States. Xanthan gum is used in a variety of industrial and oil-field applications, pharmaceutical and personal care items, and processed foods (table 4). Its broad usefulness as a thickening and stabilizing agent makes xanthan gum one of the most attractive products of the over $2.5-billion hydrocolloid market. The outlook for xanthan gum is bright in both food and industrial applications. However, industrial uses are increasing at a faster rate than food uses. Between 1983 and 1993, gums derived from microbial fermentation of starch have enjoyed strong market success, with average growth rates of 9 percent annually. List prices for both food-grade and industrial-grade xanthan gum were stable between 1989 and 1992. Prices increased in 1993 for both categories by approximately 10 percent. Food-grade prices rose from $5.50 per pound to a current price of over $6.20 per pound. The price of xanthan for industrial applications varies considerably, depending upon the grade. On average, industrial- grade xanthan sells for $5 per pound, while refined grades for special applications command over $8 per pound. Xanthan Gum Has Many Industrial Uses Although food and beverages account for the largest end-use category, xanthan gum also is used in a wide variety of industrial applications (figure 1). Industrial xanthan gum prod- ucts are manufactured to meet formulation criteria, such as long-term suspension and emulsion stability in alkaline, acid, and salt solutions; temperature resistance; and pseudoplasticity. In addition, a range of differentiated xanthan gum products are designed to meet specific applications requirements. These include a transparent grade to improve solution clarity and a dispersible grade for low-shear mixing conditions. Examples of xanthan gum's many industrial uses include: Agricultural products. Xanthan gum is an excellent suspension agent for pesticides, fertilizers, and liquid-feed supplements. It helps control spray drift and cling, which increase the contact time between the pesticide and the crop. Ceramics. Xanthan gum is used as a suspending agent in electrode coatings, as well as in glazes and binding agents for tiles and sanitary ware. It also prevents sagging and pinholing in these products. Cleaners. Xanthan gum's flow properties and broad pH stability make it the thickener of choice in products such as highly alkaline drain, tile, and grout cleaners; acidic solutions for removing rust and metal oxide; graffiti removers; aerosol oven cleaners; toilet-bowl cleaners; and metal-cleaning compounds. Xanthan gum provides cling to vertical surfaces, as well as easy removal. Coatings. The pseudoplastic properties of xanthan gum provide excellent texturing in ceiling-tile coatings and paints with a high-solids content, ensuring in-can stability, ease of application to the wall, and retention of the textured finish. Xanthan gum thickens latex paints and coatings, and uniformly suspends zinc, copper, and other metal additives in corrosion coatings. Oil-drilling aids and fluids. Xanthan gum is used as a thickener in conventional drilling aids that flush pieces of rock away from the drill bit. Xanthan-formulated systems provide optimum hydraulic efficiency of drilling fluids. It reduces pressure losses within the drill string, allowing maximum hydraulic power to be delivered to the bit. As a result, penetration rates can be increased. Historically, secondary and tertiary oil-well drilling have been significant users of xanthan gum. Paper. Xanthan gum is used as a suspension aid or stabilizerin the manufacture of paper and paperboard, particularly when intended for contact with food. Personal care applications. Xanthan gum improves the flow properties of shampoos and liquid soaps and promotes a stable, rich, and creamy lather. It is an excellent binder for all toothpastes, including gel and pumpable types. Ribbon quality and ease of extrusion are improved as well. Pharmaceutical applications. Xanthan gum stabilizes suspensions of a variety of insoluble materials such as barium sulfate (for x-ray diagnoses), complexed dextromethorphan (for cough preparations), and thiabendazole. It is playing an increasingly important role in controlled-release applications, where disintegration of the tablet is the primary mechanism of release. Polishes. Xanthan gum suspends solids in leather and silver polishes, provides lubricity to lotions and heavy creams, and stabilizes polish emulsions. Textiles. Xanthan gum forms temperature-stable foams for printing and finishing, and acts as a flow modifier for dyeing heavy fabrics. Its flow properties and temperature stability make it ideal for carpet jet printing, where it ensures sharp print definition, absence of frosting, and trouble-free operation. [Irshad Ahmed, (703) 917-2060; Charles Plummer, (202) 219-0717; Allen Baker, (202) 219-0360; and John McClelland, (202) 501-6631] Fats and Oils Surfactants and Biodiesel Expand the Use of Vegetable Oils The use of agriculturally based surfactants is increasing in existing products and processes and in newer applications. U.S. transit operations will be able to use biodiesel to meet air- quality regulations, without any change in operability and maintenance, if it is approved as a certified technology for the Urban Bus Retrofit Rebuild Program. In the European Union, biodiesel production and commercial use expanded in 1994 and is expected to intensify in 1995. Crambe growers in North Dakota have contracted with the Archer Daniels Midland plant in Enderlin, North Dakota, to toll process their 1996 crop. Surfactants Use Increasing in Traditional and New Applications Surfactants are compounds that change the surface and interfacial tension of materials. As ingredients in soaps and detergents, they increase the wetting ability of water so that it can more easily penetrate fabric and remove dirt particles. In paints, they improve adhesion of paint particles to the surface being painted. Surfactants were first manufactured by the soaps and detergents industry for their products. As more uses were discovered, an independent industry arose. Driven both by environmental regulations and expanding niche markets, the use of surfactants is increasing both in existing products and processes and in newer applications. With 23 States either partially or completely banning phosphates in laundry detergents and 7 others contemplating bans, detergent manufacturers are turning to environmentally friendly, surfactant-based systems to achieve maximum cleaning characteristics. The industry is meeting consumer demands for biodegradable products with the use of surfactants derived from vegetable oils and fats. The current popularity of superconcentrated detergents also has boosted the demand for these surfactants. Surfactants can be made using either petrochemical feedstocks or agricultural materials, such as vegetable oils, animal fats, and starches. Many different vegetable oils are, or can be, usedto make surfactants (table 5). Coconut and palm kernel oils are popular feedstocks. Coconut oil prices have ranged from 30.5to 35.6 cents per pound during the first 7 months of 1995 (table 35), while palm kernel oil prices varied from 31 to 37 cents per pound (table 42). Ethylene, a major petroleum feedstock for surfactants, sells for 20 to 22 cents per pound. There are four major types of surfactants: nonionics, cationics, anionics, and amphoterics (figure 2). About 15 percent of anionics come from plant and animal sources, while over 30 percent of nonionics are made from these natural feedstocks. Overall, an estimated 20 percent of all surfactants are derived from natural raw materials. In many applications, such as laundry detergents, surfactants derived from agricultural and petroleum feedstocks are interchangeable. Industrial grade surfactants usually sell for under 50 cents per pound, while specialty surfactants with applications in cosmetics and textiles go for $1 per pound and higher. While surfactants have long been considered environmentally neutral products, recent studies have found traces of carcinogens--such as nitrosamines, dioxanes, and ethylene oxides- -in some surfactants derived from petrochemical feedstocks. These concerns have spurred the replacement in detergents of surfactants containing petrochemical-derived branched-chain alcohols with surfactants containing straight-chain fatty alcohols derived from vegetable oils. Straight-chain alcohols also biodegrade more easily than branched chain compounds. Henkel Corporation of Gulph, Pennsylvania, a leading surfactant manufacturer, is producing a new line of vegetable oil-based surfactants for the soaps and detergents industry. The surfactants are made from corn, coconut, and palm kernel oils, and are marketed under the trade name Plantaren. Henkel's Cincinnati, Ohio, plant produces 27,500 tons of Plantaren per year. More than 10 large surfactant manufacturers are using natural feedstocks to commercially produce a wide variety of surfactants with potential to supply almost all segments of the organic chemicals industry. For example, Hoechst Celanese produces a group of ethoxylate-type surfactants, called Grenapol 26-L, at its Charlotte, North Carolina, specialty chemicals plant that are made from coconut and palm kernel oils. Leading surfactant manufacturers that use natural raw materials include Witco Corporation, Henkel Corporation, Ethyl Corporation, and Proctor & Gamble Company. In 1994, U.S. surfactant industry shipments were valued at $19 billion, an increase of over 3 percent in constant dollars from 1993. U.S. surfactant consumption in 1994 was roughly 7.5 billion pounds. Industrial processes accounted for the largest market share, followed by laundry and soap (figure 3). The industry employs over 9,000 people in the United States. In 1995, surfactant markets are expected to exceed $20 billion. New Markets Are Being Developed One of the fastest growing segments of surfactant markets is specialty surfactants, which are designed with properties to meet specific end-product requirements. The introduction of two-in-one and three-in-one products--such as shampoos that combine shampoo, conditioner, and coloring agents in one formulation--has opened up new markets for surfactants derived from natural materials. The markets for specialty surfactants has been growing at a rate of 10 percent per year since 1990. In 1994, 1.5 billion pounds of specialty surfactants, valued at $1.7 billion, were consumed in the United States. Surfactant-based systems are increasingly being used as a substitute for solvents, bleaches, and other processing chemicals in the pulp and paper, metal cleaning, and chemical processing industries where the key property requirements are bleaching, hydrolysis, and/or surface chemistry. For example, Interchem Industries, Inc., of Overland Park, Kansas, has developed several methyl ester-based solvents that are effective as degreasers and cleaning agents for machinery and removing graffiti from walls and sidewalks. Surfactant-based techniques also are being developed for replacing lubricating systems. Surfactants derived from vegetable oils nearly eliminate toxic pollutants when used as an alternative to conventional boron-based petrochemical equivalents. The surfactant industry is forecast to grow 3 to 4 percent annually during the next 5 years. Manufacturers will attemptto satisfy the demand for more effective cleaning agents by introducing new all-purpose cleaners. Environmental concerns will force producers to look for natural substitutes, such as agricultural-based surfactants, for fluorocarbons and chlorinated hydrocarbons used as degreasers. (See the Specialty Plant Products Sections for other natural alternatives.) Regulations and Environmental Benefits Boost Biodiesel's Prospects Twin Rivers Technology, Inc., of Quincy, Massachusetts, has submitted a certification package to the U.S. Environmental Protection Agency (EPA) that includes the use of biodiesel fuel for approval as a "certified technology" for the Urban Bus Retrofit Rebuild Program. Finalized in 1993, the program is designed to reduce particulate-matter exhaust emissions from older-model urban buses (model year 1993 and earlier). (See the special article on biodiesel for more information on the program.) To date, only an oxidation catalyst developed by Engelhard, a New Jersey-based technology company, has achieved certification. Twin Rivers' proposed technology uses a straight 20/80-percent biodiesel/diesel blend, a 20-percent blend with a minor engine timing change, or the blend in conjunction with an oxidation catalyst. Urban transit operators will be making their decision on compliance options for the retrofit program by the end of 1995. If approved, biodiesel's certification will enable transit operators to meet Clean Air Act regulations without any significant change in operations or maintenance. In a recent survey of urban transit managers, one-fifth indicated that biodiesel is their number one alternative fuel. Biodiesel ranked second in the survey behind compressed natural gas as the alternative fuel of choice for urban bus systems (1). The Energy Policy Act of 1992 (EPACT) affects virtually all aspects of U.S. energy markets. Under the auspices of the U.S. Department of Energy (DOE), EPACT provisions encourage increased use of renewable energy and more efficient use of fossil fuels and nuclear energy, which will increase the competitiveness of these sectors. Under the umbrella of renewable energy, biodiesel is covered under several sections of the law, such as Alternative Fuels Utilization, Biofuels User Facility, and Biofuels Renewables. DOE's Biofuels Systems Program views biofuels asa win-win strategy that could provide energy security, improve the environment, increase farm income, and promote rural development (2). On July 31, 1995, DOE published a notice in the Federal Register announcing a limited reopening of the public comment period for EPACT's Alternative Transportation Fuels Program. During the original public comment period from February 28 to May 1, 1995, many respondents requested that biodiesel specifically be included in DOE's regulatory definition of "alternative fuel." DOE is considering amending the proposed definition to include neat biodiesel, with a caution that this proposal does not relieve alternative fuel producers from complying with other federal, state, or automobile manufacturer requirements. DOE also is considering comments urging the inclusion of biodiesel blends in the definition of "alternative fuel." EPACT Section 301 authorizes such an addition for fuels that are "substantially not petroleum and would yield substantial energy security and environmental benefits." One of EPACT's advantages is its complementarity with federal environmental regulations and programs. For example, biodiesel can help reduce tailpipe emissions of hydrocarbons, carbon monoxide, and particulate matter. It does not contain sulphuror harmful aromatics. Plus, it is nontoxic and biodegradable. Thus, it could help diesel users comply with Clean Air Act regulations, such as the Urban Bus Retrofit Rebuild Program and the Clean Fuel Fleet Program. EPACT's biofuels provisions also complement the U.S. Climate Change Action Plan, which aims to mitigate the greenhouse effect caused by the build up of carbon dioxide (CO2) and other trace gases in the atmosphere. Test Results Further Quantify Biodiesel's Environmental Benefits Test results from two independent studies further validate biodiesel's reputation as a health- and environmentally friendly fuel for mining and marine applications. In the first study,the French Oilcrop Association ONIDOL, together with the Government of France, conducted engine-durability and emissions-level testing using biodiesel produced from rapeseed oil. Results show that unregulated exhaust emissions of gaseous polycyclic aromatic hydrocarbons (PAH's) declined significantly with increased percentages of rapeseed biodiesel in the fuel blend (table 6). Particulate PAH's decline as well for a 30-percent biodiesel blend. PAH's are organic compounds adsorbed on diesel particulate matter that have received considerable attention because of their potential mutagenic and carcinogenic properties. The second study, which was conducted by the University of Idaho for USDA's Cooperative State Research, Education, and Extension Service (CSREES), demonstrates that biodiesel fuels are readily biodegradable in an aquatic environment. Biodegradability isan issue for water quality and ecosystem effects in case the fuel enters an aquatic environment in the course of its use or disposal. Not only are oil spills a hazard to natural waterways, diesel-fueled vessels and equipment operating in an aquatic environment often leak small amounts of fuel into the surrounding ecosystem. Using CO2 evolution tests in a shaker flash system, various biodiesel fuels and petroleum diesel were added to distilled water containing small amounts of organic-matter-rich soil, raw sewage water, yeast, and a nutrient supply (nitrogen and phosphorus). The amount of CO2 given off indicates how much of the substrate has been metabolized. Results show that rapeseed- and soybean-oil-based biodiesel degraded at about the same rate as dextrose and three times faster than petroleum-based diesel (table 7). In addition, more biodiesel disappeared after 28 days than had raw soybean or rapeseed oil. In tests of biodiesel/diesel blends, the presence of biodiesel prompted and accelerated the degradation of the entire blend (table 8). After 7 days, 25 percent of a 20-percent biodiesel blend had degraded into CO2 and water, versus 12 percent for diesel fuel. European Biodiesel Production Expands Unlike the limited use of biodiesel in the United States, biodiesel production and commercial use in the European Union (EU) expanded in 1994 and is expected to intensify in 1995. Rapeseed (mostly canola) grown for biodiesel production amounted to approximately 1.2 million metric tons in 1994, almost a three- fold increase over 1993. This expansion is due to EU agricultural policies that allow farmers to grow oilseeds and certain other crops for industrial uses, such as biodiesel production, on set-aside land. The EU's Common Agricultural Policy requires producers of arable crops (grains, oilseeds, and protein crops) to set aside a portion of their arable crop base to receive support payments. Farmers receive a set-aside premium for industrial oilseeds production in addition to payments from seed sales. The average set-aside premium for arable crops in 1994 was about $138 per acre. The amount of set-aside land on which industrial oilseeds were grown for the production of biodiesel increased from 204,000 hectares in 1993, the first year of the program, to 621,000 hectares in 1994. In 1995, the forecast is around 900,000 hectares (table 9). The main beneficiaries of the set-aside program for biodiesel are EU rapeseed and sunflowerseed producers. In Austria, an early leader in European biodiesel development, farmers plant both rapeseed and sunflowers, while rapeseed is popular in France and Germany and sunflowers in Italy. Although most biodiesel in Europe is used in urban public bus and truck fleets, it is also used to fuel farm equipment, as a heating fuel, solvent, hydraulic oil, and lubricant. Since biodiesel has less of an environmental impact compared with petroleum-based products, most European countries that commercially produce biodiesel--France, Germany, Italy, and Austria--offer some form of tax break to reduce production costs to make biodiesel competitive at the pump. High European excise taxes on petroleum products raise the retail price of diesel fuel to a level that allows higher cost biodiesel that is exempt from excise taxes to compete. For instance, if 85 percent of the excise tax were removed, the prices of diesel and biodiesel would be competitive (figure 4). Greater biodiesel production also has been made possible by an expansion in processing capacity. In 1994, EU crushing plants could process approximately 350,000 tons of oilseeds. This capacity is expected to double in the near future due to continued program assistance from national governments, oil companies, producer cooperatives, and oilseed promotion boards. Despite the expected capacity expansion, production is restrained by uncertainty over limits on industrial oilseed production agreed upon by the EU and the United States. Concerned about the competition for soybean exports from oilseed meals produced as coproducts, the United States sought limits on the amount of oilseeds grown on European set-aside land. Under the Blair House Agreement, signed by the EU and United States in 1992, the EU agreed to limit the production of industrial oilseeds on set-aside land to the equivalent of 1 million tons of soybean meal, which is roughly equal to 2.3 million tons of rapeseed. With the EU likely to reach its industrial-oilseed production limit this year and the uncertainty on how these limits will be administered, biodiesel producers are hesitant to further increase productive capacity. Crambe Farmers Search for Crushing Facility During the past few years, farmers in North Dakota, in cooperation with National Sun Industries, began developing a significant crambe industry. Like many farmers across the United States, these farmers were attempting to diversify crop production and market opportunities. Crambe acreage increased from 2,200 in 1990 to 55,500 in 1993, then declined to 43,900 acres in 1994 (table 10). No commercial acreage was planted in 1995, primarily because much of the crambe oil produced last year had not been sold by the spring planting date. However, a few fields of crambe were planted and harvested in 1995 for seed stock. As with many new crops, it is difficult to match supply and demand. In the case of crambe, crop production grew faster than the demand for the oil as an industrial feedstock. Most crambe oil is processed into erucamide, which is used as a slip agent for plastic wraps and bags. Despite the lack of commercial acreage in 1995, the crambe growers, organized as the American Renewable Oilseed Association (AROA), continue their efforts to commercialize and market crambe. Previously, National Sun Industries processed crambein their plant in Enderlin, North Dakota. However, the company decided in 1994 to discontinue crushing operations and concentrate on value-added processing of oilseed products. Asa result, National Sun leased the Enderlin plant to Archer Daniels Midland Company (ADM), which is using it to process sunflowers. AROA personnel expect to produce about 40,000 acres of crambe in 1996, with the crop to be toll processed by ADM at their Enderlin plant. AROA has contracted with Witco Chemical to buy the crambe oil and will market the meal on its own. HEADE Provided Crambe With Crucial Support Because of the market potential for products containing, or derived from, erucic acid (the major fatty acid in crambe and industrial rapeseed oils), an effort by universities, government, and private industry was initiated in December 1986 to help develop crambe as a major crop in the United States. Participants recognized that, since erucic acid was used only in minor quantities in the United States, any attempt to develop a large-scale commercial industry would need to coordinate crop production, processing, and product/market development. The Crambe Project, as the effort was called, was supported by Iowa State University, the Kansas Board of Agriculture, Kansas State University, the University of Missouri, and New Mexico State University, plus USDA's Agricultural Research Service and CSREES. A special effort was made to involve private industry. The Crambe Project became the High Erucic Acid Development Effort (HEADE) in 1990 and research was expanded to include industrial rapeseed. Eventually, consortium members also included the land grant universities of Georgia, Idaho, Illinois, Nebraska, and North Dakota. While it was never incorporated or organized asa legal entity, it was a very effective multistate group whose scientists operated in multidisciplinary teams. Some of HEADE's funding came from a Special Grant appropriation, which was administered by CSREES. Federal funds were matchedby state funding on approximately a dollar-for-dollar basis. Federal appropriations for the project reached $500,000 in the early 1990's, but funding was discontinued in fiscal 1995. Thus, HEADE lost funding and its primary private sector proponent at about the same time. A review of HEADE's structure, activities, and progress show how the consortium was successful in its development efforts and how it may be an appropriate model for the development of other new crops. The HEADE structure included a management committee, plus subcommittees for production, processing, and marketing/economics. HEADE's priorities were reviewed annually by the management committee, with significant input from subcommittee members, private-industry participants, others knowledgeable about high-erucic-acid oils and their products, and those knowledgeable about the agronomics of crambe and industrial rapeseed. Once priorities and the level of federal funding were identified, a request for proposals was issued. The proposals received were evaluated and prioritized by peer review panels for each of the subcommittees. The subcommittees' ranked proposals were then collectively considered and ranked by the management committee, according to quality, potential for contribution to the HEADE project mission, and the potential to dramatically increase the level of production of these crops and use of high-erucic-acid oils in the United States. Those receiving the highest ranking were funded. Typically, 15 to 20 projects were funded annually, at levels ranging from $5,000 to $20,000 each. Production advances outpaced those in processing and product development. The combined efforts of National Sun Industriesand North Dakota State University expanded crambe acreage in North Dakota from test plots in 1989 to 55,500 acres in 1993. While this was a prime example of private-public cooperation, the failure to develop additional markets for high-erucic-acid oils resulted in excess supplies. Significant advances have been made in plant breeding. A major breeding program for crambe is underway at North Dakota State University, while the industrial rapeseed work is located at the University of Idaho. The University of Georgia also expanded their breeding program for industrial rapeseed and canola. These programs, plus activities by agronomists and plant scientists at each of the member universities, have resulted in significantly higher yields, improved winter hardiness, and better knowledge of planting and harvesting dates, fertilizer needs, harvesting methods, and other relevant factors. The processing subcommittee conducted pilot-scale tests and determined that extrusion processing of whole and dehulled crambe and rapeseed provided excellent seed preparation for solvent extraction of both crops. The subcommittee provided advice to National Sun when the company began crushing crambe by prepress-solvent extraction in their Enderlin mill. Researchon the uses of defatted crambe meal in beef cattle rations aided marketing of the meal to feeders and feed formulators. The subcommittee also sought to increase the value of crambe meal by examining ways to extract glucosinolates from the meal. Projects were funded to evaluate glucosinolates as potential herbicides, nematicides, insecticides, fungicides, and chemoprotectants/antitumor agents. Product development efforts were restricted by the level of HEADE funding, but numerous research proposals were considered and a number funded. The types of products explored include surfactants, lubricants, paints and coatings, and various polymer types and applications. Some of these projects are ongoing and may result in new uses for high-erucic-acid oils. For instance, scientists continue to research a catalytic process for cleaving erucic acid to brassylic and pelargonic acids, which may make these two products accessible to the chemical intermediates market for use in polymers, coatings, lubricants, and other functional fluids. Research on developing polymer composites from high-erucic-acid-oil derivatives also continues. International Lubricants, Inc. (ILI), of Seattle, Washington, developed automatic transmission fluid additives based on vegetable oils, including high-erucic-acid oils. Such additives are currently used by five automobile manufacturers in Europe and are widely used in transmission repair shops in the United States and other countries. Subsequent products developed by ILI include cutting oils, hydraulic oils, power steering fluids, and, recently, a telomer that modifies the viscosity of oil-based products so they can be used in a wide range of applications. HEADE worked closely with ILI early on, and funded product testing by certified laboratories to assure product acceptance. HEADE succeeded in promoting significant commercial production of crambe and industrial rapeseed in a relatively short time, and helped develop information about these crops, their oils, and current and potential products. The HEADE experience shows that limited Federal and state funding encouraged private sector investment and commercialization of high-erucic-acid-oil crops in the United States, and significantly expanded the body of knowledge available for future development. HEADE's multidisciplinary approach to research and development is an appropriate model for future Federal-state collaborations. Itis expected that the associations and affiliations developed as the result of HEADE will continue. [Donald Van Dyne, (314) 882-0141; Irshad Ahmed, (703) 917-2060; Anton Raneses, (202) 219-0742; Alan Weber, (314) 635-3893; and Maryanne Normile, (202) 219-0774] 1. Biodiesel Awareness and Attitudes by Transit System Managers. Fleishman-Hillard Research, St. Louis, MO. Submitted to the National Biodiesel Board, September 1994. 2. Biofuels: A Win-Win Strategy. U.S. Department of Energy, Biofuels Systems Division, Washington, DC, November 1994. Natural Fibers Cotton Finds Markets Beyond Traditional Uses About 90 percent of collected cotton linters and motes are transformed by chemical or mechanical means into hundreds of diverse products, while only about 5 percent of cotton lint is used in industrial applications. In 1994, an estimated supplyof 10.8 billion pounds of cotton lint, linters, motes, and textile wastes were available for industrial purposes. Cotton fibers are mechanically processed to form yarns, threads, fabrics, and absorbent products, or chemically converted to produce fiber pulp, whose cellulosic nature provides the basis for hundreds of industrial and consumer products. Some of the more traditional uses of cotton include nonwoven felts and fabrics, buffing wheels, awnings, machine belts, and upholstery fabric, linings, and padding. Moreover, the industrial market for cotton fiber has expanded into such varied applications as solid rocket propellants, oil-spill absorbents, and fingernail polishes. Cotton Fiber Available in Various Forms Cotton bolls are the part of the plant that hold the seed and fiber. Each boll contains four to five locks, and each lock has approximately seven seeds firmly attached to the fibers. After cotton is harvested, the ginning process separates the fiber (lint) from the cottonseed. Only very short fibers (linters) remain on the cottonseed after ginning. Linters are removed during the delinting process at cottonseed oil mills. Linters are identified as first cut, second cut, and mill run, depending upon the number of passes through the delinters. Linters, by far, are the largest source of cotton fiber for industrial applications. Cotton ginning also can supply another source of useable fiber, gin motes. Motes are cotton fibers that are reclaimed from cotton ginning waste that accumulates during lint-cleaning operations. Reclaimed motes can be cleaned of foreign matterand sold for use in padding and upholstery filling, nonwovens, and low-quality yarns. In 1994, about 45 to 50 percent of the 1,350 U.S. cotton gins reclaimed motes for sale. Textile-mill waste is primarily shorter or tangled fibers removed in carding and combing operations in the yarn-formation process. This material is generally very clean and can be reused by blending it back with other cotton lint to produce coarser count yarns, or used directly to form high-quality nonwovens, fine writing paper and currency paper, or in certain medical applications. For many higher value uses, it is important that mill waste be 100 percent cotton fiber and not mixed with manmade fibers. Fiber Supplies Depend on Level of Cotton Production The level of domestic cotton production primarily determines the quantity of the various cotton fibers available for alternative uses. While cotton-lint yields per acre can change significantly from year to year, the relative output of cottonseed and gin motes remains fairly constant per pound of cotton lint produced. The quantity of cotton linters obtained per pound of processed cottonseed also changes very little. The 1994 cotton crop was produced on over 13.3 million harvested acres, and totaled nearly 19.7 million bales or 9.5 billion pounds of cotton lint. (The standard cotton bale weighs 480 pounds.) An average of 1,447 pounds of seed cotton must be machine picked to produce one 480-pound bale of lint (figure 5). Ginning yields approximately 800 pounds of cottonseed, and about 20 pounds of motes are available for reclaiming. Seventy-two pounds of cotton linters can be removed from the 800 pounds of seed, about 9 percent by weight. The remaining 147 pounds is trash, such as sticks, leaves, and hulls. This material is usually incinerated, composted, or plowed into fields as a soil conditioner. Not all available motes are gathered for sale, and not all cottonseed is delinted. With about half of the U.S. cotton gins collecting motes, this would indicate a potential 1994 supply of about 197 million pounds. Cottonseed production during marketing year 1994/95 (August-July) totaled 15.2 billion pounds. According to recent estimates, nearly 44 percent was used as animal feed (mainly for dairy cattle), seed, and other uses; 3 percent was exported as whole cottonseed; and the remaining 53 percent was crushed at oil mills. The total quantity of cotton linters is estimated at 725 million pounds (15.2 billion pounds of cottonseed x 53 percent crushed x 9 percent linters yield). Historically, about 20 percent of linter production is first cut, 70 percent is second cut, and the remaining 10 percent is mill run. The supply of textile-mill or spinning waste is dependent upon the amount of cotton used by domestic mills and the type of yarn being produced. On average, a textile-processing waste factorof 7.5 percent yields an estimated supply of 407 million pounds of mill waste in 1994/95, based on the 11.3 million bales consumed. Market Outlets Expand as Supplies Increase Industrial markets for cotton fiber are expected to grow in coming years as traditional markets expand and new uses are developed. Sharply increasing raw cotton production since 1986 is expanding the supply of cotton lint, linters, and motes for industrial applications. These larger supplies should improve cotton's competitive position for industrial uses compared with manmade fibers, rayon, and wood pulp. During the past 10 years, U.S. consumption of cotton lint in all end uses has risen steadily from about 6.4 million bales in 1985 to 11.2 million in 1994 (figure 6). The use of cotton lint in industrial products, however, has remained fairly constant at about 610,000 to 680,000 bales, or 293 to 326 million pounds. Market gains in some outlets have generally been offset by losses in others. The largest single industrial market for cotton lint is in medical supplies, accounting for 129,000 bales in 1994 and about 40 percent of all fibers used in medical applications (table 11). Together with industrial thread, tarpaulins, abrasives, and book bindings, these five markets accounted for nearly 64 percent of all industrial uses of cotton lint. In terms of fiber market share, cotton represents only about 11 percent of all fibers consumed, indicating a potential for expansion in a number of market areas. In contrast to cotton lint, where industrial uses account for only about 5 percent of total use, approximately 90 percent of collected linters and motes end up in some form of industrial application. Through mechanical or chemical means, these fibers are transformed into hundreds of diverse products. According to the National Cottonseed Products Association, chemical applications account for about three-fourths of total volume (figure 7). Generally, first-cut linters are longer and whiter and are used in nonchemical markets. They usually compete with textile mill waste and lower quality cotton lint in manufacturing absorbent products, gauze, twine, wicks, and carpet yarns. A large quantity is put through a process called garnetting to produce belts and batting for use in bedding products and cushioning for furniture and automobiles. Second-cut linters, those in largest supply, are used primarily by the chemical industry. Since linters are composed of almost pure cellulose, they represent a valuable industrial feedstock. Linters are purified by chemical treatment consisting of digesting, bleaching, and washing, and drying. The resulting linter pulp is then bulk baled, formed into long rolled sheets, or cut and packaged flat for shipment. Further processing turns linter pulp into dissolving pulp. This pure cellulosic material is used to produce: o Cellulose nitrate, the basis of many plastics, smokeless gun powder, rocket propellants, and even fingernail polish; o Viscose, which is used extensively in food casings for bologna, sausages, and hotdogs; o Cellulose esters and ethers, which are used in making pharmaceutical emulsions, lacquers, cosmetics, paint, and even salad dressings; and o Cellulose acetate, a primary ingredient in producing various plastics and films, such as outdoor signs, tool handles, and automotive parts. A large quantity of cellulose acetate is used in making photographic and x-ray film, envelope windows, and recording and transparent tapes. Acetate yarns are also usedin many household and industrial fabrics. New and innovative markets continue to be developed for cotton fiber. For example, flame-retardant cotton fabric is now widely used for protective clothing in civilian and military applications, and loosely woven cotton lint and linters are being used as a planting medium to combat erosion. A recently developed linter product is an edible grade of linter fiber containing more than 99 percent total dietary fiber. This product is a pure white, flavorless, odorless flour that is chemically stable and will not react with other ingredients. It is used in many food products including baked goods, dressings, snacks, and processed meats. [Edward Glade, Jr., (202) 219-1286] Animal Products Dairy Products Used To Make Pharmaceuticals and Related Compounds Immunized dairy cows are producing antibodies that can be used to treat gastrointestinal tract infections. Transgenic goats and cattle are being developed to produce proteins--such as antithrombin III, human-serum albumin, alpha-1 proteinase inhibitor, and human lactoferrin--used in the treatment of infections and diseases. Dairy products also are used to produce low-cost, optically pure chiral intermediates for the pharmaceutical, food, and agricultural chemical industries. The dairy industry is expanding beyond traditional items, such as milk, cheese, butter, and ice cream, to include the production of pharmaceuticals and related high-value chemicals. Technologyis now available that allows the production of antibodies and other compounds in the milk from dairy cows and other farm animals. Using animals, companies can produce significant quantities of high-value proteins at relatively low cost. These compounds are then used by the food, pharmaceutical, and chemical industries in various applications. Significant research has been conducted by both public and private entities on using various types of animals to produce special chemicals. The following information describes products and activities under development by a few private firms. Immunized Dairy Cows Are One Source GalaGen Inc., a pharmaceutical company located in Arden Hills, Minnesota, immunizes pregnant cows using proprietary immunization agents and regimens. After calving, the antibody-rich colostrum is collected from the first several milkings and processed using highly refined techniques that concentrate and preserve the antibodies. The antibodies, or immunoglobulins, have the potential for both treating and preventing infections, primarily in the gastrointestinal tract. They are taken orally, eitherin a solid-dosage form or as a liquid reconstituted from a dry powder. Initial disease targets for GalaGen products include: o Yeast infections of the mouth and esophagus caused by Candida albicans, o Ulcers and gastritis caused by Helicobacter pylori, o Antibiotic-associated diarrhea caused by Clostridium difficile, and o AIDS diarrhea, caused by Crypotosporidium parvum. Since the antibody products are derived from milk, they are likely to be tolerated by humans with minimal side effects. GalaGen's strategy is to first demonstrate the safety and efficacy of these products as therapeutic agents, and later to exploit the technology's value for disease prevention. Due to the speed with which GalaGen can develop products, the relatively low cost of manufacturing, and the anticipated safety of the products, new therapeutic antibody products can be developed at a fraction of the cost of traditionally derived pharmaceuticals. GalaGen estimates that antibodies produced from dairy cows may cost as low as $1 per gram, while a similar product from cell-culture systems might cost $10,000 per gram. Also, the investment costs for cell culture could be as high as $300,000, while costs associated with a single dairy cow would be no more than a few hundred dollars annually. GalaGen produces its antibodies through a highly efficient system that links local veterinarians, dairy farmers, and the Land O'Lakes (LOL) procurement system. LOL is a dairy marketing and input supply cooperative with 300,000 members in 15 States. LOL's procurement system meets rigorous USDA and U.S. Food and Drug Administration standards for milk quality and sanitation. Cows calve annually and produce over a pound of antibody in the first several milkings after the calf is born. With over 5,000 dairy farms in the LOL system, more than 150 tons of antibody product could be available each year. Transgenic Animals Another Possibility While GalaGen and other companies develop products through an immunization route, other firms are developing innovative products by developing transgenic animals. These animals are developed by physically inserting a new segment of DNA into the genes of all cells, including the reproductive cells, so that the new DNA is transmitted to offspring as a continuing trait. This is typically accomplished using test tube technologies where the DNA is micro injected into early-stage fertilized embryos. Transgenic animals were first developed in 1980-81. Genzyme Transgenics, located in Framingham, Massachusetts, has successfully developed transgenic technology in mice and goats. Several proteins have been successfully developed and are in various stages of development, testing, and commercialization. Genzyme's Antithrombin III (AT-III), monoclonal antibodies, and other human-protein products represent a potential revenue of $300 to $400 million, according to a prospectus developed by Payne Webber in 1994. AT-III is a blood-clotting protein usually present in human blood. Individuals lacking normal production of AT-III suffer from a high incidence of inappropriate blood clotting, especially in the lungs and extremities. It is estimated that AT-III deficiency is inherited by one in every 5,000 to 10,000 individuals. Acquired AT-III deficiency can result from illnesses--including certain liver diseases, acute venous thrombosis, septicemia (blood poisoning), and disseminated intravascular coagulation--surgical procedures, and the use of oral contraceptives. Genzyme Transgenics established a joint venture with Sumitomo Metals in September 1990 to develop recombinant AT-III in transgenic animals. They have achieved expression levels of AT- III in the milk of transgenic mice at concentrations of more than 10 grams per liter. Transgenic goats also have been developed, with expression levels of up to 7 grams per liter in the milk. The company has produced several transgenic goats with the AT-III gene, and selected a founder goat from which their production herd is being generated. This goat has approximately 4 gramsof AT-III per liter in her milk. Genzyme Transgenics expects to begin clinical studies in 1996. The company projects the worldwide market to be in excess of $300 million annually. Currently, AT-III is derived from human plasma. Payne Webber estimates that the demand for AT-III could be satisfied by about 300 transgenic goats, which would be much more economical than providing the product from increasingly expensive human plasma. Another product developed by Genzyme Transgenics is human-serum albumin (HSA), which is a major protein component of human plasma. It is used clinically as a blood-volume expander andto increase the levels of blood protein in trauma, shock, and post- operative recovery. HSA has been expressed in transgenic miceat a level of 10 milligrams per liter of milk. The company is working on transferring HSA genes into goats in 1995. Alpha-1 proteinase inhibitor, which is used to treat inherited alpha-1 antitrypsin deficiency, is being developed for possible use against atopic dermatitis, a chronic inflammatory skin disorder with symptoms of severe itching that is common in young children and maybe inherited. This disease affects close to 2 million Americans. Preliminary studies have shown significant clinical improvement of patients after treatment with alpha-1 proteinase inhibitor. A pilot study was initiated in March 1995 at the Boston University School of Medicine and Mount Sinai Hospital to confirm the preliminary results. Alpha-1 proteinase inhibitor has been expressed in high levels in mice and rabbits, and work has begun to develop this protein in goats. Another company, GenPharm Europe (now GenPharm International headquartered in Mountain View, California) developed the world's first transgenic bull. Born in December 1990, GenPharm's Herman was genetically engineered to bear human genes and pass them on to his offspring. In 1994, the breeding program produced 55 bovine pregnancies, of which half were transgenic. The animals carry a gene for producing human lactoferrin (HLF) in cow's milk. Lactoferrin, an orally active protein produced naturally in human milk, has antibacterial, iron transport, and other important properties. GenPharm plans to build a herd of several hundred transgenic cows to produce HLF on a large scale. Milk from each cow should contain several grams of HLF per liter. With each cow expected to produce up to 10,000 liters of milk per year, this would result in thousands of kilograms of HLF annually. The milk will be processed by removing water and milk fat, thus yielding milk powder containing HLF for use as an ingredient in oral formulations. The company eventually hopes to subcontract milk production to farmers or dairy cooperatives, similar to the strategy being used by GalaGen. GenPharm intends to market HLF to populations that are at risk for bacterial infections of the gastrointestinal tract. This includes cancer patients whose immunity is lowered by chemotherapy, AIDS patients, and premature infants. Like GalaGen, GenPharm expects regulatory approval to be easier with milk products than with other genetically engineered products. The company also believes that transgenic dairy cattle are the only viable commercial route to making sufficient volumes of HLF to serve such a large market. Chiral Compounds Made From Whey Another company, Synthon Corporation, uses proprietary synthesis technologies to produce low-cost, optically pure chiral intermediates for the pharmaceutical, food, and agricultural chemical industries. Chiral compounds have the same chemical composition, but they have different physical geometries--they are mirror images of each other. This has implications for pharmaceutical and other industries since each form, or enantiomer, of the same drug can affect biological systems in different ways. Synthon's first product is a chiral lactone, optically pure (S)-3-hydroxy-gamma-butyrolactone, known as HGB, which is used by the pharmaceutical industry as a protein inhibitor for AIDS and a vitamin source. Synthon has exclusive license to technologies developed at Michigan Biotechnology Institute and Michigan State University. The company uses whey and other inexpensive feedstocks, such as corn and wheat starch, to produce the chiral compounds. Synthon's production process uses water as the reaction's only solvent and processing temperatures of less than 7oC, which is safer than many conventional methods that produce chiral intermediates with toxic substances. The company has already shown that the process can be easily scaled up. They can produce 100 percent optically and chemically pure HGB, which can be sold for under $500 per kilogram. Current prices range from $1,000to $4,000 per kilogram for a less pure product. The 1993 worldwide market for chiral drugs was estimated at $9.2 billion for bulk active compounds and $32.4 billion for final dosage form. That represents a 16-percent increase in both categories from 1992. The worldwide market is estimated to reach $60 billion by 1997. [Donald Van Dyne, (314) 882-0141] Forest Products Industry and Residences Use Wood for Energy The use of wood for energy is projected to reach between 2.8 and 3 quadrillion BTU's in 2000. The forest products industries themselves are the major users of wood for fuel, accounting for 69 percent of wood fuel consumed in 1992. Residential use, utilities, and other industries consume the remaining 31 percent. Production of liquid fuels from woody biomass is not economical at this time, but research is being conducted to lower costs. USDA's Forest Service estimated wood-energy use as part of a 1993 assessment of the U.S. demand and supply of forest resources (3). Long-term, energy-use projections were based on various assumptions about trends in the prices of fossil and wood fuels and projected increases in energy use by various sectors such as residences, industry, and liquid fuels. Wood energy use is projected to increase from a base of 2.67 quads (quadrillion BTU's) in 1986 to about 3 quads in 2000, 3.35 quads in 2020, 3.5 in 2030, and 3.7 quads in 2040. The U.S. Department of Energy (DOE) also has made projections for wood energy consumption, which are broken down into nonelectric and electric uses. Nonelectric uses include steam productionfor industry and heat for residential dwellings. Wood is the biggest supplier of renewable energy for nonelectric uses (table 12). In 1993, wood and wood waste accounted for 97 percent of nonelectric renewable energy consumption, excluding ethanol. Wood for nonelectrical uses is expected to increase from 2.09 quads in 1993 to 2.61 quads in 2010, an annual growth rate of 1.3 percent in about 17 years. For electrical power generation, DOE projects wood use at approximately 0.5 quad in 2000 and about 3 quads in 2030, assuming that wood comprises more than half the energy derived from forest and agricultural residues and municipal solid waste (2). DOE also projects that energy crops will contribute less than 0.5 quad in 2000 but will eventually overtake agricultural and forest residues as a source of electricity before 2020. This assumption of large-scale production of short-rotation energy crops is the major difference between these DOE projections and those made by the Forest Service. Industries Are the Biggest Users of Wood Energy Until the turn of the 20th century, wood was the major source of energy in all sectors of the U.S. economy. But with greater popularity of low-priced coal, oil, and natural gas, use of wood fuel declined rapidly. As wood became less important as a fuel for residential heating, industrial uses of wood and wood wastes took up the slack. In 1992 (the last year for which data is available), the industrial sector accounted for 1.6 quads or 71 percent of total U.S. wood energy consumption (table 13). The largest industrial users of wood and wood byproducts are the forest products industries themselves. In 1992, the pulp and paper industry alone used 79 percent of the wood energy consumed by the industrial sector (table 14). Black liquor (the leftover fluid from chemical pulping), wood, and bark are burned for heating, steam production, and electrical energy. Lumber mills and other primary processing industries use mill residues--such as log trimmings, sawdust, and bark--for energy. These industries are responsible for another 18 percent of industrial wood energy use. Other industries account for the remaining 3 percent. Regional differences in wood energy use are due to the location of wood resources and wood-consuming industries. The South has the largest share of consumption, followed by the West, the Northeast, and the Midwest. Areas such as New England, the upper Midwest, and parts of the South that have a surplus of low-grade hardwood trees and other biomass continue to be the focal point of biomass and biofuels energy production. For example, Weyerhaeuser Company in cooperation with Amoco Corporation, Carolina Power and Light, and Stone Webster Engineering Corporation are assessing the economic merits of expanding the use of biomass at Weyerhaeuser's New Bern, North Carolina, facility to produce both electric power and liquid fuel. Weyerhaeuser determined that a combined-cycle power system of 60 megawatts for internal use and sale has the potential for significantly increased efficiencies. The production of electricity from wood has been highly successful in moderate-scale facilities in northern New England and the upper Midwest. In Vermont, New Hampshire, and Maine, over 700 megawatts of electrical-generating capacity have been added since 1980. About 30 cogeneration and free standing plants have been built. Many of these plants are cogeneration facilities located at pulp and paper or other forest-product mills that produce both steam and electricity. Other cogeneration facilities are located in the South, West, and Canada. New technologies are being developed for cofiring biomass in coal-fired boilers. Dry densified wood fuels, such as pellets and brickettes, can be burned efficiently in furnace/boiler units and wood stoves by commercial or residential users. For instance, wood or biomass is pelletized and fed into coal boilers at about a 15-percent share. This low-cost supplemental fuel helps dispose of wood wastes, lower emissions of sulphur dioxide and other undesirable gases, and reduce fossil-fuel consumption. One company, Energy Performance Systems of Minneapolis, Minnesota, has developed a technology that only uses wood. It's whole-tree-energy system is designed for a 100-megawatt plant. Residential Use Remains Despite Energy Price Changes Until the advent of fossil fuels in the late 19th century, wood was the dominant fuel used to heat homes. Roundwood (trees from farm woodlots) remained an important but declining source of fuel through the 1940's. Residential use of wood fuel dropped 61 percent between 1949 and 1969, as farm population fell. Abundant, cheap, and convenient access to fossil fuels made wood less attractive until the energy crisis of the 1970's, when crude-oil supplies were disrupted and the delivery of natural gas curtailed. Wood's popularity grew during the 1970's and 1980's. The number of wood-burning stoves in the United States reached 14 million in 1980, up from 2.6 million in 1970 and 7.4 million in 1950. The use of wood as a main heating source peaked during 1984-87, dipped thereafter, and leveled off. The decline in use since then has been triggered not only by lower fossil-fuel and natural-gas prices, but also by environmental concerns about using wood stoves during certain times. Liquid Fuels From Wood a Future Possibility The processes for making liquid fuels from wood have been known for more than a century. Considerable technological advances were achieved in Germany and Japan during World War II to compensate for lack of fossil fuels. Methanol or wood alcoholis the first and most common liquid fuel that can be produced from wood. Using a process invented by Braconnot in 1819, ethanolhas been produced from wood in the United States during World War I, in Europe during World Wars I and II, and recently in the former Soviet Union. A number of other possible fuels or fuel additives can be produced from wood, including diesel fuel, methyl tertiary butyl ether, ethyl tertiary butyl ether, isopropyl alcohol, sec-butyl alcohol, tertiary butyl alcohol, and tert-amylmethyl ether. Methanol was once derived from wood as a byproduct of charcoal manufacture, but had low yields. High-yield methanol production from wood requires producing synthesis gas, a process similar to coal gasification. Ethanol can be made using a two-stage hydrolysis process. Neither process is economically feasibleat this time. However, DOE has proposed an ambitious program, which is part of its National Energy Strategy, to produce up to 20 percent of U.S. liquid-fuel requirements from short-rotation woody plantations and other biomass. A major goal of the program is to reduce the cost of producing ethanol from energy crops from $1.27 per gallon in 1990 to less than $1 per gallon by 2005 and under 70 cents by 2010. For ethanol from cellulosic waste materials, the goals are 50 cents per gallon in 2005 and 34 cents in 2010 (1). This can be achieved through continued technology improvements and efficient utilization of the entire feedstock rather than just the cellulosic portion. Another goal of the program is to reduce the estimated cost of biomass-derived methanol from 93 cents per gallon in 1990 to 50 cents by 2010 using energy crops. With practices similar to modern agriculture, plantations of high-yield, fast-growing trees could produce up to 10 tons of biomass per acre. The establishment of such plantations on a large scale could provide a steady source of renewable fuel for cogeneration power plants to produce electricity and steam or as a raw material for chemical or alcohol production. [Thomas Marcin, (608) 231-9366, and Anton Raneses, (202) 219-0752] 1. Biofuels: At the Crossroads, Strategic Plan for the Biofuels Systems Program. U.S. Department of Energy, Washington, DC, July 1994. 2. Electricity From Biomass: National Biomass Power Program Five-Year Plan (FY 1994-FY 1998). U.S. Department of Energy, Solar Thermal and Biomass Power Division, Washington, DC, 1993, pp. 14-15. 3. Skog, Kenneth E. "Projected Wood Energy Impacts on U.S. Forest Wood Resources." First Biomass Conference of the Americas: Energy, Environment, Agriculture, and Industry. National Renewable Energy Laboratory, Golden, CO, Vol. 10, September 1993, pp. 18-32. Specialty Plant Products Essential Oils Widely Used in Flavors and Fragrances Essential oils and their derivatives are widely used as flavors and fragrances, a market estimated to be worth $9 billion. In 1994, the United States exported essential oils valued at $176.1 million, while importing $206.7 million. U.S. production of peppermint and spearmint oils in 1994 were 7.4 and 2.2 million pounds, respectively. Supplies of orange oil and d-limonene, which are highly dependent upon orange juice production in Brazil and the United States, could continue to be tight into 1996. Essential oils, also called volatile or ethereal oils, refer to a large class of natural aromatic substances found in various flowers, leaves, seeds, roots, bark, wood, resin, and the rinds of some fruits. These substances resemble oils in appearance, but they are generally light, non-greasy, and highly volatile-- meaning they evaporate readily. Essential oils, therefore, are chemically distinct from, and should not be confused with, fatty oils. Essential oils are typically named after the plants from which they are derived--for example, peppermint oil and orange oil--and are called "essential" because they tend to represent the natural "essence" of the plant based on various characteristics such as odor and taste. Essential oils and their derivatives are widely used as flavors and fragrances, and some are used for their chemical or biological activity. Essential oils are used in a wide variety of products including foods, beverages, cosmetics, pharmaceuticals, bug repellents, solvents, and more. In some cases, the oil itself may be the final product sold to consumers. It is hard to determine how many oils are commercially traded, but nearly 70 are listed in the CTFA Cosmetic Ingredient Handbook (1), and it is likely many more are sold in markets throughout the world. Production figures for most essential oils are hard to come by, but Brian M. Lawrence, a noted authority on essential oils, has estimated the world's to |