Please note that the electronic version of this reportcontains only the text of INDUSTRIAL USES OF AGRICULTURAL MATERIALS--tables and graphics are not included.

Contents

Summary
Introduction
Macroeconomic and Industrial Outlook
Starches and Sugars
Fats and Oils
Natural Fibers
Special Articles
Crambe Production and Processing:  A Case Study of theEffects on Rural Areas in North Dakota
Comparative Economics of Producing Lesquerella in Various Areas of the Southwestern United States

Coordinator
Lewrene Glaser
voice (202) 219-0091, fax (202) 219-0035, e-mail
lkglaser@econ.ag.gov

Contributors
Jacqueline Salsgiver, ERS
David Torgerson, ERS
Allen Baker, ERS
Roger Conway, ERS, Office of Energy and New Uses
James Duffield, ERS, Office of Energy and New Uses
Charles Plummer, ERS
Lewrene Glaser, ERS
Donald Van Dyne, University of Missouri

Statistical Support
Betty Barrett
Mae Dean Johnson
Charles Plummer

Editor
Martha Evans

Graphics, Design, and Layout
Fannye Lockley-Jolly
Wynnice Pointer-Napper
Cynthia Ray
 
 
 

Acknowledgments

This is the last issue of this report series.  Many organizations
and people have supported and contributed to the report since its
inception in 1993.   Funding has been received from the U.S.
Department of Energy and USDA's Alternative Agricultural Research
and Commercialization Corporation; Agricultural Research Service;
and Cooperative State Research, Education, and Extension Service;
with in-kind support from the Forest Service.  Thanks also tothe
many individuals who have contributed time and expertise to the
report over the years, including Harry Parker, Professor of
Chemical Engineering at Texas Tech University, and Donald Van
Dyne, Professor of Economics at the University of Missouri.

Mention of private firms or products does not indicate
endorsement by USDA.

Summary

Industrial Use of Agricultural and Forestry Materials Estimated
at $110 Billion in 1992

An estimated $110 billion worth of agricultural and forestry
products were used as raw materials in the manufacture of
industrial (nonfood, nonfeed) products in 1992, according to the
most recent census data available.  Wood and paper products
accounted for $96 billion, more than 87 percent of the total.
Other fibrous materials, animal products, natural rubber, and
vegetable oils were among the other agricultural materials used
in the manufacture of nonfood items.

After wood and paper products, other fibrous materials (with a
total value of nearly $7 billion), were the next largest category
of agricultural materials used by industry in 1992.  Raw cotton
use (estimated at $3.1 billion) accounted for 45 percent of all
fibers.  Other cotton products, including cotton yarns, fabrics,
felt, linters, and waste, added another $3.3 billion.  Animal
products were the third largest category of agricultural
materials used as industrial inputs in 1992, totaling nearly $3.5
billion.  Hides, skins, and pelts, valued at $1.2 billion, were
purchased by the leather and leather products industry.  Another
$1.5 billion of finished leather was used in the manufacture of
leather products and apparel.

The extraordinary 5.9-percent growth in the U.S. Gross Domestic
Product (GDP) in the first quarter of 1997 will give way to more
moderate growth for the rest of 1997 and 1998.  Even as GDP
growth moderates, the economy will support manufacturing output
growth of 4.0 percent for 1997.  Forces driving the manufacturing
sector will spur modest growth in industries that use
agricultural inputs.

Industrial uses of corn in 1996/97 are expected to total 681
million bushels, up from the 642 million used in 1995/96.
Ethanol production has rebounded from the low levels experienced
in 1995/96, averaging 81,000 barrels per day from January to June
1997.  Markets are growing for citric and lactic acids, two
organic chemicals usually derived from starch and sugar
feedstocks.

Soybean meal is being used to make adhesives and composites.
Soybean oil is finding its way into plastics, inks, and solvents.
In 1996, about 300 million pounds of soybean oil were used in
inedible applications, accounting for 2.5 percent of total
consumption.

In the United States, composite building materials are being made
from straw.  Straw bales are being used in the construction of
buildings.  Researchers are investigating straw as a raw material
for paper.  Uses of kenaf continue to expand.  Numerous companies
are producing and selling kenaf-based products.

Crambe is a new industrial oilseed being grown in North Dakota.
A special article presents analysis, using an input-output model,
estimating the economic effects of crambe production, the
construction of an oilseed processing plant to handle the crop,
and the crushing of the crop in a 15-county region in central
North Dakota.  The results indicate that nearly $10 million in
total sales and 42 new wage and salary jobs will be added to the
region as a direct result of the increase in the production and
processing of the 1997 crambe crop.  Through local purchases of
supplies and the spending of crambe-related income, the industry
will generate an estimated additional $2.8 million in total sales
and 46 wage and salary jobs.  Building the plant added an
estimated 46 temporary construction positions in the region,
which generated an estimated increase of $2.2 million in sales
and another 40 jobs in various industries as the workers spent
their wages.

Lesquerella is a new oilseed crop under development in the
southwestern United States.  A second special article evaluates
the possibility of growing lesquerella in 21 counties in Arizona,
New Mexico, and Texas.  A sensitivity analysis was prepared to
estimate lesquerella's net returns per acre given varying
combinations of production costs, seed yields, and seed prices.
Estimated net returns of traditional crops in these counties were
analyzed to assess lesquerella's chances of being economically
competitive with other crops.

Introduction

Industry Used an Estimated $110 Billion of Agricultural Materials
in 1992

An estimated $110 billion worth of agricultural and forestry
products were used as raw materials in the manufacture of
industrial (nonfood, nonfeed) products in 1992, according to the
most recent census data available.  Wood and paper products made
up more than 85 percent of the value.  Cotton, natural rubber,
and vegetable oils were among the other raw materials used by
industry.

Very little data are publicly available on industrial uses of
agricultural materials.  Moreover, when data are available, the
information often reflects a particular raw material or use.
There are no overall statistics on the volume or value of
agricultural materials used by industry.

In an attempt to get a comprehensive estimate of industrial uses
of agricultural materials, the Economic Research Service (ERS)
focused on data sources for industrial production.  Using data
from the 1992 Census of Manufactures, ERS analysts have estimated
the value of agricultural materials used by industry.  The Census
of Manufactures is part of the economic census of the Nation's
economy taken every 5 years in the second and the seventh year of
each decade.  The Census of Manufactures contains statistics for
individual industries or groups of related industries, including
the number of establishments, employment, payroll, value added by
manufacture, value of materials consumed, product shipments, and
other industrial statistics.

The census reports the value of materials consumed or used in
production by establishments in various industries based on six-digitmaterial
codes.  With the help of chemists and chemical
engineers, ERS analysts developed a list of material codes that
are classified as agriculturally derived, partially
agriculturally derived, or potentially derived from agriculture
(see tables 8-11 for a list of codes that were used in the
analysis).

The agriculturally derived category contains materials that are
obtained from agricultural, forestry, or natural-plant sources.
Agricultural materials used by the food and tobacco industries
were not included in this analysis, since the objective was to
isolate industrial (nonfood, nonfeed) uses of agricultural
materials.  The materials in the agriculturally derived category
have received various amounts of processing, from goods with
little processing, like raw cotton, to finished products used as
intermediate goods, such as vegetable oils.  The partially
derived category contains:

o  materials or chemicals that are partially derived from
   agricultural sources,
o  agriculturally based materials or chemicals that are in an
   aggregated group containing agriculturally based and
   nonagriculturally based materials or chemicals, and
o  materials or chemicals that can be derived from either
   agricultural or petroleum sources, but information onthe
   derivation is not provided in the code description.

Finally, the potentially derived-from-agriculture group includes
materials that may in the future be derived from agricultural or
forestry products, but presently petroleum sources are used. The
U.S. Department of Agriculture and other researchers are actively
exploring new processes and procedures to expand industrial uses
of agricultural materials, and these are examples of potential
future products.

Using material codes as a basis for estimating the value of
agricultural materials used by industry has some limitations.
The codes are part of the Standard Industrial Classification,
which is the classification used for all establishment-based
Federal economic statistics on industries.  The value of
agricultural materials used as inputs by manufacturing industries
may be underestimated because of how the data are collected and
reported.

Underestimation can occur for several reasons.  First, in
addition to the total cost of materials, which every
establishment was requested to report, information was collected
from most manufacturing industries on the consumption of major
materials used in manufacturing.  The inquiries were restricted
to those materials that were important parts of the cost of
production in a particular industry and for which cost
information was available from manufacturers' records.  The value
of materials used by the establishment but not listed separately
on the census form are included as "not elsewhere classified."
Also, the cost of materials for small establishments for which
either administrative records or shorter census forms were used
was imputed by the Census Bureau as "not specified by kind."
Thus, because the use of agricultural materials in a
manufacturing process may not be significant or well known makes
their inclusion in the census unlikely.  For example, information
from small establishments that may use agricultural materials in
production to satisfy niche markets would not be identified.

Second, if establishments consumed less than a specified amount,
usually $25,000, of a specific material, they were not requested
to report consumption of the material separately.  Since the
value of some agricultural materials may be low, particularly for
specific establishments, it is likely that they may have been
among those materials included in the "not elsewhere classified"
category.  Third, because the census is conducted on an
establishment basis, some data are withheld from publication to
avoid disclosing information for individual companies.  Finally,
some material codes include a large variety of materials.  Ifthe
majority of the materials in these codes were deemed likely not
to be agriculturally based, they were excluded from the partially
agriculturally derived category.

Overestimating the value of agricultural products may occur
through duplication in the cost of materials among industries.
Within a census industry, inputs are additive.  However, when
combining material codes from different industries representing
successive stages in the production of finished manufactured
goods, the possibility of double counting occurs.  For example,
the value of cotton is counted twice when it is first an input
into the manufacture of an intermediate good (yarn), and second,
when the yarn is used as an input in the manufacture of fabric.

Industries Spent $96 Billion on Wood and Paper Inputs in 1992

Given the limitations, it is estimated that more than $110
billion of agricultural and forestry products were used as raw
materials in the manufacture of industrial products in 1992,
according to the most recent census data available.  Wood and
paper accounted for more than 87 percent or $96 billion (figure
1, table 9).  Other fibrous materials, animal products, natural
rubber, and vegetable oils were among the other agricultural
materials used in the manufacture of nonfood items (table 8).

After wood and paper products, other fibrous materials were the
next largest category of agricultural materials used by industry,
with a total value of nearly $7 billion.  Raw cotton use
accounted for 45 percent of all nonwood fibers, estimated at $3.1
billion.  Other cotton products, including cotton yarns, fabrics,
felt, linters, and waste, added another $3.3 billion.
Industries also used $370 million worth of raw wool and wool
materials in 1992, such as felt, yarn, noils, and waste.

Animal products were the third largest category of agricultural
materials used as industrial inputs in 1992, totaling nearly $3.5
billion.  Hides, skins, and pelts, valued at $1.2 billion, were
purchased by the leather and leather products industry.  Another
$1.6 billion of finished leather was used in the manufacture of
leather products and apparel.  Nearly $600 million worth of
animal fats, oils, greases, and tallow were inputs into the
production of perfumes, cosmetics, and chemical preparations.
Establishments involved in the manufacture of medicinal chemicals
and pharmaceutical preparations purchased $51 million worth of
pharmaceutical-grade gelatin.  Finally, $16 million of dressed
hair, including horse hair, was used to make brooms and brushes.

An additional $69 billion of raw materials that are partially
derived from agricultural sources were used as manufacturing
inputs in 1992 (table 10).  However, $69 billion may overestimate
the value of agriculturally based materials because the category
includes intermediate goods that are derived both from
agricultural and petroleum sources.  For example, the "knit
fabrics" material code is considered partially agriculturally
derived because it includes natural fabrics, like wool, along
with synthetic fabrics, like polyester.

In 1992, industry used $3.6 billion of raw materials that came
from petroleum sources, but in the future may come from
agricultural and forestry products (table 11).  This estimateis
meant to give researchers only a rough indication of potential
market size.  For each new use, agriculturally derived materials
will have to compete with their more well-established, petroleum-based
counterparts.  For example, a new technology has been
developed for turning cornstarch into propylene glycol,
glycerine, and ethylene glycol but is not yet in commercial use.
Also, researchers are studying the use of soybean and other
vegetable oils in printing inks (see Fats and Oils section for
more information).

Agricultural Materials Were Used by All Industry Major Groups

All Industry Major Groups used agriculturally derived materials
in 1992 (table 1).  The paper and allied products industry was
the largest user, spending nearly $39 billion on agricultural
inputs and $2.6 billion on intermediate goods partially derived
from agricultural sources (figure 2).  The lumber and wood
products industry was next, using $23 billion and $0.6 billion of
agriculturally derived and partially agriculturally derived
materials, respectively.  The chemicals and allied products
industry was the third largest industry group, spending $5.5
billion on agriculturally derived materials and $16 billion on
partially derived intermediate goods.

How important agricultural and forestry materials were as inputs
varied among industries.  Nonfood manufacturing industries spent
nearly $180 billion on agriculturally derived and partially
agriculturally derived materials in 1992, which is nearly 8
percent of the $2.3 trillion spent on raw material inputs used in
production.  The two categories were most important to the
leather and leather products industry, accounting for 38 percent
of all inputs (figure 3).  Agriculturally derived and partially
agriculturally derived materials were also an important source of
inputs to the paper and allied products and apparel industries,
accounting for 32 and 31 percent of all inputs, respectively;
although for the apparel industry, most of the inputs came from
the partially derived category.  [Jacqueline Salsgiver, ERS,
(202) 501-7107, jsalsgiv@econ.ag.gov]

Macroeconomic and Industrial Outlook

U.S. Economic Growth Is Expected To Moderate in the Rest of 1997
and 1998

The strong growth in the U.S. Gross Domestic Product (GDP) in the
first half of 1997 will give way to more moderate growth for the
rest of 1997 and 1998.  Even as GDP growth moderates, the economy
will support manufacturing-output growth of 4.0 percent for 1997.
Forces driving the manufacturing sector will spur modest growth
in industries that use agricultural inputs.

U.S. industries that use agricultural inputs tend to be mature
industries and, as such, find their economic prospects closely
tied to changes in the general U.S. economy.  This section
provides an overview of the U.S. economy and manufacturing
sector, focusing on nine major industries that use agricultural
materials.

The U.S. economy continues its seventh year of economic
expansion.  In the first quarter of 1997, the U.S. Gross Domestic
Product (GDP) grew at an extraordinary annualized rate of 5.9
percent, which supported a 5.3-percent increase in manufacturing
(table 2).  Ordinarily, the strong manufacturing growth that has
occurred in the previous year and the maturity of the economic
recovery would bring a moderation in manufacturing output.
However, that has not happened.  The only major component of GDP
that fell in the first quarter of 1997 was net exports, as the
real trade deficit widened by almost $18 billion.  Exports rose
at an 11-percent annual rate, $18 billion, while imports rose by
23 percent, $36 billion.  The growth of manufactured goods
exports in the first quarter was concentrated in auto parts,
computers, and airplanes.  This export growth, along with a
strong inventory buildup and a sharp increase in consumer demand
for trucks, led to the strong manufacturing output seen in early
1997.  Manufacturing growth remained strong in the second
quarter, while GDP growth moderated.

Among the nine industries using agricultural materials, the
increase in output during the first half of 1997 was even more
remarkable for those not subject to strong foreign price
competition.  Lumber and products output rose 4.2 percent in the
first quarter of 1997 due to a weather-induced increase in
commercial and residential construction and a rise in building-supply-store
inventories.  Without a strong economy, lumber
output and/or prices would have fallen despite the warm winter.
With housing demand high because of strong labor income growth
(from higher real wages and strong employment gains) and record
high levels of consumer confidence, lumber product output rose
9.2 percent in the second quarter.  Stable mortgage rates, strong
corporate profits, and abundant credit further supported
commercial construction.

Similarly, transportation equipment output rose 14.2 percent in
the first quarter due to an unusually strong 22.4-percent
annualized growth in car and truck production.  The strong
vehicle output reflected a rebuilding of inventories and strong
growth in light truck sales.  Consumer vehicle spending was
supported by good personal income growth and record consumer
confidence levels.  Because of warm weather, light truck sales
occurred in January and February instead of the more usual April
or May.  Reflecting this early buying, transportation equipment
output dropped 3.4 percent in the second quarter.  Although
furniture and household equipment sales were strong in the first
quarter, the growth was from higher appliance sales and furniture
inventory liquidation and not furniture output, which stagnated
during the quarter.  During the second quarter, furniture output
expanded at an annualized rate of 10.3 percent because of strong
disposable income growth and the previous quarter's inventory
liquidation.

Of the nine industries, those that have more direct foreign
competition did less well during the first half of 1997.  Textile
mill production was flat in the first quarter, despite booming
clothing and vehicle sales.  Because of the strong dollar,
imported textiles supplied the increased demand.  In contrast,
textile production rose 6.1 percent in the second quarter.
Rubber production and chemicals and products output were hurt by
the strong dollar during the first half of 1997, which slowed
exports, increased imports, and resulted in subpar growth.

Industrial machinery is a very competitive sector
internationally.  The roughly 10-percent growth in machinery
output from the second quarter of 1996 to the first quarter of
1997 has been driven by computer and office equipment production,
which expanded over 28 percent during the year.  The spectacular
growth in domestic equipment investment was supported by very
strong computer export growth over the same period.  The restof
the machinery sector, which is the part that uses agricultural
materials, has been growing much less rapidly.  The United States
has a comparative advantage in the production of office equipment
and a comparative disadvantage in making many other types of
machinery.  Similarly, leather goods production, which is quite
labor intensive, continues to decline irrespective of the rate of
economic growth.

The Outlook Is for More Modest Growth

A potential risk to continued economic growth evaporated in early
1997, as crude oil prices, which peaked at over $23 per barrel in
December 1996, fell below $19 per barrel by May 1997.  A risein
fuel prices is not expected this summer despite the usual summer
increase in fuel demand because of plentiful world supplies.
Crude oil prices should average below $19 per barrel for the next
seven quarters; various forecasts range from $16 to $19 per
barrel.  Low energy prices will help support manufacturing by
slowing input price inflation throughout 1997 and 1998.

Preliminary data show strong industrial production and employment
growth and declines in retail sales during the second quarter,
which suggest strong inventory accumulation that may exceed the
first quarter's $31.5 billion.  In the second quarter, GDP is
estimated to have grown at an annualized rate of between 2.4 and
2.6 percent as manufacturing output increased 4.4 percent.  Some
of the first quarter's extraordinary growth spilled over into
manufacturing in the second quarter.  The slowdown via the
corrections in inventories, business investment, and consumer
durable spending should be evident by the third quarter of 1997.

The cyclical adjustments that will slow spending growth on
consumer durables and producer equipment and generate a lower
rate of inventory buildup may be facilitated by a modest
tightening of interest rates by the Federal Reserve (Fed) this
fall.  This will mean more modest growth in GDP and manufacturing
in the second half of 1997 and 1998.  For those six quarters,GDP
is expected to grow at an average annualized rate of about 2.2
percent.  Record high consumer confidence will fall as employment
growth moderates, although wage gains will keep confidence from
falling sharply.  Tight labor markets will result in real wage
gains in both 1997 and 1998.  The expected continued growth in
real wages, as employment gains moderate, is key to strong
disposable income growth for the rest of 1997 and 1998.  Growing
after-tax personal income will mean continued growth in consumer
spending.

The growth of consumer spending on durable goods, which has
supported manufacturing growth, will be modest.  Consumer debtis
at very high levels, so lenders will be more careful about making
new loans.  The Fed's likely hike in short-term interest rates,
done to keep inflation from accelerating in 1998, will be
reflected in somewhat higher long-term rates.  Higher commercial
interest rates and tighter standards for consumer credit will
constrain growth in spending on durable goods, such as cars,
furniture, and household appliances.  Moreover, the pent-up
demand for durable goods has mostly been filled.  From 1994
through the first quarter of 1997, consumer spending on cars,
furniture, and appliances was very high, largely reflecting
postponement of purchases due to slow personal income growth,
high interest rates, or lack of credit availability from 1990 to
1993.  Near-term growth in durable goods demand will be based
largely on demographics, such as new household formation.
Consumer spending on services and nondurables will be the major
components of consumer spending growth through the end of 1998.

Higher wages will slow employment growth as employers shed excess
workers to offset lower profit growth.  Tighter credit standards
and flat business profits will slow growth in business equipment
sales, especially in 1998.  Higher interest rates will keep the
dollar strong in 1997 and 1998.  A strong dollar and modest
growth in the economies of our major trading partners, except for
Canada, will slow export growth to single-digit levels and keep
import growth somewhat higher.  On average, the trade deficit
should rise modestly for the second half of 1997.  The slowdown
in investment and export growth will further curtail future
manufacturing growth.  Government spending will increase very
modestly as lower Federal purchases are offset by local
governments spending the higher income- and excise-tax revenues
resulting from higher wages.

Prospects for Industrial Materials Moderate

As a result of slowing growth in construction, spending on
consumer durables and business equipment, and exports, no major
manufacturing sector will do as well in the last half of 1997 or
1998 as they did from the second quarter of 1996 to the first
quarter of 1997.  Nevertheless, the strength of the U.S. economy,
even as growth moderates, will increase manufacturing output 4.0
percent for all of 1997.  Forces driving the manufacturing sector
will spur modest growth in the nine industries using agricultural
inputs.  However, in 1998, noncomputer manufacturing will grow
only 1 percent, making prospects for further growth in the nine
industries modest to poor.

Lumber and products output will grow about 2 percent in 1997 and
1 percent in 1998.  Construction growth will slow during the rest
of this year and next.  Lumber prices should fall modestly
because of a decline in capacity utilization.  Furniture and
fixtures output is expected to grow 3 percent in 1997, reflecting
many people's desire to fill their relatively new houses with new
furniture.  The furniture sector is expected to grow 2 percentin
1998, reflecting market maturity.  Sluggish demand will bring
small price cuts in 1998.

Transportation equipment will grow 5 percent in 1997, reflecting
further growth in light truck and bus sales.  Prices are expected
to rise about 2 percent.  The prospects for 1998 are for a mere
1-percent growth in output, triggered by modest price cuts.  The
generally austere Federal budget will curtail large purchases of
fleet buses and subway cars by local transit authorities in 1998.

Output of textile mill products has bounced back from the flat
first quarter and should finish 1997 with 3-percent growth
because of a rise in spending on household furnishings driven by
good personal income growth.  The strong dollar will keep price
increases at 1 percent in 1997.  In 1998, output should rise 5
percent, again due to household furnishings demand.  Wholesale
textile prices should be up 3 percent in 1998, reflecting strong
demand.

Paper and products output should rise 4 percent in 1997 and 3
percent in 1998, reflecting good personal income growth.  Prices
should increase 4 to 6 percent by the end of 1998, as supplies
continue to be tight.  Chemical and products output should beup
4 percent in 1997.  Most of the rise will be driven by increased
sales of drugs and agricultural chemicals.  A modest expansionin
chemical exports in 1998, due to a rise in foreign economic
growth, will boost output 1.5 percent.

Rubber and plastic production will increase 3.6 percent in 1997
because of strong consumer demand and higher production of
transportation equipment.  In 1998, output growth will slow to
about 1.5 percent, reflecting modest gains in consumer demand.
Prices should rise about 4 percent by the end of 1998.

The Midterm Prospects for U.S. Manufacturing

The potential for continued growth in U.S. manufacturing is good.
The next decade is expected to have moderate GDP growth, slowly
rising real oil prices, only a modest increase in inflation from
current levels, a dollar not greatly overvalued compared with the
relative purchasing power of our trading partners' currencies,
and a balanced budget by 2002.  However, the manufacturing sector
has three interrelated challenges.  The sector is highly
cyclical, dependent on appropriate adoption of new technology,
and exposed to international competition.

Manufacturing demand is driven by consumer demand for durables,
business investment in plant and equipment, and exports, all very
cyclical parts of GDP.  Manufacturing has become increasingly
dependent on export markets and is subject to quality and price
competition from foreign firms.  For example, the very high value
of the dollar from 1982 to 1986 severely curtailed manufacturing
growth and led to a consolidation within the sector, personnel
downsizing, and the bankruptcy of many smaller firms.  The
manufacturers that survived did so by adopting appropriate
technology and using new capital investment.  In this process,
many jobs were lost and labor productivity rose sharply.  The
U.S. auto industry went from a declining sector to one that
reinvented itself and adopted the inventory practices and niche-market-seeking
philosophy of its Japanese competitors.  Costs
went down and American cars became cost competitive.

The major risks to moderately good manufacturing growth over the
next decade are:

o  Prolonged or very deep recessions;
o  A substantial real oil price shock as large as 1973-74 and
   lasting for several years, which would increase interestrates
   and likely slow investment spending;
o  A greatly overvalued dollar for several years, as occurred
   during the mid-1980's; or
o  A trade war.
[David Torgerson, ERS, dtorg@econ.ag.gov, (202) 501-8447]

Starches and Sugars

Ethanol, Citric Acid, and Lactic Acid Use Corn as a Feedstock
Industrial uses of corn in 1996/97 are expected to total 681
million bushels, up from the 642 million used in 1995/96.
Ethanol production has rebounded from the low levels experienced
in 1995/96.  Markets are growing for citric and lactic acids,two
organic chemicals usually derived from starch and sugar
feedstocks.

Industrial uses of corn in 1996/97 are expected to total 681
million bushels, up from the 642 million used in 1995/96 (table
3).  In 1997/98, industrial uses of corn may account for 736
million bushels, a further increase over this crop year.
Industrial uses will account for 7 percent of the supply of corn
in 1996/97, the same percentage as in 1995/96 when supplies were
lower, and a similar proportion is expected in 1997/98.

Corn used to produce ethanol in 1996/97 increased 10 percent from
a year earlier.  In 1995/96, ethanol producers were caught
between higher costs for inputs, moderate increases in coproduct
prices, and stable prices for competing products, which limited
their ability to raise ethanol prices.  Thus, many ethanol
producers suspended operations to do maintenance on their plants.
Corn used for ethanol production in 1997/98 is expected to
increase from 1996/97 as ethanol firms continue production with
prices competitive with other oxygenates.

In 1996/97, corn used for manufacturing alcohol was about the
same as the previous year.  In 1995/96, about 60 million bushels
of corn were used for manufacturing alcohol, up from 36 million
in 1994/95.  Even with tight supplies of corn in 1995/96, higher
prices for industrial alcohol relative to fuel alcohol kept corn
use strong.  In 1997/98, corn used for manufacturing is expected
to be about the same as in 1996/97.

Corn used in industrial starch production in 1996/97 will likely
be about the same as the 186 million bushels used a year earlier.
In 1995/96, corn used for starch production was down 3 percent
from the 192 million bushels used in 1994/95.  As producers
passed along the higher costs of corn in 1995/96, their buyers
apparently found alternative products that were less expensive.
Corn prices in 1997/98 are expected to be down from a year
earlier and corn use for starch production will likely increase.
Industrial starch prices and corn use are not highly correlated
because starch users and starch producers tend to contract ahead
to meet their needs (figure 4).

Ethanol Production Rebounds Somewhat

The financial squeeze ethanol producers experienced in 1995/96
has dissipated as corn prices have dropped and prices of gasoline
and methyl tertiary butyl ether (MTBE) have increased.  Blending
margins for ethanol have greatly improved from last summer when
the wholesale price of gasoline was almost 28 cents per gallon
less than that for ethanol, excluding the 54-cents-per-gallon
ethanol tax incentive.  Ethanol prices are strongly influencedby
gasoline prices because a large proportion of ethanol is blended
into regular gasoline as an octane enhancer and fuel extender.
In the spring of 1997, the price difference had narrowed to about
6 cents per gallon.  Ethanol also has been competitive with its
main rival, MTBE, in oxygenated-fuel-mandated areas because MTBE
prices have been on an upward track until recently.

While ethanol production is increasing because of more favorable
economics, it has not rebounded to the peak level of 1995 (figure
5).   From January to June 1997, ethanol production has averaged
81,000 barrels per day.  In comparison, U.S. MTBE production
averaged 187,000 barrels per day during the same period.  In
addition to domestic production, significant amounts of MTBE are
imported, particularly to the West Coast.  About 435 million
bushels of corn are estimated to be used for ethanol production
in the 1996/97 crop year.  With this amount of corn, plus sorghum
and other feedstocks, ethanol production is expected to total
28.6 million barrels in 1996/97, up from 24.8 million barrels in
1995/96.

Ethanol producers are apparently still trying to regain the
market share they lost in octane and oxygenated fuel markets when
corn prices reached record levels during 1995/96.  The loss
cannot be overcome immediately, because producers must
reestablish long-term contracts with blenders.  After last year's
extended maintenance shut downs, ethanol producers found many
petroleum firms already had committed to MTBE for the winter
oxygenate season.  In May 1997, stocks of ethanol were 166
percent of a year earlier, suggesting by the winter oxygenate
season, petroleum firms will find plentiful supplies of ethanol
for blending.  Another reason for the slow rebound is that a
robust market for beverage exports has diverted production from
fuel-grade alcohol.

Demand Is Growing for Citric and Lactic Acids

Many organic chemicals can be derived from starch and sugar
feedstocks, including citric and lactic acids.  These two organic
acids have multiple uses, both food and industrial, and have
growing markets.  Though both chemicals can be derived
synthetically, biobased production methods are the main source of
these commodities.  Both citric and lactic acid are derived by
microbial fermentation of a carbohydrate feedstock.  Either crude
sugars, such as sucrose or molasses, can be used or the sugar
feedstock can be derived from any starch-rich crop, including
potatoes, sweet potatoes, wheat, barley, rice, and corn.

Citric acid is the largest volume organic acid produced by
fermentation, accounting for approximately 85 percent of the
fermentation-based organic acid market (6).  In addition to wide
use as an acidulant in the food and beverage industry, it also is
used in a variety of industrial and pharmaceutical applications
as an acidulant, dispersing agent, sequestering agent, water-conditioning
agent, detergent builder, and cleaning agent.  In
the United States, about 45 percent of citric acid is used in the
beverage industry, 23 percent in foods, 20 percent in detergents,
6 percent in pharmaceuticals, and 6 percent in other chemical
processing industries.

Output in the three main producing regions of Western Europe, the
United States, and China, which together account for about 88
percent of world capacity, was estimated to be over 1.2 billion
pounds in 1994 (1).  With steady growth rates in citric acid
markets in recent years, production in these regions in 1997
could be as high as 1.3 to 1.7 billion pounds.  However, another
estimate puts the world market at less than 1 billion pounds
annually (6).  Estimates on the value of the world market also
differ, ranging from less than $1 billion to as high as $2
billion annually.

In the United States, citric acid production is estimated to be
about 475 million pounds annually, with an industrial capacity of
about 490 million pounds (3).  U.S. domestic demand for citric
acid is assessed to be between 400 and 450 million pounds per
year, with a market value of about $340 to $380 million.
Continued market expansion is expected due to growth in
traditional and new uses.  With strong growth, improved product
value in specialty applications, and increased production
capacities, the market for U.S.-produced citric acid could reach
$650 to $750 million by the year 2005.

The three major U.S. producers are Archer Daniels Midland Company
(ADM); Cargill, Inc.; and Haarmann and Reimer Corporation (H&R),
a subsidiary of Bayer.  Currently, most citric acid in the United
States is produced via submerged (deep-tank) fermentation of
corn-derived glucose or dextrose.  Other carbohydrate sources,
such as potato, sweet potato, and wheat starch, may be utilized,
but on a smaller scale due to their higher cost relative to
cornstarch.  H&R, the only major producer not vertically
integrated back to feedstocks, is looking to sell its citric acid
plant.  ADM, on the other hand, recently announced plans to build
a new bioproducts plant in Cedar Rapids, Iowa, that will produce
citric acid, lactic acid, lysine, xanthan gum, and glycerine. In
recent years, vertical integration and large facilities, which
take advantage of economies of scale, have become very important
to the profitable operation of fermentation facilities.

Another organic acid that has the opportunity for expanded use
due to developing industrial applications is lactic acid.  Itis
produced by either fermentation of a carbohydrate feedstock or
synthetically by hydrolysis of lactonitrile.  About 85 percentof
lactic acid demand is for food and food-related applications,
particularly as a general purpose food additive and to produce
emulsifying agents for use in baked goods.  Lactic acid also is
used in foods and food preparation as an acidulant, flavor
enhancer, preservative, texture modifier, antibacterial agent,
and preservative for meat carcasses.  Some examples of industrial
applications, which currently account for about 15 percent of
lactic acid use, include use as an ingredient or intermediate in
the manufacture of numerous chemicals, a mordant in dyeing wool,
a pH balancer in shampoos and soaps, and as the building block
for polylactic acid (PLA), a biodegradable polymer (for
information on PLA, see the September 1995 issue of this report).

Much of the lactic acid used in the United States has
traditionally been imported from Europe, although U.S. production
is on the rise.  ADM is the largest U.S. producer, followed by
several other companies such as Cargill, A.E. Staley
Manufacturing Company, and Chronopol, Inc.  Total U.S. capacity
is estimated to be near 40 million pounds per year, although this
will likely rise as companies expand capacity and form joint
ventures to build new plants.  For example, Cargill has entereda
joint venture with the Purac Group, a subsidiary of the Dutch
food multinational CSM, to produce lactic acid at a new plant
being built in Blair, Nebraska.  Purac is the largest producerof
lactic acid in the world, with plants in Europe, South America,
and the United States.

Although the bulk of the market for lactic acid is fairly mature
and slow-growing, newer applications, such as the manufacture of
biodegradable polymers, will likely increase lactic acid demand.
Current U.S. demand for lactic acid is estimated at about 55
million pounds and total world demand near 150 million pounds (2,
4).  Assuming lactic acid is worth an average $1.15 per pound,
U.S. and world markets would be valued at approximately $63
million and $173 million, respectively.  These values will likely
rise as the use of new lactic acid products grows and production
technology improves.  Conservative estimates have the market
growing 3 to 5 percent annually (5), while higher estimates put
the range at 8 to 10 percent annually.  [Industrial uses of corn:
Allen Baker, ERS, (202) 219-0360, albaker@econ.ag.gov.  Ethanol:
Roger Conway, OENU, (202) 219-1941, rkconway@econ.ag.gov, and
James Duffield, OENU, (202) 501-6255, duffield@econ.ag.gov.
Citric and lactic acids:  Charles Plummer, ERS, (202) 219-0717,
cplummer@econ.ag.gov]

1.  Bradley, Rosemary, Hossein Janshekar, and Yashukiko Sakuma,
    "CEH Abstract: Citric Acid," Internet abstract ofa Chemical
    Economic Handbook report, http://piglet.sri.com/CEH/,undated.

2.  "Cargill and Purac Link Up For Major Lactic Acid Plant,"
    Chemical Marketing Reporter, May 27, 1996, p. 5.

3.  "Chemical Profile: Citric Acid," Chemical Marketing
    Reporter, April 1, 1996, p. 37.

4.   "Ecochem Drops Out of Lactic Acid," Chemical Marketing
     Reporter, November 28, 1994, p. 4.

5.   "Lactic Market Is Reshuffling," Chemical Marketing Reporter,
     May 13, 1996, p. 7.

6.   Madia, Ashwin, "Organic Acids," 1995 Regulatory Seminar,
      Corn Refiners Association, Inc., Washington,DC, pp. 91-99.

Fats and Oils

Soybean Meal and Oil Make Inroads in New Industrial Applications

Soybean meal is being used to make adhesives and composites.
Soybean oil is finding its way into plastics, inks, and solvents.
In 1996, 305.2 million pounds of soybean oil were used in
inedible applications, accounting for about 2.5 percent of total
consumption.

Soybeans contain both meal and oil.  Soybean meal is currently
the more valuable component obtained from processing soybeans,
although this can change when relative prices of commodities
change.  Over 90 percent of soybean meal is used as a high-protein
ingredient in livestock feed.  A small portion of soymeal
is milled into flour or grits, primarily for edible applications,
or used in the preparation of protein concentrates and isolates,
which have food and industrial applications.

Soybean oil is the most widely used and least costly domestic
vegetable oil, so it is frequently used in industrial
applications.  It is a source of fatty acids that are used to
produce surfactants, emulsifiers, and alkyd resins for paints.
One major industrial use is as epoxidized soy oil for a
plasticizer in polyvinyl chloride (PVC) and other plastics.  In
1996, 305.2 million pounds of soybean oil were used in nonfood
applications, such as livestock feed and the manufacture of
resins, plastics, paints, inks, and soaps.  This constituted
roughly 2.5 percent of all soybean oil consumed in 1996, with the
remaining 12 billion pounds going into edible uses (table 25).

Soybean oil accounts for about 75 percent of the vegetable oil
produced in the United States.  Due to the abundance of domestic
soybean production, research and development of industrial uses
of vegetable oils have tended to concentrate mainly on soybean
oil.  For example, research on biodiesel has focused on using
soybean oil as a major feedstock.  Most biodiesel production
today is used for testing and demonstration projects, but demand
could increase in coming years (see the August 1996 issue of this
report for more information on biodiesel).

A variety of public and private research on finding new uses for
soybeans is underway.  Much of this  research is funded bya
checkoff program in which farmers pay for promotion, research,
and market development through an assessment on the sale of their
crop.  The United Soybean Board (USB) , which distributes a
portion of the earmarked money, has approved more than $6.6
million for new-product research and development from fiscal 1997
funds.  The money is being used to fund 34 new projects with 1-
and 2-year grants to universities, private companies, and public
research facilities.  Many of the new applications use soybean
oil, but new uses for soybean meal also are being pursued.  This
article highlights examples of recent market successes and
ongoing research projects.

Soy-Based Composites Are on the Market

One of the most successful new soybean-based products recently
brought to market is a composite material that looks like granite
and works like wood.  Environ is comprised of 45-percent soybean
flour and 45-percent old newspapers, with inks, oils, and other
materials accounting for the remaining 10 percent.  It is
manufactured by Phenix Biocomposite, Inc., of Mankato, Minnesota,
into 3-by-6-foot boards, which are used to make furniture,
paneling, flooring, and other wood-like products.  The company
cites studies that the product has a potential market of $1.8
billion a year by 2000.  Construction has begun on a new 150,000-
square-foot production facility in Mankato. The $29-million plant
should be operational in early 1998.

Commercialization of New Wood Adhesives and Composites Is Imminent

Research on new soybean-based wood adhesives promises
performance, economic, and environmental benefits.  One product,
developed by Kriebich and Associates of Seattle, Washington, is
an adhesive specifically developed for use in finger-jointing
lumber.  The process takes short scrap pieces of lumber and glues
them end-to-end to make longer, more marketable lumber.  The soy-based
adhesive works in tandem with a traditional adhesive.  The
soy-based adhesive is applied to one piece of wood and the
traditional adhesive to the other piece.  When the pieces are
joined, a strong bond forms in seconds.  The water- and boil-proofbond is
created without the use of heat, saving energy and
time compared with traditional adhesives.  The soy-based adhesive
has a high tensile strength, which exceeds the minimum standards
for finger joints.  Using short lengths of lumber to make
marketable products supplements scarce supplies of saw logs.
Additional mill trials are planned for this year.  If the tests
are successful, commercial sale of the adhesive is anticipated to
begin in 1998.

Other soy-adhesive research has focused on making composites,
such as plywood, particleboard, and oriented-strand board (OSB)
or chipboard.  University of Minnesota researchers are conducting
tests to make OSB using soy flour and methylene diphenyl
diisocyanate (MDI) adhesive.  MDI is commonly used in OSB
production.  Researchers combine the two adhesives to make a
powder that is applied to wood chips.  The chips are coated with
the adhesive mixture and fed into a press.  Heat and pressure
bond them to one another to form a high-quality OSB.  The soy-based
adhesive could replace half of the more expensive MDI, resulting in
less expensive OSB.  Four other research projects in the woodproducts
area are testing the use of different forms of soy derivatives from
whole meal to protein concentrates and isolates.

Researchers Attempt To Increase Soy Use in Plastics

In 1996, approximately 121.1 million pounds of soybean oil were
used in plastics and resins, the largest category of inedible
uses (table 25).  Much of this was used to make epoxidized
soybean oil, a plasticizer used to modify the properties of PVC
and other plastic resins (see the June 1994 issue of this report
for more information on vegetable oil-based plasticizers).
Soybean oil currently accounts for only 3 percent of the
plasticizers used to make PVC pipes and other products.  If too
much soybean oil is used in the formulation, the oil causes the
PVC to become brittle and degrade.  Research is being conducted
in an attempt to modify soybean oil, enabling manufacturers to
use up to 25 percent soybean oil in the plasticizing process.
The majority of the plasticizers used in forming PVC resins are
petroleum-based or generic phthalic esters, which sell for
approximately 56 cents per pound.  In comparison, the price of
soybean oil has averaged 25 cents per pound during the last 5
years (table 36).  Finding practical ways to modify the oil while
maintaining its lower price is critical to the success of the
project.

Another area of plastics research sponsored by the USB is the use
of soybean meal or flour in the manufacture of biodegradable
foams and films.  Scientists at the University of Missouri at
Rolla have developed prototype materials that are being tested
for such uses as rigid insulation boards and agricultural
mulching films.  Planned field testing will help researchers to
refine formulations for improved performance.

Inks Now a Large User of Soy Oil

Soybean oil is used in ink formulations as a vehicle, which, as
defined by the ink industry, is any media that acts as a solvent,
carrier, or binder for pigments to the substrate.  Developed by
the American Newspaper Publishers Association in response to the
oil shocks of the 1970's, soybean oil-based inks were first
marketed in 1987.  Since then, soybean oil has been incorporated
into a number of ink formulations.  The amount of soybean oil
used varies among manufacturers and types of ink.  For an ink
manufacturer to claim its product is soy ink, soybean oil must
make up a minimum percent of the ink's total formula weight
(table 4).  Newer formulations have higher amounts of soybean
oil; for example, some black news inks contain up to 75 percent
soy oil.

The newspaper industry is a large user of soy inks.  Soy inks
account for more than 90 percent of all colored inks and about
one-third of black inks used by U.S. newspapers.  Soy inks
produce better colors and provide greater clarity with reduced
rub-off on readers' hands.  The lighter color of soybean oil
makes it ideal for color inks because the true color of the
pigments can show through.  Newspaper pictures are composed ofa
pattern of dots, which with petroleum-based inks increase in size
during the press run, reducing the clarity of the picture.  With
soy inks, the dots remain relatively the same size, keeping
picture clarity constant throughout the press run.  Moreover,soy
inks can be used for printing newspapers without a change in
equipment or printing methods.  Soy ink has been found to be a
better carrier of pigments, driers, and other agents than other
ink vehicles, which can result in less press time, lower cost,
and higher quality results.

Color soy inks have taken over much of the market not only
because of their superior properties, but also due to their
competitive price.  Color inks contain less oil, and prices are
based primarily on the cost of the pigments.  On the other hand,
the price of black inks, which are 70 to 80 percent oil, is
driven by the cost of the vehicle oil.  Currently, the price of
refined soybean oil is higher than that for petroleum-based
mineral oil, making black soy inks more expensive than their
conventional counterparts.  (See the June 1993 issue of this
report for more information on soy ink development.)

The U.S. Department of Agriculture's (USDA) Agricultural Research
Service (ARS) has patented a 100-percent vegetable oil ink that
replaces the petroleum-based vehicle and resins used in
conventional inks with vegetable oil derivatives.  The ARS
formulation represents an improvement over most soy oil inks that
replaced only the mineral oil carrier with soy oil, but not the
resins.  USDA issued its first license on the patent in 1992 to
Franks Research Laboratories, Inc., of Oklahoma City, Oklahoma,
giving the company the right to make ink products for sale in
five states.  The Department continues to explore other licensing
opportunities.  ARS scientists also developed sheet-fed and heat-setinks
containing up to 60 percent soybean oil by eliminating
the petroleum oil and resin.  Patents are pending for these
technologies.

In addition to their other attributes, soy inks are more
environmentally friendly than traditional petroleum-based inks.
Soy inks can help improve air quality since they emit almost no
volatile organic compounds (VOC's) into the air.  Petroleum inks
typically have VOC ratings of 25 to 40 percent, while soy ink
manufacturers report VOC ratings under 10 percent, with many soy
inks registered at 2 to 4 percent.  Soy ink also enhances paper
recycling since soy ink is easier to remove from paper pulp than
petroleum-based ink, so there is less damage to pulp fibers
during deinking.  Finally, soy inks are more biodegradable than
petroleum-based inks.  In a study to test the biodegradabilityof
various inks, ARS scientists found that 90 percent of USDA's 100-percent
vegetable oil inks biodegraded, compared with 60 percent
for regular soy-based formulations that contain about 30-percent
vegetable oil and 20-percent biodegradation for petroleum-based
inks.  All inks, including the 100-percent vegetable oil
formulations, utilize pigments, which are derived from either
petrochemicals or metallic oxides, that preclude complete
biodegradability.

According to the National Soy Information Center, the use of
soybean oil in printing inks grew nearly 27 percent between 1994
and 1995, from 46 million pounds to 58.2 million pounds.
However, industry analysts suggest that growth in U.S. vegetable
oil-based inks will begin to flatten out, primarily because most
of the environmentally proactive users have already switched from
petroleum-based inks and demand will stay constant.  In contrast,
interest is expanding overseas.  For example, soy inks are being
tested in the Asian market.  South Korea's two largest newspapers
are using and actively promoting soy ink.  Major newspapers in
both Japan and Taiwan are considering making the switch to soy.

Soybean Solvents Are Cleaning Up

A new soy-based industrial solvent, now being marketed by several
companies, is a direct substitute for petroleum distillate as a
cleaner and carrying agent.  Soy solvents help cut grease, oil,
tar, hydrocarbons, and a variety of oil-based paints and rubber
compounds.  Other benefits of using soy solvents are that they
have no harsh fumes or unpleasant odors, they do not irritate
skin, and they are recyclable.

Using USB funding, Cyto Culture International, Inc., of Point
Richmond, California, has developed a process that uses methyl
soyate to clean up oil spills.  The solvent is sprayed on sand
and contaminated rocks, and the oil is separated and recovered by
conventional skimming technology.  In many cases, more than 90
percent of the oil can be removed by the soy solvent.  The
remaining crude oil then biodegrades more quickly after exposure
to the methyl soyate.  This new method is far less expensive than
older methods of cleaning oil spills that usually require high
transport and storage costs of moving the soiled sand to a
landfill.  In 1997, the U.S. Environmental Protection Agency
listed the product and process for use as a surface cleaning
agent.

Promising Research in Soy-Based Lubricants

USB is funding research on soy-based lubricants with the goal of
commercial use in 3 to 5 years.  Soybean oil is biodegradable,
which gives it an advantage over petroleum lubricants in
instances where the lubricant is lost into the environment and
may contaminate water supplies.  Soybean oil also protects metal
better than petroleum lubricants and costs less than canola or
industrial rapeseed oils, which are already being used in
lubricant formulations.  However, soybean oil has technical and
economic barriers to overcome before commercial use is feasible.
The oil gels up under pressure and high temperatures.
Researchers at the University of Delaware may alleviate these
performance problems by using oils from genetically modified
soybeans.  Also, soybean oil is more expensive than petroleum
lubricants, which will relegate soy-based lubricants to niche
markets where users would be willing to pay a price premium.

Developing commercially viable soy-based lubricants is primarily
focused on hydraulic fluids, crankcase oils, and total-loss
lubricants.  A niche market for biodegradable hydraulic fluids
has already formed in Europe, where many localities ban the use
of nondegradable hydraulic fluid to protect water supplies.
Industry analysts expect similar requirements to reach the United
States sometime in the near future.  A prototype biodegradable,
soy-based hydraulic fluid has passed year-long development tests
at the University of Northern Iowa's Agricultural-Based
Industrial Lubricants Research Program and is ready for market
introduction.

Scientists at Agro Management Group, Inc., of Colorado Springs,
Colorado, are testing soybean oil in conjunction with canola oil
in the crankcases of small engines, such as lawnmowers and
snowblowers.  Renewable Lubricants of Hartville, Ohio, is
researching the use of soybean oil as a crankcase lubricant in
automobile engines.  Soybean oil-based lubricants also can filla
need in situations where oils and greases are routinely lost into
sensitive environmental areas.  These include uses in railroads
and offshore-drilling equipment.  Soy lubricants are also safer
for workers in industrial situations like metal-working factories
where workers are exposed to fumes from quenching and cutting
oils.  International Lubricants, Inc., of Seattle, Washington,is
evaluating soy-based total-loss lubricants.  Total-loss
lubricants, which include oil for lawnmowers and other machines
with two-cycle engines, drop directly to the ground or water
through normal use.  Omni Tech International of Midland,
Michigan, estimates that certain crankcase oils and hydraulic
fluids made with soybean oil could be on the market in 2 to 3
years.  The company expects soy-based lubricants will eventually
capture 10 to 15 percent of the lubricants market.

Creative Efforts of Students Result in New Uses

Professional researchers have not been the only ones in recent
years investigating new uses for soybeans.  Other innovative uses
have been developed by students.  Two Purdue University students
developed a soy-based fire-starter log.  The log is a flat,
brownish bar made from sawdust and fully hydrogenated soybean oil
under pressure.  Two commercial companies have expressed interest
in the product.

Other student projects at Purdue have found ways to substitute
hydrogenated soybean oil for paraffin, a petroleum-based wax.
The first project developed a set of soy-based crayons.  The
crayons, which are 80-percent soybean oil, are nontoxic and
washable.  Already in commercial production, soy-based crayons
could require the oil from up to 200 tons of soybeans a year.
The market for crayons is large, about 2 billion annually.
Another group created birthday candles, made with edible wax.
The candles are 83-percent hydrogenated soybean oil and come in
seven flavors.  The candles reportedly drip less and burn an
average of 25 seconds longer with a shorter flame than paraffin
birthday candles.   [Jacqueline Salsgiver, ERS, (202) 501-7107,
jsalsgiv@econ.ag.gov]

Natural Fibers

Straw and Kenaf Make Inroads in Building Materials and Paper

In the United States, composite building materials are being made
from straw.  Straw bales are being used in the construction of
buildings.  Researchers are investigating straw as a raw material
for paper.  Uses of kenaf continue to expand.  Numerous companies
are producing and selling kenaf-based products.

Straw is the stalk of the plant that remains after the harvest of
grains, such as wheat and rice.  Most straw is incorporated back
into the soil, used for animal bedding, or burned in the field.
However, concern about straw burning and high wood prices has
prompted interest in alternative uses of straw.  Technological
improvements in baling, collecting, and transporting straw during
the last few decades also have made off-farm uses more
economical.  For example, modern balers can produce various-sized
bales, with the larger sizes weighing up to a ton.  A few
companies in the United States have begun using straw to make
composite building materials.  Straw bales also are being used
directly in the construction of homes and other structures as
walls and insulation.  Its use in paper is being investigatedin
the United States by government and private researchers.

Straw Is Produced in Many U.S. Regions

Numerous types of straw are available throughout the United
States as residues of grain production.  Most is wheat and rice,
but barley, oats, rye, and grass straws also are found in some
areas of the country.  The amount of straw available for off-farm
uses varies.  How much can be removed from a field depends onthe
soil type and field topography.  In many instances, some straw
must be incorporated back into the soil to maintain soil quality
and reduce wind and water erosion.  Also, farmers may use someor
all of their straw on-farm for livestock bedding or other uses.

Data on straw production or the amount used off-farm are not
available.  However, researchers have developed techniques to
estimate crop residue production, including straw, and, in some
instances, the percentage that can be harvested without harming
soil productivity.  For example, about 78.5 million tons of wheat
and rice were produced on average during 1990-96 in the United
States (table 5).  About 123 million tons of straw was produced
annually as a byproduct during the same period.  North Dakota,
Kansas, Oklahoma, and Washington were the leading wheat growing
states, while Arkansas and California were top in rice
production.  In these and other major growing areas, an estimated
51 million tons out of the 101 million tons of straw produced
annually could have been harvested without lasting damage to the
soil.  These estimates do not take into account on-farm uses,nor
whether local production was concentrated enough to make straw
collection and transportation feasible.

Because straw is bulky, the distance to which straw bales can be
economically transported is limited.  Companies using straw asa
manufacturing input must decide on plant location, collection
methods, and type and location of storage facilities, among other
business decisions.

In California, finding off-farm uses for rice straw is becoming
more important as the mandated phasedown in agricultural burning
in the Sacramento Valley continues.  Burning has been the
standard method for clearing rice fields and disposing of the
straw.  However, public complaints about the effects of burning
on visibility and air quality led to the passage of the Rice
Straw Burning Reduction Act of 1991.  The law phases down the
yearly amount of rice straw that can be burned in the Sacramento
Valley Air Basin from 90 percent of planted rice acreage in 1992
to 25 percent in 1998-99.  In 1996, farmers burned 45.7 percent
of their rice acreage (figure 6), slightly below the 50-percent
level mandated by the act.  To foster off-farm uses, the
California Legislature passed a law in 1996 authorizing a yearly
tax credit of up to $400,000 for 11 years for firms using rice
straw.  Businesses can claim a $15-credit for every ton of rice
straw used in products and services.

In 1991, legislators in Oregon also passed a law phasing down
field burning of grass-seed and cereal-grain straw in the
Willamette Valley from 180,000 acres in 1991 to 40,000 acres in
1998 and thereafter.  The law also authorizes state funds and
burning fees be used for research and development to find
alternative methods of field sanitization and uses of straw.

Companies Are Making Composite Panels from Straw

A process for producing compressed straw panels was invented in
the 1930's and was used to a limited extent in Europe, Canada,
and Australia in the intervening decades.  Only in the last
couple of years have companies in the United States started
manufacturing structural and nonstructural panels and composite
products made from straw.  For example, Agriboard Industries,
based in Fairfield, Iowa, and Coppell, Texas, began producing
compressed straw panels in February 1997 at its Electra, Texas,
manufacturing facility.  Farmers bale straw into 1,000-pound
bales, which are shipped to the factory and stored for use.  The
company estimates that it will initially use about 13,000 tons of
straw annually and at full capacity, up to 40,000 tons per year.

A 240-foot long linear extrusion mill separates wheat or rice
straw into loose strands, compresses it under intense heat, and
fuses it into 3-inch thick strawboard.  No chemical binders are
added.  Straw fibers, when compressed under high temperatures,
bond together without any adhesive.  For structural applications,
the strawboard is then laminated between oriented-strand board to
form a stress-skin panel.  Stress-skin-panel building systems,
usually made with synthetic extruded polystyrene foam or paper as
the core material, have become popular in applications where
their high insulative properties are desired.  Agriboard's panels
have undergone testing by the National Association of
Homebuilders Research Foundation and other testing agencies to
demonstrate their fire resistance, acoustical properties, and
structural and thermal performance.  The company is supplying
panels for several construction projects across the country,
including a large retail store in Chicago, Illinois, and 200- and
300-unit apartment complexes in Austin, Texas.  The company plans
to open plants in California and Ohio within the next 18 months.

Other straw panel manufacturers are due to come on line in 1997.
BioFab, LLC, of Redding, California, is now marketing imported
prototype strawboard panels, and is planning a full-scale
production facility to come on line this fall in California's
Sacramento Valley.  The panels are formed through an extrusion
process under heat and pressure, using 100-percent rice straw and
no chemical additives.  The company offers two products for
interior and nonload-bearing applications:

o  A decorative acoustical ceiling/wall panel, which looks likea
thatched ceiling, and

o  A nonstructural panel covered with recycled-content
linerboard, which is sold as a replacement for gypsum-board
drywall and wood studs.

Pierce International of Englewood, Colorado, and Stramtech of
Rupert, Idaho, are planning to open a production facility in
Rupert this fall.  Construction is underway.  A similar facility
in Virginia's eastern shore is scheduled to open in the fall of
1998.  Once in operation, these plants will compress straw under
heat and pressure in an extrusion process to produce straw
panels.  Plants in Europe and Australia have been using the same
technology to manufacture straw panels since the late 1940's.
The panels will be used for interior and nonload-bearing walls
and partitions.

Cereal straws are also being used for the production of
particleboard and plywood substitutes.  For instance, PrimeBoard,
Inc., is making an industrial-grade particleboard from wheat
straw at its new $15-million plant in Wahpeton, North Dakota,
which opened in August 1995.  The particleboard is made from
wheat straw and a formaldehyde-free binder made from methylene
diphenyl diisocyanate (MDI).  The absence of urea formaldehyde,a
common substance in wood particleboard, is seen as a plus because
formaldehyde-containing adhesives give off toxic fumes.
PrimeBoard's composite panel has been independently tested and
mill certified to meet or exceed all specifications for industrial-grade
particleboard and can be used in the same applications as wood particleboard.
One of PrimeBoard's primary customers is PrimeWood, Inc., a kitchen
cabinet/furniture/architectural millwork component manufacturer
also located in Wahpeton.  A major impetus for forming PrimeBoard
came from PrimeWood's concern about long-term supplies of wood
for building materials.

Naturall Fibre Boards, LC, of Minneapolis, Kansas, began
manufacturing strawboard on a limited scale in June 1995.  The
equipment chops up the straw, mixes it with a MDI resin, and
presses it into panels.  A new press is on order for deliveryin
1998 that will increase production eight-fold.  The panels are
being marketed as floor underlay (a material that is often under
carpeting, vinyl flooring, and other floor coverings).  According
to the company, the panels meet the requirements for fiberboard
and particleboard underlay and comply with all building codes.

Eleven farmer cooperatives in central Kansas formed CenKan
Enterprises to produce straw-based particleboard.  The
manufacturing facility in Hutchinson, Kansas, is scheduled to
come on line this summer.  The production system was purchased
from a British firm, which is marketing the technology worldwide.
As with similar systems, chopped straw is mixed with a MDI binder
and pressed into panels.  CenKan has signed a 5-year contract
with a Canadian-based distributor to market the straw-based
particleboard in ready-to-assemble furniture applications in the
United States.  These companies are just a few examples of the
firms that are using straw or are planning straw-based
enterprises in the near future.

According to an analysis of alternative construction materials
made from cellulosic wastes (straw, urban wood waste, and
recycled paper) by the Institute for Local Self-Reliance, the
short-term acceptance of alternative building systems or products
depends not only on customer acceptance but also on whether the
systems comply with building codes.  Construction products made
from cellulosic sources will likely have the most success when
used with pre-existing construction techniques (8).

Straw Bales Are Used Directly in Construction

In addition to using straw to manufacture building materials,
straw bales are being used directly in construction.  The bales
are used to make the walls of houses, garages, storage sheds, and
other structures.  Two types of smaller bales are used:

o  Two-string bales, which are roughly 35-40 inches long, 18
   inches wide, and 14 inches high and tied together withtwo pieces
   of polypropylene twine, or
o  Three-string bales, which are usually 32-47 inches long, 23-24
   inches wide, and 14-17 inches high and tied together withthree
   pieces of polypropylene twine.

   Any type of straw can be used.  Bale size, density,and the
   number of strings will vary with the type of straw andthe type
   of baler used.

Bale walls can be built on top of any type of foundation, and can
be load-bearing or used as infill with post-and-beam
construction.  If the walls are load-bearing, which means they
are the structural support for the roof, the bales are stacked in
staggered courses like big bricks, then rebar (steel
reinforcement bars used in concrete structures), bamboo, or
wooden dowels are driven down through the bales for vertical
reinforcement.  Load-bearing structures are usually one-story,
square, or rectangular buildings.

With post-and-beam construction, a wood, metal, or masonry
structural frame supports the roof, and bales are stacked in
between the posts to make the walls.  Post-and-beam construction
offers greater flexibility than load-bearing designs, allowing
for a wider variety of floor plans, roof designs, and building
heights.  Hybrid systems, with some load-bearing walls and some
post and beam, also exist.  As one of the final steps in
construction, the walls are covered with some sort of finish.
Commonly, stucco is applied to the exterior and plaster to the
interior, although various other wall finishes have been used.

In the United States, building with bales can be traced to the
Sand Hills of Nebraska around the turn of the century.  Few trees
were available for timber, and the soil was too sandy for sod
homes.  The advent of baling equipment allowed settlers to use
prairie hay as a building material.  From about 1890 to 1935,
bales were used to build load-bearing homes, farm buildings,
churches, schools, offices, and grocery stores.

Recent interest in straw bale construction began in the late
1970's after an article by a Nebraska historian on the bale homes
in that state was published in 1974.  Using straw bales appeals
to future home owners, architects, and builders who are concerned
about the impact of traditional building systems on the world's
resources.  They view straw as an abundant renewable resource.
In the southwestern United States, straw bales also were found to
be a cheap substitute for labor-intensive double-wall adobe.

One facet of straw bale building often mentioned in the popular
press is its affordability. However, walls typically represent
only 15 to 20 percent of the overall cost of most houses, and
building costs can vary depending on the climate, the
characteristics of the site, building-code and permit
requirements, and labor and raw-material costs.  Using salvaged
materials and labor donated by the owner/builder, friends,
relatives, and straw bale workshop participants are frequently
mentioned as ways owner/builders can reduce construction costs.
Structures built by architects and contractors are only
marginally less expensive than conventional construction, given
that labor accounts for 60 percent of the cost of a contracted
home (6).  Nevertheless, lower energy and maintenance costs over
the life of the structure are often cited as a benefit of straw
bale buildings.

Straw Bale Buildings Can Be Found in Many Locations

All types of buildings have been erected with straw homes,
cabins, storage sheds, barns, and other out buildings.
Initially, most structures were built in rural areas, where
complying with building codes was not a problem.  The first straw
bale house to have a building permit was constructed in Tesuque,
New Mexico, in 1991.  This post-and-beam structure was considered
a breakthrough by the industry, as it was the first permitted,
contractor-built, bank-financed, straw bale house in the United
States (4).

The first load-bearing house to receive a building permit was
constructed in Tucson, Arizona, in 1993.  Approval was made
possible as the result of structural tests conducted at the
University of Arizona, in cooperation with city and county
building officials (5).  Since then, load-bearing houses have
been approved in other Arizona jurisdictions, California,
Colorado, Florida, Maine, Oregon, and Washington State.  An
estimated 20 states have straw bale structures built with
building permits and another 23 have straw bale buildings erected
since 1940 (figure 7).

Applying for and receiving building permits is a local process.
Unlike Canada and most European countries, the United States does
not have a national building code.  Building codes are usually
adopted as municipal or county ordinances or by state
legislatures in the case of statewide codes.  These codes often
are based on one of three model building codes:

o  the Uniform Building Code, which is common west of the
   Mississippi River,
o  the Basic Building Code, which is used primarily in the
   Northeast and Midwest, and
o  the Standard Building Code, which is usually found in the
   Southeast (3).

All three model codes contain sections that address the use of
alternative building materials, such as straw bale, adobe, and
rammed earth.  Building officials may approve any such
alternative, provided that the proposed design of the structure
is satisfactory and complies with the provisions of the local
code and that the material is, for the purpose intended, at least
equivalent to that prescribed in the code in terms of
suitability, strength, effectiveness, fire resistance,
durability, safety, and sanitation (3).

A few jurisdictions have approved building codes specifically for
straw bale construction.  In January 1996, New Mexico adoptedthe
post-and-beam code that the state had been using as guidelines to
issue building permits.  Also, in January 1996, the City of
Tucson and Pima County, Arizona, adopted standards for load-bearingand
nonload-bearing straw bale construction.

In the fall of 1995, the California legislature enacted a bill,
which became effective January 1, 1996, that amends the state
building standards law to establish safety guidelines for the
construction of structures that use baled rice straw as a load-bearingor
nonload-bearing material.  California cities and
counties must adopt the guidelines for them to become part of
local building codes.  Individual jurisdictions may modify the
guidelines as deemed necessary.  Several counties, including
Glenn, Napa, Trinity, and Yolo, have adopted the straw bale
guidelines as part of their building codes.  Also in 1995, a law
was passed in Nevada specifying that local jurisdictions amend
their building codes to permit the use of straw and other
materials that are renewable or conserve scarce natural
resources.

Bale Wall Systems Have Various Attributes

One of the most often cited benefits of building with straw bales
is the increased insulation the thick bales provide.  Resultsof
two studies conducted in 1993 and 1994 indicate that straw bales
have an average R-value (resistance to heat flow) of 2.5 to 3 per
inch, compared with 1 for wood, 0.2 for brick, and 3 for
fiberglass batts.  Thus, depending on the thickness of the bale,
R-values can range from 35 to 55.  Plaster, stucco, or other
finishes also can add to the R-value of completed walls.

While loose straw burns, once it is packed into bales it is
remarkably fire resistant.  The dense bales limit the oxygen
available for combustion.  Fire-resistance tests were conducted
in December 1993 for New Mexico on test straw bale walls.  A 1994
report from the New Mexico State Construction Industries Division
on straw bale construction states that the results of the fire-
resistance tests demonstrate that a straw bale infill wall
assembly is a far greater fire-resistive assembly than a wood
frame wall assembly using the same finishes.

Moisture is a concern with straw bale buildings as it is with
wood structures.  Fungus (dry rot) can occur in straw at humidity
levels above 20 percent of the dry weight.  However, for
significant damage to occur, these humidity levels must be
maintained over a period of time.  To keep obvious sources of
moisture at bay, those familiar with straw bale construction
recommend that the bales be elevated above the surrounding soil
and a moisture barrier used in areas subject to direct wetting.
Historical experience suggests that the best way to avoid
sustained high-moisture concentrations is to permit finished
bales to transpire any accumulated moisture back into the
environment.  Common finishes, like lime and adobe plaster and
cement stucco, do allow vapor transmission.

More Testing Needed on Straw Bale Construction

For straw bale construction to become more widely accepted,
particularly by building code officials, more research and
testing is needed on topics such as building methods and
parameters and long-term durability in various climates.  Some
testing has been done in the last few years.  For example,
structural and thermal tests have been performed in Tucson,
Arizona, and fire, wind-loading, and compression tests have been
conducted by a certified laboratory in Sante Fe, New Mexico.

In addition, during the early 1990's, the Navajo Nation, in
cooperation with the U.S. Department of Energy (DOE) and U.S.
Department of Housing and Urban Development, initiated a search
for more energy-efficient, affordable housing that could be built
on the reservation with local materials and would fit the Navajo
lifestyle.  The result was a demonstration home, using a
combination of adobe walls and load-bearing straw bale walls,
constructed near Ganado, Arizona.  On behalf of DOE, Lawrence
Berkeley Laboratory analyzed the thermal characteristics of the
various wall materials and projected energy savings for the
prototype home.  In its final report, the laboratory concluded
that straw bale building offered the best energy performance of
any of the new construction types being considered, with a 15-percent
improvement in overall building energy efficiency in
heating for the climates on the Navajo reservation.

In 1995, the City of Tucson's Community Services Department was
awarded a $73,000 grant to measure and evaluate the affordability
and energy efficiency of straw bale housing and site/resource
utilization.  The funding came from DOE and was administered by
the Urban Consortium Energy Task Force.  In 1996, Habitat for
Humanity Tucson and the Tucson Urban League, in conjunction with
the city, each built a straw bale house on city-owned land.  The
buildings were designed for low-energy and resource use and will
be monitored for energy use for a minimum of 1 year.  The
structures, now private homes, are open to the public on a
limited basis for 1 year for educational and informational
purposes.  The information gathered during construction and
monitoring of the two houses will be documented and analyzed to
determine costs and energy and resource savings.

The nonprofit Aprovecho Research Center of Cottage Grove, Oregon,
will soon complete a 2-story straw bale dormitory.  The post-and-beam
structure complies with Lane County Building Codes and has
350 rye grass straw bales as infill.  Part of the funding forthe
project came from the Oregon Department of Agriculture for
construction of a straw-bale home that could be studied for
practicality and durability.  A portion of the money, from a
state fund for finding alternatives to burning straw on
Willamette Valley grass-seed fields, goes to the university for
monitoring the dormitory with moisture-detecting sensors imbedded
in the walls.

Other Countries Are Using Straw for Paper and Paperboard

During the 1800's, straw was widely used in the United States and
other countries to make paper and paperboard, but the advent of
wood pulping technology in the mid-1800's displaced straw from
many paper grades.  Straw pulping for paperboard continued to
expand and peaked in the 1940's.  During the next couple of
decades, demand for paperboard increased substantially as
corrugated cardboard boxes began to displace wooden crates as
packing and shipping containers. However, declining economic
returns caused many paperboard manufacturers to switch from straw
to hardwoods and waste paper.  The last U.S. mills stopped using
straw in the 1960's.

Nevertheless, cereal straws and other nonwood fibers continue to
be important in many countries where supplies of pulpwood are
limited.  In developing countries, many of which are located in
areas with limited forest resources, nonwood fibers accounted for
about 35 percent of the raw materials used for pulp production
during the 1990's.  In contrast, during the 1990's, nonwood
fibers made up less than 0.5 percent of pulp production in
developed countries, which often have greater forest resources.
In 1995, nonwood fibers accounted for 7 percent of total world
pulp production, up from roughly 4 percent in the 1970's and
early 1980's (figure 8).

Straw, sugar cane bagasse, and bamboo are the leading nonwood
fibers countries use for general paper production (table 6).
Other nonwood fibers, such as abaca and sisal, have unique
characteristics and are used in specialty applications.  China
and India are major producers of nonwood fibers (table 7).  As
for straw, China accounted for 88 percent of straw pulp capacity
in 1993, with another 22 countries holding the remainder (2).

For straw to again become a raw material for paper and paperboard
in the United States, industry experts cite a number of issues
that must be addressed:

o  Certainty of supply over the long run at a competitive price.
   For an industry accustomed to using trees, relying ona byproduct
   of annual grain production raises concerns about availabilityand
   price.

o  Raw material bulkiness.  Straw is bulky, which means
   collection, transportation, and storage costs will behigher than
   for wood over similar distances.  Pulping proceduresalso must be
   adjusted to account for straw's bulkiness.
o  Extended storage.  After harvest, straw must be collectedand
   stored for year-around availability, without significantdeterioration of fiber quality.
o  Silica content.  (Silica is a common mineral; its mostfamiliar form is sand.)
   Depending on the type, straw can contain 4- to 15-percentsilica, which interferes with
   conventional    recovery of pulping chemicals.
o  Pulp drainage characteristics.  Straw pulp contains highamounts of  hort fibers
    (less than 1 millimeter in length) and hemicellulose,which combine to slow the drainage
    of water from the pulp.  Fast drainage is importantwhen using high-speed papermaking     machines, whichhave been key in increasing industry productivity.

A few universities and other organizations are researching the
feasibility of using straw for paper and paperboard.  For
example, Weyerhaeuser Company, Oregon State University, and the
Oregon Department of Agriculture initiated a project in 1993 to
investigate new technologies for processing ryegrass straw.  The
project has progressed to tests in a 50-tons-per-day pilot plant
using a steam-explosion process.  The straw pulp would be used
with wood pulp to make linerboard for corrugated containers.
Also, the University of Washington and Washington State
University are cooperating on a project to assess pulping options
for wheat straw and to select wheat varieties with improved fiber
properties.  The project hopes to receive a grant to assess the
feasibility of a straw pulp mill in eastern Washington.

University of Minnesota researchers are working with Blandin
Paper Company of Grand Rapids, Minnesota, and local wheat and
barley growers to investigate the use of straw for paper.  In
preliminary tests, researchers found that mixing straw and wood
pulps yielded the same type and quality of paper Blandin was
making for glossy newspaper inserts.  Up to 30 percent of straw
pulp could be used without a loss in quality.  The group is now
planning to conduct a feasibility study of producing straw from
farmer-owned mills in the upper Midwest.

One company, Arbokem of Vancouver, Canada, is already producing
limited amounts of straw pulp.  It's demonstration-scale pulp
mill in Vulcan, Alberta, can make up to 2,000 tons of pulp per
year using a proprietary potassium-based process.  The company
plans to build a rice straw-based pulp mill in California's
Sacramento Valley.  In collaboration with different paper mills,
the company has produced various grades of paper for test
commercial sale, principally in California.  Its white photocopy
paper is made from 45-percent wheat straw, 43-percent post-consumerrecycled
paper, and 12-percent calcium carbonate.

Kenaf Production and Products Continue To Expand

Development and commercialization of kenaf and various kenaf-based products
in the United States have been ongoing since the 1940's.  Researchand
development efforts, initiated by the U.S. Department of Agriculture(USDA)
when U.S. jute imports were interrupted during World War II, receiveda boost
in the 1950's when researchers identified kenaf as the most promisingnonwood
fiber for pulp and paper making.  More recent USDA research andindustry
interest was triggered by high newsprint prices in the late 1970's.

Like jute and flax, kenaf stems consist of two distinct fibers.
The outer bark of bast fibers comprises 30 to 40 percent of the
total dry weight of the stalk.  The inner core of short balsa-wood-like
fibers accounts for the remainder.

Kenaf can be grown in many parts of the United States and the
world, but it generally needs a long growing season to produce
the necessary yield to make it a profitable crop.  With a long
growing season, like that found in the southern United States,
kenaf can reach a height of 12 to 18 feet and produce 5 to 10
tons of dry fiber per acre annually.  An estimated 8,000 acresof
kenaf currently are being grown in the United States (1), up from
roughly 4,000 acres in 1992 and 1993 (see the June and December
1993 issues of this report).  Primary production areas are Texas,
Mississippi, Georgia, Delaware, and Louisiana.

Numerous companies are producing and selling kenaf-based
products.  Kenaf International, headquartered in McAllen, Texas,
has been producing kenaf since 1981 (1).  The kenaf is grown in
southern Texas and processed locally to separate the bast and
core fibers.  The fibers are used in moldable fiber mats and oil-absorbent
pillows for cleaning up oil spills.  The fiber mats,
which are made from the bast fibers, are being used in European
automobiles as interior door panels.  The company also is
evaluating other products that can be made from the bast and core
fibers.  Company President, Charles Taylor, has identified many
current and potential types of kenaf-based products, including:

o  Pulp, paper, and paperboard produced by wet processing;
o  Fiberboard produced by dry processing using moldable fibermats;
o  Absorbing media;
o  Packing materials;
o  Composite products;
o  Livestock forage and feed; and
o  Traditional cordage uses.

In February 1997, Canadian-based Kafus Capital Corporation
announced that its subsidiary, Kenaf Paper Manufacturing (KPM),
had acquired an option to purchase 50 acres of land in Willacy
County, Texas, on which the company plans to construct a
newsprint mill (7).  The facility will be the first commercial
pulp mill in North America to use whole-stalk kenaf as its sole
fiber source.  The announcement indicated that KPM is in the
final stages of concluding long-term sales agreements for its
newsprint with leading newspaper publishers, primarily in Texas.
Newspapers reportedly are interested in newsprint from kenaf
because it has the potential to be an additional source of
newsprint at a reasonable price.  Long-term contracts for
supplying kenaf fiber also are expected soon with Kenaf
International, which is a minority owner of KPM.

The KPM plant is estimated to cost slightly over $100 million to
build and will be capable of producing between 70,000 and 90,000
tons of high-quality newsprint annually.  Although this plantis
somewhat smaller than most conventional newsprint facilities
constructed in North America during the past 10 years, the
company claims it is designed to be one of the lowest cost
producers of newsprint on the continent.

First Farm Fibers, a Delaware-based corporation comprised of
farmers and investors, and researchers from the University of
Delaware have worked with Curtis Paper Mill, a division of James
River Paper, in Newark, Delaware, to produce kenaf paper, which
can be bleached or unbleached, coated or uncoated.  They also
have collaborated with Crane Paper Company of Dalton,
Massachusetts.  Crane, looking for ways to expand market options,
has placed an order for 10 tons of kenaf fiber to be used in its
fine stationery.  In 1996, First Farm Fibers contracted with
farmers to produce 250 acres of kenaf in Delaware, and has 750
acres under contract this year.

Another commercial producer of kenaf paper is KP Products of
Albuquerque, New Mexico. According to the company, kenaf paper is
stronger, whiter, longer lasting, more resistant to yellowing,
and has better ink adherence than wood-based paper.  The firmhas
produced about 200 tons of kenaf-based paper since 1992.

Examples of other businesses that sell kenaf-based paper products
and the types of items they offer include:

o  Acorn Design, stationery sets;
o  Dancing Kenafs, kenaf spiral journals;
o  Don Mickey Designs, letterhead stationery, envelopes, and
   business cards;
o  Eco Specialties, specialty advertising products;
o  Everything Earthly, notepads, writing tablets, and envelope
   sets;
o  Grass Roots Paper Company, soft-covered journal paper;
o  Okina Sales, spiral notebooks;
o  Simple Thoughts, coloring books and calendars; and
o  Soundings of the Planet, cassette tape and compact disk
   inserts and posters.

Ankal, Inc., based in Atlanta, Georgia, also has developed
technology to separate the bast and core fibers.  The primary
product advertised by the firm is a kenaf-core-based cat litter,
which is described as biodegradable, dust free, and
environmentally friendly.  Other products mentioned in company
literature, but not advertised for sale, include kenaf paper,
building materials, pressure sensitive labels, and pelletized
fiber and feed.

During the early 1990's, the Mississippi Delta Fiber Cooperative
of Charleston, Mississippi, attempted to produce 2,000 to 3,000
acres of kenaf annually.  However, due to various problems, much
of the crop was not harvested and, in 1995, the business was
taken over by Lumus Gin Company.  About 1,600 acres were grownin
1996.  The company hopes to produce about the same volume of
kenaf this year on less, but more productive, land.

Kenaf Research Also Continues

While significant progress has been made on commercialization of
kenaf, much research and development remains to be accomplished
before kenaf becomes a major U.S. crop.  The largest and most
comprehensive U.S. research effort on kenaf is located at
Mississippi State University (MSU).  MSU has had over 20
scientists from more than 15 disciplines evaluating various
aspects of kenaf, including product development.  Much of the
financial support was Federal funding provided through USDA's
Agricultural Research Service, but this funding is being phased
out in 1997.  The types of research MSU staff have been
conducting include:

o  Varietal selection and breeding;
o  Evaluating planting date, row spacing, plant density, and
   other yield determinants;
o  Production practices;
o  Control of nematodes and other kenaf pests;
o  Fertility;
o  Weed control;
o  Plant desiccation for harvest;
o  In-field separation of fibers;
o  Economic analysis of fiber separation;
o  Using kenaf as bedding for horses, broilers, and laboratory
   animals;
o  Evaluating kenaf as an oil sorbent;
o  Kenaf core as a bioremediation enhancer, a feedstock for
   composite materials, and a component in landscape andgreenhouse
   bedding media; and
o  Use as a textile fiber, including processing, fiber characteristics,
   and product development.

University of Delaware researchers have been evaluating kenaf as
an alternative crop for their area.  Farmers like to use kenafin
rotation with soybeans because it helps to break the life cycle
of the soybean cyst nematode.  In addition to on-going kenaf
production research, scientists are conducting product
development work such as using kenaf fibers in composite
materials and kenaf core in cat litter, animal bedding, and as a
growing medium for plants.  [Straw:  Lewrene Glaser, ERS,(202)
219-0091, lkglaser@econ.ag.gov.  Kenaf:  Donald Van Dyne,
University of Missouri, (573) 882-0141,
ssvandyn@muccmail.missouri.edu]

1.   Associated Press, "Kenaf Could Be First New ProfitableCrop
     for Rice Belt Since Soybeans," May 31, 1997.

2.   Atchison, Joseph, "Present Status and Future Prospectsfor
     Use of Non-Wood Plant Fibers for Paper GradePulps," paper
     presented at the AF&PA 1994 Pulp and FiberFall Seminar,
     Tucson, AZ, November 14-16, 1994.

3.   Eisenberg, David, "Building Codes, Straw-Bale Construction,
     and You,"  The Last Straw, No. 5, Tucson,AZ, Winter 1994,
     pp. 23-25, 30.

4.   Eisenberg, David, "The Land of Enchantment: Fertile Ground
     for the Straw-Bale Revival," The Last Straw,No. 7, Tucson,
     AZ, Summer 1994, pp. 1, 5-9.

5.   Eisenberg, David, Straw Bale Construction and the Building
     Codes, Development Center for AppropriateTechnology,
     Tucson, AZ, April 1995, 26 pp.

6.   Hofmeister, Richard, "Plastered Straw-Bale Construction:A
     Renewable Resource for Energy-Efficient, Self-HelpHousing,"
     Association of Collegiate Schools of Architecture,
     Washington, DC, 1994, pp. 38-47.

7.   Kafus Capital Corporation, press releases, Vancouver,
     British Columbia, Canada, July 15, 1996, andFebruary 24,
     1997.

8.   Lorenz, David, A New Industry Emerges: Making Construction
     Materials From Cellulosic Wastes, Institutefor Local Self-Reliance,
     Minneapolis, MN, June    1995, 13 pp.
 

Special Article
Crambe Production and Processing:  A Case Study of the Effectson
Rural Areas in North Dakota
by
Jacqueline Salsgiver 1/

Abstract:  Crambe is a new industrial oilseed being grown in
North Dakota.  An input-output model was used in this analysisto
estimate the economic effects of crambe production, the
construction of an oilseed processing plant to handle the crop,
and the crushing of the crop in a 15-county region in central
North Dakota.  The results indicate that an estimated gain of
nearly $10 million in total sales and 42 new wage and salary jobs
will be added to the region as a direct result of the increase in
the production and processing of the 1997 crambe crop.  Through
local purchases of supplies and the spending of crambe-related
income, the industry will generate an estimated additional $2.8
million in total sales and 46 wage and salary jobs.  Buildingthe
plant added an estimated 46 temporary construction positions in
the region, which generated an estimated increase of $2.2 million
in sales and another 40 jobs in various industries as the workers
spent their wages.

Keywords:  Crambe, North Dakota, industrial crops, oilseed
processing, regional development.

Over the last 10 to 15 years, a few new industrial crops have
been developed in the United States and are now under commercial
production.  Kenaf, an annual fiber crop, is being produced in
the southern regions of this country.  Two new industrial
oilseeds, crambe and meadowfoam, are grown in North Dakota and
Oregon, respectively.
 
1/ Salsgiver is an agricultural economist with ERS, (202) 501-7107,
jsalsgiv@econ.ag.gov.

The development, commercialization, and adoption of new crops can
provide farmers with additional cropping options.  Crop
diversification can minimize the risk of uncertain markets and
production problems, such as adverse weather conditions and
disease outbreaks.  Some new crops may fill a rotational need
that has multiyear benefits.  For example, farmers in North
Dakota prefer to use crambe as a broadleaf crop in rotation with
small grains because it does not have the insect problems often
seen with canola and sunflowers, yet it is not susceptible to the
weeds and diseases plaguing small grains.  Another example is
meadowfoam, which has given farmers in Oregon's Willamette Valley
an alternative crop when grass-seed production is no longer
viable due to weed problems or other reasons.

Potential Rural Impacts of New Industrial Crops

Although these new crops may bring about only marginal changes in
farm income and agricultural output at the national level, they
may have a greater impact at the local level.  The development
and commercialization of new industrial crops can affect rural
economies in several important ways.  First, farm income could
rise as a result of new crop opportunities.  Second, if farm
production increases, the level of inputs, transportation, and
storage may increase.  Jobs in farm-related industries could be
created, such as in processing the raw commodities and producing
products.  Finally, rural employment also may rise because ofthe
multiplier effects of enhanced farm income, increased demand for
agricultural inputs, and the establishment or expansion of
processing and manufacturing facilities that use agricultural
commodities.

The benefits to rural communities depend in part on the
industrial mix of the community.  Rural areas with a large
agricultural base are likely to experience a greater impact due
to changes in farm employment, income, and land values than rural
areas that specialize in nonagricultural activities (2).
Approximately 24 percent of all nonmetropolitan counties are
classified by the Economic Research Service as farming-dependent,
deriving at least 20 percent of their total labor and proprietor
income from farming.  Farming-dependent counties are primarily
concentrated in the Great Plains, spanning from North Dakota to
the Texas Panhandle.

Even if a new industrial crop is produced in a nonmetropolitan
area, not all the potential income and job benefits will be
realized.  For instance, farm employment may not change with the
introduction of a new crop, particularly if it is similar to
those currently produced.  Also, the higher value-added benefits
may not be captured in the area.  A firm's decision on where to
locate its processing and/or manufacturing facility is based on a
region's resource base, transportation costs of the raw commodity
relative to the processed product, and the availability of
skilled labor.  Rural areas generally have a comparative
advantage over urban areas in terms of availability of natural
resources, lower tax rates, and less expensive land and labor
costs.  However, some processing plants, particularly for those
crops that are less costly to transport and store, are located in
metropolitan areas.  Also, some industries that use agricultural
raw materials, such as the chemical and rubber industries, are
located in metropolitan regions because they rely on highly
skilled labor and technicians.  In these situations, metropolitan
areas may receive more benefits from industrial crops and
products than nonmetropolitan areas (2).

If the development of new industrial crops is to be used as a
rural development strategy,  it may be useful to develop criteria
for which new crops would likely cause the greatest net gain for
a region.  A new crop should provide some benefit to farmers by
fitting into a crop rotation, having the ability to be grown on
otherwise unproductive land, or replacing a lower valued crop.
Ideally, the region should also capture some of the frontward
linkages of the new agricultural products, such as processing and
marketing enterprises.  This case study illustrates how a rural
area is affected by a new industrial crop.  The study looks at
crambe production and processing in rural North Dakota, showing a
region's success in both producing a new industrial crop and
participating in the enhancement of the product.

Crambe Uses and Production in North Dakota

Crambe is an annual oilseed crop first introduced in the United
States in 1940.  Sustained commercial production began in 1990in
central North Dakota.  The crop is grown for its inedible oil,
which contains high amounts of erucic acid, a 22-carbon fatty
acid.  Erucic acid is used to make intermediate chemicals, such
as slip and antiblock agents, emollients, and surfactants, that
are used in the manufacture of such items as plastic bags,
cosmetics, personal-care products, and laundry detergents (1).
Crambe oil could potentially be used in paints and coatings,
nylon-1313, plastics, and hard waxes (3).

Industrial rapeseed is the traditional source of erucic acid for
the world market, but in the United States, crambe has begun to
tap into this market.  Industrial rapeseed and crambe are the
only commercial sources of erucic acid (1).  The United States
currently imports about 40 million pounds of industrial rapeseed
oil, primarily from Canada and Eastern Europe, worth about $10
million annually.  A small amount of industrial rapeseed is also
grown in the Pacific Northwest.

The American Renewable Oil Association, an association of crambe
growers, contracted with 435 producers to grow crambe on 50,000
acres in 1997, an increase of 28,000 acres from the previous
year.  The number of acres contracted is the estimated amount
required to meet the domestic demand for crambe oil.  All of the
acreage is in North Dakota, with much of the production
concentrated in the center of the state.  In addition to crambe
production, AgGrow Oils, a grower-owned company, has begun
construction of an $8-million oilseed-crushing plant in Foster
County, North Dakota.  The plant is a full-press, mechanical
processing facility that is scheduled to begin operation in
November 1997 processing this year's crambe crop.  The company
estimates the plant will be able to handle 200 tons of seed per
day at startup.  The plant will process other novel oilseeds,
such as high-oleic sunflower and safflower, flax, and possibly
specialty canolas, as well as crambe.  AgGrow Oils plans to adda
refining system to the plant in subsequent years.

Using an Input-Output Model To Assess Crambe's Effects

To analyze the regional effects of crambe production and
processing, a study area of 15 nonmetropolitan counties was
defined.  The study area encompasses the major crambe growing
areas and the related oilseed crushing plant (figure A-1).  Total
population in the region is 149,000, with an average income of
$40,382 per household (table A-1).  Nearly 24 percent of the
86,538 jobs are in the services sector, which accounts for the
largest share of the region's employment.  Although agricultural
employment makes up only 15 percent of regional employment, 8 of
the 15 counties are considered farming-dependent.  The region
produces 30 percent of North Dakota's barley crop and 47 percent
of the state's sunflower seeds, which is 11 percent of the
Nation's barley crop and more than 26 percent of all domestically
grown sunflower seeds (table A-2).

The effects of crambe production and its related enterprises on
the overall economy of the central North Dakota study area are
estimated using a regional input-output model.  Input-output
provides a framework in which to collect, categorize, and analyze
data on the interindustry structure and interdependencies of a
region's economy.  Input-output models estimate the direct,
indirect, and induced impacts from a final demand change on a
region.  In this case study, the direct effects are the sales,
employment, and value added generated directly by crambe
production and the construction and operation of an oilseed
processing plant.  Indirect impacts are the sales, employment,
and value added that result from other firms in the local economy
selling to the crambe enterprises, such as the agricultural input
industries, agricultural services, and wholesalers.  Induced
effects or impacts are the sales, employment, and value added
generated from the earnings of the workers in the newly created
jobs as the earnings are spent in the North Dakota study region.

The analysis is performed within the framework of the 1993 Input-Output
Model for Planning and Analysis (IMPLAN) Pro version.  This modelprovides
for county-level analysis from 528 industry sectors, similar in detailto the
three-digit Standard Industrial Classification codes for most industries. The
ability to assess a change in the overall economic activity of a regionas a
result of some change in one or several economic activities is the
appeal of using a model like IMPLAN.

Estimating the Value of Crambe Production and Processing

The first task in estimating the impacts of crambe on the North
Dakota study region was to determine the size of the crop, its
value to the growers, and the value of the processed oil and
meal.  First, it is assumed that 90 percent of the 50,000
contracted acres in 1997 will be harvested, i.e., a 10-percent
loss will occur due to weather, disease, or other factors, which
leaves 45,000 harvested acres.  Multiplying 45,000 by the
estimated average yield of 1,350 pounds per acre results in a
total crambe crop of 60.75 million pounds.  Given the contracted
price of 10.1 cents per pound, the value of the crambe crop is
estimated to be $6.136 million.

Industry sources indicate that an 82.6-percent recovery rate of
crambe oil and a 98-percent recovery rate for the meal are
reasonable estimates for a mechanical processing facility like
the Foster County plant.  Crambe seeds contain 35 percent oil
(4); therefore, there are 21.263 million pounds of oil in 60.75
million pounds of crambe seed.  However, only an estimated 82.6
percent is recovered, or 17.563 million pounds of oil.
Subtracting the pounds of extracted oil from the total amount of
crambe seed yields 43.187 million pounds of crambe meal.  Using
the estimated 98-percent recovery rate, the output of crambe meal
is about 42.323 million pounds.  The total loss rate for crambe
processing at this plant is anticipated to be 1.4 percent.

Prices for crambe oil and meal are not available, so price ranges
of 28 to 35 cents per pound of oil and $75 to $100 per ton of
meal are used as best estimates, based on industry analysts'
forecasts.  Prices for crambe and industrial rapeseed oil are
likely to vary within the range depending on the availability of
world supplies.  If supplies are adequate, prices may be in the
low end of the range.  However, if supplies tighten, prices may
rise.  The price of crambe meal is probably about one-third the
price of soybean meal.  Crambe meal can only be fed in limited
quantities to beef cattle, as per U.S. Food and Drug
Administration regulations, and feed formulators may not be
familiar with it.  However, mechanical processing leaves more
residual oil in the meal, giving it a higher feed-energy value
than meal from solvent extraction.  Given the volumes cited
above, the value of the crambe oil is estimated at $4.918 to
$6.147 million and the meal at $1.587 to $2.116 million.  The
value of the two products together is $6.505 to $8.263 million.

Estimating the Impact of Crambe Production

The size of the impact of crambe production on the North Dakota
study area is estimated under two different scenarios.  The first
scenario assumes the 28,000-acre increase in crambe acreage was
on land not previously in crop production.  The second scenario
assumes the increased crambe acreage displaced another crop that
would have otherwise been grown on the land.  In this case, the
income and employment gains from increased crambe production are
offset by the loss of the foregone income and employment from the
production of the crop that crambe displaced.
 
The estimated $6.1 million sales of the 1997 crambe crop is up
$2.5 million from 1996's $3.6 million crop.  This $2.5-million
increase was used to estimate the total economic impacts of the
expansion of crambe production on the North Dakota study area
under the first scenario.  The growth in crambe output alone
translates into direct economic impacts of $1.2 million value
added and the creation of 29 new wage and salary jobs (table A-3).
Value added, which includes employee compensation, proprietary income,
and indirect business taxes, is a measure of the value of goods andservices
produced by the crambe growers.  When indirect and induced effectsare
calculated and added onto the direct effects, the total economic impactsof
increased crambe production are $3.6 million in total sales, $1.8 million
in value added, and 48 new jobs.

Under the second scenario, it is assumed the increased crambe
acreage came from canola acreage.  Canola was chosen as the
displaced crop because it is the most profitable crop after
crambe in the north central North Dakota region.  The estimated
net return of $83.04 per acre from crambe production in 1997 far
exceeds the projections for other crops grown in the region
(table A-4).  Given the $44.21 net returns per acre for canola
production, total sales of canola from 28,000 acres are estimated
at $1.2 million.  An impact analysis on canola reveals that the
loss of $1.2 million in sales from canola production would reduce
total sales by $1.8 million, with losses of $900,000 in total
value added and 24 wage and salary jobs, including induced and
indirect effects.  Therefore, the gains from crambe production
under this scenario are roughly half the size of those under the
first scenario.  The difference would be even greater if crambe
were substituted for a crop less profitable than canola.  Aside
from crambe's profitability, farmers also benefit by having
another crop to put into their crop rotations, an advantage not
captured in this analysis.

Assessing the Effects of the Processing Plant

A similar impact analysis was performed to look at the effects on
the 15-county study area from the construction of an $8-million
oilseed processing plant.  Of the $8-million outlay for the
plant, an estimated $3.5 million is to be spent on processing
machinery, $4 million on construction materials and labor, and
$0.5 million on engineering and technical services.  The total
output effect is estimated at over $10 million and 86 full- and
part-time jobs added to the region's economy during construction
(table A-5).  Because building the plant is a one-time shock to
the region, these effects are not expected to be permanent.

The last phase of the analysis is to examine the impacts
associated with the oilseed-crushing plant.  In the first yearof
operation, the plant will process the 1997 crambe crop, which is
estimated to be nearly 60.1 million pounds.  The value of
production from the plant is difficult to determine because
prices for crambe oil and meal are proprietary.  Nevertheless,
the direct output is calculated to be about $7.4 million, the
midpoint of the estimated values of oil and meal determined
earlier.  Including indirect and induced effects, the total value
added impact from crambe processing is estimated at $9.1 million,
with a possible increase of 40 new jobs (table A-6).

Under the first scenario, the combined direct effect from crambe
production, the construction of the processing plant, and the
crushing of the 1997 crambe crop is estimated at $17.9 million
and an added 88 new jobs in the North Dakota study region (table
A-7).  Adding the indirect and the induced effects accounts fora
nearly $23-million impact on total output and an increase of 174
jobs.  Total impacts are not estimated for the second scenario
given the uncertainty of the alternative uses of the land used
for crambe expansion.

The added jobs come from different economic sectors.  Direct job
impacts occur in the agricultural, construction, manufacturing,
and services sectors (table A-8).  The indirect and induced
effects show job gains mainly in the trade and services sectors.
Most of the new trade jobs are in wholesale trade and eating and
drinking establishments, while the model predicts that hospitals
account for most of the new service jobs.  When total jobs are
considered, 24 percent are in services and 22 percent are in
construction.

The employment and income impacts from crambe production will be
sustainable for the North Dakota study region if the demand for
crambe does not fluctuate significantly.  Industry sources
estimate that about 50,000 acres of crambe would supply market
clearing levels of crambe oil.  Once the Foster County processing
plant reaches full-scale operation of processing other oilseeds
in addition to crambe, employment in this value-added industry
will likely increase beyond the estimates in this analysis.

Conclusions

The development of new industrial crops may result in modest
rural employment and income growth in agriculturally related
industries.  Choosing new crops that can attract related
industries to a region, such as oilseed crushing, is key to using
industrial demand as a tool for rural development.
 
The results of this study demonstrate the importance of crambe to
a farming-dependent region of North Dakota.  A full 42 wage and
salary jobs were added to the area as a direct result of the
increase in the production and processing of crambe.  Through
local purchases of supplies and the spending of crambe-related
income, the industry generates another 46 wage and salary jobs.
The region will enjoy the added benefit of the construction
activity while the plant is being built, temporarily adding 46
new positions and generating another 40 jobs in various
industries as the workers spend their wages.

The crambe case study also underscores the importance of value-addedindustries
to the economy.  The higher wage jobs in such industries provideopportunities
for nonmetropolitan residents, thereby aiding in the retention of populationin
rural areas.

References

1.  Glaser, Lewrene K., "Crambe: An Economic Assessment of theFeasibility of
    Providing Multiple-Peril Crop Insurance," ERS,
    Washington, DC, November 1996.

2.  U.S. Congress, Office of Technology Assessment, "Agricultural
    Commodities as Industrial Raw Materials," OTA-F-476,Washington,
    DC, May 1991.

3.  U.S. Department of Agriculture, Cooperative State Research
    Service, "New Industrial Uses, New Markets for U.S.Crops: Status
    of Technology and Commercial Adoption," Washington,DC, August
    1993.

4.  Van Dyne, Donald L., Melvin G. Blase, and Kenneth D. Carlson,
    "Industrial Feedstocks and Products From High ErucicAcid Oil:
    Crambe and Industrial Rapeseed," University of Missouri,
    Columbia, MO, March 1990.

Special Article

Comparative Economics of Producing Lesquerella in Various Areas
of the Southwestern United States
by
Donald L. Van Dyne

Abstract:  Lesquerella is a new oilseed crop under developmentin
Arizona, New Mexico, and Texas.  A sensitivity analysis was
prepared that estimates net returns per acre given varying
combinations of production costs, seed yields, and seed prices.
Twenty-one counties in the three states have been identified as