A diverse group of industrial leaders in new crops research and development have been brought together as panelists, and invited to present their own ideas on the role that industry must play in the total commercialization process of developing new and alternative industrial crops.
We know there is no one pathway or solution to the successful commercialization of new industrial crops. Hopefully, the ideas from these panelists and from the Symposium will better enable us to tailor a unique, successful solution to our individual sets of conditions and variables. Thus, our major objective is to exchange ideas on the possibilities and opportunities as well as constraints. By this process, we should be able to identify new courses of action that could move this essential developmental process forward to the mutual benefit of all participants, as well as the ultimate consumer.
We have all heard of the difficulties involved in getting new crops and industrial products made from them into commercial production and use. Research at a number of locations and organizations around the country has identified possible products that can be produced from new crops; e.g., high value oils, rubber, newsprint. While it is often possible to produce industrial products from new or even existing crops, the path to commercialization is not an easy nor straight forward one. Sometimes, we in the research community, talk blithely about technology transfer of our research findings, forgetting that the cost of commercialization for a new product or process is at least nine times the cost of doing the original research. In the case of a new crop and its intended products, the cost for commercialization may be even higher as a percentage of the total cost of introduction.
The expenses involved in developing new products often stymies commercial development by producers and processing firms. Industrial firms do not feel they can risk the tremendous investment that is necessary to accomplish the transfer of one of our ideas into a commercially viable, profit-making enterprise. One way to help overcome this problem is through cooperative research and development beyond the basic discoveries. Thus, I would like to discuss technology transfer, specifically Cooperative Research and Development Agreements, commonly referred to as CRADAs.
CRADAs were authorized under and are an implementation of the Federal Technology Transfer Act of 1986 (Public Law 99-502). The objectives of CRADAs is to help bridge the technology transfer gap between discoveries (technology in the rough in many cases) made in Federal laboratories like USDA/ARS, and the marketplace. The Federal government, by utilizing CRADAs, has put the "D" in R&D to get new products/processes on the market in order to improve American industry's competitive position in world markets.
USDA/ARS is one of the leaders, along with the National Institutes of Health
(NIH), in their use of CRADAs. Despite the fact that ARS accounts for less
than 1% of the total Federal R&D budget of over $70 billion, ARS has
entered into more than 200 CRADAs since the first one was signed in July, 1987.
All but a few are with individual industrial firms. Some early ones have
already resulted in new products reaching the market including:
A Technology Transfer Agreement between a commercial firm and USDA/ARS will
include provisions on:
Other benefits to the commercial firm are improved access to ARS scientists and facilities. As a firm's employees work more closely with ARS scientists, better access is almost guaranteed. They also have better access to expertise related to research results and inventions. The knowledge of an ARS scientist in regard to the fine points of problems and potential uses and benefits of a particular technology may be worth more than what is on paper or published in scientific journals. Of course, the most important benefit is the enhancement of profitability related to the development and marketing of new products and processes, which is the ultimate goal of the collaboration made possible by CRADAs.
There are also major benefits of the Technology Transfer Agreements to USDA/ARS. These arrangements significantly improve the opportunities for ARS to develop and transfer technology. It again puts the "D" in R&D. ARS also receives better feedback from industry on what research is needed. CRADAs require regular or at least frequent contact with industry representatives for operation of the CRADA, which provides more opportunity for feedback. ARS scientists and administrators also receive increased familiarity with problems related to commercialization of a product or process.
Another important benefit in these times of budgetary restraint is that scientists and ARS share licensing fees and royalties. There is a chance for funds returning to ARS to help finance more technology transfer. This provides a real incentive to scientists as the inventors receive 25% of any licensing fees and royalties paid to ARS by the licensee.
There are several steps that firms can take to initiate a Technology Transfer Agreement with USDA/ARS. First, the firm must learn of ARS research capabilities, programs, and results. These can be through contacts made at professional and scientific society meetings, published journals, and other ARS publications. One-on-one visits to laboratories to meet and discuss mutual interests with the scientists are useful. The USDA/ARS computer database TEKTRAN, which contains brief reports of the latest ARS research results, is another good source. TEKTRAN and most ARS publications also give information to facilitate contact with the ARS scientist who is responsible for the program of interest.
The next step is to work with the ARS scientist to develop the necessary plan of work for the cooperative research and development program. This would usually take the form of a brief, jointly written proposal. It is important that the draft proposal receives appropriate preliminary review and clearance within the private firm and within the ARS. Delays at this step can be avoided by both parties if proper attention to getting preliminary approval. The final step involves the joint approval of the cooperative research and development agreement that incorporates the proposed research plan. Final approval in many firms require processing through several levels just as in ARS, and this combination may take several weeks, or even months to complete. Careful preliminary discussion, planning, and agreement can significantly reduce the length of time involved in the final approval process.
A CRADA is a technique that has promise, but it is only one phase or a beginning of technology transfer. In the subsequent phases, there are other important activities such as assembling financial resources for further research and development, conducting marketing studies, pilot plant evaluations, scale up of production, and distribution activities.
CRADAs may not be applicable to all technologies. Involvement of other mechanisms such as the Agricultural Extension Service and other technology transfer entities is essential to the successful commercialization of viable new crop-related products and processes developed by ARS, the State Agricultural Experiment Stations, and industry.
We envision our role as one that helps foster the various interdisciplinary linkages that exist in the research and academic areas. We seek also those linkages that bridge over into and involve the business community. One of our roles is to encourage a focus on the eventual end users, and to bring research efforts into the marketplace. We want to build constituencies and a knowledge base among administrators within USDA/ARS, Land Grant, and other universities. They need to be sympathetic to the funding and utilization of programs. Often the administrator is the spigot as well as the funnel in regard to what can be done.
The New Uses Council has worked to a considerable extent with the USDA, the Congress, and other national entities to educate them about opportunities and needs. We believed it is necessary to get rid of some of the governmental impediments that were in our Farm Bills. These have prevented a producer of normal farm commodities, such as grains and soybeans, from growing a new crop or from developing research and opportunities for new uses of our traditional crops. In recognition of these constraints, an effort was undertaken to see if we could get new language in the 1990 Farm Bill. The New Uses Council contributed to and supported incorporation of Title XVI, Subtitle G--Alternative Agricultural Research Centers (AARC). This new legislation should significantly contribute to the development of new industrial uses and products from agricultural materials. We have just learned during this conference that Congress has agreed and the President has signed the Bill to appropriate $4.5 million for FY 1992. The guidelines in Subtitle G call for an appropriation of $485 million for AARC over the next decade. However, if we added up all the work that is now ongoing, we would be hard pressed to identify $2 to $3 million per year. This extrapolates to a 20 fold increase in effort in this direction, and we will continue to try to see that it happens.
Activities also are taking place in the private sector, including the various commodity groups. We need a good foundation or basis of support among such groups as the maize, soybean, and wheat growers and users. We need to educate them about the opportunities in this area, and gain their support. Some commodity groups are concerned that a new effort may diminish emphasis on their crop. We must build a constituency with them, and an awareness and a desire on their part to see that we are successful, and that our efforts are complimentary. It is extremely important that we develop good relations with them.
We need to work with our processors, both established and potential. We need to promote the processing of agricultural materials into either an intermediate feedstock or a consumer ready product, or our work on commercialization does not get into the marketplace.
Almost always, we need to seek and try to get adequate financing. If it is only a concept and only works on paper, but doesn't work enough to draw capital to it, it will not happen. Either established or newly formed companies will have to be successful in getting capitalized to do the job. Industry representatives talk in the terms of getting a 20% return on investment. I believe these new things are going to have to bring in 40% returns, or venture capitalists will not "buy in."
The New Uses Council sees our focus and efforts on getting new uses commercialized as not being a competitive effort, or an attempt to displace any existing activity. Our motives are to help "grease the slide" to bring in the eventual processors and marketers of the end use, to work closely with them to commercialize the process or product, and to get the needed financing. We do this by newsletters, and by holding conferences and meetings.
The 1992 Annual Meeting of the New Uses Council in St. Louis--Biobased Product Expo '92 "Expanding Markets for Agricultural & Forestry Materials" will be a major event. The Department of Energy has committed $50,000 to coparticipate in it. Substantial funds from the Office of the Secretary of Agriculture are committed, and funds from the U.S. Small Business Administration are anticipated. The Association for the Advancement of Industrial Crops (AAIC) will hold their annual meeting in conjunction, and will jointly participate in activities designed to further our mutual goals. The New Uses Council's primary role is to try to be an umbrella, to provide linkages, and bring together all individuals and groups that share our vision of developing new industrial uses and products from agricultural materials.
Walker, K.A. 1993. Commercializing new crops: Measuring the opportunity. p. 678-680. In: J. Janick and J.E. Simon (eds.), New crops. Wiley, New York.
While there may not be a generally applicable answer to these questions, there is a guide-post that most companies use to measure a technological opportunity. The process called "Opportunity Analysis," whether completed formally or informally, is a part of every company's commercial development function, and contains within it the elements that form the motivators necessary to gain the interest of private enterprise. The perspective presented here is that scientists would benefit by understanding the framework of such an analysis, and could use it to improve the probability of commercial success of their ideas.
There is one other important element. In market assessment, if we never think beyond the current needs of the customer, then we may never find the truly unique and differentiated products that novel technology can provide. This approach to commercial development has recently been described by D.N. Peters as pioneer, fill-in, or lily-pad marketing. These strategies involve short step-outs from currently identified businesses or markets anticipating future needs and directions. Pioneer marketing requires a more intimate association between the technologist on the one hand and the marketer on the other. In my opinion, bridging the knowledge gap between these two disciplines is of greatest importance to much of the innovation necessary to the successful development of new crops.
Our process of evaluation must lead us to the conclusion that we can deliver a value-added product or service to a buyer. Our focal point is not the creation of technical solutions, but the application of new or existing technologies in the development of a profitable business center. The literature is filled with examples of technically elegant solutions without economic commercial application. Small businesses such as ours cannot make many payrolls with reprints of papers we might publish.
In our view, the most significant resource a successful new product venture can have is a buyer. While a purchase order does not make an industry, it's a very good place to start.
In the case of jojoba, the distribution system we have created over the past 15 years, is oriented to the cosmetic and personal care industry. This industry also uses significant quantities of castor oil, which contains hydroxy fatty acids similar to lesquerella oil. Our evaluation concluded that lesquerella oil has an opportunity to achieve a first level of commercial use within the cosmetic industry. While lesquerella will initially command higher prices than castor, there are niche applications within the cosmetic industry where high price is accepted in exchange for uniqueness or perceived benefits such as mildness. The marketing and distribution system in place for jojoba can be effectively utilized to gain trial and acceptance of lesquerella and other botanical ingredients within the cosmetic industry.
Next, we must evaluate our resources in terms of our ability to participate in the eventual chain of supply for the new crop product. While an early pioneering effort in the development of a new industry is important, it can as often mean that you simply make a better target for your competitors.
With jojoba, those early efforts most closely tied to the marketplace have proven to be the most successful. Other factors contributing to effective longevity in the jojoba chain of supply have been related to the early development of various technologies associated with the agronomics or processing of jojoba. In the case of lesquerella, there are number of factors in place that we believe will enhance its likelihood of becoming a long lived new industrial crop.
First, and most important, is the fact that for the past seven or eight years, lesquerella has had an ongoing, albeit small, program of USDA/ARS sponsored genetic and agronomic research. This research has resulted in significant advances in the domestication of this wild species. Jojoba, despite the fact that it has been the most successful new industrial crop to be commercialized since castor, has suffered from the lack of public research funding.
Second, small business organizations such as ours now have USDA supported Small Business Innovative Research (SBIR) grant funding available specifically to develop new and/or improved technologies related to increased production of industrial products from agricultural materials. In addition, there is a small research effort underway within the USDA/ARS to conduct lesquerella product development and utilization research. Through grants, liberalized technology transfer policies, efforts of the USDA Office of Agricultural Materials, the New Uses Council, etc., small businesses such as ours have an enhanced opportunity to initiate new ventures with new crops, and achieve the first levels of commercialization. We also create new jobs and hopefully generate income and taxes to repay the national investment made through the USDA.
In a more intuitive process, we examine other factors that might influence the critical mass of effort that might be applied to new crops such as jojoba or lesquerella. Can the new crop be a substitute for an imported crop? Can the new crop be exported? Can it be grown in an area where it is likely to be a substitute for a crop requiring a lot of water, and/or other cultural inputs that might be detrimental to the environment? Can it replace a crop that is highly subsidized? Are there co-products and/or by-product opportunities with the new crop? While all of these factors are important considerations, none is more important than whether or not we believe we can develop an initial market for the new crop product.
Procter & Gamble's (P&G) chemical division is responsible for the making of oleochemicals from natural fats and oils for applications in our own non-food products (soaps, detergents, shampoos, deodorants), and for sale to the merchant market. My specific responsibility is for the R&D efforts supporting our current business brands--alchohols, glycerine, fatty acids, amines, and future surfactant developments.
My link to the "new crop" world comes from P&G's participation and support in the commercialization of Cuphea. Our company's involvement with Cuphea began in the early 1980s when P&G, along with Henkel KGaA and the USDA/ARS, co-sponsored a germplasm collection trip to Brazil for Shirley Graham of Kent State University, Ohio. Since 1984, we have supported Cuphea through an industry association called the Soap & Detergent Association (SDA). My role began in the summer of 1985, as Chairman of the Technical Subcommittee for the SDA; in effect, to be the technical liaison to this program for the Association.
The basic premise of the Cuphea project stem from the fact that seed oils of Cuphea species are uniquely high in the production of shorter chain triglycerides--specifically, and most interestingly to us, the lauric or C-12 oils. Presently, the only major source of lauric oils (coconut and palm kernel oil) come from Southeast Asia--the Philippines, Malaysia, and Indonesia. Lauric oils have unique properties that are desirable and/or essential to several American industrial and food applications.
Periodically, there have been major swings in the availability of these oils, generally due to weather conditions such as drought and typhoons. This, in turn, has resulted in significant price spikes occurring about one year in five. A major objective to domesticate Cuphea was to secure a domestic source of lauric oils and to be guaranteed an adequate supply at an affordable price. It would be prudent today, however, to acknowledge that since the Cuphea development began, there has been major palm kernel oil development work going on in Malaysia and Indonesia. This development may possibly shift the issue of availability and price from the periodic crisis level to that of a more manageable concern area; only time will tell.
A second major objective in developing Cuphea was not only to reduce dependency on a source that had a history of volatility of supply availability, but also to provide a domestic source of this oil that could benefit our country in several ways. First, it could provide another crop for the farmer that is not just a food replacement crop, but rather: (a) adds to their arsenal of options; and (b) might be growable on more marginal land, thereby helping the plight of the American farmer. Second, this is annually a half-billion dollar business that could help the United States balance of trade, and third, the expectations for any new development are that good spin-off developments and applications can occur. Certainly, with the wide range of chainlength properties available from the many Cuphea species this possibility clearly exists.
In short, there has been and continues to be a real industry need for domestically produced lauric oils. Cuphea represents a reasonable technical lead to meet that need, and together this can be a helpful business opportunity for the American farmer and the American economy.
Needs--leads--and business opportunities are three elements that are like the three legs of a stool. If one is missing or even a little short, the stool will not stand up. Another visual picture is a triangle with these three elements at the points. If you draw circles around the points, you have a real chance for a success only where the three overlap.
If there is anything that all R&D projects can suffer from, it is having an interesting technology that either doesn't fill a clear need or doesn't represent a good business opportunity. I call it the idea of a technology looking for a home! Thus, we need to be certain that we are not just working on an interesting new crop that may not speak to a clear need in the marketplace, or a clear opportunity for the farmer, or by the same token may not work for industry. If industry represents the need, the scientific community represents the technology or lead, and the opportunity benefits the American farmer and our economy, together the three parts of the triangle must stay linked. For a new crop idea to succeed, all three legs of the stool must be connected, that is we must be working together. Even with all three points overlapping, any new crop venture is a long shot proposition. Without visible good linkage of all three elements, there is little chance of successful commercialization. Many failed projects upon close examination can be demonstrated to have been short on one of these legs.
Working together means more than just good communication and verbal expression of interest. I would encourage, as we did in Cuphea, that all three parties (in this case academia, the USDA/ARS and industry), put hard dollars into the effort, until the program has a life of its own. Where there is an established crop you have an industry association supporting ideas, but for a new crop, sponsoring money may be hard to come by. However, money talks and shows the real strength of the interest. Without it, industry particularly can support a lot of avenues and ideas for study, but may pay only lip service to the outcome.
Cuphea has been and is still just a technology lead toward achieving a domestic source of lauric or short chain oils. The program has passed the embryonic stage. It has a viable life, and there has been much good progress on the technology, but clearly success has not yet been achieved. Cuphea development would not have reached this stage without a good balance of support from the needs, leads, and business opportunity components. In new crop work, industry, academia, and the USDA need each other and need to work hand-in-hand on program priorities to be certain the elements for success are really there and in proper balance.
Smithers Scientific Services, Inc. has special expertise in the rubber industry, and provides consultation to clients both in this country and abroad. We are involved in preparing feasibility studies, forecasts and programs requiring expertise in marketing, marketing research, business development, inventory management, financial management, strategic planning and purchasing. In the capacity as Director of Marketing Research, I recently completed extensive research into the rubber industry in Western and Eastern Europe and the USSR, and on the demand for natural rubber in the United States in the event of a national emergency. The current and future status of commercialization of guayule as a new domestic rubber crop was thoroughly evaluated.
Developing potential end use markets for industrial crops such as guayule is more complex than it is for ornamental or food crops. After initial processing, ornamentals and food crops are usually sold directly to the consumer. Therefore, the success or failure of these crops usually rest with the ultimate consumer who can be influenced by costs, promotional or advertising campaigns, food "fads," nutritional values, and a variety of other factors over which the agricultural industry has some control. As examples, consider the changes in demand that have occurred over the past few years with items such as: Columbian ("mountain grown") coffee, tofu, whole bran, broccoli, kiwifruit, well-marbled beef, and "no cholesterol" foods.
Unlike foodstuffs and ornamentals, however, most industrial crops are not sold to end users. The ultimate consumers may not even know what raw materials are in the goods they buy, and certainly are influenced more by factors that are not directly attributable to the agricultural commodities.
This is the case with natural rubber extracted from guayule, or from the rubber tree, Hevea brasiliensis. Smithers has researched consumer behavior in the tire industry, and recognized that most consumers are very unsophisticated when it comes to making value judgments and other purchasing decisions on the tires they buy. Consumers buy because of brand or trade name recognition, price and then "perceived values" such as "performance," "safety," or other intangibles or factors the consumer cannot measure. Thus, the problem facing the agricultural industry with a product such as guayule rubber is how to market or sell the manufacturers on the benefits or advantages of the material that cannot be translated into greater sales, or sales at a higher unit price, to the end consumer.
To be marketable to the tire producers, guayule rubber must meet one of the
following two criteria:
Even if guayule proves to be a "drop-in" substitute for hevea, the tire producers may offer significant resistance to change. Until someone takes the first step to prove the worthiness of guayule rubber, there is too much potential risk to warrant using guayule without some significant economic advantage.
Therefore, guayule is stuck on the horns of a dilemma with regards to the commercialization efforts. To prove itself to the tire producers, there must be sufficient rubber available of consistent properties to satisfy all research needs up through long range, full factory trials and use in actual field conditions. Additionally, this rubber must be reasonably competitively priced, or at least have good prospects of being available in quantity at an attractive price in the future. However, to be available in the quantities needed for full trials requires extensive capital expenditures to develop the agricultural aspects of the business and the industrial infrastructure. Commercial entities are unwilling to risk the capital needed to produce the rubber unless it has already been proven to be commercially and technically feasible.
Obviously, to move guayule rubber and its co-products off dead center requires some innovative thinking. Guayule will not sell itself. If it is to become a commercial reality, something or somebody must champion the product in an industry that still suffers from the "NIH Syndrome"--Not Invented Here.
The trials done to date indicate that guayule rubber is a viable alternative to hevea rubber from a technical standpoint. Therefore, what is needed is the incentive for the initial capitalization required for it to be a commercial success. We feel this can best be accomplished by the support of the Department of Defense as a critical need in times of national emergency. A relatively modest expenditure now, properly applied, could be returned many times over once guayule rubber becomes a commercial reality.
In addition to VOICI, a National Vegetable Oil Program (NOP) was started in The Netherlands in 1990. Some nine institutes of the Ministry of Agriculture, Nature Management, and Fisheries participate in this program. The research is conducted on eight potential vegetable oilseed crops. Several Dutch oil processing industries are involved in the advisory commission of the National Vegetable Oil Program.
Information on yield and seed characteristics summarized in Table 1 were obtained from selected accessions grown in The Netherlands from 1988 to 1990 in trials and small scale cultivations. Compared to existing oilseed crops like rape seed and sunflower, the oil yield per hectare is rather low. Further crop development of these crops should be directed toward oil yield increases.
Table 1. Yields and seed characteristics of three novel oilseed crops.
|Crop||Yield (t/ha)||Oil (%)||Principal fatty acid||Principal|
Daniel Kugler, USDA/CSRS Office of Agricultural Materials
Dr. van Soest, you have projects in The Netherlands that alone are funded at levels that are higher than the total appropriation made to the new AARC--Alternative Agriculture Research and Commercialization Subtitle of our new Farm Bill. Would you comment on the general level of support for the commercialization in the European Community?
Louis van Soest, Panelist
It is very difficult to say exactly how much it is. The EC has several programs. One program, ECLAIR, concentrates on the linkage between agriculture and industry. Furthermore, there is the Bridge Program, and there are two or three programs on biotechnology where some industrial crop development is involved. Currently, the EC is about to start an Agro-Industry Program, which is mainly meant for diversification--not only crops, but also for animals. This program will be funded over the next four years (1992-1996) at a rate equivalent to about U.S. $300 million. Thus, about $400 million in total is directed to development of crop diversification for the next four years.
W.M.J. van Gelder, Wageningen, The Netherlands
Additional EC funds related to R&D on industrial utilization of agricultural crops would total to about $400 million, which is quite a large total. Many research programs are ongoing within the EC. In The Netherlands, we have programs on industrial utilization of carbohydrates, application of and utilization of fiber materials, protein crops preferably in the non-food, non-feed area, and oilseeds. Some of these programs are cooperative, involving the research institutes and universities to develop entirely new technologies and products. The research institutes and universities have been requested to be sure that industry expresses support for these projects. It is important that the developments being created will be used directly by industry.
The present situation in Europe in regard to agricultural raw materials from an industrial perspective is rather negative. Many agricultural raw materials are not properly characterized. We hardly know the structure, composition, and industry specifications for many materials. Our first step is to adequately characterize our raw materials, and working closely with industry, determine how these materials can be used. We believe this is primarily the task of the government, because most industries are not directly interested in the use of raw materials from agriculture as their current raw material supplies are satisfactory. We have to convince industry that there is a real opportunity from a price-performance point of view. When you reach that stage, you will then have close cooperation with industry. However, I see some differences in our situation compared to that in the United States in regard to the sharing of financial rewards from such cooperation. Our programs are primarily directed to finding an outlet for the excess agricultural raw materials. We therefore think that it is not strictly necessary that the government receives profits from the patents, even when they have been jointly developed. The surplus situation with respect to agricultural products is not a problem for industry. It is the problem of the agricultural sector.
Daniel Kugler, USDA/CSRS Office of Agricultural Materials
There are representatives on the Panel that have international operations. Does the level of support in Europe surprises you? Is the United States behind what is happening in Europe, and what do we do if that is the case?
Keith Walker, Panelist
I am not surprised at the level of support. From a very parochial perspective, I do not believe that Agrigenetics/Lubrizol corporation would see it as a race where somebody is ahead or behind. We look at our business on a world-wide basis. Some of the products we may develop from new crops we may only market in Europe. Lubrizol receives more than 50% of its current revenue dollars from offshore. So, we look at the whole world as a market. We believe that the United States Federal government has a unique responsibility relative to the interests of the American public, and it ought to represent those interests. We have a unique responsibility relative to our shareholders, and our global business interests.
James Brown, Panelist
My reaction would be to look at this situation in terms of the jojoba industry. I believe that jojoba is the most successful industrial crop commercialized since castor. Since the mid 1970s, there has only been less than $2 to 3 million total in public funds directed toward jojoba research. To me this only says that there is considerable potential in the further development of the industry given appropriate levels of R&D.
Robert Kleiman, USDA/ARS
One aspect we have not addressed is discovery. Everyone is using germplasm that was discovered in the 1960s. Of the some 300,000 species of plants we have only looked at 10 to 15,000. There are many new kinds of materials that may be useful for industry, American agriculture or for world agriculture. We are not taking full opportunity of this area. As for our role at the National Center for Agricultural Utilization Research (NCAUR) in Peoria, we have made some of these initial discoveries. We are now trying to utilize some of these materials that we have discovered, and are serving as a catalyst, pushing and cajoling others to recognize that there are some new materials out there that should be used. We try to give concrete examples of how these plant-based compounds may be used. I do agree with Dr. van Gelder that these materials must be characterized before industry will become interested.
Martin O'Shea, Panelist
One of the factors that has impeded R&D in some of the industrial crops has been the lack of germplasm. This directly affects the development and propagation of the crop itself, and the production of enough material to do the needed research for full commercialization. That is one of the roles in which the USDA is very effective.
Duane Johnson, Moderator
We need to remember that just because we look at one sample, and do not find what we want within a species, this does not imply a lack of variation. In general, large variation in specific chemical constituents within a species is to be expected.
Joseph Boggs, Panelist
I wish to follow up on some of the comments made by Robert Kleiman. In regard to the "needs, leads, and business opportunity factors" of which I previously spoke, I should emphasize that before you get ready to converge these concepts, there is a stage of work in the "leads area," that I call the "diverging stage." Exploring and looking for germplasm is the idea generation stage, and does not require combining the three components. We need that type of research first. However, the researcher needs to have an eye on what makes sense for a future, potential industry. Focus should not just be on what is solely of academic interest to the researcher.
Anson Thompson, Panelist
I would like to follow up on Joseph Boggs comments. The cuphea story is instructive. If the interest of industry had not been forthcoming, as expressed by the administrators of Procter & Gamble who came to the USDA and sold us on the need for more research leading to commercialization, we would not likely have started the research on our own. They clearly indicated their interest by offering to equally match USDA funds with those of their own. Actually it ended up with a unique, three-way funding involving USDA/ARS, the Soap & Detergent Association, and Oregon State University. There is always much competition for the limited amount of funds we do have. It is very difficult for us to work on certain things unless we have a real push or the expressed interest of industry. In this case, industry got our attention. We all thought cuphea had high potential, but the seed shattering aspect would be a terrible problem to overcome. It seems to have been a rather long haul since the cooperative program was started in 1983. Now it looks like there has been a major breakthrough in the development of nonshattering germplasm. Things are coming around, and it should not be difficult to sustain the necessary funding for continued research and successful commercialization. From my experience in this type of work, having someone from industry showing a strong, specific interest in ones research certainly facilitates gaining administrative and financial support.
Kenneth Carlson, USDA/ARS
I would like to ask the four industry oriented panelists, who have all worked a number of years in this area, whether you feel more or less encouraged in regard to the utilization of new or alternative crops after having participated in this Symposium.
Keith Walker, Panelist
From my own perspective, I am neither more or less encouraged. Our company has a strategy, it has an approach, and this meeting has been consistent and supports our own internal plan, direction, and views as to where we want to go and what we want to accomplish. So in that context, I am not any less encouraged than I was three days ago. In addition, I have come in contact with others here and have picked up some other new ideas. This has been a valuable conference for me. I have met several people that I want to talk to about some new opportunities. That is most important for me. My job is to put together different ideas and come up with a new approach or angle.
James Brown, Panelist
Overall, it has been very encouraging. We have had a good number of very positive discussions with both private individuals and companies, and persons from academic institutions from around the country and the world about the new interest we have in lesquerella and vernonia. We have discussed possible ways to cooperate and move commercialization forward. It has been discouraging from the standpoint of the jojoba industry. We have been trying for years to get public funding for additional research, but it has fallen on deaf ears. We do not intend to stop in our efforts, and hope that jojoba will remain an industry for this country. Unfortunately, we think it is probably headed South, the same way as castor, citrus, and other crops have done. I can see us holding a meeting 30 years from now trying to bring jojoba back to this country. So I guess I have had both encouragement and discouragement from this meeting.
Joseph Boggs, Panelist
In general, I am encouraged by the large attendance of people interested in and working on new crops. I think we sometimes get a little discouraged when we think of our national budget, and the percentage that goes to agriculture and of that which then goes to new crops research. You get to a very, very small number. If you compare that with the funding of other countries, and see the different proportions allocated, you wonder why new crops research continues to be underfunded. It is almost impossible to compete with all the other programs that get sponsored in the United States. However, I am almost an eternal optimist when I look at a group like this, and see for example just the progress that has been made on lesquerella, where pilot plant hectarage have been planted and things are beginning to happen. There is nothing like success to stimulate more funding for other new opportunities.
Martin O'Shea, Panelist
I am encouraged by this Symposium for several reasons. One is the breadth and depth of knowledge that has been brought to this conference. I think that the academic and scientific research that has been conducted and presented here is most impressive. Unfortunately, the industry that I represent had combined losses worldwide of about $2 billion in 1990, so they are starting to rival the United States national budget. That makes it difficult to take this kind of development and carry it forward on an industrial scale. However, eventually, the supply and demand situation on natural rubber will get to a point where it will no longer be a buyers market, even as oligopolistic as it is. Eventually, guayule will have a place as an industrial crop that will be very badly needed by all the world's industrialized economies. One of the things that is discouraging with new crops development is the tendency of governments to fund R&D on an annual cycle. A perennial crop like guayule takes a minimum of 18-24 months to mature. When you start funding annually, you just get going with the program when the funding gets cut off. If this happens, you can sit with the program dormant for a couple of years, before you can start all over again. This is not a very good way to fund a development program. I would certainly encourage legislative bodies responsible for these programs to be more far reaching in their thinking, and fund these on 4, 5, or 6 year cycles. This would help bring a program to fruition with the life cycle of the plant.
Keith Walker, Panelist
Many of you may be familiar with W. Edwards Deming, the management guru that helped make Japan what it is today. Many United States corporations are being "Demingized." One of Deming's major points is that of "constancy of purpose." Those in the government sector need to see to it that your administrators develop that kind of constancy and consistency in purpose. In my opinion, there is a more consistent, purposeful movement in Europe as compared to the United States. Perhaps they move later than we do in some cases, and perhaps the environment is not as entrepreneurial or as innovative. However, when you see both European companies and governments moving with a kind of constancy of purpose, which allows them to carry through on projects without deleterious interruptions, you have to be impressed.
This may be the time for all of us to examine whether a commercial development kind of function deserves to be developed and funded. This might be especially relevant with the USDA. The USDA puts out a voluminous amount of information. They make things available in terms of opportunities. That is wonderful, but it requires industry to locate the information and approach the USDA with a deal. If for some reason you happen to miss the newspaper that morning, you won't see it. There is a need for scientists and technologists who do these enormously innovative things, to have a group who can run their own opportunity analyses. They could then latch on to the most promising ones and sell them to industry. What happens now is that researchers, who should be in the laboratory, are forced to be in commercial development. I met an Agricultural Economist at a meeting this summer who was trying to sell a new development project and complained he did not know what he was. I replied he was a commercial developer, not an Agricultural Economist! It would be interesting if we could get university and public sector administrators to think about the possibilities of being a little more proactive.
James Brown, Panelist
I do not think that USDA does a very good job in communicating the real capabilities they do have, at least down to our levels. As we have become more and more involved in discussions on these new crops, we find a great number of opportunities to do mutual, cooperative work. We also have the opportunity to offer suggestions and comments to programs, especially at the initial stages of development. We could often save some time and energy if we have an early opportunity to comment. On the other hand, we can possibly move things along a lot faster if we know more about some of the resources available to us. Much of our previous lack of knowledge may have been our own fault. We are finding more and more opportunities that are out there, such as the CRADAs and the new Small Business Innovative Research (SBIR) grants in the area of industrial applications involving agricultural materials. It is especially helpful that these opportunities are specifically directed to organizations such as ours. As we become more involved, we feel that there are probably others who are equally uninformed. More could be done to communicate those types of opportunities to companies such as ourselves.
Louis van Soest, Panelist
In The Netherlands, we have a number of these national programs that are specifically focused on potential or new crops. Our Ministry of Agriculture, Nature Management, and Fisheries is now considering whether some of these programs, which will go up to 1994 or 1995, should be continued or terminated. The possibilities of future commercialization within 4 to 10 years is one of the major criteria.
James Hall, Panelist
I believe that in respect to development we are "preaching to the choir." If you want something to happen, you have to talk to the Congress and the upper administrative levels of the Department, because that is where decisions are made on the levels of funding. You cannot formulate and maintain a commercial development group like you are talking about within USDA on $50,000 a year. Keith Walker related that Lubrizol had about 230 staff in commercial development. What are their sales?
Keith Walker, Panelist
This is the number of staff in just one division, with sales of about $500 million.
James Hall, Panelist
In contrast, that is roughly about the same or actually a little less than the USDA/ARS total annual budget; about $600 million.
Keith Walker, Panelist
Our research budget at Lubrizol is about $100 million, so to be comparable, USDA/ARS should have over 1,000 commercial development people!!
Francis Nakayama, USDA/ARS
I think that one of the things that industry is missing is the failure to ask the right questions. We have a tremendous computer data base that covers both Federal and State agencies. For example, Robert Perdue requested information on vernonia harvesting. The key word he searched was vacuum. Lo and behold, the computer spewed out all the methods of harvesting different crops using a vacuum system. He is now using this to harvest his vernonia seed. There is a database available, and one simply needs to search the system. If you do not get the answer you need, you keep asking. Then you need to contact the right people. If you searched for the word cuphea, I am sure most of the names of those that have worked with cuphea would be listed along with their research and location. As an ARS scientist, we are obligated to spread our information, and we are requested to participate in technological transfer to private industry and to the consumer.
Robert Kleiman, USDA/ARS
We haven't had our heads in the sand completely over the years. Whenever we have found anything and when our research is completed, we have published in appropriate journals, attended and reported on our findings at appropriate meetings. If we have something in the oleochemical area we go to the oil chemist's meetings; if we have something in rubber, we go to the rubber technology people and give a talk. We are not hiding this technology. The only other thing I can think of is to take out an ad in the Wall Street Journal! Maybe that is what we should be doing. We have tried to promote or at least tell the industry and public that we are working in a variety of areas.
Martin O'Shea, Panelist
You will probably meet more resistance from industry, particularly highly competitive industries like the one I am involved in, when you start asking them questions, than you will when they start asking you questions. The tire industry can be surprisingly uncooperative when it comes to trying to find out what their current thoughts are concerning research and development projects. That is not information passed about very freely among the industry. So it is not entirely the fault or shortcoming of the USDA and various other governmental agencies when they try to promote these new things. In very many cases, industry is going to be less than cooperative talking about their thrust and specific nature of their research to you.
Anson Thompson, Panelist
I would like to elaborate on the comments of Francis Nakayama and Robert Kleiman. USDA researchers must prepare interpretive summaries every time we publish a paper in layman's language on what we have done, its purpose, what the outcome might be, and what the potential is for our findings. These things are available through James Hall's office in Beltsville through the TEKTRAN system.
James Hall, Panelist
This is available electronically to anyone that has a personal computer, a modem, and a telephone line.
Lewrene Glaser, USDA/ERS
We have been talking mainly about Federal programs. I would like to hear comments about different approaches in regard to State programs, whether offered by universities or various State agencies and organizations that have been developed to look at this problem.
Raymond Burns, Panelist
The New Uses Council has met with and brought together State agencies and Land Grant Universities in six states to date. I believe that if this had been done five years ago, only about a dozen ongoing industrial material projects would have been involved. In our recent meetings during the last few months, we have discovered scientists and projects numbering about 150. I believe that this type of developmental research is more popular and acceptable today, and scientists are not shunned for saying they are working on something other than food and fiber. There has always been scientists that have worked in areas that have led to industrial applications. However, to fully capitalize on this new opportunity, we need a lot of reapplication of talents, efforts, materials, and financial resources. Based on our small sample, I would surmise that essentially all of the States have ongoing programs of some magnitude. I believe it is coming into focus with greater clarity that industrial products from agricultural materials represent a real opportunity and challenge. One of our goals is to help gain support in State legislatures for companion programs to the Federal programs.
James Simon, Purdue University
Indiana has about 13 of 26 million total acres in crops, with about 10 million acres in maize or soybeans. The agricultural industry in the state represents a major economic force, but the risks involved in the economic dependency on a few major crops has lead the state as well as Purdue University to consider exploring the potential opportunity for new or additional crops and plant-based products.
In Indiana, we are fortunate to have a State Agency, the Indiana Business Modernization and Technology Corporation (BMT) that provided the initial funding and remains the major supporter of our New Crops Center at Purdue University. The BMT, formerly known as the Indiana Corporation for Science and Technology (CST), also co-sponsored and provided financial support to this Symposium as well as our first Symposium on New Crops held in 1988. We are pleased that this State Agency has the vision to recognize the economic potential for Indiana businesses in new crops and plant products. State funding is very closely linked with the commercialization of new crops and products. BMT is not interested in supporting research per se, but only in supporting research on specific projects that have already shown preliminary promise, and which can receive matching funds from private industry.
We also have a second State Agency, the Center for Value-Added Products, that funds and supports work on plant and animal based products and is focused to a larger extent on the commercialization of new products and processes for the food industry. Both of these funding opportunities are focused on the commercialization and the demonstration of potential economic gain to the state and could be classified more as economic development projects than merely "agricultural projects."
Both State Agencies have been very supportive to Agriculture. However, we have to convince them that determine whether support for specific projects should be committed for longer than a single year or single growing season, making R&D plans more efficient and realistic. We need, in particular, to take our case to them and educate them and others at the State House on the many new crop activities and the economic benefits of diversifying our agricultural base. We have found that most legislators and State personnel, who had previously been very much unaware of these activities and their potential for economic development, have become quite interested and supportive of such programs.
Lastly, support from the State has enabled us to generate additional funds from private industry, which allows us to leverage modest funds to accomplish larger objectives. State support should not be overlooked, but as we have found in Indiana, may take several years to develop.
Raymond Burns, Panelist
I would add that when we deal with State legislators and annual budgets, they demand instant success. They have a very short term and want something immediately to take home to their constituents. There are many competing interests within the districts they represent, and they are limited in what they can do. This is only amplified in the national Congress, and this problem will not disappear. We need a bigger, broader, more knowledgeable constituency. When working with a national commodity group, we frequently get pressures if we are working to bring on an industrial material that may bring competing byproducts into the marketplace. The staff of the commodity group is hired to make their commodity go, and represents parochial interests. Almost all farmers grow more than one commodity, and they could care less which commodity group is successful if on the whole they are successful. We have to continue to bridge these gaps.
Lyndon Drewlow, Mikkelsens, Inc., Ashtabula, Ohio
One of the plant explorations, a USDA/ARS-Longwood Gardens sponsored expedition in the late 1960s, collected 21 accessions of New Guinea Impatiens as a secondary product. These were turned over to private breeders in 1971. USDA/ARS, Longwood, and some university scientists worked on it initially to develop new germplasm and cultivars. In 1991 there was over 100 million cuttings sold worldwide. There are breeding programs in Israel, Germany, the United States, and probably The Netherlands. They have also been introduced into Australia, New Zealand, and Japan, all based on these 21 new accessions. I would estimate the current value of this new crop to be from $50 to 100 million, and this has all happened within the past 20 years with a crop that was not even in our marketplace. So, in the ornamental area, results can be very rapid and economically significant.
W.M.J. van Gelder, Wageningen, The Netherlands
There is a different attitude toward new crops in America and in Europe. In Europe, we need development very rapidly. We have big problems in regard to excess production. We all know there are international trade negotiations, and things have not gone too well so far. With respect to the price policy, the EC does not choose to let its farmers suffer from a too drastically decreasing income; especially not where it concerns small family farms. Therefore, the EC is urgently working to create new market outlets for agricultural products especially in the area of non-food/non-feed products, and providing a good funding base.
The panelists did an exceptional job of providing insights into the process of commercializing research advances that use agricultural materials in industrial products. Much could be gained from more sessions such as this, plus small informal sessions where a few private sector representatives meet with a group of researchers on a specific topic. Representatives of the private sector have a lot to offer to researchers in terms of how the private sector thinks and operates as well as knowing the needs in the marketplace.
The session's overriding theme was the need for an improved mechanism to bridge the gap between research advances developed by the public sector and those elements of the private sector that are willing to risk investment in a new product, process, or crop.
Opportunities exist to produce industrial products from agricultural materials. Commercial success would employ excess agricultural resources and spur rural economic development. New crops are one component in the equation. The panelists discussed techniques to capitalize on a crops potential and hence increase the return on investment to taxpayers for publicly funded research.
Research, development, and commercialization are required to transform potential for industrial products from agricultural materials into marketplace reality. The need for new crops for industrial feedstocks will be derived from demand in the marketplace for the final product. Several panelists spoke of need to focus on a market demand driven approach as opposed to a technology driven approach. This requires a change in attitude of how research priorities are developed. James Brown stressed the need for private firms, especially small ones, to identify a market first before working to perfect a technology or product. After specifically identifying and evaluating the market need, research then can be accurately and effectively targeted.
A necessary condition or prerequisite for a commercial success is for the product to be technically sound. However, sound research or technology is far from being sufficient for a product to be successful in the marketplace. James Hall thoroughly discussed the use of Cooperative Research and Development Agreements (CRADAs) for facilitating transfer of new technology developed in Federal laboratories to an appropriate private entity. He also discussed how CRADAs can be used to facilitate fruitful cooperative R&D efforts between Federal scientists and those in industry, which should improve the probability of successful commercialization of a product or process. Successful progress in moving a new product or crop toward the marketplace requires matching of an interested private firm to work with the appropriate cadre of multidisciplinary researchers. Identifying and obtaining the interest of the "right" private firm is a key element that is often overlooked in the process.
Keith Walker related the need to perform structured analysis to clearly identify potential and hindrances. This analysis is necessary to screen for opportunities with sufficient potential to recover the research and development costs as well as to generate an acceptable return. This assessment should cover the entire system of production through marketing needs for converting an industrial material into a viable industrial product.
Martin O'Shea noted that the private sector should identify the most promising market opportunities. He also shared views on how interactions occur when an oligopolistic situation exists. He noted the need for cooperation between the private and public sectors to reduce risk over the period of time required to commercialize a new product or process.
Commercializing a new product from a research idea typically requires a bare minimum of five years. James Hall accurately pointed out that the cost of development and demonstration are typically nearly 120 times the cost of the research itself.
Researchers need to be continually asking themselves and representatives of the private sector questions such as: What will the world of industrial products look like in one or two decades? Who will be interested in buying and who will be interested in manufacturing the product? What are the chances of commercial success? Is there a "demand pull" or is a product the result of "technology push?"
Joseph Boggs delineated elements needed to successfully commercialize a product from a new crop such as cuphea by analogy to a three legged stool. The three legs of this "stool" are: Need--identification of the market need; Lead--time needed to commercialize a product; and Opportunity--profitable business potential.
One way to think about finding the "right" combination of firm and researchers is to have a knowledgeable generalist to cultivate relationships with researchers and firms to seek workable matches. I serve in such a role at CSRS's Office of Agricultural Materials in the USDA. I perceive myself as a mutual fund manager for a portfolio of industrial products to be made from agricultural materials for which interest can be generated in private firms. Resources include research conducted in the public sector. The goal is to maximize return to the investors.
One of the most important components of matching the researchers with firms is face-to-face discussions especially with high level representatives of private firms. Building private-public partnerships is a "contact sport," requiring body contact, and is key to moving new products into the marketplace. Such contacts by several individuals have resulted in two private firms working with USDA on lesquerella development and a number with the crambe/industrial rapeseed effort.
Raymond Burns of the New Uses Council noted that use of agricultural materials for industrial feedstocks can fill market niches and use excess capacity that exists in agriculture. Diversifying into use of agricultural materials for industrial products opens new markets for farmers. New food products generally substitute for existing foods, and while perhaps improving diets, they do little to expand market opportunities for excess agricultural resources. The New Uses Council promotes use of industrial products from agricultural materials, and sees a weak link between public research and commercial production that needs to be strengthened. The Alternative Agricultural Research & Commercialization (AARC) Center may soon become an effective bridge in this regard.
In the past, a major gap has existed in funding and effort to move research advances to a point that commercial firms are willing to risk investment in production of new products. Our system, in effect, has been similar to a researcher taking a technical publication to one side of a gorge and throwing it into the air in hopes that the wind will carry it intact across the raging river to a private firm, and that someone in the private sector will then read it and act. AARC provides the framework for a bridge between the two sides of the gorge thereby allowing much more rapid and effective linkage between public research and commercial production by the private sector. The latter represents the foundation of our economic system. AARC authorizes private-public partner-ships and encourages an integrated systems approach that is best accomplished by use of multidisciplinary teams.
In the United States, more private-public partnerships are needed on applied or adaptive work, including industrial uses of agricultural materials from new crops. The AARC targets this area. This assumes that the very basic research has already been conducted, a historical strength of the United States.
Congress appropriated $4.5 million for AARC in fiscal year 1992 for adaptive and applied work. Meanwhile, as noted by Louis van Soest, The Netherlands, a very small country relative to the United States, is investing significant funds in an effort to commercialize industrial crops. In addition to the funds Louis van Soest cited for industrial oilseed development, over $2 million per year of its own funds plus a similar amount from the European Community (EC) are being invested in work to commercialize one fiber crop, hemp. With increased emphasis on global markets and with the major gap that exists in funding between research advances and commercial production in the United States, the $4.5 million represents but a small start in what is required.
Research findings take on their real value when products are rapidly and successfully commercialized. Commercialization is required for the American taxpayer to receive a respectable return from the "mutual fund" composed of industrial products from agricultural materials.