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A product orientation for agriculture.

Creating innovative, higher value products from basic agricultural commodities is not a new idea. In 1862, the founding fathers of the U.S. Department of Agriculture understood the connection, as evidenced by the department's official seal proclaiming "Agriculture is the foundation of manufacture and commerce."

But it's an idea that's been slow to take hold in this country. Too often, we simply sell raw agricultural commodities, missing the opportunity to create a multiplier effect of greater business activity, more jobs, higher earnings, and increased government revenues if we would only add value to those commodities through some sort of processing.

In manufacturing, chemicals, and pharmaceuticals, we're the leader in value-added goods. Automobiles cost about $5 a pound, a jumbo jet is about $350 a pound, a fighter plane is about $2,000 a pound, and a satellite is about $22,000 a pound. All of those start from raw materials that cost pennies a pound.

But when it comes to agriculture, it's a different story. The United States, despite its tremendous force in global agriculture, needs to do a lot more to maintain and strengthen its place in the world market. Many other countries now offer for sale bulk commodities, and we don't appear to be doing a particularly better job. Thus, for example, our share of the global wheat market has dropped from 48 percent to 31 percent in the past few years.

The problem is, when you're dealing with a raw bulk commodity, you don't have much room to maneuver. Brazil produces soybeans, we produce soybeans, and there's no dramatic difference. Also, soybeans are selling for only a few cents a pound. We should be looking at making soybean products that go for several dollars a pound--products such as chemical intermediates and starch-encapsulated biopesticides. But this means processing, adding value to basic commodities.

If you're going to develop a value-added industry, first you must have an extremely productive agriculture, which the United States has. Next, you must have an extremely active entrepreneurial sector, which the United States also has.

What's needed now is more interaction between government and private industry so they might work together toward commercializing new value-added products from basic agricultural commodities. The Federal Technology Transfer Act of 1986 has helped tremendously by allowing the Agricultural Research Service to license marketing rights to its technology to industrial partners. This makes cooperation much more appealing to them. And now we have what we call the CRADA--Cooperative Research and Development Agreement.

Here's how CRADA's work: ARS enters into a partnership with a private company to develop a piece of research. The industrial partner gets an option on the invention--that is, first chance at an exclusive license on the technology. In such a partnership, you have a product champion in industry and a corresponding product champion in ARS--the scientist.

What do these two bring to the agreement? The scientist brings the discovery, along with a tremendous research network not only within the agency, but worldwide. The industry partner brings the capacity to foster development of the research and the scaling-up of the process to commercial levels. [For more on CRADA's, see the Forum in the August 1992 issue of Agricultural Research.]

Also, the industry partner has valuable market information not easily obtained that gives us some insights into market demand. You don't get that market know-how just sitting in a lab.

The result: We deliver innovative technology at an early stage of commercialization, and the industrial partner carries it into the marketplace.

Of course, the whole nation must benefit from this partnership, and it does. ARS has in place nearly 250 CRADA's with both large and small U.S. companies. And in 1991, more than 25 exclusive licenses were awarded to industry, generating for several companies new business enterprises based on technology created by ARS scientists.

But how do you know where to begin in developing new products from agricultural commodities? First, satisfy consumer desires. And there's a mounting need to address "green consumerism"--a demand for environmentally benign products. What can we provide in a product that will meet this demand? To name a few: biodegradable plastics, encapsulated (slow release, targeted) chemical products, and natural food ingredients including colorants, flavorants, and other quality enhancers.

Tempting markets exist for biotechnology-based products. For example, the world market 1or farm chemicals exceeds $20 billion annually, so opportunities exist for suitably engineered biological control products--from pest controls to plant growth regulators.

This doesn't mean we ought to stop our production and postharvest research on the raw bulk commodities. We must maintain our strength there; that's the basis for the value-added market. But a balance of priorities must be struck between research on low-margin commodities and on high-value, marketable, processed products.

I believe we're turning the situation around. The article on ARS inventions by Sandy Miller Hays that begins on page 4 in this issue shows there's no shortage of innovation among ARS scientists.

And there is an abundance of as yet unexploited innovations from earlier work still awaiting pickup and use by visionary U.S. business concerns.

Ruxton Viilet Deputy Assistant Administrator for Cooperative Interactions
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Author:Villet, Ruxton
Publication:Agricultural Research
Article Type:Column
Date:Sep 1, 1992
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