Agricultural Surpluses and Waste HARRY C. TRELOGAN AND 0. V. WELLS Agricultural Marketing Service, U. S . Department of Agriculture, Washington 25, D . C.
Agricultural surpluses are defined and limited for the purposes of this paper to products intended for food market outlets. Industrial markets for farm surpluses are characterized from the standpoint of the farmer and the industrial user. Although much time and research has been directed toward disposing of these products, their inordinately high stocks are further aggravating the problem. Uses are considered for agricultural wastes that arise from the inedible portions of food from plant and animal sources. Suggestions are offered for reducing the amount of surpluses and waste by finding new applications for these materials.
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HE types of agricultural surpluses to be considered in this paper fall somewhere between a concept of a surplus that consists only of products acquired by the Government in a price support program, and all farm products that cannot be sold a t prices satisfactory to farmers. Inasmuch as the great bulk of farm output is intended for food, this paper is limited to products intended for food market outlets. As a further simplification, the other outlets for the raw materials are assumed to be nonfood industrial products. I n establishing these limits, feed is regarded as a stage of food production or as raw material for further farm processing. Fibers, such as cotton and wool, tobacco, and numerous industrial raw materials having established continuous uses are not overlooked, for the general principles pertaining t o farm food products, can, for the most part, be extended to these products in terms of their application to primary and secondary market outlets. A surplus under these conditions can be regarded as that part of agricultural production which cannot be effectively sold for food, the primary purpose for which it is produced. The reasons why the crops, or farm output, cannot be efficiently used for food will vary. Limitations of storage, of processing facilities, or of ability to distribute the products are examples. Whatever the cause, the stuff can not be sold a t profitable prices in markets available to farmers. INDUSTRIAL MARKET FOR FARM SURPLUSES
Farmers’ Requirements. The farm produser would like to envisage industrial chemical developments for farm surpluses that provide readily available alternative markets having the ability t o absorb supplies over a wide quantity range if, when, and as surpluses occur. I n economic terms, they would like markets with a very elastic demand that, in effect, would provide floors for the prices of the products they want t o sell. Preferably, the prices would be commensurate with total costs of production, but in any event, they would want them to be sufficiently high t o meet the variable or out-of-pocket costs. Farmers would not expect to need these alternative markets every season or year, so coverage of fixed costs or the costs associated with sunken investments would not be regarded as prime requisites of prices in such an alternative market. I n other words, farmers would expect higher returns for food utilization in some, or even all years to compensate for the total costs incurred over the long run. Such surplus markets probably should be considered supplementary to the basic food markets. They would cushion the price shock that occurs when the realized supply turns out to be greater
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than the effective demand for food. I n an aggregate sense i t may be anticipated that some agricultural surpluses will be available every year because farm production is geared always to supply enough food. Consequently, the production of more than enough in most years is a natural consequence when dealing with biological materials influenced so greatly by uncontrollable variations in weather, insect infestation, and pathological developments. All the allowance for unavoidable fluctuation is above the amount expected t o be needed for food, so there would be frequent occasion to divert products to surplus markets. The trouble is, however, that the surpluses may not appear with regularity in the same crops, the same places, or the same magnitudes. Nevertheless, these are the facts of life from the farmer’s standpoint and he would like t o see markets adaptable to his production and supply problems. The general public, too, would appreciate full utilization of farm output. Industrialists’ Requirements. The characteristics of a desirable farm surplus market outlet differ materially from what an industrial user would regard as a suitable market for raw materials. The industrial user seeks a dependable supply of uniform, acceptable quality available a t a relatively stable price, preferably available over a wide range of quantities as needs for the product vary. I n other words, he seeks a highly elastic supply tending to provide a ceiling on the prices he would need to pay for raw materials. The prices must be sufficiently low to perinit profitable operations, and they must be sufficiently dependable to avoid reconversion costs from one raw material to another that would preclude profits. The raw materials must also be amenable to blending or processing modifications that will yield end products of consistent uniform quality. Otherwise, end product markets would be jeopardized to the detriment of an entire business operation. When considering the characteristics of supply required by an industrial user for efficient operations, several types of agricultural surpluses can be eliminated as being outside the range of potential possibilities. Normal seasonal surpluses incurred a t harvest times or from regular seasonal fluctuations in production can probably be ruled out because market facilities are ordinarily maintained to store the products or convert them to more stable forms for food uses. The ordinary price fluctuations that accompany these seasonal supply changes are not usually great enough t o attract the nonfood user. Moreover, with such products as milk, pricing schemes are introduced to facilitate the diversion of the products to eventual food outlets. Abnormal seasonal surpluses resulting from the vagaries of
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weather probably need to be ruled out also, because of the extremely sporadic nature of their occurrence. Most of these involve perishable commodities such as fruits and vegetables where the crops come on faster than the normal distribution or processing facilities can handle them. Even though price declines may be drastic, the volumes, the scattered locations, and the short time duration of the surpluses probably preclude opportunities for industrial users to take advantage of them. One excellent example of this type of problem occurred with the fall of some 2,500,000 to 3,000,000 bushels of apples as a result of a hurricane in New England. It is difficult to imagine industrial users making arrangements to utilize this raw material in a remunerative manner during the short time it was available. Year to year variations in annual crops resulting in surpluses that occur in only occasional years also offer little opportunity for utilization as industrial raw materials. If the raw material is perishable the time-availability factor is again a major limiting factor. If the product is relatively stable, the opportunities for inexpensive storage to carry the surplus over to succeeding years prevents price declines t o levels likely to warrant the high costs of industrial plants being maintained on a standby basis. Greater opportunities for using agricultural surpluses as industrial raw materials may be found where regularly recurring surpluses of particular crops appear t o be in prospect for a period of years in the future. Such prospects are not outside the realm of possibility or even probability at this time. They may result from a number of circumstances leading to declining food demands or increasing supplies. Demand may go down because of changes in domestic habits of consumption, declining export markets, or subsiding wartime needs. Since agricultural production once expanded cannot be readily curtailed because of fixed investments, irreversible management changes, or long term production programs, reduced demand can easily lead to such conditions of long run prospective surpluses. Technological improvements in farm production resulting in substantial cost reductions may also contribute to this condition. History demonstrates how the existence of burdensome surplus agricultural supplies from these causes can persist over extended periods. Most of the decades of the twenties and thirties were characterized by such surpluses. PROBLEMS OF UNPRECEDENTED SURPLUSES
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Currently, the inordinately high stocks, as well as prospective production, of such crops as wheat and corn-which are measured in hundreds of millions of bushels beyond foreseeable food requirements-and the increased capacity to produce potatoes are cases in point as sourcei of carbohydrates. The difficulties of reducing farm output and the reluctance to permit destruction of supplies together with the magnitude of the stocks in sight and the urge to use reproducible raw materials instead of irreplaceable natural resources suggest that serious thought about how to use such farm surpluses for industrial raw materials is timely, despite the fact that considerable thought, research, and investment have already been devoted to the problem. Since the thirties the Utilization Branch Laboratories of the Department of Agriculture have directed research efforts of major proportions to this situation, and industry has directed equally significant research and development attention to it. Much has been accomplished. But the plain facts are that surpluses of unprecedented magnitude are now on hand. Moreover, the surpluses have some features that an industrial user might seek in his raw material supply. Quantities are large and barring a n outbreak of war, prospects for continuing supplies at stable or somewhat lower prices are favorable. I n addition, locations can be ascertained where surpluses are likely to be available with a high degree of regularity. Other factors being equal, supplies for food uses will tend to be drawn from producing areas located closest to the food consuming July 1955
centers where the transportation costs incurred will be least. I n other words, surpluses, available a t lowest cost, are most likely to occur in outlying producing areas where costs of production tend to be lower and fewer alternative uses for the land and other farm resources are available. I n addition, the processing of products from these areas into more concentrated or stable forms offers more advantages from the standpoint of reducing transportation costs. These observations are especially applicable to carbohydrate raw materials. INDUSTRIAL USES FOR AGRICULTURAL PRODUCTS
Past experience has shown that many industrial uses for agricultural raw materials can be developed. Some of these provide Bizable market outlets when viewed or measured in absolute terms. Compared with the magnitude of existing and prospective surpluses they are not great when measured either individually or in the aggregate. This means that the opportunities for the further development of industrial outlets are as great as they ever were. Experience shows that any single development cannot absorb the surpluses ih sight for any major farm crops. It would be pleasant if some striking chemical process were developed that would suddenly ameliorate one or more of the major crop surpluses. If that should happen now for wheat or corn, there would be created a major market rivaling the food market and farm production might be shifted in response to it. Instead, it will be necessary to rely on numerous new developments that in the aggregate may alleviate, rather than cure, agricultural surplus problems. The researcher need not fear that either he or his rivals investigating uses for these raw materials are likely to find an outlet that will completely wipe out the surpluses as sources of supply. I n fact, far more research could be devoted to the problem without incurring such risk. AGRICULTURAL WASTES
One more type of agricultural surplus is the kind that occurs every year so long as the food product is produced. It results from the inedible parts or the less vauable parts of the animals or plants from which the main food products are taken. When such surpluses are discarded they are usually called wastes. When they are utilized in whole or in part as industrial raw materials, they are usually called by-products. Regardless of what they are called, they are regarded as potential sources of raw materials in this paper. Finding remunerative uses for agricultural wastes helps t o relieve general surplus problems in either of two ways. 1. Costs of food processing may be reduced, such aR by eliminating expensive and often aggravating waste disposal difficdties. 2. Total returns from a food processing or distributing operation may be increased b y the added revenue coming from the previously nonproductive waste. I n either event, less of the farm purchase price needs to be borne by the food product, or the costs and prices of the food may go down leading to greater consumption. Some of the best contributions of utilization research to agriculture have come from more exhaustive employment of waste materials involved in food production. Likewise, some of the best opportunities still lie in these types of agricultural surpluses because they usually offer more of the characteristics of supply sought by the industrial user. They are cheap, often assembled in sizable quantities a t food processing plants, and their supply is ensured usually with fairly uniform qualities. Problems to be overcome usually entail reducing the bulk of these raw materials; the upgrading of their qualities or reduction of their perishability; and, when they are not brought from the farm along with the food product, the costs of assembly. For plant crop materials particularly, the seasonality of production may be a n obstacle.
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CONCLUSIONS AND RECOMMENDATIONS
Much more progress has been made in finding technically feasible ways of converting agricultural raw materials to useful end products than in finding economically feasible ways to do so. Many research results must be held in abeyance until price or cost conditions change sufficiently to permit their profitable application. Such research results are not failures, because they may be regarded as constituting a cushion to fall back on if agricultural surplus conditions should become still worse, or if our dependence on renewable resources should become greater. They also provide leads for other more successful developments applicable to current economic situations. The quest in technological research should be directed toward 1. Finding less costly methods for converting known ingredients of surplus products t o known industrially useful forms 2. Discovering or identifying unknown components of the products having value to industry 3. Devising new end products that can utilize the components of agricultural surpluses more advant,ageously than alternative sources of the same ingredients The success that has already been attained in these directions suggests that more such research is entirely warranted. Greater supplementation of the technological research with marketing research designed to solve economic problems associated with assembly or purchase of the raw materials and with distribution or sale of the end products also is warranted. The full fruits of technological research cannot be realized until industry is shown how adoption of the results can yield profits and industrial management is induced to undertake the operations. It is probably too much to expect that the expediency or profitability of most technological discoveries will be so selfevident that industry will immediately adopt them. Further facts are usually necessary before a board of directors or a manager can afford to incur the expenses of contracting for raw materials, tooling up for processing, and advertising for distribution of a new or different product. Types of supplementary research that could effectively be in-
tegrated with laboratory research for the purpose of speeding u p or attaining more complete adoption of utilization research results or agricultural surpluses include 1. I n uiry into locations offering continuity of supply, acceptabaity of quality, and stability of price 2 . Inquiry into possibilities for lower buying prices or procurement costs through adjustments in harvesting or assembly methods that may no6 involve the same care of handling required for food markets 3. Inquiry into pricing schemes comparable with the differentiated price methods used in milk markets where greater values are attached to first priority food uses, with attendant lower prices for alternative surplus uses 4. Study of the impact production and sale of the new product will have on other phases of a firm’s operations in order to help judge probable net change in profitability from the new operation 5. Study of economies of scale, work simplification methods, or mechanization techniques that, may be applicable t o the handling and processing of agricultural produce for industrial purposes 6. Market testing of end products to ascertain location and volume of probable potential markets a t varying prices as well as probable colors, forms, sizes, and other attributes of end products, or their packages receiving best acceptance 7 . Estimation of probable cost of launching distribution of the new product and probable time and nature of competition to be anticipated
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These considerations are probably more applicable to agricultural surpluses as sources of carbohydrates than as sources of protein, fat, or mineral elements. Certainly this is true with respect to plant materials which constitute most agricultural surpluses. Carbohydrates from animal sources such as milk sugar are usually so high priced that a slight excess becomes a serious price depressing surplus; however, these animal source surpluses are not likely to be of great magnitude. On the other hand, plant sources of carbohydrates must be considered of an entirely different order of magnitude, purity, and cost. They offer important carbohydrate sources for food as well as nonfood uses and merit serious consideration. RECEIVED for review October 22, 1954.
ACCEPTEDMay 10, 1955.
Economics of Sucrose H. B. HASS Sugar Research Foundation, Inc., 52 Wall St., New York 5, N . Y .
ODY H. LAMBORN Lamborn & Co., Inc., 99 Wall S t . , N e w York 5 , N . Y .
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HE purpose of this paper is to call attention to the opportunities in sugar as a cheap and abundant raw material for industrial organic syntheses. This ifi far from being a new idea, but some of us are old enough to remember when the concept that a major organic industry could be built on petroleum and natural gas was also mostly a matter of conversation on the part of a few enthusiasts. For years the tangible accomplishments were few and of relatively small importance. As one success followed another, chemists succeeded in conveying the spark of imagination to management. As a result, research appropriations became mo?e nearly adjusted to the opportunities implicit in the potentialities of petroleum as a storehouse of future chemicals. Now petrochemicals are familiar not only to chemists but also to intelligent laymen. A similar potential exists in carbohydrates, but before it can be realized certain changes must occur in our way of thinking. I n the past, and with ample justification, carbohydrate chemists 1392
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have concerned themselves largely with problems of structure and configuration. This work was absolutely necessary to lay a firm foundation for the future. For the most part, this foundation is now completed for the carbohydrates that eeem destined to serve aR raw material for a synthetic organic chemical industry of the future. Wow it is necessary to think of carbohydrates as organic starting materials. With starch, this forward step has been taken; with sucrose, it is only beginning. The curious mental block which prevents organic chemistswith a few notable exceptions-from even investigating the standard reactions of hydroxyl groups with carbohydrate starting materials is almost beyond explanation. About a dozen years ago H. A. Bruson studied the cyanoethylation of about 400 compounds. h’ot until recently was the reaction tried on cotton (IO). The paradoxical thing is that the cyanoethylation of cotton seems likely to be far more important economically than the rest of the cyanoethylations put together. This reaction has
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