Businessweek Archives

Teaching Old Crops New Tricks


Top of the News

TEACHING OLD CROPS NEW TRICKS

You've got a bold plan to turn old crops into new products--say, transform wheat into plastic or lesquerella seed into nylon. At a stroke, you could cut America's dependence on foreign oil, slash government subsidies for surplus crops, and save the family farm. But financing is scarcer than lips on a chicken, since most investors don't know their jojoba from their elbow. "When you start talking agriculture, they say, `There's the door. Don't let it hit you on the way out,"' laments Agriculture Dept. (USDA) agronomist Robert Armstrong.

Enter the USDA and its novel program to develop nonfood, nonfeed uses for farm products. Last summer, the USDA's Alternative Agricultural Research & Commercialization (AARC) center doled out some $9 million among 23 companies for projects ranging from stuffing pillows with milkweed to extracting oils and chemicals from crops (table). This year, the program will invest an additional $9 million in 20 companies, including Agriboard Industries in Fairfield, Iowa, which aims to prove that straw houses can stand up better than they do in fairy tales.

BLENDER WRECKER. This is no ordinary government handout. The AARC center is playing venture capitalist--buying stock, seeking royalties, or demanding loan repayments from profitable companies. "Taxpayers have a chance to regain their capital," says Frank Erickson, president of Seattle's International Lubricants, which processes rapeseed and other plants. In 1993, Uncle Sam paid $480,000 for 8% of the company.

To the USDA, no idea is too offbeat. Consider Phenix Composites Inc. in Mankato, Minn. Back in 1991, an enterprising 11-year-old set out to make a useful material from newspapers. She shredded them in her mother's blender (which didn't survive the experiment), added glue, and baked the slop in a microwave. The result was a material tough enough to withstand seven dishwasher cycles. It caught the eye of engineer Donald E. Anderson, a member of a local group that had been searching for a "green" product to commercialize.

The group adopted the girl's idea, substituting soybean flour for glue. Out came a material that feels like wood and looks like granite. But plans to market it for furniture and floors didn't pan out until the USDA offered a $1 million loan if the company could raise the same amount. "The stamp of approval from a prestigious body like the USDA helped us raise $4.5 million," says Vice-President Scott Taylor. On May 16, the company began full-scale production.

With USDA-backed products just reaching the market, it's too soon to assess the AARC center's business acumen. But the program's crusaders aren't focused only on the bottom line. "My dream is the rejuvenation of rural America," says board member Roger S. Porter, a polymer scientist at the University of Massachusetts at Amherst. "We could have scores of miniplants that turn wheat straw into particleboard or soybeans into diesel fuel."

For companies struggling to make this vision a reality, the program is a godsend. Thomas A. Meyer, president of Aquinas Technologies Group Inc. in St. Louis, which makes windshield-washer fluid out of ethanol from corn, figures he wouldn't have been able to launch the product without $100,000 from the AARC center. Terry Brix, president of International Polyol Chemicals Inc. in Redmond, Wash., was "in a state of shock" to discover that the program existed. The USDA invested $300,000 in his company, which synthesizes such chemicals as ethylene glycol from corn.

UNLOVED, UNNOTICED. Not all is sunny in Alternative Ag-land. Backers of the program gripe that the Clinton Administration virtually ignores nonfood ag, doting instead on high-tech industries such as flat-panel displays. And they're right. "I haven't paid 10 seconds of attention to it," says a top White House technology official.

That kind of attitude frustrates USDA officials. "If we had decent support--$50 million to $100 million annually--we could make a dent in our agricultural-surplus problem," says AARC center Director Paul F. O'Connell. "In four to five years, once royalties and repayments start coming in, we wouldn't need any more money."

Of course, that assumes Americans have a taste for farm products they don't eat. Will consumers read newspapers made from kenaf, a cotton-like fiber plant, sit on furniture made from newspapers, and live in houses built of straw? For now, anyway, flat-panel displays look like a safer investment.TABLE: UNCLE SAM, VENTURE CAPITALIST

A sampling of the Agriculture Dept.'s investments in small businesses

Product Company USDA "invest

ment"

Windshield-washer fluid from Aquinas Technologies Group $100,000 loan

corn-derived ethanol (St. Louis)

Biodegradable plastic from Midwest Grain Products $818,000 loan

wheat gluten (Atchison, Kan.)

Oil for hydraulic fluids and International Lubricants $480,000

cosmetics from rapeseed (Seattle) equity invest

ment

Granite-like composite

from waste Phenix Composites $1,000,000

loan

newspaper and soybean flour (Mankato, Minn.)

Low-grade waste wool for Hobbs Bonded Fibers $700,000 loan

sopping up oil spills (Mexia, Tex.)

DATA: AGRICULTURE DEPT.

John Carey in Washington


Later, Baby
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus