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Paarlberg, D. 1990. The economics of new crops. p. 2-6. In: J.Janick and J.E. Simon (eds.), Advances in new crops. Timber Press, Portland, OR.


The Economics of New Crops

Don Paarlberg


  1. INTRODUCTION
  2. NEW CROP IMPERATIVES
  3. CROP SUCCESSES AND FAILURES
  4. ECONOMICS OF NEW CROP DEVELOPMENT
  5. CONCLUSION
  6. REFERENCES

INTRODUCTION

My task is to consider the economics of new crops and I begin, like a professor, by defining my terms. I define "new crops" broadly. The conventional definition of a crop is the cultivated produce of the ground, but I go beyond that to include also living plant material produced in the laboratory. "New," as I shall use it, means a recent or prospective addition to the existing inventory of such crops. "Recent" and "prospective," you will note, are relative terms. New crop development warrants attention from many disciplines, including plant taxonomy chemistry, agronomy, horticulture, plant pathology, entomology, hematology, genetics, plant breeding, weed science, agricultural economics, agricultural engineering, food science, gene-splicing, processing, and marketing (CAST, 1984).

Perhaps I can best make the definition clear by the use of examples. First, to classify by origin, these are new crops:

Categorizing new crops by use, there is this listing:
Every crop was once new. Our major crops were domesticated 10,000 or 11,000 years ago (Bender 1975). We have only begun to exploit available plant germplasm. There are some 350,000 species of higher plants. Harlan (1975) lists, by common and scientific names, some 350 cultivated plants. But of these hundreds, only, a few species dominate. Some years ago Professor Paul C. Mangelsdorf named 15 crops that feed the world: wheat, rice, maize, sorghum, barley, beans, peanut, soybean, sugar cane, sugar beet, sweet potato, maniac, potato, banana, and coconut.

Somewhat surprisingly, our reliance on crops has narrowed; we have become increasingly dependent on fewer crops. Throughout history man, mostly as a gatherer, has used some 3,000 plant species for food. Breeding and development have been concentrated on our leading crops and as they have been improved, lesser-used crops have fallen by the wayside.

Why is our crop base so narrow, and why have we, with all our science and skills, been unable to expand the number of cultivated crops significantly beyond those domesticated by our primitive forebears thousands of years ago? I venture three reasons: (1) Our ancestors selected the most promising species to begin with; (2) the present domesticated species, improved over the ages, are difficult to challenge; and (3) at least until recent times, we have focused so sharply on our existing inventory of crops that we have not had the vision to consider adding thereto.

What makes a plant eligible for human use? In most cases the decisive discipline is economic. It is a question of costs and benefits. The rubber tree is successful because benefits exceed costs. The shrub known as guayule produces rubber as good as that of the tree but costs exceed benefits (National Academy of Sciences 1977) and guayule is unable to compete.

A new crop, be it ever so high in nutrition, ever so vigorous a grower, or represent ever so great a scientific achievement, is likely to fail unless the returns from producing it are greater than the costs involved.

Disciplines other than economics have roles in determining the fates of crops. Political considerations are important. Marijuana is profitable but growing it is prohibited. Frost-inhibiting bacteria may be cost-effective but their use is held up by a court order.

Ecological considerations that are not strictly economic can also be decisive in the acceptance of a new crop. Crownvetch, which holds steep roadsides against erosion, is such a new crop.

Esthetic considerations can be decisive in the acceptance of what may be called a new crop, as is the case with flowers modified for time-altered blooming.

NEW CROP IMPERATIVES

Each of these other disciplines has its economic component, of greater or lesser importance. Economics insists that it has a role of some sort in every human decision.

The economics of developing a new crop must, of course, be divided into costs and benefits. First we consider costs. A key cost, not to be measured in dollars, is the vision that someone must have to conceive the possibility of a new crop. A need must be seen and the potential of a particular species to meet that need must be visualized before a new crop can come into being. The ability to conceptualize a bit of germplasm as offering economic opportunity is probably the rarest of resources needed for developing a new crop. No new crop can be brought into use without this asset.

Research is needed, of course. And this research must be funded over a long period of time. The Council for Agricultural Science and Technology (CAST 1984) reports that in a typical case, eleven years are needed to develop a new crop; funding must be in sight or in prospect for that whole period if success is to be achieved. CAST indicates the stages of development in this overlapping sequence: germplasm collection, germplasm evaluation, chemical and utilization studies, agronomic and horticultural evaluation, breeding program, production and scaling- up, and commercialization. Obviously, the research must be multidisciplinary which, while most likely to be fruitful, is also certain to be procedurally difficult. The authors of the CAST report (1984) probably underestimate the length of time required to develop a new crop. They specify only three years for commercialization. The record shows it usually takes longer than that; the development process is ongoing. Soybeans were introduced into Colonial America as a new crop in 1765, before the founding of the United States, and it was not considered a very promising candidate for permanent status until the 1930s.

The consuming public must become convinced that the new crop meets a felt need before success is possible. And there must be tillage tools, harvesting machines, processing facilities, and transportation before the new crop can catch on. Here is a problem: processors and other entities in the production chain are not interested in putting up facilities until volume is assured, and farmers will not plant unless a market is in sight. One way of overcoming this dilemma is by vertical integration involving contract production, so that growing the crop and moving it into use go forward together.

The researcher's or the agribusinessman's hope, of course, is for a phenomenal success like soybeans, which came from almost nothing a few decades ago to its present status as one of the big three American crops, along with corn and wheat. But such extraordinary performance is most unlikely. New crops may fit into niches, small openings between larger crops. Among these are meadowfoam, producer of an oil used in the cosmetics industry, and kiwifruit, an exotic new food. The increase in numbers of Hispanic and Asian people in our midst gives opportunity to produce domestically the foods that these new Americans ate and loved in their former countries.

There is always the hazard that the new crop may become a weed. Kudzu, introduced as an ornamental in 1876, is an example. Quackgrass, introduced to control soil erosion along roads, became a noxious weed in cropland. Multiflora rose, introduced from Japan as a living fence, spread through permanent pastures and is now classified as a noxious weed.

The danger that a new introduction may be hurtful instead of helpful applies to the new products of biological engineering as well as to conventional crops. This concern may be overdrawn and sometimes may, approach hysteria but a degree of concern is legitimate. With such powerful techniques now in hand, researchers face increased accountability. The idea that scientific endeavor has no discipline other than its own is fading. The age of innocence is over.

If a new crop succeeds, there is a great likelihood that it will displace, in part, some other farm enterprise. Soybeans speeded up the use of margarine, to the injury of the dairy industry.

This is a formidable list of costs to be overcome if the new crop is to succeed. It is not surprising that so few ventures surmount these obstacles.

But new crops, if they catch on, can lift farm income, improve diets, lower food costs, expand markets, diversify agricultural production, and increase exports. The possibilities are enough to attract the venturesome scientist. His chance of success may be only one in a hundred. But success can be so rewarding and failure so insulated from professional reproof that the quest goes on despite the odds. The cost of failure is much greater for an agribusiness firm than it is for a researcher, thus explaining the hesitance of a processor or a merchandiser to embrace a new crop. Trying to develop a new crop is like drilling for oil; you never know whether you're five feet from a million dollars or a million feet from five dollars.

CROP SUCCESSES AND FAILURES

For illustration, I list a few new crop successes and failures. One acknowledged success is sunflower for oil now grown on 3 million acres, a 20-fold increase in 15 years' time. The recently acknowledged high quality of the oil, plus introduction of good cultivars from abroad, good research on cultural practices, and construction of processing facilities are responsible for the advance. Another success is high-bush blueberries, developed by plant breeding, aided by research on cultural practices, and promoted by the trade which built this fruit into a number of attractive foods. Blueberries are one of those new crops that have found a niche, a small one perhaps, but a profitable one for a number of farmers.

A failure is tung oil, or Chinese wood oil as it is commonly known. The tung tree, a native of China, produces a high quality drying oil on which our country had become reliant. World War II cut off the supply. Studies revealed that our Gulf Coast had the soil and climate suitable to the crop and it was developed there with subsidized help from the Department of Agriculture. The tree grew well enough and produced the needed oil but American costs were too high for the oil to compete in the market. High price supports were voted by the Congress to make the crop viable, and tung oil was for a time, relative to the income it generated, the most politicized crop in America. The USDA supported the price by purchase; the oil, priced above the market, went into government tanks instead of the market. So much for the effort to meet a wartime need. The high price attracted tung oil from Argentina, which was kept out by import controls, aggravating our diplomatic relations with that country. Year after year the Commodity Credit Corporation ran this expensive, ineffective program. Finally the Lord, in His Wisdom, blew up a great hurricane out of the Gulf of Mexico that uprooted the tung trees and the program mercifully was closed out.

Another failure was the Jerusalem artichoke, which is neither an artichoke nor is it from Jerusalem. It has long been a troublesome weed, growing as tall as a man and producing gnarled tubers which have the appearance of small hand grenades. It is propagated by planting these tubers. Beginning in 1981, the American Energy Farming Systems of Marshall, Minnesota began promoting this crop as a source of fuel alcohol, a feed, a food, and a sugar crop. Fantastic profits were indicated, up to $36,000 per acre. A thousand farmers attended a promotional meeting in Marshall (Communicator, Mar. 15,1983). Farmers participated by signing a binding contract to purchase, from the company, 1,000 pounds of seed stock per acre at the fantastic cost of $1.20 per pound, making an outlay of $1,200 per acre for seed alone. The company signed a non-binding contract to buy the crop, intended for seed stock, to sell to yet more farmers to plant yet more acres. There was no market for Jerusalem artichokes, except for seed stock to be sold to new participants. Nationwide, 450 farmers paid $19 million to get into the deal. In Indiana alone, 89 farmers paid in $884,000. It was a pyramiding scheme, a phenomenon familiar in the financial underworld. It was a plan of the sort made famous by Charles Ponzi, the Boston swindler, in 1920. As long as new participants so increased in number that they paid in more money than was needed to pay off the old participants, all went well. When the number of new participants fell off, as it had to, the scheme blew up. The Jerusalem artichoke venture lasted three years—three cycles—before it perished. Fred Henderson, former vice-president and secretary of the company that marketed Jerusalem artichokes as a "wonder crop," was sentenced to a year in jail and fined $20,000. Farmers did not receive restitution for their losses. Perhaps some day the Jerusalem artichoke will become a profitable crop. If so, there will have to be a concerted program of research, processing, and market-building, as the Canadians have done with canola. The lesson here is that promotion alone is not enough for a new crop to succeed.

ECONOMICS OF NEW CROP DEVELOPMENT

Scientists have made lists of plant species that give promise as new crops. CAST (1984) lists kenaf, cuphea, and buffalo gourd. The National Academy of Sciences lists 36 unexploited tropical plants with promising economic value. In New Mexico, biochemist Jim Hageman and agronomist Jim Fowler are trying to convert the Russian thistle into a forage crop (Fincher 1988). The number and kinds of new crops that might be produced by gene-splicing is not subject to count but must be very large. Scientists are at work on these opportunities.

Whose job is it to develop new crops? The answer is that it is a teamwork job. Scientists, farmers, agribusiness, and consumers are all involved.

A key question in the development of a new crop is whether or not it can be proprietized. Hybrid maize can; the necessary inbreds are the property of the commercial seed firm and are an attractive source of profit, so there is strong commercial investment in research and development. Basic scientific knowledge, by its very nature, cannot be proprietized and so private firms are unlikely to develop it. It is a job for public institutions. Improved forage crops are, by their propagating habit, incapable of being proprietized; they are in the public domain. Research and development therefore are unlikely to be undertaken by commercial firms and the development task falls to public- supported institutions like the Experiment Stations and the Department of Agriculture.

Contrary to the perceptions of some socially-minded people, private property can be a source of public good. Alexander Fleming discovered penicillin in 1928. A public-spirited man, he refused to patent his discovery, thinking thereby to speed up its distribution. But because the substantial investment in the development process could not be protected, the discovery languished for 12 years. In contrast, gene-splicing techniques were developed by the late seventies and by 1980 a Supreme Court decision granted patenting and property rights for engineered microbes. Within three years 150 genetic-engineering firms had become established (Imprimis, 1983) and development moved forward rapidly.

Many new scientific discoveries cannot—and should not—become private property. The tax-supported research institutions have responsibility to work in this area. The idea of the Experiment Station is that research costs in appropriate areas are borne by the public. Farmers and private firms have market incentives to adopt and develop new crops made possible by this work. The resulting improvement in efficiency and resource use redounds to the benefit of all and so justifies the public outlay. The American pattern of teamwork between public and private agricultural agencies in the generation of new scientific knowledge is the admiration and envy of the world.

CONCLUSION

This is an appropriate time to hold a symposium on new crops. The U.S. Department of Agriculture and the Land Grant colleges have launched a new venture in what is called "Alternative Agriculture," of which new crops are an appropriate component. Beyond all this, we are better poised, technically and institutionally, for an initiative. We now have the best opportunity in history to break out of our traditional complex of established crops. There is the long-term institutional setting: the Experiment Stations and the Department of Agriculture. To this we have recently added the International Research Network. The non-Land Grant Colleges do an increasing amount of agriculturally- related research; gene-splicing was first done at Stanford University. The non-agricultural federal agencies are now doing biological research. Commercial firms, with the opportunity to patent their discoveries, are deep into research. Gene-splicing techniques open up a broad horizon for new crop development.

World population is expected to double by the middle of the next century. We will in all likelihood again experience concern about the ability of the world to feed itself. The drought of 1988 bears testimony to this fear. The balance between food and people is cyclical, irregularly so. During my adult life I have experienced four periods of concern about the adequacy of the food supply:

Between these perceived shortages, we dealt with the problems of abundance and, believe me, abundance is better.

REFERENCES


Last update February 12, 1997 by aw