Table of Contents
Jolliff, G.D. 1996. New-crops R&D: Necessity for increased public
investment. p. 115-118. In: J. Janick (ed.), Progress in new crops. ASHS
Press, Alexandria, VA.
New-Crops R&D: Necessity for Increased Public Investment*
Gary D. Jolliff
- DETERMINING COSTS OF SURPLUSES
- Federal Outlays
- Lost Wealth Estimates
- NEW CROP SOLUTIONS
- Table 1
- Fig. 1
Surplus production, and consequent low prices, of agricultural commodities has
been a regular peacetime phenomenon in the United States for more than a
century. It was a problem in the 1870s when the USDA was formed, in the 1890s
when cotton producers were encouraged to diversify their cropping systems and
introduce new crops (Taylor and Taylor 1952), and in 1933-1942, 1956-1973, and
1982-1995 (Fig. 1). National farm policy aimed at agricultural income
stabilization was initiated in 1935 but the problem remains 60 years later
despite large government outlays (Tweeten 1995) and several million farmers
have been forced off the land because of insufficient economic opportunities.
Peacetime cropland reduction, i.e. the cropland taken out of production by
federal government programs (Crosswhite and Sandretto 1991) has trended upwards
since 1933 (Fig. 1) and the absence of sufficient profitable new-crop
alternatives has resulted in lost revenue opportunities from idled cropland, in
addition to the costly government outlays to idle the land.
Surplus production in the twentieth century is due to a combination of rapidly
increasing technology and agricultural policy. From 1918 to 1940 surpluses
were a consequence of the replacement of voracious draft animals by gas
guzzling farm tractors and thereafter it was exacerbated by increases in yields
caused by advances in genetic improvement, pest control, plant nutrition,
mechanization, and agronomic management practices developed by state and
federally supported research efforts combined with price support programs that
encouraged planting of traditional crops. With the biological revolution
currently underway, these yield improving technologies can be expected to
continue and to spread at increasing rates throughout the world. In much of
Asia increases in productivity have been sopped up by rapidly increasing
populations, but crop increases have not kept up with demand in parts of
Africa. The expanded productive capacity in North America and Europe however
has not been compensated for by equivalent population increases and, until
recently, lack of financial resources in the developing world have dampened
exports and in many cases exported feed grains were either donated or
subsidized. New crops development, particularly industrial crops (previously
called chemurgic crops) have long been proposed as a solution to this problem
and tremendous advances have been made in expanding new uses of traditional
crops such as soybeans and maize. Clearly, the problem has not been solved
suggesting that the neglected search for alternate and new crops be
There are obvious reasons why the private sector does not invest in new-crops
research and development. New-crops development is: (1) long term, (2) high
risk, and (3) may not yield benefits to the originators. Therefore, adapters
and users intentionally wait until the profit potential is more obvious and
nearer term before risking research and development investments for new crops.
Although these factors justify government-funded intervention in agricultural
research (Alston et al. 1994; Jolliff and Snapp 1988; Jolliff 1989), there has
been extreme underinvestment in new-crops research and development compared to
the established agronomic crops which are frequently in surplus (Jolliff 1989).
As there is no voice for new crops, federal support has languished.
As a result of underinvestment in research, potentially viable new crops have
not been developed to the point of profitability to the private sector.
Determining the potential payoff to justify increased public-sector investments
in new-crops development is needed. The objective of this paper is to estimate
federal financial outlays and lost national revenue opportunities for the 17
year period, 1978 through 1994, associated with the absence of sufficient
new-crop alternatives. This study was based on the assumption that science,
technology, expertise, and plant materials have existed which could have been
mobilized during the past century to provide profitable new-crops for U.S.
farmers as alternatives to idling cropland and overproduction of surplus crops.
The total cost of crop overproduction for the 17 year period 1978 through 1994
was the summation of the total cost of federal outlays, plus an estimate of
total lost opportunity costs.
Federal outlays included (1) cash outlays from Budget Function (BF) 351, (2)
value of certificates, and (3) interest. Budget Function 351 of the federal
budget is a budget category which includes many aspects of federal outlays for
farm income stabilization. Much of the expenditure is for surplus
commodity-related programs, such as loans, subsidies, and costs of acquiring
and storing commodity stockpiles. Note that some surplus-commodity-related
costs, such as foreign agricultural export losses, crop improvement research
funded through the Agency for International Development, and domestic donations
of food are not included in Budget Function 351 and are not estimated in this
analysis. Also not included are some costs to the consumer and taxpayer such
as inflated domestic prices (e.g. peanuts and sugar) as a consequence of
government program quotas. The data source was the USDA Office of Budget and
Certificates, which are non-cash outlays, include the $8.4 billion cost of the
1984 Payment-In-Kind (PIK) Program. The data source was the USDA Office of
Budget and Program Analysis.
Interest on outlays (BF 351 and Certificates) are based on 3-year U.S. Treasury
Security Interest Rates (Table B-72, Economic Report of the President,
February, 1995). Interest was compounded annually. Sums for each year were
adjusted to 1987 dollars using the appropriate deflator (Table B-3 of the
Economic Report of the President, February, 1995). Conversion of 1987 dollars
to 1995 dollars was done by multiplying the 1987 dollars by the 1995 GNP
Implicit Price Deflator of 1.281.
Lost wealth opportunity estimates are based on estimated revenue losses from
idled croplands plus the consequent lost multiplier effect based on the
economic benefit of new wealth which was not produced. Calculation of lost
wealth is based on idled acreage and returns/acre data from the Food and
Agricultural Policy Research Institute, Univ. of Missouri-Columbia. Idled
acres for each of seven crops (wheat, corn, sorghum, barley, oats, cotton, and
rice) were multiplied by the return per acre of farmers who participated in the
government program for the respective crop. This is an estimate of financial
opportunity for alternative crops on idled cropland.
A multiplier effect of 2.0 was used to estimate the economic benefit to the
economy from new wealth which could have been generated on idled land if
profitable new crops had been developed for U.S. farmers. The values for
federal outlays and lost wealth for the period 1978 to 1994 are shown in Table 1.
The lack of profitable alternative crops for U.S. farmers during the period
1977 through 1994 has been extremely costly to taxpayers with severe social
consequences to farmers and rural areas. Total costs for the 17-year period
are estimated as $728 billion in 1987 dollars, equivalent to $932 billion in
1995 dollars. Clearly, an economic evaluation of the cost of crop surpluses
requires careful examination in the context of new-crops development policy.
The annual federal budget for agricultural research is approximately $2
billion. Plant productivity research, an important component, is almost
completely devoted to established crops, with very little funding or
institutional structure committed to new-crops development.
Agricultural research is rightly touted as yielding high returns on investment.
There is question however, if the calculated rates of return in the literature
took into account the high costs of government programs associated with the
generation of crop surpluses. Also, arguments are being made with increasing
frequency that environmental and social costs of activities, such as farm
programs, should be considered (Van Dieren 1995). These types of accounting
could strengthen the case for federal investments in new-crops development
(Jolliff 1989). Federal appropriations would need to be new-crops-specific to
assure resource use in the intended area. This implies that additional
institutional innovation in national farm policy--beyond the USDA Alternative
Agricultural Research and Commercialization Center--may be necessary to bring
about needed change (Jolliff 1989). A suggested New Crops Initiative has been
suggested in CAST Issue Paper 6 (Janick et al. 1996). Advances in new-crops
development may be an important way to raise the standard of living in many
countries of the world.
Historical fiscal evidence of the costs of surpluses justifies increased
investment in the development of profitable and sustainable new-crop
alternatives for U.S. farmers. A long-term strategic national effort is needed
to make maximum use of genetic diversity in crop agriculture.
- Alston, J.M., P.G. Pardey, and H.O. Carter (eds.). 1994. Valuing UC
agricultural research and extension. Pub. No. VR-1. Agricultural Issues Center,
Div. Agricultural and Natural Resources. Univ. California, Davis.
- Council for Agricultural Science and Technology. 1995. Sustainable agriculture
and the 1995 Farm Bill. Council for Agricultural Science and Technology. Ames,
- Crosswhite, W.M. and C.L. Sandretto. 1991. Trends in resource protection
policies in agriculture. p. 42-49. In: Agricultural resources: Cropland, water,
and conservation. Situation and Outlook Report AR-23. Economic Research
Service, U.S. Department of Agriculture. Washington, DC.
- Janick, J., M.G. Blase, D.L. Johnson, G.D. Jolliff, and R.L. Myers. 1996.
Diversifying U.S. crop production. Issue Paper 6, Council for Agricultural
Science and Technology. Ames, IA.
- Jolliff, G.D. 1989. Strategic planning for new-crop development. J. Prod. Agr.
- Jolliff, G.D. and S.S. Snapp. 1988. New crop development: Opportunities and
challenges. J. Prod. Agr. 1:83-89.
- Taylor, H.C. and A.D. Taylor. 1952. The story of agricultural economics in the
United States, 1840-1932. Iowa State College Press, Ames.
- Tweeten, L. 1995. The twelve best reasons for commodity programs: Why none
stands scrutiny. Choices Second Quarter:4-7, 43-44.
- Van Dieren, W. (ed.). 1995. Taking nature into account: A report to the Club of
Rome. Copernicus. An Imprint of Springer-Verlag.
*Oregon Agr. Expt. Station Technical Paper No. 10,963. Sincere appreciation is
extended to Steve Dewhurst and Dennis Kaplan, USDA, Office of Budget and
Program Analysis for providing historical budget data; to Carmen Sandretto,
USDA, ERS for providing historic cropland reduction data used in Figure 1; to
Dr. Abner Womack, and Gary Adams, Food and Agriculture Policy Research
Institute, University of Missouri-Columbus, Missouri for providing the historic
annual data on the seven crops for acreage reduction and participant returns
per acre, and for reviewing the calculations; to Dr. James Cornelius,
Department of Agricultural and Resource Economics, Oregon State University, and
Dr. Rueben Buse, Department of Agricultural Economics, University of Wisconsin
for guidance in preparation of the research, and reviewing the calculations.
Table 1. Outlays and lost opportunities for crop agriculture,
|Category ||Billions of|
|Budget function 351 ||254|
|Interest (BF 351 + Certificates) ||289|
|Sub total ||580|
|Lost wealth opportunities|
|Lost crop opportunities ||74|
|Multiplier effect loss ||74|
|Sub total ||148|
|Grant total ||728|
Fig. 1. United States cropland acreage reduction 1933-1994. Millions
of acres of cropland taken out of production (idled) by federal government
programs (trend line: approximate fit to three means: 1934-1942 = 35; 1957-1972
= 47; 1983-1993 = 58). Adapted from Crosswhite and Sandretto (1991) and
updated from C. Sandretto (pers. commun. 1995).
Last update August 15, 1997