Diversification of Another Kind

W. B. Van Arsdel.

Thoughtful men realized long ago that the business risk of growing or processing a crop could be diminished by diversifying the market. Meat-packing concerns were among the first to put the principle into practice. I well remember that just a generation ago "everything but the squeal" was a common byword.

The great crop surpluses of the 1920's and 1930's brought the idea into new prominence. The demand for some food crops is rather inelastic, so that even an oversupply of 10 or 15 percent is enough to depress prices to ruinous levels unless the oversupply can be diverted into some other channel of consumption. Even a relatively small new use for the product may, therefore, have a powerful leverage on the price level for the entire crop. In view of the often-repeated proposition that the human stomach has only a fixed capacity, the emphasis in the search for new uses has usually been placed on the discovery of nonfood uses, even for crops that have been traditionally grown only for food.

In the crude form as I have just stated it, the proposition certainly does not contain the whole truth. Many Americans, even in prosperous times, do not eat enough food to reach an adequate calorie intake. Many, many more do not have a nutritionally balanced diet. New or cheaper food products need not simply displace older food products on the market if they can reach these malnourished persons, the total consumption of food and total farm income will be increased.

In addition, as our national standard of living rises we consume a wider variety of foods primarily for their flavor, texture, or color appeal, or because we think they are good for us. A dollar spent for orange juice or milk or lettuce does not buy so many calories as to make much difference in our need for energy foods. We cannot forget, either, that a vast hunger exists in other parts of the world and that some day, barring catastrophe, we shall be able to sell our goods freely overseas once more.

But even when we make all these proper qualifications, the fact remains that our need for food products is limited, while our appetite for other material goods seems to be insatiable.

How much of a stake do American farmers have in the market for products other than food or feed, and what are their chances for the future in this limitless field?

MOST FARM PRODUCTS find uses both as food or feed and as one or many of the multitude of other things our industrial civilization wants. Meat animals are the outstanding example. Cattle and sheep are raised primarily for meat, but hides and wool are among the most essential of the raw materials produced by agriculture. I do not know how to estimate the total value to farmers of the nonfood part of these multiple uses. Available statistics do not go far enough. The few figures we have only scratch the surface. The farm value of shorn wool in 1949 was 107 million dollars. In the same year the corn wet-milling industry converted 117 million bushels of corn into starch, sirups, dextrose sugar, dextrins, oil, and feed, but the value of the nonfood,nonfeed part of this to the farmers has not been estimated. Neither do we know the money return to farmers from the use of soybean oil cake in adhesives and soybean oil in paints; or the use of skim milk for making casein; or the sale of hides, fertilizer, and glue by packing plants. We can only say with confidence that several hundred million dollars of farm income must be ascribed to industrial uses of crops grown primarily for another purpose.

Cotton and wood are conspicuous examples of agricultural commodities that are grown for nonfood purposes. The list is not long. It includes tobacco, horses and mules, flaxseed, tung nuts, and broomcorn. Along with wood and the multitude of products derived from it go a number of secondary forest products, such as naval stores and some tanning materials.

The cash return to farmers for the nonfood commodities is impressive. The values for the 1949 production year (omitting a few crops of relatively small total value) were, in millions of dollars :

The second item, estimated by the Forest Service, includes sawlogs, veneer logs, pulpwood, fuel wood, poles, piling, and posts, estimated in unmanufactured condition at local points of delivery.

The total is approximately one-fifth of the total estimated cash receipts from farming in 1949.

AGRICULTURAL PRODUCTS constitute essential raw materials for a broad segment of American industry. The interaction is two-way; not only are many industries geared to the processing of the farmer's crops, but also in increasing degree the farmer finds that his direct customer is a processing plant.

Self-sufficient farming, nearly independent of cash sales, is today a rarity. But one consequence of that change in our farm economy is that today's farmer has a heavy stake in one or more manufacturing enterprises, and has a right to expect intelligent and efficient handling of his partner's end of the business. By fumbling, the processor may ruin both himself and his farmer-supplier.

The 1947 Census of Manufactures divided American manufacturing industries into 20 broad groups. One of these contains the food industries. Seven of the groups cover mainly nonfood products from the agricultural sources.

The 20 groups are subdivided in the Census into nearly 500 distinct industries. A third of them, about 160, produce nonfood products from agricultural commodities. The 160 industries comprise more than 65,000 separate establishments, employ 4 million wage earners, and in 1947 shipped goods valued at more than 44 billion dollars. The industries range in size from such giants as the cotton-textile and pulp and paper industries down to such modest enterprises as the manufacture of straw hats, neckties, mucilage and paste, saddlery and harness, and brooms.

The seven industry groups concerned mainly with the manufacture of nonfood products from agricultural raw materials are listed here in the order of the value of their products (in millions of dollars) :

BYPRODUCTS have a way of becoming the primary products of great industries cottonseed, for example, was once a waste.

In writings on this subject the words residue and waste are usually given special meanings. A residue is a relatively stable waste portion of a crop generally left on or near the farm when the crop is harvested. The term has been applied particularly to cereal straw and hulls and corn stalks and cobs. Waste is a broader term, embracing not only the residues but also such diverse kinds of things as peach skins and pits separated from the peach flesh in a cannery, broccoli or cauliflower leaves trimmed from the heads at a packing shed, day-old cockerels from a hatchery, whey from a cheese factory, and bark separated from wood in a pulp mill. It is a peculiarity of language, rather than of the things themselves, that the instant a commercial use is made of a waste it ceases being a waste and becomes instead the raw material for a byproduct.

Most of the wastes of agricultural processing plants are major problems in their own right, because of the difficulty and expense of disposing of them without creating a nuisance. The nuisance aspect has, in fact, provided a strong incentive toward the discovery and development of uses which would turn the wastes into raw materials for new byproduct industries. In general, the solid portions of processing wastes, classifiable as garbage, have shown much more promise of useful byproduct development than the liquid sewage.

Many of the industrially successful uses for residues and other agricultural wastes lead to nonfood products, others to highly acceptable livestock feeds.