Greener pastures for
bio-tech co-ops?

New, bio-based products may only be scratching the surface of potential

By Steve Thompson, Writer-
Editor, USDA Rural Development
StephenA.thompson@usda.gov


hat do lubricating oils, diesel fuel, glues, plastics, paints, solvents, inks and packing peanuts have in common?

If you immediately thought “petroleum,” you’re only partly right. Petroleum is usually used in the manufacturing of such products, but other raw materials can also be used, including those grown on farms. The manufacture of new “bio-based” products to replace or supplement those made with conventional, non-renewable materials may provide new opportunities for farmer cooperatives to add value to their members’ crops.

As the nation observes Earth Day in April, it is a particularly good time to take a close look at a new federal government requirement designed to spur development of bio-based products and what that can mean for the nation’s farmers.

Farm Law spurs purchases
The Farm Security and Rural Investment Act of 2002 requires federal agencies to buy officially designated, bio-based products whenever possible for purchases of $10,000 or more. On Dec. 19, 2003, the U.S. Department of Agriculture published a proposed regulation for designating bio-based products, to help pave the way for promulgating the new federal procurement guidelines.

The 2002 act gives three main objectives for the new requirement. The first is to improve the demand for biobased products good news for producers of commodities that can serve as raw materials. The second is to encourage the development of agbased, value-added processing and manufacturing in rural communities. The third objective is encouraging the substitution of fossil fuels with more environmentally friendly substances

The range of a new generation of bio-based products already available is surprising. The best known are the fuel additives ethanol and biodiesel. Ethanol is made by distilling ethyl alcohol produced by fermenting grain with yeast basically the same process used for hundreds of years to make distilled liquor. Because the ethanol molecule contains atoms of oxygen, its addition to gasoline can make engines run marginally cleaner. The Environmental Protection Agency requires that many urban areas use oxygenated fuel, especially during winter, when air pollution is worst. Until recently, methyl tertiary butyl ether (MTBE) has been the oxygenator of choice. But revelations that MTBE has contaminated groundwater in some areas, along with its unhealthy effects when breathed as fumes, have caused many states to ban it. That leaves environmentally friendly ethanol as the best alternative. Farmer-owned ethanol plants both traditional cooperatives and hybrid co-op/limited-liability corporations are springing up like mushrooms across the Midwest.

Biodiesel is produced by modifying soy oil or other naturally produced oils. Even the waste fat from fast-food deep fryers can be used, and the conversion process is simple enough that some enthusiasts make it in their own kitchens. When biodiesel is used by itself as diesel fuel, it reduces both soot and greenhouse gases as compared to conventional diesel. It also has better lubricating qualities, which can enhance engine life. The major diesel engine and fuel injection system producers have endorsed its use.

Biodiesel’s most common use promises to be as an additive, in a 1-to-4 mixture with the petroleum fuel known as B-20. In addition to lower carbon emissions, its improved lubricity allows refiners to lower the amount of sulfur in their fuel, which reduces emissions that contribute to acid rain. Blue Sun Producers is a Colorado farmer co-op that sells B-20 blended biodiesel through retail outlets. The co-op has set a goal of having 100 biodiesel pumps throughout the state by the end of the year, and is soliciting participation by local producers (see sidebar 2).

Bio-based cleaning products use technology that dissolves grease and dirt without harsh solvents. One biobased cleaner is advertised as being “powerful enough to clean battleships, yet mild enough for baby kittens,” while offering better worker and environmental safety compared to comparable conventional cleaners. Soy-based paint-remover doesn’t give off harsh fumes or burn the skin, unlike many conventional solvents.

Iowa co-op producing
soy-based lubricants
West Central Cooperative, a farmer co-op in Iowa, markets a number of soy-based industrial and agricultural lubricants, including hydraulic fluid and penetrating oil, as well as specialized cleaners such as graffiti remover. The co-op says these products reduce environmental impact and pollution. Modified castor oil is now used in the production of urethane plastics, inks, rubber and other synthetic products. Polymerized soy oil is used in paints and caulking and glazing compounds. There’s even a new kind of paper that qualifies as bio-based: it’s made from kenaf, a fast-growing field crop related to cotton and okra.

Despite the growing number of biobased products and the benefits they offer, their total share of the market is still tiny. “It’s a chicken or egg problem,” says Dan Manternach, president of the Bio-based Manufacturers Association. “To really take off, the market needs to attract big buyers: the McDonalds, the Walmarts and so on. The trouble is, the big buyers tell producers they’ll consider buying their products only if they can promise large quantities of them. But the producers can’t expand to make large quantities until they have big buyers.”

Manternich is excited about the possibilities the new federal initiative opens up for value-added activities. “This is extremely promising for providing the seed the market needs,” he says. He thinks the federal government’s role in the bio-based products market will be similar to that of an “anchor store” in a shopping mall, attracting other customers and giving manufacturers and potential manufacturers the confidence they need to start up and expand. As a bonus, the media attention will, hopefully, provide the bio-based movement with a muchneeded publicity boost.

Proponents of bio-based technologies say that current products only scratch the surface of possibilities. Kim Kristoff is the CEO of Gemtek, a company that makes bio-based cleaners, lubricants and other products. “Bio-based technologies offer tremendous value-added opportunities for farmers,” he says. “There are so many things they could be doing to enhance their income, but they’re not looking for them.” For example, Kristoff sees current use of the grain byproducts from distillation and brewing known as brewers’ and distillers’ grains as hugely wasteful.

“They’re using them as animal feed,” says Kristoff, “But there are all kinds of useful substances that can be extracted from them.” He names lignins, xanthan gums and complex sugars and proteins as examples, as well as enzymes for use in manufacturing plastics.

European co-ops have head start
Kristoff says that European farmer co-ops, especially in Belgium, Germany, Switzerland and France, have a big head start in exploiting biobased technologies. Manternach points out that European farmers are allowed to plant canola farmland as participants in set-aside programs similar to the U.S. Conservation Reserve Program, an option that isn’t on the horizon for U.S. farmers.

Recent research has investigated the extraction of nutritional supplements and pharmaceuticals from distillers’ grains. And oilseed byproducts, known as soapstocks, are also rich in exploitable chemicals, says Kristoff. USDA’s Agricultural Research Service (ARS) has been exploring other uses, and has found that cottonseed, safflower, soybean, and even rice bran soapstocks can be processed into a safe, food-grade coating that keeps vegetables such as cucumbers fresh longer. Other scientists are looking into a hair gel made from the substance, which could be produced at a lower cost than similar products made from synthetic polymers. Even watermelon rinds may be useful: ARS is researching the extraction of a key amino acid from them for use in treating sickle-cell anemia.

Production of industrial lubricants is a field that may offer attractive opportunities to co-ops. A research program of the University of Northern Iowa, called Agriculture-Based Industrial Lubricants (ABIL), is exploring the manufacture of lubricants derived from such sources as cottonseed, soybeans, canola and other field crops. Lou Honary, an associate professor and the head of the program, says that producing greases and other lubricants from plant sources isn’t that feasible for our farmers.

“We had farmers who set up soybean crushing and grease manufacturing on their farms,” Honary says. “Under a USDA grant, three farm sites were set up to crush soybeans using mechanical presses, feed the meal to livestock and make fifth-wheel grease for trucks.”

ABIL has developed some 30 different lubricants, including lubricants for machining metal, several different hydraulic fluids and bearing and fifthwheel greases. Their most successful product, at 2.5 million pounds sold so far, is rail curve grease for railroads. This grease is applied to the rail curves or train wheels to reduce noise and wear on wheel flanges. According to Honary, two of the five largest Class I U.S. railroads use ABIL rail curve grease and other Class I railroads have approved it or are in the process of approving it. “This is a ‘lost-in-use’ product,” he says, “and the bio-based grease doesn’t present the kind of environmental contamination problems petroleum grease does.”

Honary says that cotton farmers and co-ops could take advantage of the cottonseeds they harvest to economically provide a necessary “lost-in-use” lubricant to themselves. “Their cotton-picking machines each use gallons of grease every day to lubricate their spindles,” he says. Pressing oil from the seeds and making spindle grease from it would be easy and require only a small investment. “They could make it and use it themselves, and save money,” says Honary. And, since most of the grease lost goes on the field or into the cotton, using cottonseed-based grease would be more environmentally friendly and save cleaning costs.

Marketing expertise needed
ABIL-invented products are marketed through West Central Coop in Iowa and Illinois-based GROWMARK. “They market them through their own outlets,” he says. But Honary thinks a major problem with that approach is that most co-ops don’t have the expertise or resources necessary to successfully market industrial lubricants. He believes that the answer is to enter into relationships with established petroleum distributors.

“I don’t think the people who sell oils and greases really mind what the source is,” he says. “They just want to sell a product that solves the problem and which they can make money on.” One issue that American farmers must take into consideration when looking at value-added activities is opportunity cost: the cost of losing one opportunity to pursue another. The opportunity cost of using oilseeds as feedstock is currently high. Oilseed especially soybean prices are now at record high levels, and some analysts say that, because of rising incomes in China and India, the market may stay strong for quite some time.

Despite the new federal bio-based procurement requirements, high prices at present serve as a disincentive to soybean producers from making the investment needed to add value to their crops. But among the advantages of selling value-added and finished products is the vital one of more stable markets. Foregoing development of new value-added products in favor of taking advantage of current high commodity markets may well impose on producers its own long-term opportunity cost.




Eligible bio-products defined

For the purposes of the new initiative, a bio-based product is broadly defined as "a product determined by the Secretary as a commercial or industrial product (other than food or feed) that is composed, in whole or in significant part, of biological products or renewable domestic agricultural materials (including plant, animal, and marine materials) or forestry materials."

Because part of the goal is to encourage development of new markets, the new requirements will not include items that USDA has determined have "mature markets." Thus, for instance, "silk, cotton and wool garments, household items and industrial or commercial products are excluded, unless made with a substantial amount of a biobased plastic product."

Products are divided into 11 categories: adhesives; construction materials and composites; fibers, paper and packaging; fuel additives; landscaping materials, compost and fertilizer; lubricants and functional fluids; plastics; paints and coatings; solvents and cleaners; sorbents (materials that soak up liquids); plant and vegetable inks.

To qualify, a product must contain a certain percentage of bio-based materials, which varies by product. For example, 80 percent of a liquid fuel additive must be bio-based ingredients, while automotive lubricating grease is only required to contain 25 percent total bio-based materials.

For co-ops already producing bio-based items, the federal government is not yet ready to start procurement under the 2002 act. Each bio-based product will be designated as suitable for preferred procurement only after consideration of such factors as feasibility, availability, relative price, long-term costs, performance and health and environmental benefits. Each designation will take the form of a regulation published in the Federal Register, first with publication of a draft rule allowing for a 30-day comment period, followed by the final rule.

USDA is charged with developing the pilot procurement program, including procurement guidelines and employee training, in cooperation with the White House's Office of Federal Procurement Policy. Producers can help the approval process along by providing information about the items they wish to sell. On its Bio-based Preferred Procurement Program website, USDA offers a draft Product Information Sheet manufacturers can use as a template for submitting product information:

http://www.biobased.oce.usda.gov/public/prodSub.cfm. The information posted by manufacturers and venders will be used by Federal agencies to help identify products that fit their needs.
Steve Thompson



USDA grant helping Colorado cooperative produce biodiesel

Blue Sun Producers co-op was founded in June 2003 to provide biodiesel production opportunities for farmers in Colorado and neighboring High Plains states. Members will grow a new kind of crop based on mustard seed, which, the co-op says, is cheaper to produce and can be made into a higher quality fuel than can soybeans.

Mustard seed also requires less rain, crucial in the arid High Plains. The growing cycle of the new oilseeds allows them to be planted after harvest on land used for winter wheat, making two crops a year from the same acreage.

The co-op will provide feedstock to Blue Sun Biodiesel, a corporation founded in 2001, which opened its first biodiesel pump Feb. 3 at a feed and hardware store in Fort Morgan, Colo. On the same day, the co-op received a $450,000 grant from USDA Rural Development for development of this new renewable energy source.

Blue Sun is now recruiting farmers in Colorado, Nebraska, Wyoming and Kansas to grow the new crop. Further information is available on the web at or by telephone, 970-221-0500.





March/April Table of Contents