119 



In regard to the capacity situation, we have adequate — I won't go 

 through the first paragraph here, but we have adequate capacity 

 to satisfy food/fiber industrial needs. Unless we find other outlets, 

 we will continue to support the excess supply situation. 



The United States has invested heavily in growing markets for 

 bulk ag commodities — the export market. The disappointing news 

 is that despite major efforts, exports have been declining for major 

 commodities. In the 1980's, the U.S. share of the world market for 

 com slipped to 66 percent from 77 percent, wheat fell to 32 percent 

 from 44 percent, and soybean exports fell to 66 percent from 78 

 percent. The United States has offered price discounts in excess of 

 30 to 40 percent in some bulk commodity markets and has pushed 

 hard in every forum available to liberalize ag trade in the belief 

 that the lower-cost U.S. commodities would eventually displace 

 higher-cost products produced in importing countries or subsidized 

 by other exporters. 



The lack of success so far in the Uruguay Round and the growing 

 cost of the export promotion programs raise concerns about the 

 costs and benefits of growing the export market. While few, if any, 

 would suggest that we abandon negotiations and export promotion 

 programs, more and more observers recognize that bulk commodity 

 exports alone are not likely to answer our excess capacity situation. 



Also, opportunities in the food area domestically are limited. 



The AARC Center believes that more of our ag and forestry ma- 

 terials need to be converted to value-added products prior to ex- 

 port. Western Europe does a much better job of adding value to 

 their ag materials prior to export than we do in the United States. 

 About 30 percent of our ag exports are consumer-ready products 

 compared with about 70 percent in the Western European coun- 

 tries. 



In terms of tools to identify new markets and products, the 

 AARC Center can be of significant help in bridging the gap be- 

 tween research advances and getting a commercisJ product into the 

 market place. I just want to expand just very briefly on this be- 

 cause it is very critical. 



When we do our research £ind it looks promising that we will be 

 able to move it into commercial products, that is a very small part 

 of the cost. It requires about 10 times that research cost to develop 

 that particular technology and it takes 10 times that to get the 

 product on the market. So it is absolutely critical that we begin 

 looking at the in-between phase between the research bench and 

 getting the product on the market. 



The AARC Center is industry led and market driven. The major- 

 ity of the AARC board of directors, reviewers, and applicants are 

 from the private sector. We have direct links with these people — 

 some already have products with export potential that are made 

 from ag commodities and others are near commercialization — ^but 

 few have experiences in accessing and penetrating export markets. 



I just want to indicate a few examples that I have here. The 

 Phenix Composites' Newstone, Mr. Chairman, which I know you 

 are familiar with from Minnesota which is a product that I have 

 right here, and this is made out of soybean meal and wastepaper 

 and this is a project that we are supporting. They are in the proc- 

 ess now of building a production facility right around St. Peter, 



