Two Words: Biodegradable Plastics

Editor's note: A previous edition of this article misidentified the ownership of the former Cargill-Dow, now known as NatureWorks, LLC. Dow Chemical sold its interest in the firm to Cargill in 2005. The Fool regrets the error.

One of the all-time great movie lines comes from the 1965 hit, The Graduate, when a family friend pulls Dustin Hoffman's character aside at his college graduation party and whispers, "I've got one word for you: plastics." Updated for 2007, that line might read, "I've got two words for you: biodegradable plastics."

Just yesterday, Metabolix (Nasdaq: MBLX) and Archer Daniels Midland (NYSE: ADM) announced a 50-50 joint venture, Telles, to commercialize biodegradable plastics made from corn starch, under the brand name Mirel. Telles expects to produce 110 million pounds of Mirel by the second half of 2008.

In the grand scheme of plastics, this is chump change. Every year, America consumes 350 billion pounds of plastic. But replacing even a fraction of these plastics with their biodegradable cousins could create a huge opportunity for profit.

That should become especially true as the public grows more aware of biodegradable plastics' environmental benefits. Manufacturing plastic currently consumes about 10% of all the oil used in the U.S.. Switching to corn-based plastics could help reduce our reliance on foreign fossil fuels, at least marginally. These plastics' ability to decompose should also reduce the burden permanent plastic currently imposes on solid waste systems across the country.

As it stands right now, Metabolix and ADM don't have a monopoly on this market. NatureWorks, LLC -- formerly Cargill-Dow -- has been working on biodegradable plastics for some time, as have DuPont (NYSE: DD) and BASF (NYSE: BF), but I'm guessing that the field can sustain more than one player.

Metabolix and ADM have indicated that they're currently working with more than 40 different prospective customers. I'd encourage investors to look for additional news on this front; if Telles can begin lining up major consumer product producers or users such as Procter and Gamble (NYSE: PG) and McDonald's (NYSE: MCD) -- which are always seeking ways to improve their environmental profiles -- "biodegradable plastics" could translate into two more words: healthy profits.

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Fool contributor Jack Uldrich wishes his wife's credit cards were made of quickly degradable plastic. He doesn't own stock in any of the companies mentioned in this article. Dow Chemical is a Motley Fool Income Investor pick. The Fool has a strict disclosure policy.