Does 'Mid-Oleic' Spell U.S. Sun Oil's Future?
Here it is, Mr. Farmer: Springtime in the year 2001. Time to sow this season’s sunflower crop. The fields are waiting, and your planter is ready to roll.
Those black oil-sunflower seeds flowing out of their bags and into your planter boxes or air cart look exactly like the hybrids you bought during the ’90s. You’ll use the same seeding rates as in prior years; you’ll manage this crop similarly to previous ones; and everything else being equal, you’ll harvest yields as good as or better than those you pulled off last fall.
But there’ll be a big difference — a difference you cannot detect, yet one which your local elevator will measure and verify when you deliver your crop: The oil in the crop harvested from those hybrid sunflower seeds will possess an “oleic” fatty acid content somewhere between 60-75 percent. That compares with a typical oleic reading in the neighborhood of 16-22 percent back in the mid-1990s.
What drove this change? And why is it important — important to you, to your seed company, to elevators, to crushers and to the U.S. sunflower industry in general?
The above scenario is not offered as a fairy tale. It is, instead, very plausible. Some would say “probable.” For although this drama’s plot is still evolving and undergoing definition, it appears the U.S. oil sunflower industry could be poised for a dramatic change in the nature of the product it offers its customers — as well as in the very makeup and magnitude of that customer base. And it all revolves around something called “mid-oleic” sunflower.
First, some background.
In the three decades since the domestic sunflower oil crushing industry was established, its predominant product has been an oil high in “linoleic” acid. (See the article on page 8 for more discussion on the various fatty acids.) When U.S. sunflower acreage was exploding during the heady days of the late 1970s, there were numerous predictions about how this oil — with its healthy attributes and bright image — was destined to become a prominent player in the U.S. fats and oils consumption arena. However, despite some successes, those predictions have not come true. From 1981/82 through 1990/91, domestic use of sun oil averaged just over 70,000 tons per year. During the next four marketing years, it averaged nearly 110,000 tons — but still accounted for only about one-fourth of total U.S. sun oil production in that period.
Exports have been the industry’s core, with marketing year 1994/95 sun oil exports setting an all-time record at 444,000 metric tons. But while of great importance, such heavy dependence upon exports can also prove fickle and risky. Export volume is very dependent upon the degree of competition from other sun oil exporters — most notably, Argentina — and upon the availability of U.S. government price support programs to help meet this competition. Also, some of the major U.S. sun oil customers of recent years (e.g., Iran and Algeria) do not have notably stable governments or economies.
“We need to be price-competitive with the Argentines, who have some real export advantages,” explains Larry Kleingartner, executive director of the National Sun-flower Association. “For example, they have a number of crushing plants located right on the coast, so they avoid the cost of shipping oil from the interior to the ports.
“While last year was an exception, there’ve been times in the past few years when we’ve needed a subsidy to compete in international markets,” Kleingartner continues. “And with the decline or elimination of export subsidies, it’s not in our best interest — for the long-term health of this industry — to rely so heavily upon those markets.”
Price and reliability of supply have been primary obstacles to sunflower oil’s making a major dent in the domestic market. Promoted for its “premium” oil characteristics, food companies found that U.S. consumers were not willing, by and large, to pay a “premium” price for their vegetable oils. The majority of domestic use has been for margarines and salad oil, with the selling tag being the healthfulness imparted by sun oil’s high polyunsaturated fatty acid content (the high-linoleic factor).
As a frying oil, sunflower has had limited market success because of its relatively high cost and certain traits which make it less stable in heavy-duty frying as compared to cottonseed oil. This has been one area where the “high-linoleic” nature of sun oil has not been an advantage. A partial hydrogenation process is required to lower the linoleic acid content and make the oil more suitable for frying purposes.
Over the past quarter-century, many nutritionists and consumer advocacy groups have touted the healthy aspects of vegetable oils high in polyunsaturated acids. Recently, however, three new and parallel trends have emerged: (1) the movement of U.S. consumers toward diets lower in fat content and saturated fats specifically; (2) growing concerns among nutritionists and consumers about “trans-fatty” acids, which are produced during the vegetable oil hydrogenation process; and (3) mono-unsaturated (as opposed to “poly-”) fatty acid’s having demonstrated, in some studies, the ability to lower the levels of undesirable types of blood cholesterol.
Hydrogenation’s image is becoming a concern. The jury is still out among health scientists as to exactly how trans-fatty acids affect human health, says Ed Campbell, technical director of the vegetable oils division of ADM in Decatur, Ill. But as more consumers perceive trans-fatty acids as potentially harmful, many food companies are looking at eliminating hydrogenation from their product formulas. That’s obviously a negative development for high-linoleic sunflower — and also for soybean and canola oils, which are high in linolenic, another type of fatty acid.
But of adversity can come opportunity. In this case, the opportunity may be unprecedented for the sunflower industry.
One of the nation’s major users of vegetable oils for frying purposes is Dallas-based Frito-Lay, Inc., the manufacturer of numerous snack food products. As a key player in the snack food industry and a huge purchaser of cottonseed, soybean and canola oils for use in its potato chips and other products, Frito-Lay has had to confront the “low-saturated fat” issue head on. Nutritional information appearing on product labels carries tremendous marketing implications these days.
Dr. Monoj Gupta of Frito-Lay Technology explains that to meet the Food and Drug Administration’s guidelines for labeling a food “Low in Saturated Fat,” a product must contain less than one gram of saturated fat — from all ingredients combined — in a serving size of one ounce (28.4 grams); or, less than two grams in a serving size of 50 grams.
Citing the example of a one-ounce bag of potato chips, the oil used to fry those chips typically will account for 36 percent of total product weight, or 10.2 grams per serving. Regular sunflower oil contains 12 to 13 percent of total saturated fatty acid, which translates into about 1.3 grams per serving. It thus does not meet the FDA maximum of one gram per one-ounce serving, so the label on those potato chips cannot read “Low in Saturated Fat.” High-oleic sunflower typically has a saturated fatty acid content around 9.5-10 percent, so would fall — just barely — within the FDA guideline for snack food products.
To date, the four oils which a snack food company could use in preparing its potato chips and still fall within the FDA guidelines are: regular canola oil; low-linolenic acid canola oil; low-linolenic/low-saturated-fatty-acid soybean oil; and, in some cases, high-oleic sunflower oil. Regular (high-linoleic) sunflower oil could be used, but its percentage of product ingredient would have to reduced to 27.7 percent, which could negatively impact consumer acceptance of some snack foods.
While all these other oils have their strong points, they also carry drawbacks — usually related to price, quality character-istics or availability of supply. That has left the door open for a mid-oleic sunflower, according to Gupta. He says a mid-oleic sunflower oil — i.e., one with an oleic acid content between 60 to 75 percent and a saturated fat content of eight percent or lower — would meet snack food manufacturers’ need for a low-saturated fat product which does not require any hydrogenation.
Currently, cottonseed oil and hydrogenated soybean oil are the standard oils used by the domestic frying industry. But cottonseed oil has a typical saturated fat content of 26 percent, while that of soybean oil is around 15-15.5 percent. Gupta believes a mid-oleic sunflower oil could displace those two oils in a large segment of the domestic snack food market if its price is competitive and no consumer negatives are found with the oil. Snack food manufacturers may be able to pay a small premium for the improved quality of a mid-oleic sun oil; but that price premium could not be substantial, he indicates.
How significant is this potential market? The U.S. snack food sector alone uses one billion — with a “b” — pounds of vegetable oil per year. If sunflower captured even 20-25 percent of that market, it would equate to the entire domestic usage of sun oil during the 1994/95 marketing year (115,000 tons). Put another way, if the typical acre of sunflower yielded the equivalent of 520 pounds of oil, a one-billion-pound market would consume 1.92 million acres of sunflower production.
And that doesn’t include potential access to another billion-pound market represented by the food service and restaurant sectors. “If [the sunflower industry] can provide a satisfactory frying oil that is nonhydrogenated and reasonably priced, it would find a very willing market — particularly among the fast-food restaurants,” predicts ADM’s Ed Campbell.
Campbell says his company — whose subsidiary, Northern Sun, processes sunflower in plants at Enderlin, N.D., Red Wing, Minn., and Goodland, Kan. — strongly supports a transition to a mid-oleic-based oil sunflower industry. So does Cargill, the nation’s other major oil sunflower seed processor. “It’s a very logical step both for the industry and for growers,” agrees Paul Erickson, general manager of Cargill’s multiseed processing plant at West Fargo, N.D. (Continued)
Campbell, who is the current president of the American Oil Chemists’ Society, points out that other oils (soybean and canola) are already players in the “low-saturated fat” trend. “But the competitive products that are attempting to make it happen face major obstacles,” he says — some of which are attributable to the large size of the soybean and canola industries. “It’s going to take a long time for those industries to make an economic change [in order to be competitive with a mid-oleic sunflower], whereas the sunflower industry could do it almost ‘overnight’ — and do it economically.” Campbell says it’s not a matter of developing a new market for mid-oleic sunflower oil. That market already exists because of consumer demand for low-saturated fat products and cooking/frying oils produced without hydrogenation.
NSA’s Larry Kleingartner agrees. “It’s a consumer-driven market,” he says, ”not one the snack food industry believes it’s going to ‘create.’ The market is already there; they just haven’t been able to fill it yet.”
Kleingartner believes the sunflower industry is facing an opportunity that it cannot afford to pass up. “What we see here is an opportunity to participate in a significant domestic market — probably at a slight premium to the existing market,” he states. “If we don’t [develop a mid-oleic industry], we’re going to be continually battling the challenges of the export market. Also, if it’s not done by us, another commodity will fill that niche — the soybean people, the corn people or the canola people.
“Even if we do it successfully, we can assume there’ll be others biting at our heels. But being first is very important; otherwise, we’ll be two steps behind.”
hat impact would this transition have on sunflower prices? There’s no way to know for sure, of course, although proponents obviously believe it will be positive for growers as well as for the industry at large. Kleingartner does cite a somewhat-parallel situation which occurred in 1992 when Frito-Lay switched from soybean to cottonseed as its primary oil for potato chip manufacturing.
Cottonseed oil provides a price bonus through two mechanisms: the Cottonseed Oil Assistance Program (COAP) and the development of new domestic markets. COAP, a USDA export assistance program, is the cottonseed version of the Sunflower Oil Assistance Program (SOAP). It is generally assumed that COAP has had an impact on cottonseed prices roughly similar to the impact SOAP has had on sunflower prices.
That leaves the domestic vegetable oil market. Since mid-1992, when Frito-Lay made its decision to switch to cottonseed oil, there has been a change in the demand structure and price impact, Kleingartner notes.
Prior to the switch, cottonseed oil prices averaged 245 percent of soybean oil and 98 percent of sunflower oil prices (as measured in points over the Chicago Board of Trade soy oil contract, FOB New Orleans). However, during the two years following the 1992 announcement, cottonseed oil prices averaged 285 percent of soy oil and 137 percent of sunflower oil. During those same two years, sunflower oil export values relative to the Chicago soybean oil contract increased by 10.7 percent; those of soy oil by 32.5 percent; and those of cottonseed oil by 53.9 percent.
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