Major Issues Affecting the Cottonseed Oil Industry

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Major Issues Affecting the Cottonseed Oil
Industry

• Robert M. Reeves, President
• Institute of Shortening and Edible Oils
• Presented at the
• National Cottonseed Products Association
• 111th Annual Convention
• Destin, Florida
• May 5-8, 2007

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OVERVIEW

• Trans Fat
• Biodiesel
• Federal Regulations
• Environmental
• Security
• Food Labeling
• Sustainability

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FDA Food Labeling Regulation (Effective 1-1-06)

• Requires Trans Fat Content on Label
• Reason trans fats raise LDL cholesterol,
  therefore cause increased heart disease risk.
• Applies to packaged foods at retail
• Stimulated reformulation toward 0 g. trans
  fat/serving throughout retail food industry

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AMOUNTS OF FAT IN DIET

• Total Fat 32
• Saturated Fat 11
• Trans Fat 2

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SOURCES OF TRANS FAT IN U.S. DIET

• 80-85 - Hydrogenation of Vegetable Oils
• 15-20 - Tissue of ruminant animals

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TRANS FAT ALTERNATIVES

• Trait enhanced oils
• (e.g., low linolenic soy, high oleic canola)
• Naturally stable oils
• (e.g., palm, cottonseed, corn, mid oleic
  sunflower)
• Mixing fully hydrogenated hardstock with
  unhydrogenated oils. Interesterification of
  mixture customizes melt point
• Modification of hydrogenation process
• (time, temperature, pressure, catalyst)
• Gelling or emulsifying agents

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COTTONSEED OIL AS A TRANS FAT ALTERNATIVE

• Naturally stable without hydrogenation
• Enhances flavor of foods cooked in it
• Low flavor reversion
• Economically competitive with other oils
• Good source of essential fatty acids (linoleic,
  linolenic)
• Beta-Prime crystalline structure promotes
  smooth creamy texture in shortening

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STATE LAWS AND MUNICIPAL ORDINANCESRESTRICTING
TRANS FATS

• 20 states have proposed regulations
• Over 25 municipalities have proposed ordinances
• New York City Health Code
• Requires restaurants to reduce trans fat to less
  than
• 0.5 g/serving in cooking oils, shortenings and
• margarine, by July 1, 2007
• All other foods must comply by July 1, 2008
• (e.g. specialty baking shortenings)
• Requires restaurants to provide calorie
  information for standardized menu items
• Over 25 school districts have proposed standards

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STATE LOCAL TFA RESTRICTIONS
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SUPPLY AND DEMAND OF MAJOR TRANS FAT ALTERNATIVES
Demand 8 billion pounds (partially
hydrogenated oil subject to
replacement) Supply Billions
(Lbs.) Crop 0.90 low lin
soy 1.25 high oleic canola 1.75 palm
0.60 other stable oils 4.50 Total Resu
lt Large scale demand in short term unlikely to
be met with adequate supplies.
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ETHANOL EXPANSION AFFECTING 2007 CROP OUTLOOK

• Corn plantings for 2007 90.4 M acres (highest
  in 67 years)
• Corn production 13.8 B bushels in 2007
• Farm corn prices to average 3.60/bu in 2007-2008

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MAJOR CROP PLANTED ACREAGE 2006-2007(Source
USDA April 11, 2007)

• 2006 2007
• Crop (M Acres) (M Acres) Change
• Corn 78.3 90.5 15
• Soybeans 75.5 67.1 -11
• Wheat 57.3 60.3 5
• Cotton 15.1 12.1 -20
• Rice 2.8 2.6 - 7

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ENVIRONMENTAL REGULATIONS

• National Ambient Air Quality Standard for Ozone
  (NAAQS)
• EPA ordered by Court to propose standard by
  6-20-07 and finalize rule by 3-12-08
• EPA has proposed a standard of 0.06 ppm ozone
  average over 8 hours (current standard 0.08 ppm
  ozone)
• Significant implications for generators of
  volatile organic compounds (VOC) and nitrous
  oxide (NO).
• Edible oil extraction and refinement facilities
  potential generators of VOCs

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ENVIRONMENTAL REGULATIONS (Continued)

• Spill Prevention, Control and Countermeasure
  (SPCC) Rule
• Designed to prevent oil spills
• SPCC applies to any facility having 1320 gallons
  of oil on hand, (e.g., cottonseed oil mills and
  refineries)
• Facilities in operation before 8-16-02 must
  maintain existing SPCC plan and amend/implement
  by 7-1-09
• Facilities in operation after 8-16-02 through
  10-31-07 must prepare and implement by 7-1-09
• Facilities in operation after 10-31-07 must
  prepare and implement plan before beginning
  operations

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CHEMICAL SECURITY

• Chemical Security Bill (S2145) passed 10-4-06 as
  part of Appropriations Bill
• Department of Homeland Security (DHS) designated
  to establish and enforce security standards at
  chemical facilities to thwart terrorist attacks
• DHS Interim Final Rule of 4-9-07 requires
  vulnerability assessments, response plans,
  facility registration, etc.
• DHS screening chemicals of interest which
  include some that may be used in edible oil
  extraction/processing plants (e.g., chlorine,
  hydrogen, ammonia, boron trifluoride)

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FOOD UNIFORMITY LEGISLATION

• Requires food labels and warnings by states to be
  identical to federal rules
• HR4167 passed House by voice vote in September,
  2006
• S3128 submitted in Senate and hearing conducted.
  No action taken. Bill died in Committee as 109th
  Congress ran out of time. Unlikely to be revived
  under Democratic control of Congress

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SUSTAINABILITY

• Major corporations (e.g., WalMart) requiring
  verifiable sustainability polices from suppliers
• Environmental stewardship principal goal/focus
  areas
• Ingredients
• Packaging
• Energy use
• Water use
• Waste management/recovery
• Emissions