Major Issues Affecting the Cottonseed Oil Industry by iqJlIdbE

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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



1
                  OVERVIEW



    • Trans Fat

    • Biodiesel

    • Federal Regulations
       – Environmental
       – Security
       – Food Labeling

    • Sustainability


2
          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




3
    AMOUNTS OF FAT IN DIET




    Total Fat       =   32%

    Saturated Fat   =   11%

    Trans Fat       =   2%




4
    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 ORDINANCES
               RESTRICTING 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

14
     • Over 25 school districts have proposed standards
     STATE & LOCAL TFA RESTRICTIONS




15
                  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

     Result: 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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DEC. 2006 Corn Futures Prices
           (CBOT)
      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
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       generators of VOC’s
         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


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