When Frito-Lay, the 900-pound gorilla in the $15 billion snack food industry, announced it would start cooking its best-selling potato chip line in sunflowerseed oil, it was a major blow to cottonseed oil.
As if the economic consequences weren't bad enough, headlines such as the one in USA Today, “Lay's chips away at ‘bad’ fat with new oil,” only added insult to injury.
It was just another straw on the camel's back of problems confronting the cottonseed sector these days, says Harrison Ashley, assistant director of member services for the National Cotton Council at Memphis.
“Cottonseed oil generally has traded at a premium to soybean oil,” he told members of the Delta Council's Ginning and Cotton Quality Improvement Committee's joint meeting with the Southern Cotton Ginners Association at Stoneville, Miss.
“Following the Frito-Lay decision, that premium has virtually disappeared.”
The snack food giant said the switch in cooking oils was made to reduce the amount of saturated fat in its chips. The change to sunflower oil, company officials said, would reduce saturated fat in its Classic potato chips by 66 percent.
Even so, Ashley says, cottonseed oil is “a premium cooking oil,” which doesn't have trans-fats, another dietary no-no. He cited articles in the New York Times and other publications describing it as “a healthy oil.”
“We need to seek more opportunities to market cottonseed oil as a premium, healthy oil,” he says.
Additionally, Ashley says, there are a number of priorities for the cottonseed industry, identified in a council survey.
Ranked No. 1 was concern about the impact on cottonseed demand from large quantities of dried distiller's grains (DDGs) as a byproduct of the process of making ethanol from corn.
“DDGs are not a direct substitute for whole cottonseed (in animal feeds), but as they move into the markets they can be a drag on cottonseed prices,” Ashley says.
In testimony on the 2006 Energy Policy Act, he says, the council noted that “there may be some unwanted problems for the producer in this legislation when it comes to cottonseed at the farmgate, because a portion of what goes in the farmer's pocket comes from cottonseed, and we want to make sure this is understood.”
He referred to a study by the University of Missouri-Columbia Food and Agricultural Policy Research Institute in August 2005 that projected impacts of the energy bill:
DDG prices would decline an average 6.87 percent annual for the life of the bill (through 2012).
Corn prices would drop an average of 4.58 percent.
Soybean prices would decline 0.34 percent due to competition from DDGs.
Soybean oil prices would increase 13.23 percent as that oil took up the slack for some of the corn going into ethanol.
Soybean meal prices would decline 10.36 percent.
“For every $1 per ton decrease in DDG prices, the study projected a 26-cent decrease in cottonseed meal prices and a 36-cent decrease in whole cottonseed products,” Ashley says.
“For every $1 decrease in soybean meal prices, there would be a 66-cent decrease in cottonseed meal prices and a 22-cent decrease in whole cottonseed products.
“For every $1 per pound increase in soybean oil prices, there would be a 73-cent increase in cottonseed oil prices.”
While the preponderant focus of ethanol production has been on corn, Ashley notes, “many experts say the future of energy is not ethanol from corn, but ethanol from biomass or other feedstocks. Concern has been expressed about taking large amounts of corn from human/animal use and making ethanol.
“If we converted every bushel of corn in the U.S. to ethanol, it would meet only a small fraction of our fuel demand. If we grew corn on every row crop acre in the U.S., it would amount to only about one month's supply of fuel.”
Among other issues of concern to ginners and producers, Ashley says, is cottonseed size/quality.
“Many of the newer cotton varieties have smaller seeds, which results in less seed weight and lower oil yield. This is a major issue in the Mid-South and Southeast states.”
Transportation concerns were also noted in the council's survey. “We've been getting a lot more calls about increasing transportation costs, lack of transportation, inability to get railcars in a timely manner, and fuel surcharges.”
Other issues confronting the industry, Ashley says, are finding ways to handle phytosanitary matters in a more streamlined, efficient manner, biosafety protocols and bioterrorism, excess trash, and linter yields.
Tim Price, executive vice president of the Southern Cotton Ginners Association, said a survey of 260 member gins across five states rates the new farm bill as “a key concern.”
“I've been working on farm legislation for 25 years, but it looks as if this bill may be quite different from all those that have gone before.”
Budget shortfalls and an increasingly urban populace and Congress are going to require that “we do some innovative thinking about farm policy. Most ginners are also farmers, and if we don't get good farm policy and a good economic setting for producing cotton, our industry could be in for some tough times.”