High Oleic Soybean Oil Has Potential to Create Additional Soybean Meal Demand in U.S. Animal Agriculture

posted on Thursday, December 7, 2017

Soybean oil is the most dominant edible oil in the U.S. domestic fats and oils market. Relative abundant supply and cheaper soybean oil are the main reasons behind its dominance in local markets. Approximately 88 percent of total soybean oil production is domestically utilized with the remaining 12 percent exported. Out of total domestic usage, nearly 66 percent is taken up by food, feed, and other industrial use and 34 percent is consumed by the biodiesel industry.

The health issues related to trans fats found in conventional soybean oil is created by the partial hydrogenation process and has been a major concern in the food industry. Trans fat increases bad cholesterol and reduces good cholesterol, both factors contributing to heart disease. Trans fat is an unhealthy byproduct of the hydrogenation process which is required to make certain oils more stable in cooking. Increased preference for refined oil due to the growing awareness in health and fitness has been at the forefront in the edible oil market.

To reduce the issue’s impact on vegetable oil demand, the U.S. food industry has increasingly turned to canola oil. Canola oil has become a very attractive vegetable oil source and competes well with soybean oil, mainly in fast food restaurants and various finished food product industries. As a result, canola oil usage has grown at a faster rate than soybean oil in recent years. This is partly due to the booming Canadian canola industry. The United States imports most of its canola from Canada. Because of the higher palatability of canola varieties, the U.S. Food and Drug Administration granted the canola oil “Generally Recognized as Safe” status in 1985. Because canola oil has a relatively low level of saturated fat, it appeals to health-conscious consumers in the United States, causing the production and usage of canola oil to steadily increase while displacing conventional soybean oil.

Soybean oil must offer an enhanced value nutrition characteristic if it wants to retain its market dominance in the fast food and restaurant industries. In response to this, U.S. soybean farmers recently started adopting high oleic soybean varieties. High oleic soybean oil provides a healthier soy-based frying alternative that meets food service functionality needs and is sparking interest among U.S. soybean farmers because of its potential to regain market share. The soybean industry has set a goal of 18 million acres of high oleic soybeans planted by 2023 to meet projected consumer needs.

If high oleic soybean oil can compete with canola oil, then demand for canola oil may decline in domestic food industry. It turns out that any reduction in demand for canola oil could also reduce the supply of canola meal in the domestic animal feed market. Soybean meal should be able to substitute for any drop in canola meal utilized in animal feed, leading to enhanced demand for soybean meal.

In a recent economic analysis using data published by USDA, DIS found that if the high oleic acid component in conventional soybean oil were to be raised by 10%, demand for domestic canola oil will reduced by approximately 12%. As a result, canola meal demand will decline by 12% as well. This will in turn increase the quantity demanded for soybean meal by approximately 13% in the U.S. domestic feed market place. Theoretically, this means an additional 4.45 million tons of soybean meal production could be required in the United States in the near future. U.S. soybean farmers need to produce an additional 187,000 bushels of soybeans to meet the additional soybean meal demand if high oleic soybean oil can realize its potential.