Cotton co-ops benefit from
cottonseed oil comeback
Editor’s note: this article supplied courtesy the National Cottonseed
Products Association.
ho knew that actions taken to protect heart
health could breathe new life into the cotton
industry and cottonseed oil mill cooperatives
across the South? But that’s exactly what
happened when officials in New York City
made the decision to ban trans fats from restaurants about
two years ago. Many restaurants across the country are
following suit. Many food manufacturers — from potato chip
makers to donut purveyors — have also started to eliminate
the artificial fat, which is blamed for increasing one’s risk of
coronary heart disease.
The cotton industry, best known for its role in textile
production, suddenly had a renewed interest in an old
product: cottonseed oil.
“A product that once was sold to help offset ginning costs
is now viewed as a viable revenue stream,” says Ben Morgan,
executive vice president of the National Cottonseed Products
Association. “Today, it’s about more than just the fiber value
per acre.”
Currently, cottonseed oil is the most lucrative market for
cottonseed processors. Prices peaked in July 2008 at 80-90
cents per pound, more than double the five-year average.
Prices have since settled at the 35-cent range, following the
downward trend of all edible oils and responding to the
current economic downturn of most industries. But demand
and optimism remain strong, given the ongoing need for
trans fat-free oils.
“For the first time in more than 10 years, more cottonseed
will be crushed for oil than will be fed as whole cottonseed to
dairy cattle,” Morgan notes. For calendar year 2007,
government data showed use of cottonseed oil for “salad or
cooking oils” reached 573 million pounds — a 47-percent
increase from just three years ago.
Heartfelt health
As America’s original vegetable oil was beginning to make
a comeback, the cottonseed crushing industry saw an
opportunity to reinvent itself and differentiate itself among a
growing range of edible oils available to the commercial food
industry, including soybean oil and consumer-friendly
sunflower oil.
In 2007, the National Cottonseed Products Association
launched a new public relations campaign to educate food
industry decisionmakers and consumers about cottonseed oil’s
role as a trans fat-free cooking oil.
Cottonseed oil’s built-in stability, thanks to a 23-28
percent saturated fat level, eliminates the need for
hydrogenation, the process by which hydrogen is introduced
to create artificial stability, making it harder for the body to
break down and contributing to heart disease and obesity.
Unlike many other oils
with single-digit saturated
fat levels, cottonseed oil is
stable on its own and
valued for its longer fry life
and ability to resist flavor
reversion.
Still, the saturated fat
level is low enough to be
recommended as “hearthealthy”
by the American
Heart Association.
For years, oil mills have
provided a steady flow of
cottonseed oil which, along
with cottonseed meal,
makes up about 80 percent
of cottonseed’s value.
Standing out as one of
the more lucrative crops,
cottonseed remains on the
forefront and continues to
provide a reliable, steady
revenue stream for cotton
gins and farmers through
co-op rebate programs. The rebate programs are designed to
fluctuate with the market, a delicate balance, and are now
seeing a renewed interest in membership.
Co-ops see increased demand
In Oklahoma City, Producers Cooperative Oil Mill
(PCOM) — long known for its cottonseed oil extraction — is
producing cottonseed oil for use in a larger number of
consumer products than ever before.
“When Frito Lay announced its move away from
cottonseed oil a few years ago, the market dropped
significantly,” says PCOM President Gary Conkling. “But
we’ve seen a reversal since the trans fat movement began and
cottonseed oil is now back in high demand.”
As the trans fat movement gained momentum in 2007 and
the price of cottonseed oil rose, snack food manufacturers felt
an urgency to purchase already-produced oil in larger
quantities and grew concerned that cottonseed oil would
soon not be as readily available, or affordable.
“Cottonseed oil has always been a premium oil in the food
market, and manufacturers prefer it over other oils because of
its neutral flavor and extended fry life,” says Ronnie Gilbert,
vice president of oil trading and packaged oil for PYCO
Industries. “However, over the past year, the economy has
dipped and consumer behaviors have changed. They’ve
purchased fewer snack food products and are dining out less,
so the food industry’s oil reserve has lasted longer than
expected.”
A reborn need for cottonseed oil has surfaced and
producers are confident that the demand for cottonseed oil
will remain steady, if not
increase, this year.
Cottonseed oil
continues to compete with
corn and soybean prices
and fight for acreage in
previously cotton-rich
states in the South.
However, in states like
Texas, where the weather is
hot and the natural water
supply is weak, the cotton
crop is favored over
competing crops that
require more maintenance.
The cottonseed industry
also has seen a decrease in
the amount of cottonseed
that is being fed to dairy
cows, freeing up more seed
to be crushed for oil.
For members of cotton
cooperatives, the positive
forecast and continued
moderately priced
cottonseed oil means the industry overall sees a significant
increase in demand. When the demand for oil increases, coops
see more seed come in not only from members, but from
non-members who have outright sold their seed to the co-op
at a competitive price in the open market.
“Members have a choice when it comes to how they want
to sell their seed to the co-op. They can sell it direct to the
co-op at a competitive price, or they can utilize the rebate
program and have the opportunity to see a greater return,”
says John Fricke, CEO and general manager of Planters
Cotton Oil Mill, Pine Bluff, Ark.
“Because non-members don’t have access to co-op rebate
programs, either way members choose to do business, they’re
still receiving the marketing, storage and accessibility benefits
of belonging to a co-op,” Fricke continues. “And when the
demand is high and more seed is being crushed from both
members and non-members, members are still the ones who
enjoy a greater reward.”
