Health drives Cargill 'ramp up' for soybean oil

The Minneapolis maker of food ingredients, grains, oilseeds and animal nutrition products said the R$65 million (€17.8m) investment into the new soybean plant in Rio Verde, Goias will turn out some 1,500 metric tons of soybeans a day and 90, 000 metric tons of degummed soybean oil a year. "The availability of raw material, the local demand for soybean meal and the region's logistics - which offer a number of ways to transport the product - were instrumental in determining the choice of Rio Verde," said the firm in a statement. Since the early 1990s, the US share of world soybean production has declined from about 50 per cent to less than 40 per cent. During that time, Brazil's share increased to more than 25 per cent, and similar changes are underway in the processing sector. Health concerns are currently driving market demand for soybean oil as food makers introduce the ingredient into new food formulations on the back of ongoing research that suggests soy not only lowers cholesterol, but can also have a preventative effect on breast cancer and other hormone-related cancers. Today, soybean oil - together with palm oil - accounts for over half of all oil consumed in the world. And a recent report from market analysts Business Communications Company suggests that US production of major crude vegetable oils is slated to reach 8.6 million metric tons in 2008, with soybean oil accounting for nearly 87 per cent of the major vegetable oil production at 7.4 million metric tons. But in recent months, soy ingredients suppliers such as Cargill and US firms ADM and Bunge have been confronted by soaring prices for soybeans - at 15-year highs - as stocks for the raw material were severely cut through poor harvests last year. Despite this price pressure, Cargill has kept a handle on the market and earlier this month reported a considerable 38 per cent rise in sales for the last quarter to $1.28 billion (€1.04bn), largely attributable to risk management tools. "Our team's ability to manage the price volatility and trade uncertainty that permeated markets was critical to our results," said Warren Staley, chief executive officer of the privately held firm. Relief for soybean prices could be imminent with the August WASDE (World Agricultural Supply and Demand Estimates) report , released last week by the US government, suggesting soy stocks should rise significantly this year on the back of improved harvests across the globe. "Overall, the estimated global stocks-to-use ratio rose by six days to 88 days, which would be the highest level in 18 years and the second highest on record," reported investment bank Goldman Sachs, adding that it had argued for several months that soybean prices "were too high given the robust global stock levels." At the same time as announcing the opening of the Brazilian plant, Cargill said from 20 September it planned to cut production at its corn processing facility in Dimmitt, Texas, citing poor sales for the soft drinks ingredient High Fructose Corn Syrup (HFCS). Sales of the sucrose-alternative sweetener - used by Coca-Cola and PespsiCo - have been hit considerably by a 20 per cent tax imposed on the ingredient by the government of Mexico, a key market for the sweetener. A World Trade Organisation dispute panel is currently weighing up whether these tax measures, introduced in January 2002, discriminate against beverages and syrups made with any sweetener other than cane sugar. Together with UK sugar and sweeteners firm Tate & Lyle, and ADM, in 1995 Cargill was accused of fixing prices in the €2.6 billion world market for high-fructose corn syrup. In 2004 all firms managed out of court settlements, with Cargill confirming in May this year that the $24 million class-action lawsuit had been settled. High fructose syrups, known as isoglucose in Europe, are not used extensively in the European market, principally due to protectionist policies that seek to secure the EU's sugar regime and control sucrose alternatives. This means that isoglucose, also used in canned fruits, condiments, ice cream and frozen desserts, is entitled to only a small niche market. Leading isoglucose suppliers in Europe are Amylum, the number one isoglucose player and a subsidiary of UK sugar giant Tate & Lyle, and Cargill.

Health drives Cargill 'ramp up' for soybean oil

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