Issues Affecting the Fat and Oil Industry

1
Issues Affecting the Fat and Oil Industry

• by
• Robert M. Reeves, President
• Institute of Shortening and Edible Oils
• at the
• American Fats and Oils Association (AFOA)
• October 17, 2007

2
UPDATE ON TRANS FATS
3
Major Trans Fat Reformulation Stimuli

• FDA Trans Fat Labeling Rule effective 1-1-06
• Added trans fat to nutrition facts panel of food
  label
• New York City ban on trans fats in food service
  sector
• Spreads, cooking oils and shortenings used for
  spreads and frying to contain less than 0.5 g/s
  trans fat by 7-1-07
• Oils and shortening used for deep frying yeast
  dough and cake batter and all other foods
  containing trans fats affected by 7-1-08

4
Aftermath of NYC Health Code on Trans Fats

• 16 states have proposed TFA regulations
• 23 municipalities or counties have proposed
  ordinances or health codes
• Over 25 school districts have proposed standards
  affecting TFA levels in ingredients or foods
  served
• Miscellaneous restrictions Hospitals, theme
  parks, county fairs

5
Cities/Counties having passedRegulatory
Initiatives on TFA

• New York City, NY
• Albany, NY
• Brookline, MA
• Philadelphia, PA
• Montgomery County, MD
• King County, WA (Seattle area)
• Calgary Health Region, Canada
• Nassau County, NY

6
Trans Fat Alternatives

• Naturally stable oils or fats
• Trait-enhanced vegetable oils
• Blends of more stable oils with less stable oils
• Interesterification of blends
• Modification of processing methods
• Gels, emulsifiers and other texture-building
  agents

7
Naturally Stable Oils

• Canola (high oleic)
• Coconut
• Corn
• Cottonseed
• Palm

• Palm kernel
• Peanut
• Rice bran
• Soybean (low linolenic)
• Sunflower (high oleic)

8
Trait Enhanced Oilseed Varieties Availability

• Current Future
• Low linolenic soy Mid and high oleic soy
• High oleic canola Low lin, low saturate soy
• High stearic soy and canola

9
Blends of More Stable Oils with
Less Stable Oils

• 15 fully hydrogenated hardstock (no trans fat)
  mixed with 85 unhydrogenated liquid oil.
• Interesterification to rearrange fatty acids on
  glycerin molecules in blends to customize melt
  points
• Blend of palm oil fractions and other vegetable
  oils (canola, soy, sunflower)

10
Low Linolenic Soy Acreage/Oil Production
Estimates (2007)

• Seed Developer Acres Oil (M lbs.)
• Pioneer (TreusTM) 250,000 125
• Monsanto (VistiveTM) 1,500,000 750
• Iowa State (AsoyiaTM) 50,000 25
• 900

11
Low Linolenic Soy Acreage/Oil Production
Estimates (2008)

• Target 3 million acres soybeans (all
  varieties)
• 1.5 billion pounds of oil
• Estimates subject to demand and level of
  contractual agreements with soybean farmers.

12
Canadian High Oleic Canola Acreage/Oil Production
Estimates

• Acres (M) Oil (lbs.)
• 2004 1.0 624 M
• 2005 1.5 936 M
• 2006 1.6 1.0 B
• 2007 2.0 1.25 B
• 2008 2.5 1.5 B

13
U.S. Palm Oil Imports

• Year Metric Tonnes Pounds (B)
• (Calendar)
• 2004 271,185 0.596
• 2005 420,209 0.924
• 2006 629,455 1.384
• 2007 750,000 ? 1.650
• 10 non-edible use (e.g., oleochemical)
• 30 non-edible use (e.g., oleochemical,
  biodiesel)

14
American Heart Association Activities

• Trans Fat Alternatives Conference, Washington,
  D.C., October 2006
• "Face the Fats" campaign initiated April, 2007
• Web-based campaign to educate consumers on how to
  minimize trans fat intake without increasing
  saturated fat consumption

15
Center for Science in the Public Interest
Activities on TFA

• Tested french fries from NYC restaurants in late
  July, '07, to determine trans fat and saturated
  fat content.
• Results Sat. Fat. g/s Trans, g/s
• McDonalds 4.0 0.2
• Burger King 5.3 3.3
• Wendy's 4.7 3.7
• CSPI activity indicates compliance with NYC's
  Health Code will be "enforced" by consumer groups

16
Puerto Rico Bans TFA and Hydrogenated Oils in
Restaurants

• Legislation approved March 12, 2007 contains the
  following language
• "No food that contains hydrogenated fat or
  trans fat shall be stored, distributed, retained
  for service, used in the preparation of any food
  on the menu, or served in any establishment,
  except for food which is served directly to the
  clients in the original sealed package of the
  manufacturer."

17
Myths and Misconceptions of Trans Fats in the
Media

• Obesity caused by trans fat consumption
• "0 grams trans fat per serving" means no trans
  fat in food product
• "Partially hydrogenated" and "hydrogenated" fats
  synonymous with trans fats

18
New York City Calorie Labeling Code Overturned

• Federal judge invalidated Code requiring caloric
  content of foods be listed on menus and menu
  boards of restaurants already supplying such
  information on websites, pamphlets or other means
• Grounds for decision Conflict with federal
  regulations
• New York Restaurant Association brought suit
  against NYC

19
New York City Calorie Labeling Code Overturned
(Continued)

• Unlikely to affect trans fat code
• Appeal of ruling planned by NYC

20
Conclusions

• Majority of basic trans fat alternatives
  currently in marketplace
• Current focus on improving product performance
  and expanding product lines
• Municipal and county trans fat bans/restrictions
  likely to continue in short term
• Consumer advocacy groups will "help" cities and
  counties "enforce" their codes
• Trans fat content in American diet is decreasing
  due to significant reformulation in packaged
  foods and food service sectors

21
Department of Homeland Security (DHS) Chemical
Security Interim Final Rule (4-2-07)

• Applies to chemical facilities broadly defined as
  establishments that possess or plan to possess a
  quantity of a chemical substance determined to be
  potentially dangerous
• Establishes risk-based performance standards for
  facilities
• Creates "chemicals of interest" list (Appendix A)
• Lists over 200 chemicals and threshold amounts

22
Content of Rule

• Listed chemicals include those commonly used in
  food facilities (e.g., chlorine, anhydrous
  ammonia, hydrogen, propane, boron triflouride)
• If facility is deemed a high risk, a security
  vulnerability assessment is required
• Food facilities anticipated to be categorized as
  minimal risk (Category 4)

23
FOOD SAFETY LEGISLATION
24
FDA Amendments Act of 2007 (HR 3580)

• Sponsored by Rep. John Dingell (D-MI) Chair-man,
  House Energy and Commerce Committee
• Imposes stricter requirements on imported foods
  and drugs
• Limit ports of entry to 13
• User fees placed on food imports to fund
  inspections
• Tests performed at entry ports to detect pathogens

25
FDA Amendments Act of 2007 (HR 3580) (Contin
ued)

• Establishes "Reportable Food Registry" containing
  information supplied by manufacturers or
  regulatory officials on foods for which there is
  a reasonable probability that they are
  adulterated
• Signed into law 9-27-07

26
Safe Food Act of 2007 (HR 1148) (S-654)

• Sponsored by Sen. Dick Durbin (D-IL) and Rep.
  Rosa DeLaura (D-Conn)
• Consolidates authority for food safety into a
  single food agency, the "Food Safety
  Administration"
• Plans to insert provision in 2007 Farm Bill to
  end the authority for all Federal food protection
  agencies in two years
• Year 1 plan for changes in food safety system
• Year 2 implement plan

27
EPA's Spill Prevention Control and Countermeasure
(SPCC) Rule Update

• July 1, 2009 new deadline for facilities to amend
  and implement SPCC plans
• Applies to facilities handling 1,320 gallons of
  oil above ground or 42,000 gallons of oil below
  ground
• Proposed amendments to consider differentiation
  of integrity testing of AFVO storage tanks
  meeting certain criteria and FDA regulatory
  requirements

28
RENEWABLE FUEL IMPACT ON OILSEEDS
29
Renewable Fuel Impact on Oilseed and other Crop
Plantings - 2007

• 2007 2006
• Crop Acres (M) Acres (M) Change
• Corn 92.90 81.80 11.9
• Soybeans 64.10 72.00 - 11.0
• Wheat 60.50 57.20 5.8
• Cotton 11.60 14.25 - 22.4
• Rice 2.74 3.38 - 18.9
• Source FSA, ERS, USDA

30
U.S. Biofuel Industry Expanding Faster than
Expected
Source Renewable Fuels Association, National
Biodiesel Board
31
U.S. Biodiesel Production vs. Capacity

• June 2007
• 148 companies/plants in existence 1.4 billion
  gallons of capacity
• 96 companies/plants under construction, expansion
  1.9 billion gallons of capacity

Source National Biodiesel Board
32
U.S. Ability to Meet Total Biodiesel Capacity

• U.S. capacity 3.3B gals by 2008
• 3.3B gals x 7.5 lbs. oil/gal biodiesel 24.75B
  lbs oil
• Total veg oil/animal fat production in U.S.
  27.7B lbs in 2006
• Current capacity for biodiesel production could
  use 89.4 of U.S. veg oil/animal fat production
  (27.7B lbs)
• Inadequate amounts of veg oil/animal fats to
  operate all of biodiesel plants on stream by
  2008 and eat!

33
Percent of Soybean Oil Supply Used in Biodiesel
Production
Source USDA
34
Soybean Oil Ending Stocks
Source USDA
35
December 2007 Soybean Oil up 40 percent since
last Fall
36
Conclusions for Renewable Fuels

• High corn prices affecting soybean acreage, thus
  soy oil supplies and resultant prices
• Strong demand for biodiesel and foods pressuring
  vegetable oil prices upward
• U.S. biodiesel capacity unlikely to be met short
  term
• Biofuels will need continued government support
  to remain viable
• Vegetable oil prices likely to remain high for
  near term