Edible Oils Manufacturing
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Industry Overview
The edible oils manufacturing industry includes about 200 companies with combined annual revenue of $38 billion. Major companies include Archer Daniels Midland, ConAgra, Cargill Foods, and CHS. The industry is highly concentrated: the 50 largest companies account for about 70 percent of industry revenue.
Edible oils manufacturing includes wet-milling corn (separating corn into its basic components); processing soybeans, tree nuts, and vegetables into oil; refining vegetable fats; and blending vegetable fats with purchased animal fats. This industry doesn't include companies that render or refine animal fats, wet-mill corn into ethyl alcohol, or mill-dry corn for flour.
Competitive Landscape
Demand is driven by consumer trends in consuming sweeteners, fats, and food oils, and in eating meat, since soybean meal is used primarily to feed poultry, swine, and cattle. The profitability of individual companies depends on managing raw material costs, leveraging federal farm subsidies, and operating efficiently. Large companies have advantages in purchasing, distribution, and marketing. Small operations can compete effectively by serving a local market or offering specialized products. The industry is capital-intensive: average annual revenue per employee is $1.5 million.
Products, Operations & Technology
Major products include soybean cake and meal (40 percent of the market); shortening and cooking oils (20 percent); and corn sweeteners (20 percent). Other products include margarine, butter blends, butter substitutes, and soybean oil.
To produce soybean meal and oil, beans are transported by truck or rail to a soybean processing facility. The beans are inspected, cleaned, and cracked to remove the hull. Rolling machines disrupt the oil cells, facilitating oil extraction. Oil is typically solvent-extracted using hexane, a highly flammable liquid agent. Solvent extraction removes all but 1 percent of the oil from the meal. The defatted soy flakes enter a rotary dryer, are cooled, then ground to the preferred level of fineness. Around 95 percent of defatted soy flakes are processed as soybean meal for animal feed, although some flakes are ground into soy flour, soy grits, soy protein concentrates, or textured vegetable protein (TVP). The remaining soybean oil is further refined and processed for food or industrial use.
US soybean processors crush 2 billion bushels of soybeans each year (a bushel of soybeans is 60 pounds). The average soybean processing facility can process 65,000 bushels of beans a day. Each bushel yields 44 pounds of meal and 11 pounds of oil; 75 percent of all edible fats and oils consumed in the US are derived from soybeans.
To produce corn-based oils and sweeteners, #2 yellow dent corn is shipped by truck or rail to a wet corn mill. The corn is inspected and cleaned twice to remove the cob, chaff, and dust. Cleaned corn enters steep tanks in a continuous batch process, where the grain is steeped in a rotating water solution containing 0.1 percent sulfuric acid. This 24- to 48-hour process softens the kernel for milling and helps break down proteins. After steeping, the corn flows in a water slurry to a germ separator, where cyclone separators spin the corn germ out of the slurry. Further refining of the germ produces corn oil for cooking. Corn germ contains 85 percent of corn's total oil content.
The remaining slurry of fiber, starch, and protein is ground, screened, and separated. Corn starch is washed up to 15 times to remove all traces of proteins. Processors use various acids or enzymes to convert the liquid starch into dextrose, maltose, or high-fructose corn syrup (HFCS). Dextrose is typically fermented and distilled to produce fuel ethanol.
The corn milling industry processes 3.5 billion bushels of corn annually (a bushel of corn is 56 pounds). A bushel of wet-milled corn produces about 33 pounds of HFCS (dry weight); 15 pounds of gluten feed; and 2 pounds of crude corn oil. Each year, processors manufacture 15 million tons of HFCS, representing nearly 60 percent of the US nutritive sweeter market. The industry also processes 5 million tons of corn oil meal for livestock and 500,000 tons of corn oil annually. The largest wet corn mills have a daily grind capacity of 2 million bushels.
Common inputs in the edible oils industry include electricity, water, chemicals to extract oils, and equipment repairs. Buying the grains or oilseed is, by far, the largest material cost.
Recent technological advances often involve uncovering new uses for processed soybean or corn. New products include dextrose-based biodegradable plastic, soy- and corn-based lubricants and chemicals, and food oils that are free of unhealthy trans fats. Large processors with advanced research capabilities genetically modify soybean and corn strains to create new hybrids and improve the viability of existing seed.