The ultra-low-linolenic soybean market
Does the failure of Asoyia Inc., the Iowa-based company that marketed 1% ultra-low-linolenic soybeans and soy oil, signal the beginning of the end for the ultra-low-linolenic soy oil market in the United States?
As mentioned in the March issue of inform (21:141, 2010), Asoyia was placed in receivership by the Pilot Grove (Iowa) Savings Bank on December 15, 2009. The company was formed in 2004 by 25 Iowa farmers, who licensed soybean varieties developed by breeder Walter Fehr of Iowa State University in Ames. Among Asoyia's products was an ultra-low-linolenic (less than 1.5% a-linolenic acid) soybean and oil marketed as a non-genetically modified (non-GM) trans-fat-free replacement for partially hydrogenated soy oil. The company also contracted acreage of low-linolenic TREUS GM beans through Pioneer Hi-Bred International (Johnson City, Iowa, USA).
In April 2008, Asoyia received about $4 million in venture capital from two firms: Prolog (St. Louis, Missouri, USA) and Life Science Partners (Boston, Massachusetts, USA). By the 2009 growing season, Asoyia had contracted more than 100,000 acres (almost 40,500 hectares) on 350 farms for soybean and seed production, which was four times the 2008 level. Further, the company was expecting 2010 oil sales of 45 million pounds (more than 20,000 metric tons), or three times the volume Asoyia had sold in recent years. Included among the company's customers was Pepperidge Farm, which used the oil (in addition to sunflower and canola oils, depending on pricing) in its Goldfish savory crackers. A Pepperidge Farm spokesperson said in early March 2010 that the company had no comment about its future formulation plans.
Beth Fulmer-Boyer, an AOCS member and Asoyia's vice president of oil business, confirmed that the company was turned over to the bank in December 2009. She cited the recession as lowering the demand for value-added oil, as well as the fact that "too much cost was built into the system." Once the full impact of the company's storage agreements was felt and the payments came due in December 2009, Fulmer-Boyer said that the "$2.75 premium without coverage from the protein was just too much for the oil side of the business to carry."
Asoyia relied on Cargill (Minneapolis, Minnesota, USA) for processing. Contract growers transported beans to three Cargill facilities in Cedar Rapids and Des Moines, Iowa, as well as Bloomington, Illinois. A Cargill spokesperson said his company had established a process with Asoyia and other interested parties "under which we are able to work with them to keep supplying Asoyia oil to customers." The spokesperson confirmed that Cargill is only marketing oil from 2009 soybean production, although the company "is in discussion about 2010."
NICHE MARKET ECONOMICS
Asoyia's ultra-low-linolenic soybeans had to compete not only with low-linolenic beans from other, larger companies (Pioneer's TREUS and Monsanto's Vistive varieties) but also with other solutions to removing trans-fats from foods. "In general, the economics of production and transportation of a commodity will always win over the economics of a specialty grain," noted Charles Hurburgh, a professor of agricultural and biosystems engineering at Iowa State University, who worked with Asoyia.
Hurburgh added: "In a raw material situation, it costs more to transport and distribute grain than it does to grow it. Further, if you want to use the traditional handling and processing network for a specialty bean, there is a critical mass that you have to get beyond before the efficiencies are good enough for the specialty market to have any staying power at all. That fact weighs in the favor of larger companies."
To the extent that ultra-low-linolenic oil could be sold competitively with other alternatives to zero-trans fat food formulation-alternatives such as trans- and interesterification and oil blending-it had a market, Hurburgh said.
For its part, Pioneer Hi-Bred, a DuPont business, is "holding steady" on its low-linolenic soybean business, according to a spokesperson. "Low-linolenic oil was a step in the right direction for food processing companies looking for alternative oils in the wake of the FDA trans fat label requirement," noted Amanda Rinehart, marketing communication manager for Pioneer's PlenishTM business.
In July 2003, the US Food and Drug Administration mandated the addition of trans-fat content to the Nutrition Facts panel on food labels; the regulation became final in January 2006. Asoyia's ultra-low-linolenic soybean oil was one option for food manufacturers rushing to remove trans fats from their products.
However, Pioneer is now focusing its efforts on "next-generation output traits with increased oil stability and nutritionally enhanced fat profile," Rinehart said, particularly the Plenish high-oleic soybeans that will be grown under contract for continuing field and oil testing in 2010 and 2011, with commercialization anticipated in 2012. "Food companies now are looking for a product with greater stability, extended shelf life, and flexibility in applications," she said.
Monsanto Co. (St. Louis, Missouri, USA) reports that its Vistive low-linolenic (less than 3%) soybean is performing well, although the company clearly also is focused on next-generation products.
"The food segment Vistive occupies is solid but limited," said Ben Kampelman, a company spokesperson. "We are excited about the future of more healthful oils, and the Vistive platform is an important component of our portfolio. We expect our next-generation product, Vistive Gold, to build upon the success of Vistive. It will offer the same no-to-low trans benefits as today's Vistive soybeans, and add a high-oleic and low-saturated fat profile."
In the meantime, the company that grew and crushed the first ultra-low-linolenic soybean seeds in 2003 says it will remain in the ultra-low-linolenic market "for the foreseeable future." Robert Meeuwsen of Zeeland Farm Services (Zeeland, Michigan, USA) reports that "the ultra-low-linolenic market has been tough," although over time the market has remained steady.
"We will continue to produce oil in levels that the market dictates," Meeuwsen added. What those levels will be is anyone's guess at this point.