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Search for Healthier Oils Spurs High Oleic Acreage Rise

Monday, February 3, 2003
filed under: Utilization/Trade

High oleic sunflower acreage contracted for production in 2003 will be up about 12% compared to last year, spurred on in part by users looking for healthier specialty oils.

“As the trans fat issue is getting closer to being on every food label, I think you’re seeing more oil users turning to these alternative oils, and moving away from oils that need hydrogenation,” says Beth Price, marketing director of Humko Oil Products, a division of ACH Foods, the world’s largest marketer of edible oils.

The Food and Drug Administration is expected this year to announce a requirement for food labels to list trans fat content. Hydrogenated cooking oils contain trans fatty acids—trans fats for short—which are linked to an increased risk of heart disease and other health risks. Sunflower oil, including high oleic and mid oleic (NuSun) oil, is free of trans fats, and offers commercial users the selling point of being a natural, non-biotech cooking oil.

High oleic sunflower—recognized as having an oleic level of at least 77%— currently accounts for less than 10% of U.S. oil sunflower acreage. Thus, of last year’s 2.125 million acres of oil sunflower, less than 200,000 acres would have been high oleic.

ACH holds two U.S. patents related to high oleic sunflower seed and oil, as a result of its acquisition in 1996 to the rights of the high oleic sunflower business of SVO Specialty Products, Inc. and Lubrizol Corporation. Trisun® is the brand under which ACH division Humko Oil, Memphis, Tenn., markets its high oleic sunflower oil to U.S. food and industrial products manufacturers. The company works exclusively with Mycogen to develop high oleic seed, and with Kings Inc. (a sister company of Humko) to do the acreage contracting for all high oleic sunflower production in the U.S.

High oleic contracting for production in 2003 began in December, and the process should be completed in March. “Our contract for the HO suns is similar to last year and a good one, buying all of the growers’ production, with an ‘Act of God’ clause based on the NuSun new crop bid and 2 for 1 oil premium,” says Don Bricker, who contracts production through Kings.

Contracts are based on market demand. “We work with all of our major customers to determine what their needs are going to be this season, and the next year,” says Price. “It’s a niche market that continues to grow year after year. We have a good strong grower base for production, and we actually have a waiting list of growers who want to produce it.”

Two years ago, Humko became the first edible oil manufacturer in the U.S. to market biotech-free shortenings made with sunflower oil, targeted at a broad range of uses, from bakery applications to spray coating oils for cereals and dried fruit, and to shortening for microwave popcorn.

What happens after the patents expire?

ACH/Humko’s high oleic patents have long been a confusing and contentious issue, from the company’s attainment of the patents in the first place, to enforcement of the patents today.

Other seed companies besides Mycogen appear to be developing and possibly selling high oleic sunflower hybrids, and at least one other specialty oils merchandiser—Cargill—contracts and markets high oleic sunflower oil. How can that be, if the U.S. high oleic sunflower business is patented? One explanation might be that a U.S. patent extends only to the U.S. and its territories, not other countries. Thus, multi-national companies such as Cargill might not be able to market high oleic sunflower oil in the U.S., but may do so elsewhere in the world.

There’s also confusion in the sunflower industry about exactly when U.S. patent protection for high oleic sunflower seed and oil expires. Price says her company’s seed patents expire Nov. 16, 2004, and another on Aug. 26, 2005. She says patents on the oil would expire one year later; the last patent on high oleic oil would thus be lifted in 2006.

However, according to the U.S. Patent Office, patents filed on or before May 29, 2000, expire 17 years from the date the patent was issued (The General Agreement on Tariffs and Trade in 1995 prompted a change in patent lifespan from 17 to 20 years; May 29, 2000, is the “Grandfather Clause” date). The patent for high oleic seed (patent # 4627192) was issued on Dec. 9, 1986, and for high oleic oil (patent # 4743402) on May 10, 1988. That would put the patent expiration date for high oleic seed at Dec 9, 2003, and for oil, May 10, 2005.

Regardless of the exact date, it’s hard to speculate now what will happen to the high oleic sunflower oil market once the patents expire. Price believes demand will continue, and if anything, grow stronger. “There is a very specific market for high oleic oil,” she says. “But there are people who use regular linoleic sunflower oil. NuSun is a growing market, and there are users who aren’t able to move down or up in the oleic level. Each one of the sunflower oleic oil levels has unique properties, that makes each oil-type sunflower crop a specialized crop for different uses.”

Sufficient demand for high oleic sunflower oil that looks to remain strong after ACH/Humko’s high oleic patents expire may prompt seed companies and specialty oil processors and distributors to get more involved in the high oleic sunflower business. Price sees a difficult road for competitors, however, since establishing a network of growers, distributors, and buyers would not be an easy task.

“Once the patent expires, I don’t know that a whole lot will change. This is a specialty crop in a specialized market, and I don’t think you’re going to see people wanting to go out there and grow acres of it (without a contract) in the hopes that they might sell it,” she says. “I also don’t think that people buy from us strictly because we own the high oleic patent. I think we offer a complete identity-preserved program, and can ensure traceability through the system. Our customers know what quality of product they’re going to get, and that we can be expected to fill their needs, since we specialize in custom oil formulations.” – Tracy Sayler
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