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 Structure off the yw 
 
 SOYBEAN OIL EXPORT MARKET 
 
 ERIC R. BERG 
 
 BULLETIN 674 
 UNIVERSITY OF ILLINOIS AGRICULTURAL EXPERIMENT STATION 
 
 SF.P25 
 
Structure off the 
 
 SOYBEAN OIL EXPORT MARKET 
 
 ERIC R. BERG 
 
 Formerly Assistant Professor of Agricultural 
 Economics; now with Economic Research Service, 
 U. S. Department of Agriculture 
 
 BULLETIN 674 
 UNIVERSITY OF ILLINOIS AGRICULTURAL EXPERIMENT STATION 
 
CONTENTS 
 
 Page 
 
 PART I. THE DOMESTIC FATS, OILS, AND OILSEED ECONOMY 4 
 
 The Market for Fats and Oils 4 
 
 Technical Intel-changeability of Food Fats and Oils 7 
 
 Complementary Nature of Use 7 
 
 Substitution in Food Products 8 
 
 Price Competition Between Major Food Fats and Oils 12 
 
 Increasing Consumption of Soybean Oil 13 
 
 The Domestic Supply of Fats and Oils 15 
 
 Demand for Meal and the Supply of Soybean Oil 18 
 
 Dependence of Soybean Oil Markets on Exports 27 
 
 Alternative Uses for Food Fats and Oils 29 
 
 The Prospective Supply and Demand Situation 34 
 
 PART II. THE FOREIGN FATS, OILS, AND OILSEED ECONOMY 42 
 
 Supply Factors in the Foreign Market 42 
 
 The Economics of Supply 43 
 
 Long-Term Trends in Production 47 
 
 Trends in Production of Individual Fats and Oils 52 
 
 Long-Run Determinants of Production 56 
 
 The Foreign Demand for Food and Soap Fats and Oils 60 
 
 World Consumption of Food and Soap Fats and Oils 64 
 
 PART III. COMPETITION FOR EXPORT MARKETS 66 
 
 Major Destinations of Fats and Oils Exports 67 
 
 Major Problems in Expanding Export Markets 80 
 
 Competition With Other Exporting Countries 82 
 
 Trends in Exports of Individual Fats and Oils 84 
 
 Long-Run Competitive Position of United States Exports 88 
 
 ACKNOWLEDGMENTS 
 
 The author is indebted to T. A. Hieronymus for his assistance during 
 the five-year period that this study was in progress. C. P. Schumaier and 
 W. F. Goodell offered valuable help relating to agriculture in general. 
 
 Without the published reports of the Foreign Agricultural Service of 
 the United States Department of Agriculture and the Fats and Oils Section 
 of the Food and Agriculture Organization of the United Nations, this study 
 would not have been possible. 
 
 Urbona, Illinois August, 1961 
 
 Publications in the Bulletin series report the results of investigations made 
 or sponsored by the Experiment Station 
 
'T'HE OBJECTIVES OF THIS STUDY were to estimate trends In the 
 *- availability of food and soap fats and oils over the 15-year period 
 1960-1975, and to appraise the foreign demand for this period in view 
 of post- World War II developments in the major oilseed-producing 
 and oilseed-consuming countries. Since the end of the war, changes in 
 economic and political organization and policies, and in the develop- 
 ment and application of technologies, have been relatively rapid in 
 many producing and consuming countries and may ev6n be accelerated 
 during the next 15 years. These changes will affect th(! demand for 
 fats and oils in general, and soybean oil in particular. 
 
 Soybean culture is an integral part of agricultural production in 
 the United States. In 1958 the acreage harvested for soybeans ac- 
 counted for 14 percent of total cropland harvested. The seven leading 
 soybean-producing states (Illinois, Iowa, Indiana, Minnesota, Missouri, 
 Arkansas, Ohio), which produced four-fifths of the total in 1958, 
 devoted 20 percent of harvested cropland to producing soybeans. 
 
 The growth of the soybean industry is a recent development. Be- 
 fore 1930, annual production was below 10 million bushels. Between 
 1933 and World War II, production continued to increase, reaching a 
 prewar high of 90 million bushels in 193y. However, the major expan- 
 sion in acreage and production came with the beginning of World 
 War II. The demand for fats and oils increased due to wartime needs 
 and to a slight reduction in imports. S6ybean production consequently 
 increased rapidly in response to relatively high prices, and continued 
 to expand after the war ended. In 1958, estimated production reached 
 an all-time high of 574 million bushels. 
 
 During the postwar period, agricultural resources presumably were 
 more profitably used in soybean production than in alternative uses, 
 but several other developments tended to increase production. 
 
 In 1954 acreage restrictions were put on corn, cotton, and wheat, 
 and part of the acreage formerly used in producing restricted crops 
 was planted to soybeans, which were not restricted. In the major 
 soybean-producing areas, soybeans partly replaced oats because soy- 
 beans were a more profitable crop. Since soybeans are planted and 
 harvested at different times from corn, they enable a farmer to make 
 better use of expensive farm machinery and labor. 
 
 The primary' products of soybeans are meal and oil. (A bushel of 
 soybeans yields about 11 pounds of crude oil and 47 pounds of 44- 
 percent protein meal.) The domestic market has readily absorbed 
 larger meal supplies through increased broiler and livestock production, 
 and through advances in animal nutrition demonstrating the profit- 
 ability <A feeding high-protein supplements. During the three market- 
 ing years beginning in October, 1955, and ending in September, 1958, 
 an average of only 5 percent of the soybean meal from domestic crush- 
 ings was exported. 
 
 3 
 
4 BULLETIN No. 674 [August, 
 
 The United States has historically been a net exporter of food fats 
 and oils because per capita consumption is relatively stable. Resulting 
 increases in the total supply of fats and oils due to expanded soybean 
 production make the export market for oil particularly important to 
 the soybean industry. From October, 1955, through September, 1958, 
 21 percent of the soybean oil from domestic crushings was exported. 
 During the decade ending September, 1958, the oil accounted for an 
 average of 48 percent of the value of the products obtained in crushing. 
 
 Except during the immediate postwar years, the price of oil has 
 been subject to frequent pressure, and various measures to support 
 prices have been employed. Starting in 1948, price-support operations 
 caused stocks of oil to be acquired by the Commodity Credit Corpora- 
 tion; by 1954, cottonseed oil stocks alone totaled over 1 billion pounds. 
 Part of this stock was sold for export below domestic prices. 
 
 The most important price-support and export-subsidy plan under- 
 taken up to 1959 is Title I of Public Law 480, first enacted into law 
 on July 1, 1954, and periodically extended. Under this program 1.6 
 billion pounds of soybean oil and 2.9 billion pounds of cottonseed oil 
 and lard were sold for foreign currencies between October, 1954, and 
 September, 1958. Almost 900 million pounds of food oils, largely 
 soybean, were exported under this program between October, 1958, 
 and September 30, 1959. Funds obtained under this program are 
 mainly used by United States embassies, in market development pro- 
 grams, and in loans and grants for economic development projects in 
 the countries from whom these currencies were obtained. 
 
 A review and appraisal of emerging trends affecting the foreign 
 demand for soybean oil exports should be helpful in formulating plans 
 for meeting foreign competition and expanding the export market for 
 soybean oil. 
 
 PART 1. THE DOMESTIC FATS, OILS, 
 AND OILSEED ECONOMY 
 
 The Market for Fats and Oils 
 
 All fats and oils are composed of carbon, hydrogen, and oxygen 
 atoms but they differ in chemical structure and in physical character- 
 istics. Fats and oils are glycerol esters of fatty acids. Oleaginous 
 substances are generally called fats if solid at ordinary temperatures, 
 and oils if they are liquid at such temperatures. Some oils, such as 
 coconut and palm, are solid at ordinary temperatures in the United 
 States, but liquid in the countries of origin. The designation applied 
 in the country of origin is usually retained. One group of fats and 
 oils is limited to nonfood uses, another is primarily utilized as food, 
 and a third group has both food and nonfood uses. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 5 
 
 The major food fats and oils produced and consumed in the United 
 States, in order of importance during recent years, were soybean oil, 
 lard, cottonseed oil, and butter. These four normally account for 
 upwards of 90 percent of domestic consumption of separated fats and 
 oils (that is, separated from fat- or oil-bearing materials). The 
 remaining 10 percent is largely made up of peanut, corn, and olive oils, 
 and edible tallow. 
 
 Per capita consumption of total food fats and oils has been rela- 
 tively stable for several decades (see Fig. 1). From 1932 through 
 1958, annual per capita disappearance varied between 39 and 47 
 pounds, although this period included several recessions causing wide 
 price swings, and two wars resulting in shortages of fats and oils. 
 During the relatively settled period from 1953-1958, per capita disap- 
 pearance varied between 44 and 46 pounds. 
 
 The major nonfood fats and oils consumed in the United States, 
 in order of importance during recent years, were inedible tallow and 
 grease, and coconut, tall, linseed, fish, and castor oils. During the 
 5-year period beginning in October, 1954, and ending in September, 
 1958, these six accounted for 94 percent of total nonfood consumption, 
 including food fats and oils used in industrial products. Minor non- 
 food oils used in industrial products included palm, palm kernel, tung, 
 and fish liver oils, and soapstock from the fats and oils refining 
 industry. 
 
 Soybean oil is the major oil produced in the United States and 
 used for both food and nonfood purposes. Its nonfood use, which is 
 relatively limited, is largely in drying-oil products. Coconut oil is the 
 major imported oil used in both food and nonfood products. 
 
 Excluding tall oil, 1 per capita disappearance of fats and oils in 
 nonfood uses reached its peak during World War II (Fig. 1). The 
 downward trend in nonfood use of fats and oils since 1947 has been 
 caused primarily by the substitution of petroleum-based synthetic de- 
 tergents for fat-based soaps, and the use of drying agents other than 
 oils in drying-oil products. Per capita use of fats and oils in soap 
 declined from a wartime peak of 17.3 pounds to about 5.3 pounds in 
 1957. Use in drying-oil products declined from 8.1 to 5.2 pounds per 
 capita from 1941 to 1958. 
 
 The downward trend in these uses of fats and oils has been partly 
 offset by increased use in a variety of other products. Increasing 
 amounts are being used in synthetic products, such as plastics, resins, 
 and detergents. One of the more important post-World War II de- 
 velopments is the increasing use of inedible tallow and grease by the 
 mixed-formula feed industry, particularly in high-energy broiler feeds. 
 
 'Tall oil, a byproduct of the coniferous wood-pulp industry, is roughly com- 
 posed of 55 percent fatty acids, 35 percent rosin acids, and 10 percent unsaponifi- 
 able matter. 
 
BULLETIN No. 674 
 
 [August, 
 
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 1932 1935 1940 1945 1950 1955 
 
 Per capita U. S. use of fats and oils for civilian consumption. 
 
 (Fig. 1) 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 7 
 
 Technical Interchangeability of Food Fats and Oils 
 
 Constituents of major domestic food fats and oils. In their natural 
 state, the major fats and oils are composed of various fatty acids in 
 differing proportions. Soybean and cottonseed oil are composed pri- 
 marily of oleic and linoleic fatty acids. The fatty acids in soybean oil 
 are 51 percent linolenic and 31 percent oleic, plus palmitic, stearic, 
 arachidic, and linoleic acids. The major fatty acids of cottonseed oil 
 are 39, 33, and 19 percent linoleic, oleic, and palmitic, respectively. 
 Lard is composed primarily of oleic, palmitic, and stearic fatty acids, 
 and the major fatty acids of butter are oleic, myristic, palmitic, stearic, 
 and lauric. 
 
 Significance of the hydrogenation process. Linoleic and oleic fatty 
 acids are unsaturated and are liquid at room temperature. Oils con- 
 taining such unsaturated fatty acids can be hardened by the hydro- 
 genation process, which increases the number of hydrogen atoms in 
 the fatty acid molecule by injecting hydrogen into the oil (in the 
 presence of a catalyst, usually nickel), and thereby changing the chem- 
 ical structure. 
 
 Fats and oils to be used in food products are refined prior to 
 hydrogenation. After hydrogenation they can be further processed 
 into other products, chiefly margarine and shortening, which compete 
 directly with butter and lard. Lard itself is used in sizable amounts as 
 an ingredient of shortening and margarine. 
 
 Complementary Nature of Use 
 
 For food uses fats and oils are primarily used as cooking aids (in 
 frying, roasting, baking, etc.), as condiments, and as constituent ingre- 
 dients of other food products. Because fats and oils in food uses are 
 usually consumed only in connection with other foods, the demand 
 for them is dependent upon the consumption of such foods. Cost of 
 the fats is usually small in relation to the cost of the finished food 
 product with which they are consumed, such as meats, salads, candies, 
 cakes, pastries, and bread. 
 
 Stability of per capita consumption. Fats and oils are generally 
 consumed in relatively fixed proportions with staple foods that are 
 relatively stable. As a result, the per capita consumption of fats and 
 oils also tends to be highly stable. 
 
 Over several years the proportions of fats and oils consumed with 
 other foods are subject to change, as is the per capita consumption of 
 the staple foods themselves. The trend toward greater use of con- 
 venience foods may also influence fats and oils consumption, but its 
 effects are not yet clear. Household food consumption survey data 
 indicate that from 1942 to 1955, per capita consumption of separated 
 
8 BULLETIN No. 674 [August, 
 
 fats and oils in prepared foods by urban households increased from 
 5.2 to 6.8 pounds. 1 
 
 Adverse findings concerning the effect of fats and oils on blood 
 cholesterol levels and their relation to circulatory diseases would, with 
 increasing public awareness, probably reduce per capita consumption. 
 Survey data indicate that in 1955 separated fats and oils accounted 
 for only one-third of total fat intake for urban households of two or 
 more members. 1 The other two-thirds were in the form of nonsepa- 
 rated fats and oils. Any future reduction in fat intake will probably 
 be in the form of visible separated fats and oils. 
 
 A fat-free frying substitute based on lecithin, a by-product of the 
 soybean industry, was commercially introduced early in 1959. If it 
 finds wide consumer acceptance, it may cause per capita consumption 
 of fats and oils to decline. 
 
 Population shifts from farm to city also affect per capita consump- 
 tion. Data covering a representative week in 1955 show a per capita 
 consumption of separated fats and oils, excluding processed foods, of 
 0.6, 0.7, and 0.8 pound a week for urban, rural nonfarm, and farm 
 families, respectively. 2 
 
 Consumption of separated fats and oils appears to be highest 
 among families with incomes below $2,000, and relatively constant 
 among households with higher incomes. 3 Consumption of invisible 
 separated fats and oils in finished products, such as breads and candies, 
 increases with income. Total per capita consumption of visible and 
 invisible separated fats and oils is little affected by per capita income. 
 
 Total per capita consumption of separated fats and oils is relatively 
 unresponsive to price changes. A statistical analysis by multiple cor- 
 relation, using the logarithms of per capita consumption as the de- 
 pendent variable, and using deflated wholesale prices and deflated per 
 capita income as independent variables, indicated that a 1.0 percent 
 price increase resulted in a 0.1 percent decrease in per capita con- 
 sumption. 4 This analysis included annual data for the 27 years, 1931- 
 1957. 
 
 Substitution in Food Products 
 
 Largely because of hydrogenation, the four major United States- 
 produced food fats and oils (lard, butter, and cottonseed and soybean 
 oils) are directly substitutable in food products. Soybean and cotton- 
 seed oils may be processed into margarine and shortening as substi- 
 
 1 The National Food Situation, October, 1957, p. 43. U. S. Dept. Agr. 
 
 1 Ibid., p. 34. 
 
 'Household Food Consumption Survey, 1955, Rep. No. 1, pp. 17, 46. U. S. 
 Dept. Agr. 
 
 ' The coefficient is statistically significant at the 0.05 level. The standard error 
 is 0.049. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 9 
 
 tutes for butter and lard. Lard is used in the manufacture of shorten- 
 ing and, to a limited extent, in margarine. 
 
 Only small amounts of liquid soybean oil are sold directly to 
 consumers. Because soybean oil is subject to autoxidation and thermal 
 oxidation and thermal polymerization when used repeatedly as a 
 deep-fat frying agent, it is not widely accepted for home use in the 
 United States. In foreign countries where deep-fat frying is less 
 widely practiced, the problem of rancidity due to reversion may be 
 less important. Moderate rancidity is not necessarily a deterrent to 
 consumption, because many consumers in foreign countries are ac- 
 customed to moderate amounts of rancidity, though not necessarily to 
 the flavor of rancid soybean oil. 
 
 Many oils, including cottonseed, contain appreciable amounts of 
 saturated glycerides, commonly referred to as stearins, which cause 
 the oil to become milky at winter temperatures. For use as liquid oils, 
 they are "winterized" by a process which removes most of the stearins, 
 causing the oil to remain clear at relatively low temperatures. 
 
 Utilization of the major food fats and oils (excluding butter, which 
 is largely consumed in its natural form) is shown in Table 1. The 
 quantity of a given fat or oil utilized in the major food uses is largely 
 determined by available supplies and relative prices. However, be- 
 cause of characteristic differences in individual fats and oils soybean 
 and cottonseed oil, for example their use in certain products is 
 limited. Improved purification methods have tended to make fats and 
 oils more interchangeable. Further developments may increase inter- 
 changeability in more products. 
 
 Changes in utilization of fats and oils as ingredients of margarine, 
 shortening, and other edible products from 1937 to 1957 are shown in 
 Table 1. Soybean oil has largely replaced cottonseed oil as an ingredi- 
 ent of margarine and shortening. In other edible uses, the amount of 
 cottonseed oil in uses other than for margarine and shortening has in- 
 creased, as has soybean oil, but cottonseed oil consumption has in- 
 creased more rapidly in proportion to total supply. In 1957, 58 percent 
 of total domestic disappearance of cottonseed oil was in edible uses 
 other than margarine and shortening. 
 
 Another major trend shown in Table 1 is the increasing use of 
 lard in shortening. This is the result of technical developments facili- 
 tating its use, and a relatively low price for lard. 
 
 The interchangeability of fats and oils in the production of end 
 products is facilitated by consumer acceptance of these products. 
 From pre-World War II to 1957, two major changes in consumption 
 patterns have developed: (1) a considerable substitution of marga- 
 rine for butter and (2) an increased consumption of cooking and salad 
 oils. (See Figs. 2 and 3.) 
 
 The upward trend in consumption of cooking and salad oils was 
 associated with increased use of commercially prepared "convenience" 
 
10 
 
 BULLETIN No. 674 
 
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 STRUCTURE OF SOYBEAN OIL EXPORT MARKET 
 
 11 
 
 
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 "^ BUTTER (FAT CONTENT) 
 
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 1 1 1 1 l 1 1 1 l 1 1 1 l l f i i l l l l l i 1 l i 
 
 1950 
 
 1955 
 
 (Fig. 2) 
 
 Per capita U. S. consumption of butter and margarine. 
 
 foods, and with greater consumption of fresh vegetables which in- 
 creased the demand for salad oils and dressings. Greater use of such 
 products as potato chips and frozen French-fried potatoes probably 
 also increased the consumption of cooking oils. 
 
 The per capita consumption of lard is subject to much annual 
 variation due to cyclical changes in hog slaughter. Shortening is, 
 however, a close substitute, and the combined consumption of lard and 
 shortening is relatively stable. 
 
 LARD 
 
 SHORTENING 
 
 LIQUID OILS 
 
 I i 
 
 Per 
 
 1932 1935 1940 1945 1950 1955 
 
 capita U. S. food uses of lard, shortening, and liquid edible oils. (Fig. 3) 
 
12 
 
 BULLETIN No. 674 
 
 [August, 
 
 26 
 
 24 
 
 22 
 
 20 
 
 18 
 
 16 
 
 14 
 
 12 
 
 10 
 
 8 
 
 6 
 
 4 
 
 2 
 
 i I 
 I I 
 
 COTTONSEED OIL 
 
 IfN^ SOYBEAN OIL 
 
 fAN 
 
 LARD 
 
 I I 
 
 I I 
 
 I I 
 
 1932 
 
 1935 
 
 1940 
 
 1945 
 
 1950 
 
 1955 
 
 Average annual U. S. prices of soybean oil (basis crude, Decatur), cotton- 
 seed oil (basis crude, Southeast Mills), and lard (loose, Chicago). (Fig. 4) 
 
 Price Competition Between Major Food Fats and Oils 
 
 Substitution of soybean and cottonseed oils and lard in end prod- 
 ucts causes their prices to bear a relatively constant relationship to 
 one another. 1 Such relationships are, however, disrupted by rapid 
 changes in supply of a given fat or oil relative to the other major fats 
 or oils, or by technical considerations. Lard, soybean oil, and cotton- 
 seed oil have characteristics which limit their use in certain products. 
 For example, soybean oil and lard do not make suitable cooking oils. 
 Even where a given fat or oil is well suited for use in a given end 
 product, its use may require manufacturing processes entailing addi- 
 tional expenses. Changes in the fat ingredients may also raise the 
 
 1 Because of price support operations, the price of butter has been relatively 
 stable in recent years. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 13 
 
 cost of labeling, or change the quality of the end product, either 
 actually or in the consumer's opinion. 
 
 Price relationships. From 1947-1956, lard was generally cheaper 
 than soybean oil and increasing amounts of lard were used in the 
 manufacture of shortening. (See Fig. 4 and Table 1.) Technical 
 developments also facilitated the use of lard for this purpose. 1 
 
 Soybean and cottonseed oils tend to maintain a relatively stable 
 price relationship (Fig. 4). This relationship was maintained in spite 
 of rapid increases in the utilization of soybean oil in shortening, 
 margarine, and salad oils. (See Table 1.) Cottonseed oil, on the other 
 hand, was used increasingly as a cooking oil because of its relative 
 stability to cooking temperatures. 
 
 Close association of the prices of soybean and cottonseed oils and 
 lard, indicated by Fig. 4, can be measured statistically. Simple correla- 
 tion of annual data from 1932-1958 showed that 98.5 percent of the 
 price variations of soybean and cottonseed oils were associated, and 
 84.7 percent of the price variations of soybean oil and lard were 
 associated. 2 The percent of association between variations in the price 
 of cottonseed oil and lard was 83.6. 
 
 Increasing Consumption of Soybean Oil 
 
 The rapid increase in the use of soybean oil from pre- World War 
 II through 1957, shown in Table 2, was associated with increased 
 population, relative stability in per capita consumption of total fats 
 and oils, and a relatively stable supply of competing fats and oils. In 
 1957 total domestic utilization of all fats and oils was 7.6 billion 
 pounds, an increase of 2.0 billion pounds over 1935. During this same 
 period, utilization of soybean oil increased 2.2 billion pounds. 
 
 The slight decline in total utilization of fats and oils other than 
 soybean oil from 1935 to 1957 was caused by a sizable decline in the 
 use of butter during World War II. During the war the demand for 
 fluid milk increased rapidly, and the percentage of total available milk 
 processed for butter declined markedly. 
 
 The decline in butter production gave rise to an expanded mar- 
 garine manufacture. In 1950 a federal tax on colored margarine was 
 virtually eliminated and various state restrictions were abolished, fur- 
 ther encouraging the manufacture of margarine. The quality of mar- 
 garine was gradually improved, and earlier prejudices against its use 
 gradually disappeared. The upward trend in margarine consumption 
 greatly expanded the market for soybean oil, as shown by Table 1. 
 
 1 Prior to 1947 the largest amount of lard used in shortening in any one year 
 was 62 million pounds, in 1942. (Banna, Antoine. Oilseeds, Fats and Oils, and 
 Their Products, 1909-1953, p. 119. U. S. Dept. Agr. Stat. Bui. 147. 1954.) 
 
 2 The coefficient of simple correlation for soybean and cottonseed oils was 
 0.9925; for soybean oil and lard, 0.9203; for cottonseed oil and lard, 0.9146. 
 
14 BULLETIN No. 674 [August, 
 
 Table 2. Total Fats and Oils: Domestic Utilization as Food, 1935-1957 
 
 Year 
 
 Soybean 
 oil 
 
 Cotton- 
 seed oil 
 
 Lard 
 
 Butter* 
 
 Other 
 
 Total 
 
 
 
 
 (billion 
 
 pounds) 
 
 
 
 1935.. 
 
 .1 
 
 1.3 
 
 1.2 
 
 1.8 
 
 1.2 
 
 5.6 
 
 1936 
 
 2 
 
 1.2 
 
 1.4 
 
 1.7 
 
 1.4 
 
 5.9 
 
 1937 
 
 1 
 
 1.6 
 
 1.4 
 
 1.7 
 
 1.1 
 
 5.9 
 
 1938 
 
 3 
 
 1.5 
 
 1.4 
 
 1.7 
 
 1.0 
 
 5.9 
 
 1939 
 
 4 
 
 1.3 
 
 1.7 
 
 1.8 
 
 0.9 
 
 6.1 
 
 1940 
 
 .4 
 
 1.3 
 
 1.9 
 
 1.8 
 
 0.7 
 
 6.1 
 
 1941 
 
 4 
 
 1.5 
 
 1.9 
 
 1.8 
 
 0.8 
 
 6.4 
 
 1942 
 
 6 
 
 1.3 
 
 1.8 
 
 1.8 
 
 0.7 
 
 6.2 
 
 1943 
 
 1.0 
 
 1.2 
 
 1.8 
 
 1.4 
 
 0.6 
 
 6.0 
 
 1944 
 
 1.1 
 
 1.1 
 
 1.8 
 
 1.5 
 
 0.5 
 
 6.0 
 
 1945.. 
 
 1.1 
 
 1.1 
 
 1.6 
 
 1.3 
 
 0.6 
 
 5.7 
 
 1946 
 
 1.2 
 
 1.1 
 
 1.7 
 
 1.2 
 
 0.5 
 
 5.7 
 
 1947 
 
 1.2 
 
 1.0 
 
 1.9 
 
 1.3 
 
 0.7 
 
 6.1 
 
 1948 
 
 1.2 
 
 1.3 
 
 2.0 
 
 1.2 
 
 0.6 
 
 6.3 
 
 1949 
 
 1.2 
 
 1.4 
 
 1.9 
 
 1.3 
 
 0.6 
 
 6.4 
 
 1950.. 
 
 1.4 
 
 1.4 
 
 2.1 
 
 1.3 
 
 0.8 
 
 7.0 
 
 1951 
 
 1.5 
 
 1.0 
 
 2.1 
 
 1.2 
 
 0.8 
 
 6.6 
 
 1952 
 
 1.9 
 
 1.2 
 
 2.1 
 
 1.1 
 
 0.7 
 
 7.0 
 
 1953 
 
 2.1 
 
 1.1 
 
 2.0 
 
 1.1 
 
 0.7 
 
 7.0 
 
 1954 
 
 2.0 
 
 1.7 
 
 1.8 
 
 1.2 
 
 0.7 
 
 7.4 
 
 1955.. 
 
 2.3 
 
 1.3 
 
 2.0 
 
 1.2 
 
 0.8 
 
 7.6 
 
 1956 
 
 2.2 
 
 1.3 
 
 2.1 
 
 1.2 
 
 0.8 
 
 7.6 
 
 1957 
 
 2.3 
 
 1.2 
 
 2.0 
 
 1.2 
 
 0.9 
 
 7.6 
 
 Fat content. 
 Source: USD A, The Fats and Oils Situation, May, 1958. 
 
 Nonfood uses of soybean oil have also increased, but not so steadily 
 as have food uses. Major nonfood uses are in foots, a by-product of 
 soybean refining, and as a drying oil. Its use as a drying oil amounted 
 to 242 million pounds in 1953, but declined to only 190 million pounds 
 by 1957. Total nonfood use, excluding foots and refining loss, 
 amounted to only 9 percent of total utilization in 1957. 
 
 Soybean oil is not ideal as a drying oil because it is not highly 
 unsaturated, as a drying oil should be. However, soybean oil has 
 specialized uses, such as in alkyd-resin paints. 
 
 A prime deterrent to greater industrial use of food fats and oils 
 is price instability. Prices are the result of supply and demand 
 throughout the world and are subject to abrupt change. Prices of raw 
 materials of agricultural origin are in general more unstable than 
 prices of nonagricultural raw materials. Wherever possible, industry 
 prefers to reduce the risk resulting from erratic price movements by 
 utilizing raw materials which are relatively stable as to supply and 
 price. This largely accounts for the relatively small use of soybean oil 
 in nonfood products. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 15 
 
 The Domestic Supply of Fats and Oils 
 
 In free markets the use of land, labor, capital, and managerial 
 ability is determined by the relative profitability of alternative uses 
 of these resources. The stimulus for shifting the use of resources is 
 provided by prices developed by the marketing system. This impor- 
 tant function of prices is not always performed efficiently. Changes 
 in prices to producers are frequently reflected forward to consumers 
 only after an appreciable lapse of time, often depending on the com- 
 modity and on the amount of processing necessary before it is avail- 
 able to consumers. Supply responses are usually based on past prices 
 not on future prices, which are generally unpredictable by most 
 producers and, as a result, supply frequently changes rapidly in re- 
 lation to demand, causing wide price swings. Changes in supply fre- 
 quently result from climatic conditions. Institutional factors, such as 
 lack of adequate information by the producer, lack of credit, and the 
 producer's reluctance to change his production pattern, also reduce the 
 effectiveness of price in achieving an efficient allocation of resources. 
 Technological advances in production, especially those favoring specific 
 crops, tend to cause supply responses varying from past price rela- 
 tionships. Acreage restrictions on certain basic crops have caused the 
 expansion of unrestricted crops. 
 
 For the bulk of commodities, prices and relative profitability tend 
 to influence their production over a period of years even in the 
 presence of factors that tend to detract from the influence of price in 
 the allocation of productive resources. 
 
 Dependence on joint production. Fats and oils are produced jointly 
 with other products and, as a result, their production is partly deter- 
 mined by the demand for the products with which they are jointly 
 produced. The major joint product of soybean oil is soybean meal. 
 The major joint products of cottonseed oil are cotton fiber, linters, and 
 cottonseed meal. Lard is produced jointly with pork meat and various 
 other products of the hog slaughter industry. The use of milk in 
 butter manufacture is largely a residual use because, in most instances, 
 only that milk which cannot be sold for fluid consumption, where it 
 commands a price premium, is processed into butter, cheese, dry whole 
 milk, evaporated and condensed milk, and frozen dairy products. 
 
 Factors affecting supply. Because the major food fats and oils are 
 produced jointly with other products, several factors other than price 
 determine the supply of fats and oils. One of the chief factors is the 
 proportion of the total value of the joint products of a given fat- or 
 oil-yielding material accounted for by the fat or oil yielded. During 
 1954-1958, cottonseed oil and lard accounted for 10 and 12 percent, 
 respectively, of the value of the joint products of cotton and hogs, 
 
16 BULLETIN No. 674 [August, 
 
 and soybean oil accounted for 51 percent of the value of the joint 
 products of soybeans. 
 
 Because of the small proportion of total value of all joint products 
 contributed by cottonseed oil and lard, the value of cotton and hogs is 
 affected little by changes in the price of cottonseed oil and lard. There- 
 fore, price is relatively ineffective in stimulating increased production 
 of oil and lard by bringing about increased production of cotton and 
 hogs. 
 
 Changes in the proportionate amounts of the fat-bearing materials 
 processed for their fat or oil content have been important in the case 
 of cottonseed oil and butter. During the 1920's only 77 percent of the 
 cottonseed supply was crushed for oil. This proportion has increased 
 to 90-92 percent during recent years due to decreased use of cotton- 
 seed as feed and fertilizer. 
 
 The lard-yielding parts of hogs have limited alternative uses, and 
 as a consequence the yield of lard per 100 pounds of ^liveweight has 
 been relatively constant for several decades. 
 
 The decline in butter production has been caused by a reduced 
 proportion of milk available for processing for butter. During the 
 1930's about 45 percent of milk sold by farmers was processed for 
 butter, compared with only 25 percent in 1957. Milk used in manu- 
 factured products such as butter and cheese generally commands a 
 lower price than milk sold as fluid milk. In 1958 average prices re- 
 ceived by farmers for fluid milk were 47 percent higher than for milk 
 used for manufacturing. 1 In 1957, butter accounted for 16 percent of 
 the farm value of total marketings of dairy products, continuing a 
 long-term downward trend. 
 
 Peanuts are another source of edible oils, ranking after soy- 
 beans and cottonseed. The oil equivalent of peanut production for 
 1958-59 totaled about 500 million pounds, compared with about 5,800 
 million pounds for soybeans. Recently about 20 percent of peanut pro- 
 duction has been crushed for oil, mostly excess stocks acquired by the 
 Commodity Credit Corporation under price-support programs. Peanut 
 acreage has been severely restricted, declining from 3.5 million acres 
 in 1943 to 1.5 million in 1958. Yield per acre increased about 90 
 percent from 1943 to 1958. 2 Peanuts have important alternative uses 
 in peanut-butter spreads and consumption as whole peanuts. 
 
 Production conditions peculiar to individual oil-bearing materials, 
 such as length of production cycle, adaptability to varying environ- 
 mental conditions, and response to intensive cultural practices, further 
 condition production responses to price changes and the relative profit- 
 ability of employing available resources in alternative uses. All major 
 oil seeds grown in the United States are annuals, and rapid changes in 
 
 1 The Dairy Situation, February, 1959, p. 27. U. S. Dept. Agr. 
 
 ' The Fats and Oils Situation, September, 1958, p. 40. U. S. Dept. Agr. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 17 
 
 production are possible in the absence of limitations such as acreage 
 restrictions or climatic conditions. Different varieties of soybeans are 
 ecologically adapted to a wide range of conditions; consequently their 
 acreage can be readily expanded. In addition, machinery used to pro- 
 duce small grains can also be used in soybean production. 
 
 Cotton is not adapted to as wide a range of conditions as are soy- 
 beans. Cotton requires a longer growing season, limiting its production 
 to the southern and southwestern states, and special harvesting ma- 
 chines are needed in the absence of labor for hand picking. It is, how- 
 ever, more responsive to intensive cultural practices, such as the use 
 of fertilizers, than are soybeans. 
 
 Peanuts, like cotton, require a relatively long growing season and 
 special harvesting equipment. Peanuts need a well-drained sandy loam 
 soil and are severely soil-depleting, making it advisable to plant land 
 to peanuts only once every three or four years. 
 
 The productive cycle for lard is relatively short, since brood sows 
 can produce two farrowings a year, gilts can be bred at about six 
 months of age, and swine are generally marketed when six to eight 
 months old. An important limiting factor in swine and lard production 
 is the availability of feed. 
 
 Increasing butter production by increasing the size of the dairy 
 herd requires about three and one-half years. Some production in- 
 creases are possible by more intensive feeding and by utilizing a larger 
 proportion of the available milk supply in butter manufacture. Pro- 
 duction decreases can be achieved by reducing the dairy herd, less 
 intensive feeding, increasing the period between calvings, and utilizing 
 a larger proportion of the milk supply in nonbutter uses. 
 
 The capacity of the oilseed crushing industry is of prime impor- 
 tance because the oil becomes available only after the oilseeds have 
 been processed. The rapid increase in soybean production has been 
 accompanied by an expansion of the crushing industry and by greater 
 utilization of the solvent method of extraction, which increased the 
 oil out-turn about 10 percent per bushel. During 1945-46 only 28 per- 
 cent of all soybeans were processed by the solvent extraction process, 
 but in 1956-57 about 95 percent were so processed. The shift to solvent 
 extraction of cottonseed has been less rapid, increasing from 11.5 
 percent during 1951-52 to 27 percent during 1956-57. The yield of oil 
 per ton of cottonseed crushed increased about 6 percent during this 
 period, probably due in part to higher-quality seed. 
 
 Cottonseed production has tended downward, especially in the 
 southeastern United States, and the cottonseed crushing industry has 
 not been expanded in this region. The shift of cotton production to 
 southwestern states has increased the crushing capacity of this region. 
 
 Price and the supply of soybean oil. Soybean oil accounts for a 
 large proportion of the total value of the joint products of soybeans 
 
18 BULLETIN No. 674 [August, 
 
 (51 percent for the four marketing years ending in September, 1958). 
 Its price, therefore, has a prime influence on the prices received by 
 producers, and on the processors' crushing margins, which are par- 
 ticularly significant to the soybean industry. Soybeans fed directly 
 have a relatively low use value compared to the value of meal and oil 
 after crushing. Relatively stable and high crushing margins were 
 necessary to attract the capital for the rapid expansion of the soybean 
 crushing industry which has occurred. 
 
 Investment in crushing plants involves risk because of numerous 
 uncertainties. For the decade ending in September, 1958, the spread 
 between the farm price of soybeans and the value of the products 
 averaged 43 cents per bushel. This does not necessarily indicate actual 
 crushing margins, because a number of costs, such as transportation 
 charges and elevator handling and storage costs, have not been sub- 
 tracted. Also, in an attempt to shift risk, hedging operations by 
 processors may cause profits or losses resulting from price changes 
 in cash soybeans and soybean products relative to their futures prices. 
 
 The 10-year average spread of 43 cents per bushel between the 
 farm price of soybeans and the value of the products compares with an 
 average spread of 33 cents for the two marketing years ending in 
 September, 1958. During these two years the farm price support for 
 soybeans averaged 212 cents per bushel and the price received by 
 farmers averaged 213 cents per bushel. For the previous eight years 
 the farm price averaged 20 cents a bushel above the support price. If 
 the future effect of price support operations is a reduction in crushing 
 margins, expansion of the crushing industry will probably cease or be 
 less rapid. 
 
 Risk itself involves costs, because potential risk-bearers will not be 
 forthcoming unless they are compensated for assuming such risks. 
 For a stabilized industry, new risk capital is of minor importance, but 
 it is very important for an expanding industry, such as the soybean 
 industry. In a free-enterprise economy, the only way to attract capital 
 is through the prospect of relatively high profits. Risk is, in effect, a 
 cost which must be borne by soybean producers and consumers in the 
 absence of governmental subsidies to the crushing industry. Govern- 
 mental subsidy of oil exports is, in effect, a subsidy for both the pro- 
 ducer and the soybean crushing industry. Without oil subsidies the 
 value of the joint products would be less, thereby tending to reduce 
 the crushing margin, especially if the support price for soybeans were 
 in effect. 
 
 Demand for Meal 1 and the Supply of Soybean Oil 
 
 Soybean meal accounts for approximately half of the value of the 
 joint products from crushed soybeans. A 1 -percent reduction in the 
 
 1 Throughout this study the term "meal" includes oilseed cakes. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 19 
 
 price of meal, therefore, causes a reduction approximately half as 
 large in the price of soybeans. Assuming that price directly influences 
 the production of soybeans, it is clear that the price of soybean meal 
 influences the supply of soybean oil by its effect on soybean produc- 
 tion. 1 Soybean production is concentrated in the midwestern United 
 States, a region where agricultural resources have many alternative 
 uses. For this reason the assumption that the price of soybeans relative 
 to other crops has a direct influence on soybean production is con- 
 sidered logical. In the northern high plains in the United States and 
 Canada, alternative uses for agricultural resources are limited. Con- 
 sequently a downward adjustment of wheat production in response to 
 lower prices may be expected to be very slow. 
 
 For commodities with an elastic demand, total revenue received 
 from their sale will increase as the amount sold is increased. Under 
 normal conditions the price of a commodity drops as the amount sold 
 is increased. If the percentage increase in the amount consumed 
 is greater than the price reduction necessary to bring about this in- 
 creased consumption, total proceeds from the sale of the commodity 
 will increase as the volume sold is increased. 
 
 Statistical analyses indicate that the demand for high-protein feeds 
 in the aggregate had an average elasticity of 1.6 during the interwar 
 and postwar period through 1954. 2 This indicates that, with a 1.0 
 percent increase in price, the amount bought could be expected to 
 decline 1.6 percent. With a 1.0 percent decrease in price, consumption 
 could be expected to increase 1.6 percent, and total proceeds would 
 increase as the volume sold was increased. If the volume sold were 
 decreased, total proceeds would decrease. 
 
 Individual high-protein feeds, for example, soybean meal and lin- 
 seed meal, are substitutable in varying amounts in mixed feeds with 
 other high-protein feeds, such as the meals of peanuts, cottonseed, 
 copra, fish, alfalfa, meat scraps, and tankage. The practicability of 
 such substitution depends on a number of factors, including relative 
 prices, growth rate of the consuming animals, and the ability of the 
 meals to meet their amino acid requirements. As a consequence of 
 such substitution, the elasticity of demand for any given high-protein 
 
 1 No attempt is made here to estimate the response of soybean production to 
 price changes. It has often been observed that agricultural production frequently 
 increases when prices decline, giving rise to the notion that, with lower prices, 
 farmers produce more in an attempt to maintain income. It has also been ob- 
 served that agricultural production frequently increases when prices advance. The 
 increase in both cases can come from a variety of causes, such as favorable 
 weather, improvements in production techniques, and increased use of resources. 
 
 1 King, Gordon A. The Demand and Price Structure for By-Product Feeds. 
 U.S. Dept. Agr. Tech. Bui. 1183, pp. 1, 85-88. 1958. The period included the 
 years 1921-1941 and 1946-1954. 
 
20 BULLETIN No. 674 [August, 
 
 feed may be expected to be greater than the elasticity of demand for 
 high-protein feeds in the aggregate, as indicated by statistical analyses. 1 
 
 The rapid expansion of the soybean industry has been accompanied 
 by increased output and consumption of soybean meal. Table 3 shows 
 an upward trend in the domestic use of soybean meal, increasing from 
 1,526,000 tons during 1940-41 to 7,123,000 tons in the 1956-57 mar- 
 keting year. Total revenue in constant dollars also increased as volume 
 of sales and use increased, tending to confirm the results of statistical 
 analyses. Table 3 also shows that the price of soybean meal in constant 
 dollars tended upward during this period of rapid expansion. 
 
 The upward trend in the price of soybean meal probably occurred 
 because of increased demand. An increase in demand is evidenced 
 when, for example, a greater volume is bought and sold at the same 
 or higher price than a smaller volume during a prior period. 
 
 An increase in demand may be due to several causes. For most 
 commodities, higher per capita incomes tend to increase their demand. 2 
 Other demand-increasing factors include population increases, higher 
 prices of other commodities for which the commodity is a good sub- 
 stitute, and lower prices and increased consumption of those com- 
 modities which are not good substitutes but which utilize relatively 
 small amounts of the product in question in order to increase its utility. 
 In cases of different commodities that are good substitutes for each 
 other, an increase in the price of one would cause the substitution of 
 other commodities for the one with a relatively high price. For ex- 
 ample, a sizable advance in the price of cottonseed meal would prob- 
 ably increase the demand for soybean meal. Changes in the prices of 
 high-protein feeds relative to feed concentrates, such as corn, will tend 
 to encourage substitution, depending on their relative prices, relative 
 feeding value, and the rate of growth obtained. 3 Protein requirements 
 vary greatly with different animal species. Feed grains, such as corn, 
 are better substitutes for protein concentrates in cattle rations because 
 less protein is required than in hog or poultry rations. Protein 
 requirements as a percent of total nutrients decrease as animal weights 
 increase. 
 
 Lower prices for formula-feed ingredients such as antibiotics, 
 vitamins, and minerals would probably increase the demand for soy- 
 bean meal by increasing the feed efficiency of formula feeds. During 
 
 1 Ibid., pp. 108-129. 
 
 J The demand for such commodities as salt pork and beans, however, appears 
 to decline in the United States as per capita incomes increase. This is not nec- 
 essarily the case in very low-income countries, where such commodities may be a 
 relatively expensive item of diet and may, in fact, be a luxury. 
 
 'A statistical analysis for 1921-1941 and 1946-1954, by Gordon A. King (op. 
 cit., pp. 1, 85-88) indicates that the demand for feed grains and high-protein feeds 
 was highly competitive during these years. 
 
1961} 
 
 STRUCTURE OF SOYBEAN OIL EXPORT MARKET 
 
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22 BULLETIN No. 674 [August, 
 
 the 1949-50 marketing year, the most recent year for which compre- 
 hensive data are available, about 85 percent of the soybean meal fed 
 was used in formula feeds. 1 
 
 Technological developments which have increased the demand for 
 soybean meal include the discovery of the value of antibiotics, vita- 
 mins, and minerals as feed supplements. Synthetic production of 
 vitamin B 12 made it possible to use more soybean meal and less ani- 
 mal protein in poultry feeds. Another development is the toasting of 
 soybean meal during the oil extraction process. Toasting increases the 
 assimilation of the amino acids cystine and methionine by nonrumi- 
 nants. Soybean meal is further improved by the addition of methio- 
 nine, a step made feasible by development of a process for synthetic 
 production of this amino acid. 
 
 New technological developments in agriculture are often relatively 
 slow to be adopted. One major reason may be the large number of 
 producing units. In 1954 there were almost 5 million farms in the 
 United States. It is difficult to communicate the fundamentals of a 
 new technology and its application to the numerous producers, and the 
 level of technical education among producers is sometimes relatively 
 low. Many are reluctant to change established methods of production 
 frequently for valid economic reasons, such as inability of the 
 producer to assume the risk associated with a new production method. 
 
 New production methods frequently require large-scale producing 
 units for economical operation, as well as additional capital. Credit 
 from banks or other lending agencies is often unavailable, especially 
 if the prospective borrower does not already have a large share of the 
 capital. 
 
 With respect to soybean meal, widespread use of new feeding 
 techniques was made possible by a number of developments. Among 
 these was the rise of the formula-feed industry and of contract 
 poultry production. Since formula feeds include a large number of 
 ingredients their manufacture is rather complicated, especially if the 
 ingredients are mixed in such proportions that the required nutrients 
 are obtained at the lowest cost. Such mixing is generally not possible 
 at the farm level, and is done by mixing plants equipped to utilize 
 the latest technological developments, including those relating to vita- 
 mins, minerals, and antibiotics. The addition of optimum amounts of 
 vitamins, minerals, antibiotics, hormones, to soybean meal greatly 
 increases its value as a high-protein formula feed or supplement, 
 thereby increasing the demand for soybean meal. In addition, soybean 
 meal serves as a marketing vehicle for vitamins, minerals, antibiotics, 
 and other feed additives. 
 
 1 Jennings, R. D. Feed Consumed by Livestock, Supply and Disposition of 
 Feeds, 1949-50, by States. U.S. Dept. Agr. Stat. Bui. 145. 1954. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 23 
 
 Development of contract poultry production made it possible for 
 the individual producer to obtain increased credit, and facilitated the 
 introduction of improved poultry strains. Contract poultry production 
 also shifted a major part of risk arising from price changes from 
 the producer to the contractor. Through the development of an active 
 futures market in soybean meal and the use of an existing futures 
 market in feed grains, the parent contractor in turn was able to shift 
 part of the risk arising from feed ingredient price changes to the 
 futures market. 
 
 A primary prerequisite for developing a market for a given com- 
 modity or product is a complete marketing system. Development of 
 the formula- feed industry and contract poultry production greatly 
 facilitated development of the marketing system for soybean meal. 
 
 Contract swine production is still in its early stages. If this be- 
 comes widespread, or if individual swine-producing units expand 
 considerably under traditional management methods, the demand for 
 soybean meal as a swine feed will increase for the same economic 
 reasons associated with developments in the poultry industry. Whether 
 availability of surplus farm labor in the southern United States will 
 affect swine production as it did poultry production remains to be seen. 
 
 Consumer preferences are usually stable, but any change in them 
 will affect demand. The rapid increase in per capita consumption of 
 broilers beginning about 1940 may indicate increased consumer prefer- 
 ences for this food. Prices for broiling chickens were generally low in 
 relation to prices of competing meats, tending to increase consumption. 
 The per capita increase in commercial broiler consumption from 4.2 
 pounds live weight in 1940 to 27.4 pounds in 1957 was probably also 
 partly due to increased demand resulting from a preference for lower- 
 calorie diets, improvements in quality, and better marketing and pack- 
 aging methods. Per capita consumption of turkey meat has also tended 
 upward. A contrary trend in egg consumption has been evident since 
 1945, declining from 402 eggs per capita in 1945 to 334 in 1960. 
 
 Consumer preferences reflect habits of consumption associated with 
 the social heritage of individual national cultures, and these habits are 
 usually very stable. The diet in a given country consists primarily 
 of the foods it produces, or, in major importing countries like the 
 United Kingdom, of the foods they produced before becoming depend- 
 ent on imports for a large share of their food supply. New habits of 
 consumption can, however, be established. In free-enterprise econ- 
 omies this has usually been accomplished by pricing a substitute com- 
 modity lower than the commodity which it is replacing. Lower prices 
 for the substitute commodity tend to overcome the buyer's reluctance 
 to change long-established habits of consumption, either of producer 
 goods, such as soybean meal, or of consumer goods, such as broilers. 
 
24 BULLETIN No. 674 [August, 
 
 Another form of resistance is technical in nature. A commodity 
 that requires specialized processing machinery soybean oil, for 
 example must be sold at a lower price than the commodity which 
 it replaces, such as coconut oil, in order to induce manufacturers to 
 install specialized equipment. A further condition that must be met 
 is the assurance of the future supply of the commodity. 
 
 In the reverse situation, where a commodity with a long-established 
 demand is in short supply, consumer resistance to changing habits of 
 consumption is also in evidence, tending to increase the price of such a 
 commodity relative to substitute commodities. In the case of com- 
 modities which require specialized processing equipment, at least part 
 of the already-existing equipment becomes surplus. Since such equip- 
 ment is specialized, alternative uses are limited, and processors tend 
 to bid up the price of the commodity in question in an attempt to 
 maintain operations. 
 
 When the supply of a given commodity is being increased, new 
 capital must be raised for the purchase of specialized equipment, and 
 capital is generally forthcoming only if relatively high profits appear 
 assured. When the supply of a long-established commodity is being 
 reduced, new capital for equipment is not required and, if the existing 
 processing equipment has no alternative uses, owners tend to bid up 
 the price of the commodity in short supply until the equipment wears 
 out and is replaced by equipment to process a lower-priced substitute 
 commodity. Long-continued consumption of a substitute commodity 
 may result in the consumer's willingness to pay a higher price for the 
 substitute, should supply of the substitute commodity decline, relative 
 to the originally preferred commodity. 
 
 Demand for other oilseed meals. The domestic consumption of 
 total high-protein oilseed meals increased rapidly from the prewar 
 years through the marketing year ending in September, 1957. Total 
 consumption increased from 4,541,000 tons during the 1940-41 mar- 
 keting year to 10,077,000 tons during 1956-57 (Table 3), an increase 
 of 5,536,000 tons. The consumption of soybean meal increased 5,597,- 
 000 tons, while the consumption of other high-protein oilseed meals 
 decreased 61,000 tons, the decline being mainly in linseed meal. 
 Consumption of cottonseed meal was relatively stable except during 
 the Korean conflict, when sizable increases occurred. Changes in the 
 combined consumption of copra and peanut meals have had little effect 
 on total consumption of oilseed meals. 
 
 The available quantity of animal proteins (tankage and meat meal, 
 fish meal, and milk products) and mill by-product feeds increased 
 from a combined total of 3,318,000 tons in 1940-41 to 3,952,000 tons 
 in 1956-57, in terms of 44-percent protein soybean-meal equivalent. 1 
 
 1 Grain and Feed Statistics Through 1957. U. S. Dept. Agr., Supplement to 
 Stat. Bui. 159. 1955. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 25 
 
 This increase, amounting to 634,000 tons, accounted for 10 percent of 
 the increase in availability of total high-protein feeds. 
 
 Technical factors that increased the demand for high-protein feeds 
 have affected the demand for soybean meal more than for other high- 
 protein feeds. During the 1949-50 marketing year, only 28 percent of 
 the cottonseed meal consumed was used in formula feeds. Cottonseed 
 meal contains gossypol, which is harmful in poultry feeds. Although 
 gossypol can be removed or rendered less harmful, the primary use of 
 cottonseed meal is in cattle feeding. During 1949-50, 87 percent of 
 cottonseed meal used was fed to beef and dairy cattle. 1 Only 13 per- 
 cent was fed to poultry, hogs, and other livestock. Linseed meal, the 
 other major oilseed meal produced in the United States, is also pri- 
 marily fed to cattle, particularly to dairy cattle, which, during 1949-50, 
 consumed about 60 percent of the linseed meal. The remainder was 
 largely fed to beef cattle, sheep, and hogs. High-protein feeds have 
 encountered increasing competition from urea, a synthetic nitrogenous 
 compound that is convertible into protein by bacterial action in the 
 paunch of the ruminant animal. 
 
 Table 3 shows that consumption of oilseed meals other than soy- 
 bean meal remained substantially unchanged from 1940-41 to 1956-57, 
 while the consumption of soybean meal increased about fourfold. The 
 price of soybean, cottonseed, and linseed meals remained relatively 
 constant, even though the supply of soybean meal increased greatly. 
 As a result of the rapid increase in the supply of soybean meal, and its 
 stable price relative to other major oilseed meals, total receipts from 
 the sale of soybean meal also increased about fourfold, while total 
 receipts from other oilseed meals declined. 
 
 The demand for cottonseed and linseed meals increased as a result 
 of increasing beef cattle numbers, which rose from 32.9 million head 
 in 1940 to 60.4 million in 1958. More intensive feeding of dairy cattle 
 tended to increase the feed use per animal unit, but this was largely 
 offset by a gradual decrease in the number of dairy stock from 24.5 
 million head in 1940 to 22.4 in 1958. 2 
 
 Trends in formula-feed production. Formula-feed production in- 
 creased from 25.4 million tons in 1948 to 40.0 million in 1958 (Table 
 4). In 1939, total production amounted to approximately 13.0 million 
 tons. 3 From a volume standpoint, poultry feeds accounted for three- 
 fifths of the increase, but on a percentage basis, hog, beef, and sheep 
 feeds increased considerably more. Beef and sheep feeds (combined), 
 hog feeds, and poultry feeds increased 180, 159, and 61 percent, 
 
 Jennings, R. D., op. cit, p. 19. 
 
 'Livestock and Meat Statistics. U. S. Dept. Agr. Stat. Bui. 230, p. 6. 1957. 
 1 Wells, C. M., Jr. The Expanding Soybean Meal Market. 111. Agr. Exp. Sta. 
 Bui. 620, p. 15. 1957. 
 
26 BULLETIN No. 674 [August, 
 
 Table 4. Estimated Production of Formula Mixed Feeds, 
 by Type of Feed, 1948-1958" 
 
 Year 
 
 Poultry 
 feeds 
 
 Dairy 
 feeds 
 
 Hog 
 feeds 
 
 Beef and 
 sheep feeds 
 
 Miscel- 
 laneous 
 feeds 
 
 Total 
 formula 
 feeds 
 
 1948 
 
 14.5 
 
 6.6 
 6.6 
 
 6.1 
 6.1 
 7.0 
 6.9 
 6.6 
 
 6.3 
 6.7 
 6.7 
 7.0 
 
 (million tons) 
 2.2 " .7 
 2.2 .7 
 
 2.3 1.1 
 2.9 1.7 
 2.9 2.5 
 2.8 1.6 
 3.5 1.9 
 
 3.7 2.0 
 3.5 2.2 
 4.3 2.0 
 
 5.7 2.5 
 
 1.5 
 1.5 
 
 1.5 
 1.7 
 1.7 
 1.4 
 1.4 
 
 1.4 
 1.4 
 1.4 
 
 1.4 
 
 25.4 
 28.5 
 
 28.9 
 32.7 
 34.4 
 33.5 
 35.0 
 
 33.6 
 35.7 
 35.9 
 40.0 
 
 1949 
 
 17.5 
 
 1950 
 
 17.9 
 
 1951 
 
 20.3 
 
 1952 
 
 20.3 
 
 1953 
 
 20 8 
 
 1954 
 
 .... 21.6 
 
 1955 
 
 20.2 
 
 1956 
 
 21 9 
 
 1957 . 
 
 21 5 
 
 1958 
 
 23.4 
 
 
 
 Estimates of total mixed feeds are those of the American Feed Manufacturers Associa- 
 tion. Production estimates of individual feeds are based on reports of approximately 200 
 mixed feed manufacturers, which accounted for 46 to 49 percent of the total production of 
 mixed feeds during the period covered. 
 
 respectively, from 1948-58. The production of dairy and miscellaneous 
 feeds remained essentially unchanged. 
 
 The total protein content of the various types of formula feeds is 
 approximately equal excepting formula feeds for hogs. During the 
 1949-50 marketing year, formula feeds for hogs contained about 35 
 percent protein, whereas dairy, poultry, beef and sheep (combined), 
 and miscellaneous feeds contained about 18, 17, 15, and 15 percent 
 protein, respectively. 1 
 
 The protein content of hog formula feeds has probably declined 
 because of a tendency toward increased feeding of complete rations. 
 But for the purpose of making a rough estimate of the importance of 
 hog formula feeds relative to poultry feeds, it may be assumed that 
 the protein content of hog formula feeds relative to poultry feeds 
 remained essentially unchanged from the 1949-50 marketing year to 
 the calendar year 1958. According to this assumption, the 5.7 million 
 tons of hog formula feeds produced in 1958 equaled the 11.1 million 
 tons of poultry feeds in protein content. The protein in poultry 
 formula feeds is derived from feed grains to a greater extent than is 
 the protein in hog formula feeds. During 1949-50, every 100 pounds 
 of poultry formula feeds contained only about 8.9 pounds of protein 
 from high-protein concentrates (soybean, cottonseed, linseed, peanut, 
 copra, meat, tankage, fish, and gluten meals, and commercial milk- 
 products). Every 100 pounds of hog formula feeds, on the other hand, 
 
 1 King, Gordon A., op. cit, pp. 33-34. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 27 
 
 contained 32.4 pounds of protein from high-protein sources. Every 
 100 pounds of hog formula feed, therefore, used 3.6 times more high- 
 protein concentrates than did the poultry formula feeds, and the 5.7 
 million tons of hog formula feeds produced in 1958 contained as much 
 high-protein concentrate as 20.5 million tons of poultry formula feeds. 
 Production of poultry formula feeds amounted to 23.4 million tons 
 in 1958. 
 
 The upward trend in formula-feed production, especially of poultry 
 and hog feeds, provided an increasing market for high-protein feeds. 1 
 This tended to support the price of oilseeds, especially soybeans, even 
 with rapid increases in production, causing production of food fats 
 and oils to exceed domestic consumption. The export market became 
 increasingly important as an outlet. 
 
 Dependence of Soybean Oil Markets on Exports 
 
 Before World War II the United States was a minor net exporter 
 of food fats and oils. During 1937-41, total exports of food fats 
 and oils averaged only 318 million pounds annually while imports 
 averaged 194 million pounds, leaving a net export figure of only 124 
 million pounds. (See Table 5.) Net exports of food fats and oils were 
 small relative to domestic use, amounting to only 2 percent annually for 
 the five-year period. 
 
 During World War II, production of fats and oils increased in 
 response to wartime needs and an increasing demand for high-protein 
 oilseed meals. This upward trend continued during the postwar period, 
 with added impetus when production controls were imposed for cotton 
 (1950), corn (1954), wheat (1954), and less important basic crops. 
 
 Increased exports of food fats and oils. The relatively stable per 
 capita utilization of food fats and oils, combined with an upward trend 
 in production from the prewar years through the 1956-57 marketing 
 year, increased the importance of the export market as an outlet for 
 food fats and oils. During the postwar period ending with the 1957-58 
 marketing year, net exports reached their peak during the 1955-56 and 
 1956-57 marketing years, amounting to about 2.9 billion pounds. This 
 volume of net exports was about 23 times the 1937-41 average and 
 more than four times as large as in 1947. 
 
 During recent years the export market has been of particular im- 
 portance to the soybean industry. Exports of oil, including the oil 
 equivalent of soybeans exported, increased rapidly beginning with the 
 1955-56 marketing year and accounted for 67 percent of total exports 
 
 1 The quantity of high-protein concentrates fed per animal unit in terms of 
 44-percent soybean meal equivalent increased from 150 pounds during the 1949-50 
 marketing year to 270 pounds during 1957-58. 
 
28 
 
 BULLETIN No. 674 
 
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1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 29 
 
 of food fats and oils during the 1957-58 marketing year. Exports of 
 soybean oil, as a percentage of the oil equivalent of the production of 
 soybeans after allowing for feed, seed, and residual, also increased 
 during the postwar period. During the 1946-47 marketing year, only 
 8 percent of the oil equivalent of the crop was exported in the form 
 of either soybeans or oil, compared with an average of 36 percent 
 exported during the three marketing years ending in September, 1958. 
 
 Increased production and exports of nonfood fats and oils. Be- 
 fore World War II, the United States was a heavy net importer of 
 nonfood fats and oils (Table 5). The chief imports were coconut and 
 palm oils, primarily used in soap products and to a lesser extent in 
 food products. Less important imports included castor, tung, linseed, 
 fish, and marine'inammal oils. 
 
 Imports of nonfood fats and oils were sharply curtailed during 
 the postwar period as a result of increased domestic production, and 
 reduced utilization of fats and oils in soap products caused by in- 
 creased production of synthetic detergents, as discussed earlier. A 
 similar decline resulted from decreased utilization in drying-oil 
 products. The per capita utilization in other products, such as in fat- 
 splitting and animal feeds, has tended to increase, but this trend has 
 been insufficient to offset the downward trend in soap and drying-oil 
 uses. The gradual upward trend in total utilization is attributable to 
 population increases. 
 
 The bulk of the increased exports of nonfood fats and oils was 
 caused by larger exports of inedible tallow and grease, the major 
 ingredient of soap. During 1937-41, average United States imports of 
 inedible tallow and grease annually exceeded exports by one million 
 pounds. During the five marketing years from October, 1952, through 
 September, 1957, exports of inedible tallow and grease amounted to 1.1 
 billion to 1.5 billion pounds yearly. 
 
 The large increase in exportable supplies of inedible tallow and 
 grease caused increased pressure on the export market, and prices 
 declined in relation to those for food fats and oils. 1 The relatively low 
 price of inedible tallow and grease in the United States kept exports 
 from major prewar exporters from increasing during the postwar 
 period. 
 
 Alternative Uses for Food Fats and Oils 
 
 Relatively high-value uses in nonfood products appear limited. 
 From 1953 through 1957, average annual use of food fats and oils in 
 nonfood products, including soap stock obtained in the deacidification 
 
 * During 1937-47 the average price of crude soybean oil (midwestern mills) 
 and prime inedible tallow (Chicago) was the same. During 1954-58 the average 
 price of inedible tallow (Chicago) was 42 percent less than the price of soybean 
 oil (midwestern mills). 
 
30 BULLETIN No. 674 [August, 
 
 process, amounted to only 492 million pounds. 1 Soybean oil uses, 
 including soap stock, averaged 342 million pounds annually during the 
 same period. 2 In general, nonfood uses of food fats and oils have been 
 retarded by the development of synthetic materials of nonagricultural 
 origin, and by erratic price movements. In drying-oil uses, a wide 
 variety of synthetic resins, wholly or partly of nonagricultural origin, 
 has hindered utilization of soybean oil. The substitution of synthetic 
 detergents for soaps based on nonfood fats and oils will probably 
 continue, precluding an expansion in the use of food fats in soaps. 
 
 Use of fats and oils in mixed feeds. The use of nonfood fats and 
 oils, especially inedible tallow and grease, in feeds has been increasing 
 rapidly during recent years. During the 1954-55 marketing year, 
 approximately 289 million pounds of nonfood fats were used in feeds, 
 compared with about 500 million pounds for the 1957-58 marketing 
 year. 3 
 
 The use of fats and oils in feeds has several advantages. Recent 
 research indicates that efficiency of feed conversion in broilers is 
 increased by the addition of tallow and that "... a specific Calorie-to- 
 protein 4 ratio applies irrespective of level of dietary protein. Calories 
 from fat do not differ from Calories from other nutrients in their 
 effect upon Calorie-to-protein ratios." 5 An experiment in egg produc- 
 tion conducted by H. J. Hochreich, C. R. Douglas, I. H. Kidd, and 
 R. H. Harms 6 indicated that the addition of 6.6 percent stabilized 
 yellow grease at three different protein levels increased feed utilization 
 with no change in egg production, but with an increase in egg weight. 
 The results of an experiment by other researchers indicated that egg 
 quality was not affected by the addition of 2.5 and 5.0 percent stabi- 
 lized animal fat, nor was egg weight affected. 7 
 
 An experiment by M. H. Kennington, T. W. Perry, and W. M. 
 Beeson, dealing with the effect of adding fats to swine rations, indi- 
 cated that when stabilized lard was added to swine rations the gain per 
 pound of feed fed increased significantly. When 20 percent fat was 
 added to the ration for weanling pigs (averaging 30.2 pounds and fed 
 
 1 The Fats and Oils Situation. May, 1958, p. 35. U. S. Dept. Agr. 
 
 * Ibid., March, 1959, p. 23. 
 
 'The Feed Situation, September, 1958, pp. 20-21. U. S. Dept. Agr. 
 
 4 "Calorie" spelled with a capital C is the amount of heat required to raise 
 the temperature of one kilogram of water one degree centigrade. 
 
 Vondell, Richard M., and Ringrose, R. C. The Effect of Protein and Fat 
 Levels and Calorie to Protein Ratio Upon Performance of Broilers. Poul. Sci. 
 37:150. 1958. 
 
 "The Effect of Dietary Protein and Energy Levels Upon Production of 
 Single Comb White Leghorn Hens. Poul. Sci. 37:951. 1958. 
 
 1 Orr, H. L., Snyder, E. S., and Slinger, E. J. Effect of Animal Fat, Arsenic 
 Acid and Range vs. Confinement Rearing on Egg Quality. Poul. Sci. 37:214. 1958. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 31 
 
 to 125-pound weights), the gain per pound of feed fed increased 43.6 
 percent, and backfat thickness was also increased. With 10, 15, and 
 20 percent added fat, backfat thickness measured 1.20, 1.36, and 1.49 
 inches, respectively. The protein content of the rations was also varied 
 between 14 and 20 percent, and the experiments indicated that the 
 effect of adding fats was the same at the different levels of protein. 1 
 
 An experiment by W. G. Pond and J. H. Maner 2 showed that the 
 digestibility of protein was increased with the addition of fat to rations 
 fed to pigs averaging 19.8 pounds at the beginning of the experiment 
 and fed for 35 days. An experiment by A. J. Clawson, F. H. Smith, 
 and E. R. Barrick 3 used a ration very high in fat content, composed of 
 41.2 percent animal fat, 50.0 percent soybean meal, 5.0 percent dehy- 
 drated alfalfa meal, and 3.8 percent minerals, antibiotics, and vitamins, 
 in addition to 180 grams of trimethylalkylammonium stearate per ton 
 of feed. Results showed little difference in the number of calories 
 required per pound of gain compared with the gain made by another 
 lot whose ration consisted of 73.3 percent ground corn, 18.0 percent 
 soybean meal, 5.0 percent dehydrated alfalfa meal, and 3.7 percent 
 minerals, antibiotics, and vitamins, plus 180 grams of trimethylalkylam- 
 monium stearate per ton of feed. The swine fed the 41-percent animal- 
 fat ration had more backfat, softer carcasses, and yielded fewer lean 
 cuts than the other group. The group fed the high-fat ration also 
 tended to scour, until they attained a weight of about 100 pounds, and 
 the pastern bones in their legs tended to be weak. 
 
 A series of six-day experiments by Billy Gene Diggs, 4 using 
 weanling pigs averaging 34 pounds, indicated that the metabolizable 
 energy content 5 of three fats and oils, in calories per pound, was as 
 follows: lard, 3,418; tallow, 3,552; corn oil, 3,313. The metabolizable 
 energy content of corn was 1,473 calories per pound. 
 
 Experimental evidence as to the economic practicability of adding 
 fat to cattle rations is scanty. However, it is commonly believed that 
 cattle have a low tolerance for fat, but suckling calves are evidently 
 able to utilize relatively large amounts. 
 
 Governing factors in use of food fats and oils in mixed feeds. 
 
 The use of fats and oils in poultry feeds, especially those for broilers, 
 
 'Effect of Adding Animal Fat to Swine Rations. J. An. Sci., 17:1166. 1958. 
 
 'The Effect of the Calorie-Protein Ratio on Digestibility, Feed Efficiency, 
 and Weight Gain in Growing Swine. J. An. Sci. 17:1165. 1958. 
 
 1 Proceedings of Swine Producers Conference, North Carolina State College, 
 January 12-13, 1959. N. C. Agr. Exp. Sta., Raleigh, pp. 24-27. 
 
 'The Energy Value of Various Feedstuffs for the Young Pig. Unpublished 
 Ph.D. thesis. University of Illinois Department of Animal Science, Urbana. 1959. 
 
 '" Metabolizable energy is equal to productive energy plus the heat increment, 
 or plus the energy required in the process of digestion. 
 
32 BULLETIN No. 674 [August, 
 
 and in hog feeds has a number of advantages, but the primary factor 
 limiting their use has been cost. In terms^of productive energy (which 
 is equal to metabolizable energy minus energy lost in digestion), in- 
 edible tallow has approximated the cost of corn during the five years 
 ending in 1958. In broiler rations, tallow has 2.605 times as much 
 productive energy as ground corn. 1 During 1954-58 the average price 
 received by farmers for corn was 125.6 cents per bushel, or 2.243 cents 
 per pound. Because tallow has a productive energy content 2.605 times 
 that of corn, a pound of tallow on an energy basis would have been 
 worth 5.8 cents. The actual price of tallow (No. 1 inedible, Chicago) 
 during 1954-58 averaged 6.5 cents. 
 
 The use of fats, such as tallow, has some advantages which ap- 
 peared to overshadow their higher costs on a productive energy basis. 
 Among these were improved appearance and palatability of feeds, and 
 reduction of dust, making mixed feeds easier to handle. The concen- 
 trated energy content of mixed feeds containing fats also reduces 
 transportation charges on a nutritive basis. This is important to the 
 major feed-deficient broiler-producing areas that ship in part of their 
 feed supplies. A primary advantage of adding fats to broiler and 
 swine feeds is that the concentrated feed increases the rate of daily 
 gain, making possible faster turnover and increased production. A 
 decided hindrance in increased use of fat in mixed feeds, in addition 
 to their relatively high costs in terms of productive energy, is the need 
 for specialized mixing equipment. 
 
 The use of food fats and oils in mixed feeds has been economically 
 unfeasible because of their high prices. During 1954-58, prices for 
 loose lard (Chicago), cottonseed oil (southeast mills), and soybean 
 oil (Decatur) averaged 12.22, 13.22, and 12.16 cents per pound, re- 
 spectively. Experimental evidence shows that the productive energy 
 of vegetable and animal fats and oils is approximately the same for 
 poultry and swine. During 1954-58 the productive energy value of 
 tallow in terms of the productive energy of corn amounted to only 
 5.8 cents a pound. It was, therefore, economically impractical to use 
 food fats and oils in mixed feeds because productive energy in the 
 form of lard, cottonseed oil, and soybean oil cost over twice as much 
 as productive energy in the form of corn. 
 
 Rapid increases in the use of fats and oils in swine feeds are 
 unlikely because the volume of mixed feeds fed to swine is small 
 compared with the total feed consumed by swine, since the bulk of 
 swine feed is produced on the farms where it is fed. Mixed feeds for 
 swine are predominantly hog- formula supplements, and it is probably 
 impractical to add a sizable quantity of fat to concentrated supple- 
 
 1 Hutton, Robert F., King, Gordon A., and Boucher, Robert V. A Least-Cost 
 Broiler Feed Formula, Method of Derivation. U. S. Dept. Agr., Agr. Marketing 
 Ser., Prod. Res. Rep. No. 20, p. 6. 1958. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 33 
 
 ments. If vertical integration should occur in the hog industry, there 
 would probably be a tendency toward wider use of complete mixed- 
 feed rations, because larger production units would require the pur- 
 chase of feed ingredients as opposed to the present system of produc- 
 ing the bulk of swine feed on the farm where it is fed. This tendency 
 would be more pronounced if vertical integration for swine occurred 
 in the south and southeast rather than in the midwest, because the 
 feed would have to be shipped to those regions, and transportation 
 costs would be a more important consideration. 
 
 Since food fats and oils must compete with corn largely on a 
 productive energy basis, future changes in the price of corn will pro- 
 foundly affect the use of fats and oils in mixed feeds. Corn prices 
 received by farmers declined steadily from 145 cents a bushel in 1954 
 to 107 cents in 1958. With corn priced at 107 cents a bushel, a pound 
 of fat as feed would be worth 5 cents in terms of productive energy. 
 
 Size of the physical market for feed fats. Because of insufficient 
 experimental evidence, it is impossible to estimate accurately the vol- 
 ume of fat that could have been fed as feed in recent years if such 
 animals as broilers and swine, which research indicates have a high 
 tolerance for fat, had been fed a diet consistent with product quality 
 and maximum utilization of metabolizable energy available in fats. 
 Clawson and associates 1 found that the amount of calorie energy 
 required to produce a pound of pork was about the same on a diet 
 containing 41.2 percent fat as on the conventional diet. Deleterious 
 effects on health were noted, however. 
 
 In the last few years some commercial broiler-feed manufacturers 
 have added as much as 10 percent fat to broiler rations, evidently 
 with satisfactory results. Most manufacturers, however, add only 2 or 
 3 percent fat to the feed mix. Many, if not most, small feed-mixing 
 plants do not add fat to feeds because they lack the necessary 
 specialized equipment. 
 
 Because of the specialized equipment needed to manufacture mixed 
 feeds containing added fats, it is probably safe to assume that the 
 bulk of mixed feeds containing fats will soon be manufactured only 
 by feed plants. This precludes widespread use of fats in feed pre- 
 pared on farms. According to estimates of the American Feed Manu- 
 facturers Association, 3,877,619 tons of mixed broiler feeds were 
 produced in 1958 by 201 reporting companies, which produced an 
 estimated 49 percent of total mixed feeds. These same companies 
 also produced 2,775,801 tons of mixed swine feeds. If these manu- 
 facturers had added 10 percent 2 of fat to this volume of feed, about 
 
 1 Ibid., p. 25. 
 
 1 The usual ingredients (corn, meal, etc.) of most mixed feeds include 2 to 3 
 percent of fat. If more than 10 percent of fat is added, various problems arise, 
 including difficulty in mixing, and stickiness of the feed. 
 
34 BULLETIN No. 674 [August, 
 
 1,100 million pounds of additional fat would have been required. The 
 nonreporting feed manufacturers included the bulk of relatively small 
 plants that generally do not add fat to their mixed feed rations. The 
 201 reporting companies also produced 7,234,352 tons of other poultry 
 feeds (excluding broiler feeds and scratch), including turkey feeds, 
 and if 10 percent of fat had been added to these feeds about 1,250 
 million pounds of additional fat would have been required. Experi- 
 mental evidence relating to the tolerance of cattle to added fats in 
 their rations is too scant to presume that sizable amounts could have 
 been utilized. 
 
 The total amount of fats and oils that could have been used in 
 mixed feeds for poultry and swine amounted to approximately 2,350 
 million pounds in 1958, which is probably understated because some of 
 the nonreporting feed manufacturers, who produced about 51 percent 
 of total mixed feeds in 1958, probably also added some fats and oils 
 to their mixed feeds. 
 
 The volume of fats and oils that could have been used as feed 
 during the five marketing years ending in September, 1958, would 
 have equaled only about one-half of the volume exported during this 
 period (Table 5). 1 In addition, for fats and oils to compete with other 
 sources of productive energy, they would have had to sell for around 
 5 to 7 cents a pound, a much lower price than was actually received. 
 The combined average price for soybean oil, cottonseed oil, and lard 
 during this five-year period amounted to about 12 cents a pound 
 wholesale at major markets. 
 
 Use of fats and oils in mixed feeds appears to be a possible alterna- 
 tive at present. But because this is a relatively low-value use, the 
 export market remains of primary importance at present levels of per 
 capita production of fats and oils. If production increases, the export 
 market would become even more important. 
 
 The Prospective Supply and Demand Situation 
 
 Because fats and oils other than soybean oil are byproducts of 
 other agricultural commodities, estimates of future supply must be 
 based on the future consumption of the commodities in particular, 
 animal products that yield fats and oils as byproducts. High- 
 protein oilseed meals used for livestock and poultry feeds are produced 
 jointly with oils. In turn, the meat that is produced yields fats as a 
 byproduct. The consumption of animal products will, therefore, chiefly 
 determine the production of fats and oils. 
 
 The prospective supply of animal products. Two methods are 
 commonly used in projecting future supplies of animal products on 
 the basis of certain assumptions and established trends. One is to 
 
 1 Including the oil equivalent of oilseeds exported. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 35 
 
 estimate future demand, the other is to estimate the future supply of 
 feed grains, and then estimate the production of animal products, 
 assuming that the supply of feed grains not exported or used in 
 industrial products will be used to produce animal products. Since 
 both methods involve certain assumptions, the projections depend on 
 the validity of the assumptions. If the assumptions prove false, or 
 conditions change, the projections will be subject to error. 
 
 Projections of the future demand for farm products were made in 
 1956 by the United States Department of Agriculture. 1 These are 
 not estimates of future demand, but projections made on the basis of 
 certain assumptions. The major assumptions relate to price, interna- 
 tional relations, population, productivity, employment, and size of the 
 labor force. In line with these projections, and assuming a population 
 of 230 million and animal rations adequate in protein, a total of 22.3 
 million tons of high-protein meal (in terms of 44-percent soybean 
 meal) would be required to satisfy the projected demand for animal 
 products in 1975. 
 
 If we further assume that the production of animal proteins (meat 
 scraps and tankage) will increase in proportion to the increase in meat 
 production, that per capita cotton consumption in 1975 will total 32.0 
 pounds (an increase of 6.0 pounds from 1956), that 4.5 million bales 
 of cotton will be exported, that the consumption and production of 
 other oilseed meals (primarily linseed, copra, peanut, grain by- 
 products, and alfalfa meal) will increase proportionally with popula- 
 tion, and that 200 million bushels of soybeans will be exported, 
 approximately 860 million bushels of soybeans will be needed during 
 the 1974-75 marketing year. This crop would be used as follows: 
 domestic crush, 610 million; feed, seed, and residual, 50 million; and 
 exports, 200 million bushels. 2 
 
 Under these assumptions a domestic consumption of 22.3 million 
 tons of high-protein meal (in terms of 44-percent meal) would yield 
 17,285 million pounds of food fats and oils, assuming that the produc- 
 tion of lard and edible tallow increased in proportion to the increase 
 in meat production, that the fat content of butter consumed totaled 
 7.0 pounds per capita, that the oil yield of cottonseed remained un- 
 changed, and that the production of minor food fats and oils, such as 
 peanut and olive oil, increased in proportion to the assumed increase 
 
 1 Daly, Rex F. The Long-Run Demand for Farm Products. Agr. Econ. Res. 
 8:73-91. 1956. 
 
 1 The estimate of soybean exports is a figure arbitrarily assumed by the 
 author, since this study does not include estimates for the foreign demand for 
 protein meals. Increased exports of soybeans would, however, aggravate the 
 export problem for fats and oils. The need for fat and oil export markets is 
 here based on estimates of the demand for protein meals in the United States, 
 and as such may be considered to be minimum estimates. 
 
36 BULLETIN No. 674 [August, 
 
 in population. With the assumed population of 230 million in 1975, 
 and a per capita consumption of 45.5 pounds of food fats and oils, 1 
 total domestic requirements for food fats and oils would amount to 
 10.5 billion pounds. This would leave 7.6 billion pounds to be exported, 
 including the oil equivalent of oilseeds exported. To export this vol- 
 ume of food fats and oils would require the export of 5.5 billion 
 pounds of separated fats and oils, in addition to 2.2 billion pounds as 
 the oil equivalent of soybeans. This total would be more than twice 
 the largest amount exported in any one marketing year from the 
 postwar period to 1957-58. Under the above assumptions, 2.6 billion 
 pounds of soap fats and oils would be available for export if per capita 
 use of nonfood fats and oils and total imports (primarily coconut oil) 
 remained unchanged from 1955 to 1975. Total food and soap fats and 
 oils for export would be about 10.2 billion pounds. 
 
 Estimates of the need for high-protein feeds in 1974-75, based on 
 trends in feed-grain production, indicate that the United States will 
 need to produce almost 1 billion bushels of soybeans by the 1974-75 
 marketing year. 2 This figure assumes that the upward trend in feed- 
 grain production for the 10 years ending in September, 1958, which 
 amounted to an average annual increase of 4.1 million tons (146 
 million 56-pound bushels) will continue. If this volume of feed grains 
 and oilseeds were actually produced, approximately 20.0 billion pounds 
 of food fats and oils would be produced, including the oil equivalent 
 of an estimated 200 million bushels of soybean exports. Assuming a 
 population of 230 million in 1975 and a per capita consumption of 45.5 
 pounds of food fats and oils, domestic utilization would amount to 10.5 
 billion pounds. This would leave about 9.5 billion pounds for export, 
 more than three times as much as was exported in any one marketing 
 year prior to 1957-58 (Table 5). In addition, about 3.4 billion pounds 
 of nonfood fats and oils, chiefly inedible tallow and grease, would be 
 available for export. Total food and soap fats and oils available for 
 export would amount to about 12.9 billion pounds. 
 
 Cursory examination of projections. Projections relating to future 
 supply and demand follow directly from assumed future conditions, 
 based primarily on estimates of future population, of increased con- 
 sumption resulting from increased income, and continued stability of 
 prices. If conditions change, projections are likely to be in error. 
 
 Increased per capita consumption may result from causes other 
 than higher per capita incomes. Among these may be increased prefer- 
 ence for the commodity in question, improvements in marketing, and 
 
 1 Daly, Rex F., op. cit., p. 82. 
 
 1 Given the same assumptions as above, i.e., a per capita cotton consumption 
 of 32.0 pounds, cotton exports of 4.5 million bales, and 200 million bushels of 
 soybean exports. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 37 
 
 lower prices for the commodity in relation both to substitute commodi- 
 ties and to the level of prices for all commodities. Increased prefer- 
 ence for a commodity can usually be traced to long-continued higher 
 levels of consumption resulting from nutritional findings, increased 
 supplies and lower prices, improved marketing, and improved quality. 
 
 Tastes and preferences are actually habits which, once formed, are 
 difficult to change. Over relatively long periods, however, new genera- 
 tions develop new habits of consumption. Relatively low prices for 
 animal products will encourage increased consumption. If such prices 
 continue for a number of years, new generations will become habitu- 
 ated to a relatively high level of consumption, as will also older gener- 
 ations, although probably to a lesser degree. Improvements in the 
 marketing system, such as the individual packaging of dressed, pre- 
 cooked, or ready-to-eat poultry will tend to increase the demand for a 
 commodity. Other marketing improvements that would increase per 
 capita consumption are an even supply, and ready availability of the 
 different grades and types of animal products demanded by consumers. 
 
 Should the production of feed grains increase at an annual rate 
 of 4.1 million tons through 1974-75, and exports and industrial use 
 increase at a proportional rate, in 1975 the per capita supply of red 
 meat would amount to 201 pounds, and poultry meat to 36 pounds, 
 assuming the present conversion rate and a population of 230 million. 
 With this level of production, the combined supply of red meat and 
 poultry meat would be 237 pounds per capita, or 43 pounds more than 
 the estimated supply for the 1958-59 marketing year. 
 
 Comparison with other countries having a relatively high per capita 
 consumption of meat indicates that the domestic market for meat 
 could be expanded to absorb around 237 pounds per capita. In 1957 
 Argentina, Australia, and New Zealand had a per capita consumption 
 of 242, 223, and 220 pounds of red meat, respectively. 1 The combined 
 per capita consumption of red meat and poultry amounted to 250, 233, 
 and 226 pounds, respectively. Retail prices of meat, especially beef, 
 are generally lower in these countries than in the United States. 
 Table 6 lists prices of different meat cuts in the principal markets for 
 October, 1957. 2 A level of consumption in the United States approxi- 
 mating that of Argentina, Australia, and New Zealand would probably 
 require some downward adjustment of prices. On the other hand, 
 increased demand in the United States resulting from increases in 
 income and consumers' preference would materially assist in main- 
 taining prices. Part of the difference in relative prices shown in 
 Table 6 is probably due to higher-quality meats in the United States 
 
 'Livestock and Meat Circular. U. S. Dept. Agr., For. Agr. Ser., FLM 11-58, 
 October, 1958, p. 4. 
 
 1 For livestock prices in selected countries, see Commonwealth Economic 
 Committee, Intelligence Bulletin (published monthly); ibid., Meat (published 
 annually). 
 
38 
 
 BULLETIN No. 674 
 
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1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 39 
 
 and more nearly complete consumer services, such as convenience 
 foods. 
 
 In 1957, per capita income in Argentina, Australia, New Zealand, 
 and the United States amounted to approximately $520, $1,075, $1,165, 
 and $2,124, respectively. 1 For 1975, per capita disposable income 
 (income after taxes) for the United States is estimated to be about 
 $550 above 1957. 2 
 
 The projected per capita disposable income for the United States 
 in 1975, compared with the per capita income of Argentina, Australia, 
 and New Zealand in 1957, would indicate that per capita meat con- 
 sumption of 237 pounds in 1975 is a distinct possibility. However, 
 consumer studies show that per capita consumption increases with 
 income to a certain point, then tends to level off. In the spring of 1955, 
 a survey of the amount of various foods consumed in one week by 
 about 6,000 households of two or more persons indicated the following 
 relationship between money income (after taxes) and per capita con- 
 sumption of all meat: 3 
 
 Per capita meat 
 
 Household income Household size 4 consumption 
 
 (dollars) (persons) (pounds) 
 
 Under 1,000 3.26 2.02 
 
 1,000-1,999 3.30 2.47 
 
 2,000-2,999 3.52 2.86 
 
 3,000-3,999 3.67 2.90 
 
 4,000-4,999 3.62 3.14 
 
 5,000-5,999 3.69 3.19 
 
 6,000-7,999 3.56 3.37 
 
 8,000-9,999 3.60 3.28 
 
 10,000 and over 3 . 64 3 . 55 
 
 The tendency for the rate of increase to level off when income 
 reaches $5,000 indicates that, even if future incomes were substantially 
 higher, substantially lower prices for meat would be required to make 
 possible a per capita consumption of 237 pounds in 1975, assuming 
 
 1 Statistical Office of the United Nations, Monthly Bulletin of Statistics, data 
 published currently. Per capita income as here used includes all income accruing 
 to the factors of production supplied by residents of the countries concerned 
 before deduction of direct taxes. Foreign currencies were converted at official 
 rates of exchange. 
 
 J Daly, Rex. F. Prospective Domestic Demands for Food and Fiber. 85th 
 Congress, 1st Session, Joint Economic Committee, Policy for Commercial Agri- 
 culture, p. 109. U. S. Govt. Printing Office. 1957; Statistical Abstract of the 
 United States, 1958, p. 304. U. S. Dept. Comm., Bureau of the Census. 
 
 'Adapted from Food Consumption of Households in the United States. 1955 
 Survey, Rep. No. 1, pp. 17, 66. U. S. Dept. Agr. 
 
 4 Every 21 meals taken at home equal to one person. 
 
40 BULLETIN No. 674 [August, 
 
 that tastes and preferences remain unchanged. If consumers' prefer- 
 ences for meat can be increased in the meantime, it may be possible 
 to increase consumption to levels comparing with those in Argentina, 
 Australia, and New Zealand. 
 
 With higher incomes in the United States by 1975, it is also likely 
 that consumers will demand proportionally more higher-quality meat 
 and more beef. More grain would then be needed to produce a pound 
 of meat, because it takes more grain to produce high-quality meat. If 
 consumer preference tended toward higher-quality beef, the future 
 supply of feed grains could be used up with a per capita consumption 
 of less than 237 pounds of meat. Also, as incomes increase, a larger 
 proportion of the less desirable cuts of meat (including meat from 
 dairy cows) may find its way into lower- value uses, such as dog and 
 cat food, meat scraps, and tankage. A similar tendency has long been 
 observed with respect to pork backfat, now largely used as lard, and 
 pork intestines (chitterlings), now largely used in meat scraps and 
 tankage. If the consumption of beef increases more than other meat 
 consumption, meal-protein requirements will be reduced, because pro- 
 tein requirements of beef cattle are lower than those of swine and 
 poultry, and because urea may be substituted for high-protein feeds 
 in low-protein rations. For dairy cattle, urea is most effective when 
 added to rations containing less than 10 percent of protein. 1 In 1955 
 about 70,000 tons of urea were fed, replacing an estimated equivalent 
 of 400,000 tons of soybean meal in cattle and sheep rations. 2 On the 
 other hand, if the production and consumption of poultry meat in- 
 creases more than consumption of pork and beef, protein requirements 
 will be increased, because poultry require a high-protein ration. 
 
 It is questionable whether livestock and poultry rations will contain 
 the optimum amount of protein by 1974-75. During the 1955-56 mar- 
 keting year, it is estimated that the protein deficiency in poultry and 
 swine rations (assuming a 14-percent protein ration for swine) 
 amounted to 3,450,000 tons of 44-percent soybean meal, 2 the equivalent 
 of about 145 million bushels of soybeans. However, some progress has 
 been made since 1955-56 in reducing the protein deficit. The quantity of 
 high-protein feeds in terms of 44-percent soybean meal increased from 
 242 pounds per animal unit during 1955-56 to 270 pounds for 1957-58. 3 
 Some overfeeding of high-protein feeds always occurs, which may 
 offset future instances of underfeeding. 
 
 The projections based on future supplies of feed grains will be too 
 great if the total production of feed grains does not increase at the 
 assumed rate (4.1 million tons annually). On the other hand, if 
 
 1 King, Gordon A., op. cit., p. 67. 
 
 * Jennings, Ralph D. Consumption of Feed by Livestock, 1909-1956. U. S. 
 Dept. Agr. Prod. Res. Rep. No. 21, p. 55. 1958. 
 
 'The Feed Situation, January, 1959, p. 27. U. S. Dept. Agr. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 41 
 
 increases in feed-grain production exceed the assumed rate, the pro- 
 tein deficiency will be increased. 
 
 Actual production of feed grains will probably be largely influenced 
 by price and by demand for resources in alternative uses. A gradually 
 increasing meat supply would release resources devoted to producing 
 other foods, such as potatoes, wheat, and beans, making possible the 
 increased production of feed grains. 
 
 Changes in the proportion of total feed grains exported would also 
 influence the amount of high-protein feeds needed. Use of the St. 
 Lawrence Seaway may tend to increase foreign demand for feed 
 grains. Savings in shipping corn via the seaway from Chicago, Illinois, 
 for example, to Rotterdam, will range from an estimated minimum of 
 6.3 cents to a maximum of 16.5 cents a bushel. 1 
 
 The primary importers of United States feed grains are the coun- 
 tries of western Europe, particularly Belgium, The Netherlands, and 
 the United Kingdom. 2 During the two marketing years ending in 
 September, 1958, for example, the countries of western Europe took 
 71 percent of total United States exports. While the western European 
 demand for feed grains is rapidly increasing due to increasing in- 
 comes and improved feeding methods, other forces will have an op- 
 posite effect. Among these are a rapid reduction in numbers of horses 
 and mules, more efficient land utilization resulting from consolidation 
 of fragmented holdings and increased fertilization and mechanization. 
 
 Comparison of the 1957 per capita consumption of red meat in 
 selected consuming areas of western Europe shows the average to be 
 considerably below that of the United States: 3 
 
 Per capita 
 meat consumption 
 Country (pounds) 
 
 United States 159 
 
 Austria 106 
 
 Belgium-Luxembourg 101 
 
 Denmark 142 
 
 France 122 
 
 West Germany 107 
 
 Italy (1956) 43 
 
 The Netherlands 86 
 
 Sweden 105 
 
 The United Kingdom 134 
 
 Yugoslavia 49 
 
 1 Haldeman, Robert C. Potential Effects of St. Lawrence Seaway on Costs 
 of Transporting Grain. U. S. Dept. Agr. Marketing Res. Rep. No. 319, p. 137. 
 1959. 
 
 'The World Grain Trade. U. S. Dept. Agr., For. Agr. Ser., pp. 32-37. 1959. 
 
 3 The Livestock and Meat Situation, March, 1959, p. 12. U. S. Dept. Agr.; 
 U. S. Dept. Agr., For. Agr. Ser., Cir. FLM 11-58, October, 1958, p. 5. 
 
42 BULLETIN No. 674 [August, 
 
 X 
 
 Comparison of income and price elasticities for the United States 
 and selected countries of western Europe does not indicate that pro- 
 portional decreases in the price of meat, or increases in income, would 
 increase the per capita consumption of meat in western Europe more 
 than it would in the United States. Export of feed grains to western 
 Europe will also be hindered by transportation costs. Charges up- 
 ward of 17 cents per bushel for corn may be anticipated, 1 and to this 
 must be added interior charges, both in the United States and in the 
 importing countries. Since total transportation and other marketing 
 charges are relatively stable, decreases in the domestic price of feed 
 grains would not necessarily increase exports, because the cost of 
 transportation would be high in relation to the reduced price of feed 
 grains. This would put importing countries at a disadvantage in 
 bidding against domestic users for the feed grains, assuming the same 
 price elasticity of demand. 
 
 Summary. While exports of feed grains are likely to increase 
 large increases in the proportion of the future supply of feed grains 
 exported appear unlikely. The impending increase in the United States 
 production indicates that, if animal rations are to contain optimum 
 levels of protein, large increases in the production of soybeans and 
 soybean meal may be anticipated. Increased production of soybeans 
 and meats will mean increased production of fats and oils which must 
 be exported or utilized in relatively low-value uses in animal feeds. 
 Projection of the exportable supply of fats and oils, based on projec- 
 tions of the demand for animal products, indicates an increasing 
 exportable supply, amounting to over twice the postwar high (to 
 1957-58) by 1975. 
 
 PART 2. THE FOREIGN FATS, OILS, 
 AND OILSEED ECONOMY 
 
 Supply Factors in the Foreign Market 
 
 In the United States the demand for food fats and oils is limited 
 almost exclusively to domestically produced butter, lard, soybean oil, 
 and cottonseed oil. Total production of these fats and oils exceeds 
 domestic utilization. Imports of other fats and oils are negligible, and 
 there is little substitution of food fats and oils in nonfood uses. There 
 is no widespread substitution of nonfood fats and oils for food fats 
 and oils by a third fat or oil, such as soybean oil, which can be utilized 
 in both food and nonfood products. 
 
 In the fats and oils economy of the world there are 22 impor- 
 tant fats and oils that fall into two distinct groups from a use 
 
 1 Haldeman, Robert C, op. cit., pp. 137, 138. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 43 
 
 standpoint: the drying-technical oils, and the food-soap fats and oils. 
 The major drying-technical oils linseed, castor, tung, oiticica, and 
 sperm whale oil are used primarily in paints and varnishes, linoleum, 
 and plastics. The 17 major food-soap fats and oils are: butter, lard, 
 tallow and grease, and the oils from soybeans, peanuts, rapeseed, cot- 
 tonseed, sesame seed, corn, sunflower seed, copra, palm kernels, 
 babassu nuts, and palm, whale, olive, and fish oils. 1 Other oils are of 
 minor importance in international trade, amounting to only about 1 to 
 2 percent of total exports in most years. 
 
 A limited amount of substitution between the food-soap group and 
 the drying-technical group occurs in some localities, such as the use of 
 linseed oil as a food in local areas in India, but such uses are not 
 significant for the world as a whole. 
 
 For the foreign market as a whole, substitution between fats and 
 oils used primarily as food and those used primarily as soap ingredi- 
 ents occurs on a wide scale. The physical characteristics of many of 
 the 17 major food and soap fats and oils are similar. Consumer pref- 
 erences and incomes vary from country to country, as does manufac- 
 turing equipment used in processing fats and oils. For these reasons 
 the demand for fats and oils used primarily as soap ingredients and 
 their supply directly influence the demand for and consumption of 
 fats and oils used primarily as food. 
 
 The Economics of Supply 
 
 If we assume a stable condition in production and in efficiency of 
 use, average weather conditions, and the absence of political and social 
 forces such as governmental production controls or agrarian resistance 
 to change on noneconomic grounds, the production of fats and oils in 
 foreign countries with economic structures organized largely along 
 lines of private enterprise, and with flexible prices and profit motiva- 
 tion is determined by the relative profitability of alternative uses of 
 productive resources. Countries with an economic structure organized 
 along socialistic lines can also have flexible prices and be at least partly 
 profit-motivated, and relative prices and relative profitability can play 
 an important, if not dominant, role. In socialistic countries organized 
 along delivery-quota lines, relative profitabiliy plays a minor, if not 
 insignificant, role. 
 
 Supply response. The relative profitability of alternative use of 
 resources in both private enterprise and socialistic economies with 
 flexible prices and profit motivation, is determined by cost of inputs 
 
 1 In the United States, fish oil is used almost exclusively as a drying-technical 
 oil and is classified as such in this study. In the foreign market, fish oil is used 
 in both food- soap and drying-technical products and is commonly classified as a 
 food-soap oil. 
 
44 BULLETIN No. 074 [August, 
 
 and price received for output. The response of the supply of a given 
 oil-bearing material is determined by ( 1 ) response of marginal revenue 
 to marginal cost as producers alter their volume of production, and 
 (2) ease of entry into, or exit from, production in response to price 
 changes. In the production of oil-bearing materials, the behavior of 
 marginal costs caused by a change in production is determined pri- 
 marily by the proportion of the total value of the joint products 
 accounted for by the fat or oil, by the elasticity of demand for the non- 
 fat joint products, and by specific physical conditions of individual 
 fat-bearing materials. 
 
 With a given change in production, marginal costs will change less 
 for fat-bearing materials with a relatively high oil content than for 
 those with a lower fat or oil content, other things being equal. Table 7 
 shows the proportion of the total value of the joint products accounted 
 for by the fat and oil of the major food and soap fat-bearing materials 
 for a recent representative year. The effect of the oil content of oil- 
 seeds on marginal costs and marginal revenue is illustrated by sesame 
 
 Table 7. Production of Individual Food and Soap Fats and Oils as a 
 Percent of Total Ex-United States Production, and the Value of 
 Their Fat Content as a Percent of Value of All Joint Products, 1957 
 
 Fat or oil 
 
 Percent of 
 total ex-U.S. 
 production 
 
 Approximate 
 value of oil 
 as a percent of 
 total value of 
 joint products 
 
 Butter (fat content)" 
 
 15 
 
 ( b ) 
 
 Lard 
 
 14 
 
 10 
 
 Sunflower 
 
 13 
 
 65 
 
 Coconut 
 
 11 
 
 85 
 
 Peanut 
 
 11 
 
 75 
 
 Palm 
 
 . . . . . . 8 
 
 () 
 
 Rapeseed 
 
 6 
 
 80 
 
 Olive 
 
 5 
 
 ( c ) 
 
 Cottonseed 
 
 5 
 
 10 
 
 Soybean 
 
 3 
 
 50 
 
 Sesame 
 
 3 
 
 90 
 
 Palm kernel 
 
 2 
 
 75 
 
 Whale 
 
 2 
 
 (b) 
 
 Tallow and grease 
 
 1 
 
 4 
 
 Babassu 
 
 ( d ) 
 
 85 
 
 Corn, fish, and seal oils 
 
 
 () 
 
 
 
 
 Includes only milk used in manufacture of butter. 
 
 6 Insufficient data, but probably in excess of 75 percent. 
 
 Insufficient data, but close to 100 percent. 
 d Less than 0.5 percent. 
 
 Data not available. 
 
 Sources: London Public Ledger (London, England); Broomhall's, Corn Trade News 
 (Liverpool, England); Food and Agriculture Organization of the United Nations, Monthly 
 Bulletin of Agricultural Economics and Statistics; Commonwealth Economic Committee, 
 Vegetable Oils and Oilseeds (Her Majesty's Stationery Office, London, England); Ibid., Dairy 
 Produce: Ibid., Meat; Ibid.. Intelligence Bulletin; London Economist Intelligence Unit Ltd., 
 Three-Monthly Economic Reviews; USDA, Foreign Agricultural Service, FFO Circulars; 
 USDA. The Fats and Oils Situation. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 45 
 
 seed and cottonseed oils. The oil from sesame accounts for approxi- 
 mately 90 percent of the total value of the joint products, while cotton- 
 seed oil accounts for only about 10 percent. If the price of the oils of 
 sesame and cottonseed were increased 10 percent, the value of the 
 joint products would increase 9 percent for sesame and only 1 percent 
 for cotton, assuming no price change in other joint products. Assum- 
 ing equal percentage increases in costs of production involved in 
 increasing production, it is obvious that the elasticity of supply should 
 be greater for sesame oil than for cottonseed oil. 
 
 With changes in the production of fat-bearing materials in response 
 to a change in the price of fats, elasticity of demand for the nonfat 
 joint products will also influence marginal costs. For example, if the 
 price of soybean oil increases and if the production of both soybean oil 
 and meal increases, the total value of the joint products of soybeans 
 will be affected by the price changes resulting from the increased 
 supply of soybean meal. If the price of soybean meal remains un- 
 changed, it will not affect marginal costs, implying that the demand for 
 soybean meal is infinitely elastic, which is improbable. Under actual 
 market conditions the price of soybean meal would decline with an 
 increase in its supply, assuming an unchanged demand. 
 
 For purposes of illustration, let us assume that the price of soy- 
 bean meal would decline 10 percent with a 5-percent increase in supply 
 (0.5 elasticity). Next, let us assume that the value of oil and meal 
 from a unit of soybeans is equal (which was the case in 1957 as shown 
 by Table 7), and that the price of soybean oil increases 10 percent. 
 If this price increase causes, say, 5 percent more soybeans to be 
 crushed, the supply of soybean meal will also increase 5 percent. 
 Under our assumed conditions, a 5-percent increase in the supply of 
 soybean meal would cause a 10-percent decrease in the price of soybean 
 meal, offsetting the higher value of the oil from a unit of soybeans by 
 the lower value of the meal. However, if the price of soybean meal 
 declined less than twice the increase in its supply, the total value of 
 the joint products from a unit of soybeans would increase. 
 
 In those fat-bearing materials for which the nonfat joint products 
 contribute little to the total value of the joint products, such as sesame 
 seed meal, the elasticity of demand for the nonfat joint products has 
 little influence on marginal costs. In recent years, under actual market 
 conditions, the effect of the elasticity of demand for nonfat joint 
 products on marginal costs has been obscured by increased demand for 
 high-protein feeds. That is, an increasing supply of cakes and meals 
 has been marketed at a stable or increasing price. 
 
 Effect of production conditions. With respect to production condi- 
 tions, food and soap fats and oils can be classified into four groups: 
 (1) annual oilseeds with a productive cycle of less than 12 months, 
 
46 BULLETIN No. 674 [August, 
 
 (2) perennial tree-crop oilseeds whose productive cycle covers several 
 decades, (3) marine animals, and (4) land animals. 
 
 Entry into, or exit from, the production of annual oilseeds, such as 
 soybeans, peanuts, and rapeseed, is relatively easy in most foreign 
 countries. Little specialized equipment is required to produce most 
 annuals in most countries where the animal-drawn plow or the hoe is 
 the chief instrument of cultivation. Even in those countries, including 
 the United States, where agricultural production is highly mecha- 
 nized, the stock of existing equipment is readily adaptable to producing 
 annuals. Climatic and soil conditions impose a more severe limitation 
 because some oilseeds are not adapted to wide variations. North- 
 western Europe, for example, is climatically adapted only to the pro- 
 duction of rapeseed. Peanuts require a sandy-loam soil and a relatively 
 long growing season. Other oilseeds, especially soybeans and sunflower 
 seed, are adaptable to widely varying conditions. 
 
 Changes in production of perennial tree-crop oilseeds are less easily 
 accomplished. Coconut and palm trees require approximately seven 
 years to reach the producing stage, and they continue to produce 
 for several decades. Olive trees require about 15 years to reach ma- 
 turity and frequently continue to produce for several hundred years. 
 Raising these perennials to maturity requires a considerable capital 
 investment, which is in effect a partial prepayment of future costs of 
 production. Once a grove is brought to maturity, yearly production 
 costs are relatively minor compared with those of annual oilseeds. 
 Once a grove has been established, considerable cost would be involved 
 in removing the trees to use the land for producing alternative crops. 
 
 Palm and palm kernel oils are produced largely from native groves, 
 both tended and untended. These groves are initially in undeveloped 
 areas, and much capital is usually required to develop a transportation 
 system for transporting the oil. Other major costs include process- 
 ing equipment, educating local laborers in production methods, and 
 furnishing laborers with living facilities. Because of the large fixed 
 investments in palm and palm kernel oil production, changes in supply 
 in response to price changes can be expected to be relatively slow. 
 
 This is also usually true of marine oils because highly specialized 
 equipment with limited alternative uses is required. Whale and fish 
 oils are the important marine oils. The production of whale oil is 
 controlled by convention which in postwar years has usually limited 
 the catch to around 14,500 blue whale units. 1 Alternative uses for the 
 whaling fleets are relatively limited, and future production may be 
 expected to equal the allowable catch, even with relatively low whale- 
 oil prices, at least until the existing capital in the form of ships 
 and killer boats begins to wear out. The production of fish oil largely 
 
 1 Starting with the 1959-60 whaling season, several member countries with- 
 drew from this convention. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 47 
 
 depends on the fish- food industry and the demand for fish meals. 
 Because fish oil is largely a byproduct of the fish-food industry, and 
 because there is a strong demand for fish meals as an ingredient of 
 poultry feeds, combined with limited alternative uses for fishing boats, 
 fish oil production in the future may be less affected by price than will 
 soybean, peanut, or sesame seed oil, for example. 
 
 The major land-animal fats are butter, lard, tallow, and grease. 
 Excepting butter, land-animal fats are strictly byproducts of the meat 
 industry, and price has relatively little effect on production. With 
 increasing incomes in the world's major meat-consuming countries, the 
 demand for meat has increased rapidly, causing relatively rapid in- 
 creases in the production of fats. Butter production in numerous 
 countries is affected by a variety of price-supporting measures, and 
 future production will probably be more affected by such measures and 
 by marketing arrangements than by free market prices. 
 
 Long-Term Trends in Production 
 
 Production of fats and oils in the major producing countries has 
 mainly followed an upward trend from prewar through 1958, due to 
 several economic reasons. While prices received for output and input 
 costs determine profitability, other factors frequently influence both 
 prices and costs. The most important are technological developments 
 and institutional arrangements. Technological advances relating to 
 cultural practices, fertilizers, seed varieties, the use of high-protein 
 supplements in animal rations, etc., have greatly affected production. 
 Important institutional factors affecting prices and costs include agri- 
 cultural price-supporting measures, liberalized restrictions on mar- 
 garine, export subsidies, import quotas, and production subsidies. In 
 other instances, centrally planned socialistic societies have increased 
 production without reference to market prices and costs. 
 
 Trends in major producing countries. From 1934-38 to 1954- 
 58, world production increased 17.6 billion pounds, or 42 percent 
 (Table 8). Over half of this increase was due to a rapid wartime 
 and postwar expansion in the United States and the Union of Soviet 
 Socialist Republics. For the United States, the production increase 
 was spread over both the war and postwar years. In the USSR, pro- 
 duction actually decreased during the war, but increased rapidly 
 during the postwar years, particularly after 1955, following the 
 plowing-up of virgin lands east of the Urals in Siberia and Kazakh- 
 stan. By the end of 1956, 88 million acres had been broken and 
 additional increases were planned. 1 
 
 Other major production increases occurred in Argentina, Nigeria, 
 and the Philippines. These three countries accounted for over one- 
 
 1 United Nations. Economic Survey for Europe, p. 11. 1956. 
 
IS 
 
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50 BULLETIN No. 674 [Augrtst, 
 
 fifth of the total increase and, together with the United States and 
 the USSR, accounted for three-fourths of the increase from 1934- 
 38 to 1954-58. Production declined moderately in Indonesia, North 
 Africa, and the Antarctic Ocean (whale oil) during this period. 
 
 In the United States, heavy wartime demand for oils following the 
 cut-off of imports from Asia, and increased demand for oilseeds were 
 chief causes of the rapid production increase. Other causes were the 
 postwar emphasis on the value of high-protein supplements, and 
 acreage restrictions for designated basic crops. In the USSR, pro- 
 duction increases resulted from governmental decisions to increase the 
 allocation of productive resources to the production of fats and oils, 
 including almost a threefold increase in butter production. 1 The ex- 
 pansion in butter production was probably encouraged by a shortage of 
 equipment for producing high-quality margarine. In Argentina, a 
 strong domestic and foreign demand for sunflower seed oil, combined 
 with a relatively weak demand for linseed oil due, in part, to in- 
 creased production in the United States and substitution of synthetic 
 paints and tall oil in paints encouraged the production of sunflower 
 seed. In Nigeria, increased availability of transport, improved cultural 
 practices, and relatively high prices encouraged production of peanuts. 
 Philippine production was stimulated by increased production of copra 
 resulting from intensified harvesting, new plantings, and several years 
 of unusually favorable weather. 
 
 Production increases in other countries have been moderate and 
 have failed to keep up with population growth. Per capita production 
 for the remaining countries (excluding Argentina, Nigeria, the Phil- 
 ippines, the United States, and the USSR) during 1934-38 amounted 
 to 17.1 pounds, compared with only 15.6 pounds for 1954-58, a decline 
 of 9 percent. World per capita production, excluding only the United 
 States, was virtually unchanged during 1934-38 and 1954-58. 
 
 Regional differences in factors affecting production. The produc- 
 tion of food and soap fats and oils in the relatively high-income 
 countries of North America, northwestern Europe, and Oceania differs 
 from production in the rest of the world in several important ways. 
 In the first-named group of countries, fats and oils are byproducts of 
 the animal products industry to a greater extent than in the second 
 group of countries, where fats and oils are largely of vegetable origin. 
 Also, vegetable oilseeds produced in the first group are almost exclu- 
 sively annuals, while in the second group a high proportion of the 
 production is from perennials. In the second group, the perennials, 
 as well as most of the more important annuals, have a higher oil 
 content than do the oilseeds produced in the first group. As a result, 
 changes in the price of fats and oils will affect the price of oilseeds 
 
 1 Milk Production in the Soviet Union. U. S. Dept. Agr., For. Agr. Ser., 
 May, 1959, p. 6. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 51 
 
 produced in the second group to a greater extent than in the first. 
 One major difference between the two groups of countries is that, 
 while both groups support agricultural prices in general, production 
 controls are of only minor importance, with the notable exception of 
 the United States. 1 In those foreign countries where production con- 
 trols are applied, the purpose is largely to increase the production of 
 other commodities that might otherwise have to be imported, or to 
 increase the production of export crops. 
 
 Minimum prices are guaranteed by most foreign governments in 
 order to increase production, making the country more nearly self- 
 sufficient in food and fiber production, or to increase exports to earn 
 foreign exchange. Countries that are net importers of food and fiber 
 products, such as most countries of western Europe, are able to avoid 
 accumulating surpluses resulting from moderate production increases 
 because they are normally net importers. Most exporting countries 
 with internal price supports above international levels (at official rates 
 of exchange) generally subsidize exports. 
 
 Comparatively underdeveloped countries with internal price sup- 
 ports on fats, oils, and oilseeds aimed at increasing production and 
 export earnings, are especially vulnerable to price competition in 
 international markets because they do not have a sufficiently well- 
 developed industrial base to furnish the required tax revenue for sup- 
 porting wide-scale export subsidization of agricultural commodities. 
 Reductions in the price of fats and oils relative to prices of other 
 agricultural commodities tend to shift the use of resources from 
 production of fats and oils to other commodities, particularly in under- 
 developed countries that depend heavily on agricultural exports for 
 foreign exchange earnings to pay for imports of manufactures and 
 capital goods for development programs. 
 
 1 The major noncommunistic agricultural producers, with commodities subject 
 to governmental production controls in 1957 were: Canada (none); the I'nitcd 
 Kingdom (none); Western Germany (tobacco, hops, sugar beets); The Nether- 
 lands (eggs); France (tobacco); Belgium (none); Denmark (sugar beets, po- 
 tatoes); Sweden (none); Switzerland (coarse grains, butter, eggs); Austria 
 (none); Italy (sugar beets, tobacco, rice); Spain (rice, sugar beets, tobacco, 
 wine) ; Argentina (none) ; Brazil (none) ; Chile (none) ; Colombia (none) ; 
 Cuba (sugar cane, potatoes); Guatemala (none); Mexico (none); Peru (none); 
 Venezuela (sugarcane); Japan (tobacco); Philippines (none); Indonesia (none); 
 Thailand (none); Burma (none); India (none); Pakistan (jute); Australia 
 (none); New Zealand (none); Turkey (tobacco, rice, sugar beets, poppyseed); 
 Iran (none); Iraq (tobacco, cotton); Egypt (cotton); French West and Equa- 
 torial Africa (none); British West Africa (none); British East Africa (hogs); 
 Federation of Rhodesia and Nyasaland (none); Union of South Africa (none). 
 The communistic countries control the production of certain crops, apparently to 
 increase the production of other crops. See "Agricultural Policies of Foreign 
 Governments," U. S. Dept. Agr., For. Agr. Ser., Agr. Handbook No. 132, pp. 1- 
 141. 1957. 
 
52 BULLETIN No. 674 [August, 
 
 Price affects production of food fats and oils outside the United 
 States more than it affects domestic production because foreign food 
 and soap fats and oils are, to a large extent, produced from oilseeds 
 with a much higher oil content in relation to the other joint products. 
 During the calendar year 1957, for example, approximately 75 percent 
 of extra-United States production was from oil-bearing materials of 
 which the fat content accounted for 65 to nearly 100 percent of the 
 value of the joint products. On the other hand, 55 percent of produc- 
 tion in the United States during the 1957-58 marketing year was from 
 oil-bearing materials of which the fat content accounted for less than 
 15 percent of the total value of the joint products. Excluding butter 
 production (a residual use for milk not eligible for sale at fluid-milk 
 prices), about 90 percent of fat and oil production is from materials 
 of which the fat content accounts for less than 55 percent of the total 
 value of the joint products. 
 
 Trends in Production of Individual Fats and Oils 
 
 Total production of fats and oils during any given period depends 
 not only on the production of fat-bearing materials, but also on the 
 proportion of available fat-bearing materials processed for the produc- 
 tion of separated fats and oils, on the fat or oil content of the mate- 
 rials, on the proportion of fat or oil obtained in the extraction process, 
 and on the quantity of fat-bearing materials available from stocks. 
 
 The proportion of fat-bearing materials processed varies consider- 
 ably among different countries, especially among relatively low-income 1 
 countries whose oilseeds are either exported or largely consumed 
 whole. In such countries, oil-bearing materials consumed whole, with- 
 out separation of the fat or oil, have a high use value because of the 
 high protein content of the fat-bearing materials. In the relatively 
 high-income countries the protein fraction is primarily fed to animals, 
 from which these countries supply a large part of their protein needs. 
 Because animal products are a relatively expensive protein source, low- 
 income countries depend on cheaper sources, such as oilseeds, the less 
 desirable cuts of meat, pulses, and grains. 
 
 The more important fat-bearing materials consumed without ex- 
 traction of the fat or oil include meat products such as beef suet and 
 pork fat, peanuts, soybeans, sesame seed, and coconuts. Considerably 
 more animal fats are consumed without being processed into tallow or 
 grease in the major meat-producing countries of western Europe (Bel- 
 
 1 The terms "low-income," "underdeveloped," and "lesser developed" countries 
 are incapable of definition for several reasons, the most obvious being that many 
 foreign exchange rates are set at artificial levels. In this study these terms are 
 used interchangeably and are applied to the countries of Asia (excluding Japan), 
 Africa, Latin America, and minor Pacific islands. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 53 
 
 gium, Denmark, France, West Germany, Italy, The Netherlands, 
 Sweden, the United Kingdom), compared with the United States. 
 These European countries produce only about three or four pounds of 
 tallow and grease for every 100 pounds of meat. 1 The United States 
 is the largest producer of tallow and grease, producing slightly over 
 half of the world's total for the three years ending in 1958 2 from a 
 total meat production that is slightly more than one- fourth of the 
 world total. The United States usually produces about 12 pounds of 
 tallow and grease per 100 pounds of meat, followed by Australia and 
 Argentina with 11 and 6 pounds per 100 pounds of meat, respectively. 
 If the rest of the world produced as much tallow and grease per 100 
 pounds of meat as does the United States, average annual production 
 for the three years ending in 1958 would have been about 85 percent, 
 or about 5,500 million pounds, greater. 3 
 
 Table 9 shows the proportion of the major oilseeds processed for 
 their oils and meals, both prewar and 1948-55. There is much 
 variation among different oilseeds and also among countries for a given 
 oilseed, but for oilseeds as a whole, there is no discernible trend 
 between the two periods in the proportions crushed. 
 
 Peanuts are one of the more important oilseeds of which a sub- 
 stantial proportion of production is consumed without the removal 
 of the oil. During the middle 1950's, only about 59 percent of pro- 
 duction was crushed. Allowing for seed and waste, the average annual 
 oil equivalent of peanuts consumed whole during 1954-58 was approxi- 
 mately 1,400 million pounds. 4 
 
 About 73 percent of the world production of soybeans was crushed, 
 after allowance for seed use. During 1954-58, the average annual 
 oil equivalent of soybeans consumed whole was about 1,500 million 
 pounds. 
 
 Sesame seed is widely used in food products in Asia, Africa, and 
 the Middle East. After allowance for seed requirements, about 20 
 percent of the production is utilized without removal of the oil. 
 During 1954-58 the oil equivalent of sesame seed consumed whole 
 was about 250 million pounds annually. 
 
 Cottonseed is widely used as cattle feed and fertilizer in India and 
 China. After deducting seed requirements, the oil equivalent of cotton- 
 seed not crushed was about 800 million pounds annually, for the world, 
 during 1954-58. In India the proportion of cottonseed crushed 
 increased from about 1 percent prewar to 13 percent in 1956. 5 The 
 
 1 Foreign Agriculture Circulars FLM 7-58 and FLM 12-58. U. S. Dept. Agr., 
 For. Agr. Ser. 1958. 
 
 * Foreign Agriculture Circular FLM 12-58, p. 9. U. S. Dept. Agr., For. Agr. 
 Ser. 1958. 
 
 * Estimates for extra-United States production of lard are not available be- 
 cause many countries do not differentiate between lard and unrendered pork fat. 
 
 4 See Table 10 for production of individual separated fats and oils. 
 
 "Foreign Crops and Markets. 72:303. U. S. Dept. Agr., For. Agr. Ser. 1956. 
 
54 
 
 BULLETIN No. 674 
 
 [August, 
 
 Table 9. Percentage of Crop of Major Ex- United States Oilseeds 
 
 Processed for Edible Oils and Percentage Yield of Oil, 
 
 Prewar and 1948-55 Average 
 
 
 
 Percent 
 
 crop 
 
 Percent 
 
 Oilseed 
 
 Country 
 
 processed 
 
 for oil 
 
 oil 
 
 yield 
 
 Pre- 
 
 1948- 
 
 Pre- 
 
 1948- 
 
 
 
 war* 
 
 55 
 
 war" 
 
 55 
 
 Copra b 
 
 All countries 
 
 . 100 
 
 100 
 
 63.0 
 
 64.0 
 
 Cottonseed 
 
 India 
 
 1 
 
 5 
 
 15.5 
 
 13.0 
 
 
 Pakistan 
 
 1 
 
 60 
 
 15.5 
 
 15.5 
 
 
 China 
 
 , 25 
 
 25 
 
 15.5 
 
 15.5 
 
 
 Egypt 
 
 80 
 
 80 
 
 15.5 
 
 15.5 
 
 
 Brazil 
 
 65 
 
 65 
 
 15.5 
 
 15.5 
 
 
 Argentina 
 
 90 
 
 90 
 
 15.5 
 
 15.5 
 
 
 Europe 
 
 90 
 
 90 
 
 15.5 
 
 15.5 
 
 
 Uganda 
 
 . 75 
 
 80 
 
 15.5 
 
 15.5 
 
 
 All other 
 
 . 75 
 
 75 
 
 15.5 
 
 15.5 
 
 Peanuts 
 
 Argentina 
 
 80 
 
 80 
 
 30.0 
 
 30.0 
 
 (in shell) 
 
 Brazil 
 
 . 80 
 
 80 
 
 30.0 
 
 30.0 
 
 
 China 
 
 . 50 
 
 50 
 
 30.0 
 
 30.0 
 
 
 French West Africa 
 
 . 75 
 
 75 
 
 30.0 
 
 30.0 
 
 
 Gambia 
 
 . 90 
 
 90 
 
 30.0 
 
 30.0 
 
 
 Indonesia 
 
 . 20 
 
 20 
 
 30.0 
 
 30.0 
 
 
 India 
 
 , 75 
 
 75 
 
 30.0 
 
 28.0 
 
 
 Nigeria 
 
 . 75 
 
 75 
 
 30.0 
 
 30.0 
 
 
 Union of South Africa 
 
 75 
 
 75 
 
 30.0 
 
 30.0 
 
 
 All other 
 
 15 
 
 15 
 
 30.0 
 
 30.0 
 
 Palm kernels 8 
 
 All countries 
 
 . 100 
 
 100 
 
 45.0 
 
 46.0 
 
 Rapeseed 
 
 All countries 
 
 90 
 
 90 
 
 35.0 
 
 35.0 
 
 Sesame 
 
 India 
 
 80 
 
 80 
 
 40.0 
 
 40.0 
 
 
 China, including Manchuria. 
 
 , 75 
 
 80 
 
 47.0 
 
 47.0 
 
 
 Sudan 
 
 70 
 
 70 
 
 47.0 
 
 47.0 
 
 
 Mexico 
 
 95 
 
 95 
 
 47.0 
 
 47.0 
 
 
 Ethiopia 
 
 80 
 
 50 
 
 47.0 
 
 47.0 
 
 
 Turkey 
 
 33 
 
 33 
 
 47.0 
 
 47.0 
 
 
 All other Near East , 
 
 nil 
 
 nil 
 
 
 
 
 All other 
 
 80 
 
 80 
 
 47.0 
 
 47.6 
 
 Soybeans 
 
 Canada 
 
 50 
 
 92 
 
 15.5 
 
 16.0 
 
 
 China, excluding Manchuria. 
 
 , 27 
 
 27 
 
 15.5 
 
 16.0 
 
 
 Manchuria 
 
 . 81 
 
 77 
 
 15.5 
 
 16.0 
 
 
 Indonesia 
 
 15 
 
 nil 
 
 15.5 
 
 
 
 Japan 
 
 31 
 
 35 
 
 15.5 
 
 16.6 
 
 
 Korea 
 
 50 
 
 nil 
 
 15.5 
 
 
 
 All other 
 
 50 
 
 50 
 
 15.5 
 
 16.6 
 
 Sunflower seed 
 
 All countries 
 
 . 90 
 
 90 
 
 25.0 
 
 26.0 
 
 Mainly 1934-38 average. 
 
 b Excludes coconuts consumed as such and desiccated coconuts. 
 
 c Commercial production. 
 
 Source: Food and Agriculture Organization of the United Nations, Monthly Bulletin of 
 Agricultural Economics and Statistics, Vol. 5, No. 2, p. 3. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 55 
 
 Indian government has been somewhat successful in educating the 
 producer to discontinue the feeding of whole cottonseed, and to have 
 it crushed and feed only the cake or meal. There is also resistance to 
 the consumption of cottonseed oil, used primarily in hydrogenated form, 
 but consumption is increasing. A shortage of conveniently located 
 refining and hydrogenating plants also hinders utilization. Crushing 
 facilities are adequate, however, although inefficiently organized. Dur- 
 ing 1952-53 and 1953-54, for example, only 22 percent and 16 percent, 
 respectively, of the installed oilseed crushing capacity of India were 
 utilized. 1 
 
 Coconuts are one of the major oilseeds consumed whole without 
 removal of the oil. Data are incomplete, but information indicates 
 that annual direct consumption is about 800 million pounds, oil equiva- 
 lent, for India 2 and about 90 million pounds for Ceylon. 3 For Indo- 
 China, Indonesia, the Philippines, and the South Pacific islands of 
 Oceania, incomplete data on food balance sheets* indicate that direct 
 consumption totals several hundred million pounds annually, oil 
 equivalent. 
 
 Complete data are lacking on the direct consumption of oilseeds but 
 the above data indicate that the total is of considerable importance. 
 Known consumption amounts to approximately 5,000 million pounds 
 annually. In addition, foreign countries do not process so high a 
 percentage of slaughter fats as does the United States. If the foreign 
 yield of tallow and grease were as high as that in the United States, 
 an additional 5,500 million pounds would be produced. The combined 
 total of animal fats and known oilseed oil equivalent would amount to 
 close to 20 percent of world production of separated food and soap 
 fats and oils. These data exclude the oil content of many fat-bearing 
 materials, such as corn, not commonly processed for their oil content. 
 
 Trends in altering the fat content of fat-bearing materials. Two 
 
 chief trends are discernible in the major fat- or oil-producing countries. 
 The first is a tendency to use oilseed varieties with a higher oil content. 
 Much progress has been made along this line with soybeans in the 
 United States. The USSR claims an increase of 25 percent in oil 
 content of sunflower seed, its major oilseed, from 1940 to 1956. s The 
 Congo now has palms that yield more palm oil, with a consequent but 
 relatively unimportant reduction in yield of oil from palm kernels. 
 Some progress is being made in the improvement of peanut seed 
 
 'The Oils and Oilseeds Journal (Bombay, India). 10(7) :5. 
 
 2 Ministry of Food and Agriculture, Government of India, Agricultural Situa- 
 tion in India, September, 1958, p. 517. 
 
 Commonwealth Economic Committee, Vegetable Oils and Oilseeds (published 
 annually). 
 
 'Food and Agriculture Organization of the United Nations. Some Aspects 
 of the Coconut Situation. CCP 56/14, May, 1956, p. 9. 
 
 4 Ibid., Food Balance Sheets. 
 
 "London Public Ledger (London, England) May 16, 1959, p. 3. 
 
56 BULLETIN No. 674 [August, 
 
 strains in Africa. Among the producing countries there is considerable 
 interest in improving yields of copra by improving coconut strains, 1 
 a slow process because of the long life of coconut trees. 
 
 The second trend is toward the production of meat-type hogs with 
 a lower lard yield. This trend is more evident in Europe and Latin 
 America than in the United States. 
 
 Trends in the efficiency of extraction. The proportion of fat ob- 
 tained in the extraction process varies greatly among different coun- 
 tries. In the high-income countries of North America and north- 
 western Europe, the highly efficient solvent extraction method is widely 
 used, but in the low-income countries, extraction plants are generally 
 of the pressure or crushing type, which are relatively inefficient. Effi- 
 ciency of extraction is particularly important when oilseeds have a 
 relatively low oil content. For example, in the United States virtually 
 all of the oil in soybeans is extracted by the solvent method, with 
 yield amounting to as much as 11 pounds of oil per 60-pound bushel, 
 or 18.3 percent. In China, however, the common extraction rate is 
 about 12.0 percent with old-style pressure mills, leaving the meal or 
 cake with an oil content of about 8.1 percent, or 3.8 pounds. 2 On the 
 other hand, with a high-oil-content oilseed, such as copra, which con- 
 tains about 64.0 percent oil, there is less difference in yield between 
 the solvent and the pressure-type extraction methods. 
 
 Average extraction rates for the different oilseeds have been rela- 
 tively stable in the postwar period. (See Table 9.) The United States 
 has made much improvement in soybean oil extraction, but average 
 world extraction rates have increased only slightly because of the low 
 rates in underdeveloped countries. 
 
 Changes in supplies available from stocks. Information on world 
 stocks of fat-bearing materials is limited but it is known that large 
 stocks have been accumulated at times in northwestern Europe, in the 
 major olive-oil-producing countries of southern Europe and northern 
 Africa, and in the United States. Uncertain international relations, 
 such as war or the prospect of war, generally tend to encourage the 
 accumulation of stocks for national security, speculative purposes, 
 and consumer hoarding. 
 
 Long-Run Determinants of Production 
 
 In the United States, fats and oils are primarily byproducts of the 
 animal products industry, whose demand is primarily determined by 
 per capita incomes. An important secondary factor is the domestic and 
 
 1 Food and Agriculture Organization of the United Nations. Report of the 
 Second Session of the FAO Group on Coconut and Coconut Products. CCP/58/ 
 23, October, 1958, p. 6. 
 
 * In the solvent extraction process a bushel of soybeans yields about 47 pounds 
 of meal and 11 pounds of oil. 
 
1961} STRUCTURE OF SOYBEAN OIL EXPORT MARKET 57 
 
 export demand for cotton fiber, because cottonseed oil is a byproduct 
 of cotton production. The climate of northwestern Europe is unfavor- 
 able for the production of oilseeds except rapeseed, which yields a 
 low-grade oil. Here, too, production is largely determined by the 
 demand for meat. 
 
 High-protein feeds are used less extensively in the USSR than in 
 the United States and northwestern Europe. The USSR is currently 
 emphasizing the production of relatively high-oil-content oilseeds in 
 order to increase the relatively low consumption of fats and oils, 
 which amounted to about 29.0 pounds per capita during 1955-57. The 
 USSR plans, however, to increase production of animal products, 
 primarily pork, and, for the long run, it may be expected that high- 
 protein feed supplements will be more widely fed, increasing the 
 demand for oilseeds and the supply of fats and oils. 
 
 In the less developed countries the primary fat-bearing materials 
 are oilseeds produced for consumption whole, for their oil content, or 
 for export. Prices will be determined primarily by the value of the oil 
 fraction, which is relatively high in most of these oilseeds. Production 
 of fats and oils will be determined primarily by the price of oil, and 
 by the relative profitability of alternate uses of agricultural production 
 resources. 
 
 The less developed countries will encounter serious difficulties in 
 their attempts to expand production. The major problem is a serious 
 shortage of capital for the development of resources. The amount of 
 capital required varies greatly among countries. In the United States, 
 for example, agricultural machinery and transportation, marketing, 
 and processing facilities are relatively well developed, and little addi- 
 tional capital is required to expand the production of annual oilseeds. 
 In the less developed countries, such facilities are seriously inadequate, 
 and climatic and soil conditions often are such that only perennials, 
 which require large amounts of capital, can be grown. 
 
 The bulk of palm oil and palm kernel oil comes from native groves, 
 but a large amount of capital is required to build facilities for trans- 
 porting the oil. Vast native oil palm groves remain undeveloped in 
 western tropical Africa, but new groves will depend on the general 
 economic development of these areas. Some palm and palm kernel 
 oils are also produced on cultivated plantations in Sumatra and the 
 Congo, but here, too, large-scale investments would be required to 
 expand production. 
 
 A second hindrance to production expansion in the less developed 
 countries is the cost of building adequate transportation facilities. 
 Such facilities are lacking in the major producing countries of Africa 
 (Nigeria, French West Africa, Congo). Nigerian production consists 
 chiefly of peanuts, palm oil, and palm kernels. The peanut-producing 
 center near Kano, over 500 air miles inland, is inadequately served 
 
58 BULLETIN No. 674 [August, 
 
 by one rail line, and peanuts are usually held over from one marketing 
 year to the next, causing losses in quality. Palm oil rapidly deteriorates 
 in quality and must be quickly brought out of the hot interior. In 
 French West Africa, where the chief products are peanuts, palm oil, 
 and palm kernels, transportation is also generally inadequate. 
 
 In Asia the major undeveloped producing countries are India, 
 China, Indonesia, and the Philippines. In India the major fats and 
 oils are ghee (butter), peanut oil, and rapeseed oil. Ghee is consumed 
 locally and poses no transportation problems since insignificant 
 amounts are exported. Peanuts and rapeseed are produced in large 
 areas in the interior, and high costs are involved in transporting 
 oilseeds or oil to the major cities and seaports. The principal fats and 
 oils produced in China are lard, and soybean, peanut, rapeseed, cotton- 
 seed, and sesame seed oils. The bulk of these are consumed locally, 
 partly because of inadequate transportation facilities to the seaports. 
 China is planning to improve its transportation facilities. Planned 
 rail freight shipments in 1957 were double the shipments made in 
 1952, as were the combined rail, truck, and interior steamboat ship- 
 ments. 1 Historically, the only major export from China has been 
 Manchurian soybeans, both because of the transportation problem and 
 the relatively low population density. 2 The chief product of the 
 Philippines and Indonesia is copra, and since the groves are largely- 
 near seacoasts, transportation problems are relatively minor. 
 
 The native babassu palms in Brazil, if fully exploited, would 
 yield a considerable amount of oil. The total number of palms is 
 probably under 1.5 billion. It is useless to speculate on the amount of 
 oil they would produce if all the nuts were harvested and processed. 
 However, large-scale exploitation of these resources is impractical with 
 present transportation facilities, costs of extracting the oil-bearing 
 kernels, and available labor supplies. 
 
 The relative difficulty of expanding production of oils from 
 perennials is indicated by Table 10, which shows that from 1934-38 
 to 1954-58 the production of palm oils increased only 37 percent. 
 Production of annual oilseeds, on the other hand, is more easily accom- 
 plished, as shown by the 61 -percent increase during this same period. 
 Production of animal fats increased only 33 percent, largely the result 
 of relatively stable butter production. Lard and tallow and greases 
 increased 30 and 102 percent, respectively. 
 
 1 United Nations Economic Commission for Asia and the Far East. Eco- 
 nomic Survey of Asia and the Far East, 1957, p. 93. 
 
 1 Data on the present division of soybean production between China proper 
 (22 provinces) and Manchuria are not available, but before 1954 Manchuria 
 usually produced only one-third to two-fifths of total Chinese-Manchurian output. 
 (Food and Agriculture Organization of the United Nations, Yearbook of Food 
 and Agricultural Statistics, 1955, p. 80.) 
 
1961} 
 
 STRUCTURE OF SOYBEAN OIL EXPORT MARKET 
 
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60 BULLETIN No. 674 [August, 
 
 The Foreign Demand for Food and Soap Fats and Oils 
 
 The consumption of fats and oils (and of most other goods) in 
 any given market is determined by (1) consumer preferences, or 
 habits of consumption; (2) the ability of the marketing system to 
 process raw materials into high-quality products demanded by con- 
 sumers, and to make the finished products available to all potential 
 consumers; (3) per capita income; (4) distribution of income; 
 (5) price of fats and oils in relation to other goods; (6) total popula- 
 tion of the market area. 
 
 At any given time, expectations about future prices can also 
 temporarily influence the demand for goods in general. With respect 
 to fats and oils, two major instances in which expectations caused an 
 increase in demand were the Korean conflict and the Suez crisis. 
 During these two periods many processors, speculators, and con- 
 sumers, expecting future shortages and higher prices, increased their 
 purchases. The effect of such expectations is only temporary because 
 buyers will not indefinitely continue to buy in anticipation of higher 
 prices. As a rule, information concerning expectations about future 
 prices is too fragmentary to be useful in estimating the size of a given 
 market at any given time. 
 
 Over a given period, each of the six factors affecting consumption 
 is in turn affected by one or more of the remaining factors. There- 
 fore it is difficult to measure the effect of each factor on consumption 
 independent of the remaining factors over a given period. However, 
 some general observations about the interdependence of the factors 
 affecting consumption can be made. 
 
 Consumer preferences for fats and oils, as manifested by habits of 
 consumption, vary widely among peoples of different ethnological 
 backgrounds. The peoples of the world may be divided into three 
 broad groups on the basis of dietary habits. The group with a so- 
 called western cultural background has the highest per capita con- 
 sumption of fats and oils. The major countries comprising this ethnic 
 group are in North and South America, western Europe north of the 
 Mediterranean and Black Sea and west of the Urals, and Australia and 
 New Zealand. The other two ethnic divisions are Africa, south of the 
 Sahara, and the remainder of the world, including primarily the 
 peoples of Asia 1 and northern Africa. 
 
 The major differences in food habits that affect the demand for 
 fats and oils in these regions arise from methods of food preparation. 
 The peoples of western origin prepare a large share of their foods by 
 baking and frying, which use large amounts of fats. In several 
 countries, where fats and oils have been scarce because of insufficient 
 
 1 The Ural Mountains are commonly considered the dividing line between 
 Europe and Asia. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 61 
 
 income or lack of domestic production, consumption has recently 
 increased markedly due to increased income, domestic production, or 
 imports subsidized by another country (such as the United States in 
 the case of Public Law 480). 
 
 Western peoples have a high preference for baked wheat products, 
 which use large amounts of fat. A few countries, such as Brazil, 
 have had a relatively low per capita consumption of wheat flour for 
 several centuries because wheat products are regarded as luxuries, but 
 the preference still exists. Additional amounts of fat are used as a 
 spread on breads. In the United States, nearly half of the fats and 
 oils consumed are used in connection with wheat products. Peoples 
 with a western heritage are also at least acquainted with solid fats as 
 opposed to liquid oils, and the most important consuming countries 
 characteristically prefer solid fats. 
 
 The peoples of Asiatic origin prefer foods boiled and steamed, 
 and, to a limited extent, roasted. Fried foods are of minor importance, 
 partly because per capita meat consumption is generally very low. 
 Meats are usually roasted, but frying is used in areas where fats and 
 oils are relatively abundant. These peoples also consume a relatively 
 high amount of rice and root crops, such as sweet potatoes and 
 cassava, excepting northern China, where the basic dietary staples are 
 wheat and millets. 
 
 Food habits of the peoples south of the Sahara vary widely and 
 are changing rapidly where western culture is being introduced. Foods 
 are commonly prepared by boiling, and root crops are the most impor- 
 tant food source in many areas. Meat consumption is very low. 
 
 The diet of a given country consists primarily of the foods it pro- 
 duces or, in important importing countries like England, of the foods 
 produced before the country depended largely on imports for its food 
 supply. Food preparation methods are, in turn, determined largely by 
 local conditions. Because of the limited fuel supply, the people of 
 Asia and northern Africa commonly cook their food by boiling or 
 steaming, methods which use less heat than baking in small crude 
 ovens. Most African peoples south of the Sahara have ample fuel 
 supplies, but baking technology has been deficient. Western peoples 
 have had more ample fuel supplies. 
 
 The majority of Asian and African peoples prefer liquid oils as a 
 result of an historically low per capita consumption of animal fats 
 due to population pressure upon available agricultural resources. Ani- 
 mal fats are also subject to rapid deterioration in the warmer parts 
 of the temperate and torrid zones. Liquid vegetable oils not only are 
 less subject to deterioration but require fewer agricultural resources to 
 produce. 
 
 Transplanted peoples, such as those in North and South America, 
 Australia, and New Zealand, commonly retain the food habits de- 
 
62 BULLETIN No. 674 [August, 
 
 veloped in their mother countries. Where the agricultural resources 
 in the new country support the production of foods consumed in the 
 mother country only at relatively high cost, new dietary habits are 
 formed. The original food habits, however, linger to some extent, 
 especially among the wealthier classes. The poorer classes commonly 
 reserve the use of traditional foods for special occasions, but with 
 increased income or sizable price reductions, they tend to emulate the 
 consumption habits of the higher income classes. 
 
 Completeness of the marketing system. The forms in which fats 
 and oils are consumed depend largely on the marketing system. In the 
 relatively high-income countries of the western world, liquid oils are 
 commonly hardened by the hydrogenation process to resemble the 
 animal fats for which they are substitutes. Some hydrogenated fats, 
 particularly margarine, must be maintained at relatively cool temper- 
 atures to avoid deterioration, but refrigeration facilities are adequate 
 to prevent quality loss. 
 
 In the warm climates of Asia and of Africa south of the Sahara, 
 the system for marketing solid fats is inadequate in several important 
 respects. Equipment is not available for processing vegetable oils into 
 forms suitable for high-quality plastic fats. Refrigeration is not avail- 
 able to prevent melting and deterioration. Soft candies, ice cream, 
 mellorine, etc., cannot be widely produced or marketed in the unde- 
 veloped countries of the world. Home freezers and refrigerators and 
 ice are not readily available and refrigerated transportation and retail 
 storage facilities are lacking. 
 
 In most countries of southern Europe, Africa, and Asia, including 
 India (where butter is liquefied and converted to ghee), fats and oils 
 are commonly consumed in liquid form but the marketing systems are 
 generally inadequate for even such products. Most liquid oils are sub- 
 ject to deterioration in warm climates as a result of autoxidation and 
 thermal oxidation and polymerization. Oilseeds also are subject to 
 deterioration in warm climates, and transportation and marketing 
 facilities in many of these countries are inadequate for making even 
 relatively unprocessed fats and oils readily available to all consumers. 
 
 Per capita income. The primary determinant of demand for fats 
 and oils appears to be per capita income. The influence of income is 
 not only direct, but also indirect through its influence on several other 
 determinants of consumption. Tastes and preferences, for example, 
 may be changed by increased income as consumers upgrade their diets. 
 The completeness and proficiency of the marketing system are also 
 largely determined by per capita income. Relatively high-income 
 countries generally have an efficient, complete marketing system able 
 to supply all consumers with the commodities they demand. In addi- 
 tion, home-storage facilities for perishable commodities are generally 
 available. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 63 
 
 Distribution of income. As a broad generalization, national incomes 
 are less evenly distributed in Asia and Africa than in the other more 
 populous countries of the world. With the notable exception of Japan, 
 the countries of Asia and Africa do not have an important middle- 
 income group. Household surveys indicate that, depending on food 
 habits, per capita consumption of fats and oils in a given country tends 
 to increase as incomes increase, up to a certain point, after which it 
 levels off, and in some cases even tends to decline. This indicates that 
 more evenly distributed income would tend to increase the per capita 
 consumption of fats and oils. Distribution of income is closely asso- 
 ciated with level of income, the more wealthy countries commonly 
 having a more even distribution than the less wealthy. 
 
 Relative prices. In terms of caloric content, fats and oils are rela- 
 tively inexpensive sources of nutrition in the relatively high-income 
 countries, and relatively expensive sources in the low-income countries. 
 This difference arises largely from differences in diet. In the high- 
 income countries, relatively expensive items of food, such as meats, 
 fruits, and fresh vegetables, figure prominently in consumers' budgets. 
 In the low-income countries, relatively inexpensive foods such as root 
 crops and cereals are of primary importance. 
 
 In the high-income countries, increased expenditures for food with 
 increased incomes frequently offset increased marketing charges in 
 the form of services such as "convenience" goods, or as higher profit 
 margins and higher labor and other costs. With higher incomes, in- 
 creased food expenditures, and higher marketing margins, the price 
 of unprocessed fats and oils relative to prices of other goods becomes 
 less important in determining consumption because cost of the un- 
 processed fats and oils declines in relation to cost of the finished 
 product. In the relatively low-income countries of Asia and Africa, 
 where marketing charges make up a smaller proportion of the total 
 retail cost of fats and oils, consumption is normally more responsive 
 to price. In the United States, marketing margins for soybean oil in 
 margarine and shortening amount to about 70 percent of the retail 
 price, compared with 45 to 55 percent in the primary consuming 
 countries of northwestern Europe. Marketing margins for liquid 
 vegetable oils in southern Europe, Asia, and Africa vary considerably, 
 but generally amount to 15 to 40 percent of the retail price. 
 
 Importance of total population. The number of consumers in a 
 given market is obviously one of the major determinants of the 
 capacity of the market to consume fats and oils. But the number of 
 consumers as such exerts its influence only by means of the other 
 determinants of market size. 
 
 Demand for fats and oils as soap ingredients. During the middle 
 1950's, about 20 percent of fats and oils entering international trade 
 
64 BULLETIN No. 674 [August, 
 
 was used as soap ingredients, 1 compared with about 11 percent by 
 1958. Use of fats and oils as soap ingredients has declined during the 
 postwar years in almost all industrially advanced countries due to 
 substitution of synthetic detergents for soaps. Advances in chemistry 
 have made possible the limited use of fats and oils themselves in pro- 
 ducing synthetic detergents. Fats and oils have over three times as 
 much cleansing power when used in producing synthetic detergents 
 as when converted to soaps. 
 
 Information on production in the less industrially and technically 
 developed countries is scanty, but in countries for which data are 
 available 2 the production of fat-based soaps is following an upward 
 trend. One of the most important reasons is higher income, resulting 
 in higher standards of living and increased demand for soap. This can 
 most readily be satisfied by increasing the production of fat-based 
 soaps, because these countries do not have the equipment or the 
 petroleum resources for the production of synthetic detergents. Pro- 
 duction of fat-based soaps is relatively simple, and the essential raw 
 materials are domestically obtainable in many countries. 
 
 World Consumption of Food and Soap Fats and Oils 
 
 From prewar (1934-38) to 1955-57, world consumption of food 
 and soap fats and oils increased, but only about as much as popu- 
 lation. Per capita consumption was probably a little higher during 
 1955-57 than prewar (Table 11), but the increase shown may be 
 largely due to differences in statistical reporting procedures. The only 
 two regions shown with a sizable per capita increase were Latin 
 America and the USSR, where the peoples have western habits, 
 particularly in the use and consumption of food and soap fats and oils. 
 
 In the remainder of the world, per capita consumption has been 
 relatively stable. Per capita consumption of fats and oils as food 
 increased slightly in western Europe and Asia (excluding China), 
 probably decreased in eastern Europe and China, and remained essen- 
 tially unchanged in Africa. 
 
 The relatively undeveloped countries of Asia, Africa, and South 
 America have tried to increase agricultural production in order to 
 improve national nutrition and provide exports with which to earn 
 foreign exchange for buying equipment required in industrial develop- 
 ment. Production has increased in these countries but, as Table 11 
 
 1 Economic and Social Council of the United Nations. Studies on Fluctuations 
 in Commodity Prices and Volume of Trade, Fats and Oils. First Report, 1956, 
 pp. 20-21. 
 
 'Ceylon, India, New Zealand, South Africa, Malaya, Algeria, Argentina, 
 Austria, the Congo, Mexico, Mozambique, Poland, Portugal, and Venezuela. (See 
 Commonwealth Economic Committee, "Vegetable Oils and Oilseeds," 1958, p. 195.) 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 65 
 
 Table 11. Per Capita and Total Consumption of Food 
 
 and Soap Fats and Oils, by Geographical or Political 
 
 Division, Averages, 1934-1938 and 1955-1957* 
 
 Region 
 
 Per capita 
 
 Total 
 
 1934-38 
 
 1955-57 
 
 1934-38 
 
 1955-57 
 
 Western Europe 
 
 (pou 
 . . 47 8 
 
 nds) 
 50.9 
 60.2 
 22.9 
 11.5 
 10.4 
 43.9 
 
 24.0 
 
 29.0 
 26.0 
 9.0 
 21.4 
 
 (billion 
 13.2 
 8.4 
 2.0 
 1.8 
 5.7 
 0.4 
 
 31.5 
 
 3.9 
 2.7 
 5.5 
 43.6 
 
 pounds) 
 16.1 
 11.2 
 4.2 
 2.6 
 9.3 
 0.7 
 
 44.1 
 
 6.2 
 2.5 
 5.6 
 58.4 
 
 North America 
 
 . 59 7 
 
 Latin America 
 
 . . 15 7 
 
 Africa , 
 
 . 11.0 
 
 Asia b 
 
 8.6 
 
 Oceania 
 
 . 40 4 
 
 Total (excluding USSR, eastern 
 Europe, and China) 
 
 . 22 7 
 
 USSR 
 
 . 20 8 
 
 Eastern Europe 6 
 
 . . 28.0 
 
 China 
 
 . 10.0 
 
 World total 
 
 . 20.6 
 
 
 
 No allowance made for changes in stocks. 
 
 b Excludes China and Asiatic USSR. 
 
 Approximate estimates based on incomplete data. 
 
 Sources: Food and Agriculture Organization of the United Nations, Monthly Bulletin 
 of Agricultural Economics and Statistics, Vol. 8, No. 2; Eric Berg, Estimated World Produc- 
 tion of Fats and Oils, Prewar Average and Annually, 1946-56, >Vith Special Reference to 
 Some Factors Affecting the Demand for United States Soybean Oil in International Markets, 
 College of Agriculture, University of Illinois, July, 1958 (mimeo). 
 
 shows, increases in fats and oils have been taken up by a larger 
 population. Per capita consumption has remained relatively stable 
 except in South America, where increased sunflower seed oil con- 
 sumption in Argentina was substituted for linseed oil. 
 
 The relatively stable consumption in western Europe and North 
 America is particularly significant because it indicates that per capita 
 consumption of fats and oils in these regions has probably reached an 
 optimum level. A change to increased use of such foods as potato 
 chips and soft candies would tend to increase consumption of fats and 
 oils, but greater use of fruits and vegetables would decrease consump- 
 tion. For the less developed countries, however, increased per capita 
 income would probably greatly increase the demand for fats and oils 
 because of probable improvement in the marketing system, and 
 increased demand for foods requiring fats. 
 
 The country with the largest increase in per capita consumption 
 from prewar to 1955-57 was Argentina, with an increase of 15 to 20 
 pounds. Other countries with substantially greater postwar consump- 
 tion were Uruguay, Spain, West Germany, The Netherlands, Sweden, 
 and Yugoslavia. The reasons for these increases varied, but, in addi- 
 tion to a well-developed marketing system, all of these countries have 
 western food habits, including a preference for baked wheat products 
 and foods either baked or fried in fat. 
 
66 BULLETIN No. 674 [August, 
 
 There are marked differences in per capita consumption among 
 many underdeveloped countries, but most countries of Asia, Africa, 
 and South America have a per capita consumption of 10 to 15 pounds. 
 In general, population pressure on available agricultural resources in 
 these countries has been too acute to permit the allocation of large 
 amounts of resources to the production of fats and oils for domestic 
 consumption. An important exception is tropical Africa, where oil 
 palms grow wild in uncounted numbers and per capita consumption is 
 roughly estimated at 55 pounds. 1 
 
 PART 3. COMPETITION FOR EXPORT MARKETS 
 
 In the absence of institutional restrictions, a country's imports and 
 exports are determined by comparative costs. If a good can be im- 
 ported more cheaply than it can be produced at home, it will be 
 imported, and vice versa. However, in actual practice, institutional 
 restrictions, such as import and export controls, largely determine what 
 goods are imported and exported and from which country. The divi- 
 sion of the world into various trading areas, largely because of foreign 
 exchange controls, has in many instances influenced the pattern of 
 international trade more than have comparative costs. 
 
 During the immediate post-World War II period, most countries 
 suffered from a shortage of United States dollars for foreign ex- 
 change. Exports to the United States were generally encouraged, but 
 imports from the United States were severely restricted, largely by 
 import licensing, foreign exchange controls, quotas, and tariffs. Dur- 
 ing the intervening years, many of these restrictions were partially 
 relaxed, but many remain in force, especially tariffs on imports from 
 the United States. 
 
 Other major factors that determine exports include ease of trans- 
 port and level of demand in the exporting and importing countries. 
 Fats and oils have a relatively high value on a weight and volume 
 basis and will not deteriorate over relatively long periods under 
 ordinary conditions. Also, transportation costs are relatively small in 
 relation to their value. Since demand for fats and oils in the United 
 States is relatively stable, production exceeds domestic demand at 
 world price levels. As a result, large amounts are exported, although 
 per capita income is higher in the United States than in the importing 
 countries. Soybeans, on the other hand, are bulkier and probably 
 have a more elastic demand, but large amounts are exported even to 
 such relatively low-income countries as Japan. The main reason is that 
 soybeans have a "higher order" value as human food in Japan than 
 in the United States, where the meal fraction is fed to livestock. 
 
 1 Organization for European Economic Cooperation. Oilseeds. Paris, 1957, 
 p. 28. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 67 
 
 Table 12. Net Imports ( + ) and Net Exports ( ) of Food 
 
 and Soap Fats and Oils, by Geographical or Political 
 
 Divisions, Averages, 1934-1938 and 1955-1957 
 
 Region Average Average 
 Kegl " 1934-38 1955-57 
 
 (billion pounds) 
 
 Western Europe 
 
 +64 
 
 + 7 9 
 
 North America 
 
 +15 
 
 -3 1 
 
 Latin America 
 
 nil 
 
 +0 7 
 
 Africa 
 
 -2 
 
 -2 6 
 
 Asia" 
 
 -2 9 
 
 -1 5 
 
 Oceania 
 
 -0 7 
 
 -0 9 
 
 Antarctic 15 
 
 -1 
 
 -0 7 
 
 USSR, Eastern Europe and China 
 
 -1.1 
 
 -0.1 
 
 
 
 
 Excludes China and USSR. 
 b Whale oil. 
 Estimated from residual data. 
 
 Sources: Food and Agricultural Organization of the United Nations, Monthly Bulletin 
 of Agricultural Economics and Statistics, Vol. 8, No. 2, p. 2, 5; Commercial Reports. 
 
 Major Destinations of Fats and Oils Exports 
 
 The major world export market for fats and oils is western 
 Europe. This area normally accounts for upwards of 80 percent of 
 the total net imports of food and soap fats and oils (Table 12). l 
 Prior to 1949 the United States was a net importer of food and soap 
 fats and oils. But, largely because of the rapid increase in soybean 
 oil and tallow and grease production, it has become the world's most 
 important exporter, largely replacing Asia, including China, in world 
 markets. Exports from Africa and Oceania have also increased, but 
 this increase is relatively small compared with that of North America, 
 which changed from a net importer of 1.5 billion pounds prewar to a 
 net exporter of 3.1 billion pounds by 1955-57. 
 
 The decline in the relative importance of Asia as an exporter and 
 Latin America's rise as an importer have been due primarily to rapid 
 increases in population. While population is on the increase in all 
 major geographical regions, in the United States, Africa, and Oceania 
 production has been increasing faster than population. 
 
 The import needs of western Europe increased very slowly from 
 prewar to 1955-57. The annual rate of population increase amounted 
 to only 0.8 percent, and imports increased only 1.6 pounds per capita. 
 Per capita consumption of imported and domestically produced food 
 and soap fats and oils appears to have stabilized in recent years, and 
 future import needs will probably increase by around 50 million 
 pounds, or less than 1 percent, annually. 
 
 Need for additional export markets. Estimates of future amounts 
 of food and soap fats and oils available for export in the United 
 
 1 Net imports are total imports less total exports. 
 
68 BULLETIN No. 674 [August, 
 
 States, shown on pages 35-36, are based on a relatively uniform rate 
 of population increase, and increasing agricultural productivity and 
 per capita income. If these estimates prove to be substantially correct, 
 the need for exports will steadily increase, and by 1975 over 10.0 
 billion pounds should be available for this purpose, which would be 
 over 6.0 billion pounds more than the average during the 1955-57 
 marketing years. 
 
 The increase in availability of food and soap fats and oils for 
 export from the United States differs greatly from the prospective 
 increase in demand in western Europe. If population and per capita 
 needs in western Europe continue to increase at the rates established 
 during the past 20 years, import needs in 1975 will be only 1.8 to 2.0 
 billion pounds larger than average net imports during 1955-57. Total 
 needs would amount to about 9.9 billion pounds in 1975. 
 
 On a world basis, however, the need 1 for food and soap fats and 
 oils may be expected to increase far more than United States produc- 
 tion. Assuming that population outside the United States will continue 
 to increase at the 1950-56 rate, in 1975 it will amount to about 3,600 
 million, an increase of about 1,030 million over 1956. During 1955- 
 57, average per capita consumption outside the United States amounted 
 to 18.6 pounds. An increase of 1,030 million in population would 
 require an additional production of 19.2 billion pounds, assuming a 
 constant per capita supply. The consumption of fats and oils may also 
 be expected to expand as a result of rising per capita incomes, lower 
 prices, improved marketing system, and consumer preference for more 
 fats and oils in the diet. 
 
 Finding export markets for the increased production of fats and 
 oils in the United States will mainly involve getting a greater share 
 of the large western European market, and expanding exports to the 
 less developed countries as their demand increases. 
 
 Factors in market expansion. The United States will have to com- 
 pete with many other countries for the western European market. 
 Most of the countries now exporting to western Europe are former 
 colonial dependencies that rely on agricultural exports to west 
 European countries for foreign exchange with which to buy manufac- 
 tured goods. This two-way trade may be expected to continue for 
 some time, especially in the case of Nigeria and what was formerly 
 French West Africa, the two most important suppliers for western 
 Europe, excluding the United States. In view of the generally low per 
 capita consumption in most countries that supply western Europe, and 
 the alternative uses for scarce agricultural resources, the United States 
 may be able to increase its share of the western European market. 
 
 "Need" as here used means goods that would be consumed if all markets 
 were free of institutional restrictions on consumption (tariffs, exchange controls, 
 etc.) 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 69 
 
 Factors affecting elasticity of demand. Elasticity of demand for a 
 good at retail is determined by the number of uses for the good, the 
 number of substitutes for it, and the importance of the expenditure 
 for the good in relation to consumer income. The greater the number 
 of uses, the greater will be the number of buyers entering or with- 
 drawing from the market in response to price changes, thereby tending 
 to make the demand more elastic. Also, a good for which there are 
 many substitutes will tend to have a more elastic demand than will one 
 with a smaller number of substitutes. Goods that are relatively unim- 
 portant in consumer budgets tend to have a more inelastic demand than 
 more important goods. 
 
 As a rule, the demand for necessities is generally more inelastic 
 than the demand for luxuries. In the relatively high-income countries 
 of North America, northwestern Europe, and Oceania, fats and oils 
 are used primarily as cooking aids and condiments and are generally 
 regarded as necessities. In these countries, about 80 percent of the 
 total food and soap fats and oils are consumed as food, and about 20 
 percent in soap and other industrial uses. The number of uses is 
 therefore relatively limited, tending to make the demand for them 
 inelastic. The percentage of total consumer expenditures accounted 
 for by fats and oils is also relatively small. In 1950, for example, 
 consumer expenditures 1 for fats and oils in the United States, Den- 
 mark, the United Kingdom, Norway, France, The Netherlands, and 
 Italy varied between 1.4 percent in the United States and 3.2 percent 
 in the United Kingdom and The Netherlands. In Belgium and West 
 Germany, expenditures amounted to 3.7 and 5.0 percent, respectively. 
 The proportion of consumer expenditures for fats and oils has since 
 declined in these countries, amounting to about 1 to 3 percent of total 
 consumer expenditures in 1958. 
 
 In the less developed countries of Asia, Africa, and South America, 
 several factors tend to make the demand for fats and oils more 
 elastic. In these countries fat-bearing materials have more uses be- 
 cause they are widely consumed without extraction of the fat or oil. 
 For example, during the middle 1950's, about 40 percent of available 
 supplies of peanuts, 25 percent of soybeans, and 25 percent of coconuts 
 were consumed whole. Also, in many of these countries oilseeds are 
 a major source of proteins and calories. While the number of sub- 
 stitutes for oilseeds as a protein source are limited in the less de- 
 veloped countries, a number of substitute sources for calories are 
 available. Adequate calories are of more immediate concern than 
 optimum levels of protein intake, and calories in the form of carbo- 
 hydrates are therefore relatively good substitutes for nutrition in the 
 form of proteins. Fats and oils also require a larger proportion of 
 
 1 Gilbert, Milton, et al. Comparative National Products and Price Levels. 
 Org. for European Econ. Cooperation, Paris, 1958, p. 60. 
 
70 BULLETIN No. 674 [August, 
 
 total food expenditures in the low-income countries, even though 
 per capita consumption is only about a fifth to a third as large as in 
 highly developed countries. In 1957, for example, consumer expendi- 
 tures for separated fats and oils in a number of representative coun- 
 tries 1 amounted to about 4.0 percent of total consumer expenditures. 
 These expenditures exclude the cost of oilseeds consumed whole, for 
 which data were not available, but which figure prominently in ex- 
 penditures in almost all of the relatively low-income countries. 
 
 Higher marketing margins in the high-income countries than in the 
 low-income countries tend to make the demand more elastic in the 
 latter group. In the high-income countries, fats and oils are processed 
 into such products as margarine, shortening, cooking and salad oils, 
 and salad dressings, while in the low-income countries they are largely 
 consumed without additional processing beyond extraction from the 
 fat-bearing material. In the high-income countries, where marketing 
 margins may amount to as much as 70 or 80 percent of the retail price 
 of a finished fat or oil product, a percentage change in the price of the 
 raw fat or oil will have only a slight effect on the retail price of the 
 finished product. But in the low-income countries, where marketing 
 margins seldom exceed 30 percent of the retail price, price changes at 
 the producer level have a greater effect on retail prices and on con- 
 sumption. 
 
 Market potential for oilseed consumption in the less developed 
 countries. Data on national food intake levels indicate that expansion 
 of oilseed consumption in the less developed countries will improve 
 both the quality of the diet, and in some instances, lessen calorie de- 
 ficiencies as well. There is wide difference of opinion among experts 
 as to whether large segments of the world's population suffer from 
 calorie deficiencies. Helen Farnsworth, 2 of the Food Research In- 
 stitute, Stanford University, says: "At the Food Research Institute 
 we have tried for years to obtain and study the published results of all 
 reliable dietary-health surveys, wherever made in the world. We have 
 doubtlessly missed some. But our conclusion, based on the records 
 we have seen, is that chronic marked undernutrition with associated 
 adverse health symptoms is rarely encountered as a characteristic of 
 large population groups that it is mainly to be found among widely 
 scattered, unrepresentative individuals (probably predominantly lo- 
 cated in large cities) and in small, unrepresentative, primitive groups 
 whose location, food habits, and cultural patterns are such as to make 
 most of them poor prospects for the utilization of surplus wheat." 
 
 1 Egypt, Greece, Honduras, India, Japan, Philippines, Portugal, Italy, Turkey, 
 and Union of South Africa. Cost based on October, 1957, prices. 
 
 1 Talk given at the International Wheat Surplus Utilization Conference, 
 Brookings, S. D., July, 1958. Published in International Wheat Surplus Utiliza- 
 tion Conference Proceedings, South Dakota State College, Department of Eco- 
 nomics, Brookings, S. D., p. 60. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 71 
 
 Recent studies of the U. S. Department of Agriculture, however, 
 indicate substantial deficits, both in calories and protein. 1 
 
 Estimates by the Food and Agriculture Organization of the United 
 Nations of the calorie and protein content of national food supplies 
 of selected countries are given in Table 13. These estimates are 
 subject to a wide margin of error and, as far as calories are concerned, 
 they are probably not a valid basis for determining the nutritional 
 status of these countries. There is evidence that protein intake is 
 considerably lower in the less developed countries than in the highly 
 industrialized countries, which does not necessarily mean that there 
 is a widespread protein deficiency in the less developed countries. It 
 is known, however, that there is a high incidence of kwashiorkor 
 (protein malnutrition) among children in tropical Africa and in parts 
 of Latin America. 2 Where children suffer from protein malnutrition, 
 adults are also likely to require more protein. 3 Protein and calorie 
 deficiencies are most widespread in the less developed countries of the 
 Far East. 
 
 Table 13 shows clearly that, with few exceptions, the less developed 
 countries have a low consumption of animal proteins. Relatively large 
 amounts of vegetable protein are necessary for production of animal 
 proteins such as eggs, milk, and meat. If these countries are to con- 
 sume increased amounts of animal proteins, additional resources must 
 be used for production of animal feed, or the feed or animal protein 
 products must be imported. It is highly improbable that these countries 
 will have the foreign exchange for importing animal proteins unless 
 trade restrictions are greatly liberalized. If these countries increase 
 the production of vegetable proteins, such as oilseeds, for animal feed- 
 ing, their production of fats and oils will also increase. The conclusion 
 is that the economic development of the less developed countries will 
 give rise to increased incomes, increased demand for animal products, 
 and increased production of fats and oils from an increased production 
 of oilseeds and animal fats. 
 
 For most of the less developed countries, sizable increases in animal 
 products are likely to require several decades. For the near future, 
 increased protein consumption by children and pregnant and nursing 
 women may result in increased consumption of fat-bearing materials 
 such as oilseeds. There is evidence that infants, children, and preg- 
 
 1 The World Food Deficit, a First Approximation. For. Agr. Sen, U. S. 
 Dept. Agr. 1961. 
 
 2 Food and Agriculture Organization of the United Nations. Kwashiorkor in 
 Africa. 1952. 
 
 Ibid., Syndrome Policarencial Infantil (Kwashiorkor) and Its Prevention in 
 Central America. 1954. 
 
 Ibid., Protein Malnutrition in Brazil. 
 * Farnsworth, op. cit., p. 62. 
 
72 
 
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1961] 
 
 STRUCTURE OF SOYBEAN OIL EXTORT MARKET 
 
 75 
 
 Table 15. Live Births per 1,000 Population Selected Countries, 
 1951-1955 Annual Average 
 
 Region and country 
 
 Live births 
 per 1,000 
 population 
 
 Region and country 
 
 Live births 
 per 1,000 
 population 
 
 Northwestern Europe 
 Belgium 
 
 17 
 
 North America 
 Canada 
 
 28 
 
 Denmark 
 
 18 
 
 United States 
 
 25 
 
 France 
 
 19 
 
 Latin America 
 Chile 
 
 34 
 
 Germany, West 
 
 16 
 
 
 70 
 
 
 10 
 
 Mexico 
 
 45 
 
 
 1JC 
 
 Peru 
 
 ... 36 
 
 Eastern Europe 
 Czechoslovakia .... 
 
 21 
 
 Venezuela 
 
 45 
 
 Asia 
 Ceylon 
 
 38 
 
 
 17 
 
 
 21 
 
 Formosa 
 
 ... 46 
 
 Poland 
 
 30 
 
 India 
 
 ... 25 
 
 Southern Europe 
 Austria 
 
 15 
 
 Taoan . . 
 
 22 
 
 Malaya 
 
 44 
 
 Oceania 
 Australia 
 
 23 
 
 Greece 
 
 19 
 
 Italy 
 
 18 
 
 Spain . . 
 
 20 
 
 New Zealand 
 
 ... 25 
 
 Yugoslavia 
 
 28 
 
 
 
 
 
 1948-52. 
 
 Source: Statistical Office of the United Nations, Monthly Bulletin of Statistics, Vol. 
 12, No. 12. 
 
 nant and nursing women require a higher proportion of proteins in 
 their diet than do other population groups. 1 
 
 Comparison of Tables 13 and 14 indicates that protein intake of 
 infants, children, and pregnant and nursing mothers in the less 
 developed countries is probably below recommended minimums, and 
 far below intake levels of the relatively developed countries. The 
 need for additional protein is relatively greater among mothers in the 
 less developed countries, where breast-feeding of babies is more 
 widely practiced than in the countries of northwestern Europe and 
 North America. Weaning practices vary greatly, but infants are 
 usually weaned at about two years of age. 
 
 Most of the less developed countries of Latin America and Asia 
 have much higher birth rates than do the countries of North America, 
 Europe, and Oceania. Table 15 shows that Latin America and Asia 
 tend to have the highest birth rates, while Europe has the lowest. 
 Information on African birth rates is not sufficient to estimate. The 
 higher birth rates in the less developed countries mean increased 
 protein requirements for child-bearing females because of the more 
 frequent gestation and lactation periods. 
 
 1 Protein Requirements. Food and Agr. Org., United Nations, p. 39. 1957. 
 
76 BULLETIN No. 674 [August, 
 
 Children under 20 years of age also have a higher protein require- 
 ment than do adults (Table 14). Most countries of western and 
 
 eastern Europe, North America, and Oceania have a greater pro- 
 portion of their populations over age 20 than do the less developed 
 countries. (See Table 16.) 
 
 Table 16. Percent of Total Population Less Than 20 Years of Age, 
 Selected Countries, Specified Years 
 
 Percent of total 
 Year population under 20 
 
 years of age 
 
 Western Europe 
 
 Austria 1956 30 
 
 Belgium 1955 28 
 
 Germany, West 1955 30 
 
 France 1956 31 
 
 Greece 1951 39 
 
 Portugal 1956 37 
 
 Sweden 1956 30 
 
 Switzerland 1955 31 
 
 United Kingdom" 1956 29 
 
 Yugoslavia 1953 41 
 
 Eastern Europe 
 
 Hungary 1956 33 
 
 Poland 1956 40 
 
 Near East 
 
 Turkey 1955 50 
 
 North America 
 
 Canada 1956 40 
 
 United States 1957 37 
 
 South America 
 
 Argentina 1956 39 
 
 Colombia 1951 S3 
 
 Peru 1956 55 
 
 Asia 
 
 Burma 1954 49 
 
 Ceylon 1953 48 
 
 Formosa 1956 54 
 
 Japan 1955 43 
 
 Philippines 1956 55 
 
 Africa 
 
 Algeria b 1954 53 
 
 Belgian Congo" 1954 45 
 
 Oceania 
 
 Australia 1956 36 
 
 New Zealand 1956 39 
 
 England and Wales; excludes Scotland and Northern Ireland. 
 b ^foslem population. 
 e Native population. 
 
 Source: Statistical Office of the United Nations, Demographic Yearbook (1957), p. 
 136-149. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 77 
 
 Table 17. Essential* Amino Acid Composition (in Grams per Quart) 
 
 of Cow's Milk, Soybean Milk, and Peanut Milk 
 
 Containing 33 Grams of Protein per Quart 
 
 Grams of essential amino acids per quart 
 Ammo acid 
 
 Cow's milk Soybean milk Peanut milk 
 
 Arginine" 
 
 1.192 
 
 2.669 
 
 4.306 
 
 Histidine* 
 
 861 
 
 .956 
 
 .899 
 
 Lysine 
 
 2.484 
 
 2.271 
 
 1.192 
 
 Trytophane 
 
 497 
 
 .530 
 
 .464 
 
 Phenylalanine 
 
 1.689 
 
 1.845 
 
 1.893 
 
 Methionine 
 
 795 
 
 .530 
 
 .369 
 
 Threonine 
 
 1.424 
 
 1.486 
 
 .946 
 
 Leucine 
 
 3.250 
 
 2.773 
 
 2.460 
 
 Isoleucine 
 
 2.484 
 
 1.978 
 
 1.590 
 
 Valine 
 
 2.385 
 
 1.893 
 
 1.798 
 
 Total 
 
 17.061 
 
 16.931 
 
 15.917 
 
 The amino acid requirements for humans have not been definitely established. Histi- 
 dine is definitely required for growing children, but may not be necessary for adults. Experi- 
 mental data indicate that arginine may not be required by humans. See Pood and Agriculture 
 Organization of the United Nations, Protein Requirements, Nutritional Study No. 16 (1957), 
 Ch. 4. 
 
 Source: Food and Agriculture Organization of the United Nations, Kwashiorkor in 
 Africa, Nutritional Study No. 8 (1952), p. 66. 
 
 Recent studies of post-weaning nutritional problems in relatively 
 low-income countries show that animal milk supplies are generally 
 inadequate and, in many cases, unsanitary. Since prepared infant 
 foods are not generally available, the possibility of using soybean or 
 peanut milk as a supplemental protein source has been studied. Soy- 
 bean and peanut milks are comparable with animal milk in amino 
 acid content (see Table 17), but nutritional authorities disagree as to 
 the advisability of depending on these products for the chief source 
 of supplemental proteins. 1 
 
 A major drawback in expanding the use of soybeans in the produc- 
 tion of soybean milk is that special equipment is required for its 
 manufacture. Peanut milk can easily be made in the home, 2 but 
 acceptability remains a problem and additional testing will be required 
 before its value as a protein supplement for infants and young chil- 
 dren can be established. 
 
 While quality of diet in the less developed countries is low in rela- 
 tion to standards in the industrialized countries, there is little evidence 
 to indicate that (except among pregnant and nursing women, and 
 
 1 Waterlow, J. R., and Stephen, Joan M. L. Human Protein Requirements 
 and Their Fulfillment in Practice. Proceedings of a conference at Princeton 
 University, United States, 1955, pp. 157-173. 
 
 'Peanut milk is prepared by pounding 150 grams of lightly roasted peanuts 
 with one liter of water, then filtering through a cloth and boiling for 10 minutes. 
 (Kwashiorkor in Africa, p. 65. Food and Agr. Org., United Nations. 1952.) 
 
78 BULLETIN No. 674 [August, 
 
 infants and growing children) there is a serious undernutrition prob- 
 lem in most of these countries. Protein intake is considerably less 
 than in the industrialized countries, and intake of proteins of animal 
 origin is especially low. The effect of increasing protein intake will be 
 to improve the quality of the diet as well as to increase calorie intake. 
 
 Market potential for separated fats and oils exports. Given the 
 institutional arrangements governing foreign and domestic trade, the 
 market potential for food and soap fats and oils depends primarily on 
 per capita income, prices, population, and consumer preferences. The 
 other factors affecting demand, such as completeness and efficiency of 
 the marketing system, distribution of income, and availability of 
 foreign exchange, are in the long run determined primarily by per 
 capita income, which itself depends primarily on availability of pro- 
 ductive resources and their efficiency of use. 
 
 Per capita consumption in northwestern Europe, the primary im- 
 porter of food and soap fats and oils, appears to have stabilized. The 
 per capita consumption of fats and oils as food tended upward through 
 1958, but a counter tendency, the decreased use of fats and oils in 
 soap along with greater use of synthetic detergents, has partly offset 
 this increase. For the next two decades these trends appear likely to 
 continue, and the combined consumption in food and soap is likely to 
 increase less than 1 percent annually. 
 
 Feed grain prices are generally much higher in northwestern 
 Europe than in the United States. If the present expansion of mixed 
 feed production in northwestern Europe continues, the use of fats 
 and oils in mixed feeds will probably reach significant levels. For 
 northwestern Europe, total mixed feed production increased from 
 about 11 million tons in 1953 to about 19 million tons in 1958. The 
 bulk of this increase was in poultry feeds, which are best suited to 
 use of fats and oils. It is entirely possible that by 1975 up to one 
 billion pounds of fats and oils may be used in mixed feed production. 
 
 Per capita consumption in southern Europe increased rapidly from 
 the middle 1950's through 1958, partly as the result of sales under 
 United States Public Law 480 for currencies of the importing countries. 
 Incomes are also increasing in these countries, strengthening the other 
 factors of demand, such as completeness and efficiency of the market- 
 ing system, distribution of income, and availability of foreign ex- 
 change, and thereby tending to increase the demand for fats and oils. 
 
 In northwestern Europe little increase in demand can be expected 
 from strengthening of the factors of demand. In southern Europe 
 improvements in the marketing system may be expected to shift con- 
 sumer preferences from liquid oils to solid fats, such as margarine 
 and shortening, but in northwestern Europe these changes have already 
 been accomplished. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 79 
 
 For western Europe as a whole, consumption may be expected to 
 increase close to 1 percent per year, largely due to population increase 
 and possibly to increased per capita consumption. Total import re- 
 quirements for western Europe should reach about 10.0 billion pounds 
 by 1975, or 2.0 billion pounds more than during 1955-57. 
 
 Data relating to the USSR and communistic eastern European 
 countries are incomplete, but there is convincing evidence that these 
 countries are relatively important importers. Commercial reports show 
 that average net imports amounted to about 700 million pounds during 
 1956-58. About half of this amount came from noncommunistic 
 countries, and the remainder was from Communist China. During 
 this period, average net exports from Communist China amounted to 
 about 750 million pounds annually, about half of which went to the 
 USSR and eastern Europe and the remainder largely to western 
 Europe. 
 
 Both the USSR and Communist China plan to expand their pro- 
 duction of fats and oils. The USSR plans to increase its production of 
 animal products at a rapid rate; if these plans succeed, production 
 of byproduct animal fats and oils, and oils from oilseeds, chiefly 
 sunflower seed oil, will expand greatly. The Seven- Year Plan an- 
 nounced in early 1959 calls for increasing meat production 102 per- 
 cent from 1958 to 1965, and an increase of 34 percent in the production 
 of cotton fiber. This would greatly increase the production of cotton- 
 seed oil, one of the major oils produced in the USSR. Production 
 of vegetable oils under the plan is to increase 62 percent. Increased 
 production of synthetic detergents is planned, to make possible the 
 diversion of about 900 million pounds of edible fats and oils annually 
 from use as soap ingredients to consumption as food. If the planned 
 increases are only halfway achieved (which is far from a certainty), 
 the USSR will probably cease to be a net importer. 
 
 Communist China is emphasizing the production of oilseeds, par- 
 ticularly peanuts and rapeseed, with a relatively high oil content. 
 Chinese plans may be changed, but present emphasis on increasing 
 agricultural production makes it unlikely that they will become net 
 importers. On the other hand, because of low per capita consumption 
 (about 9.0 pounds), their consumption will probably expand with 
 increased production. 
 
 During the next decade or two, the United States will probably be 
 unable to export sizable amounts of fats and oils to the communistic 
 countries in Europe and Asia, even if present restrictions are relaxed. 
 It is more likely that the USSR will import less from Communist 
 China, and the latter will compete more actively in the large western 
 European markets with United States exports. 
 
 This leaves the countries of Latin America, Africa, and Asia 
 (excluding Communist China), in addition to western Europe, as 
 
80 BULLETIN No. 674 [August, 
 
 possibilities for increasing United States exports. During 1955-57, 
 average per capita consumption in these countries (excluding China 
 and western Europe) amounted to about 12 pounds. Total population 
 amounted to roughly 1.3 billion, and the rate of population increase 
 during recent years has amounted to at least 2.0 percent annually. 
 
 If consumption remains constant at about 12 pounds per capita, 
 and if the annual rate of population increase remains constant at 2 
 percent, the combined consumption for Africa, Latin America, and 
 Asia (excluding China) will gradually increase, and by 1975 an addi- 
 tional 7.3 billion pounds of fats and oils will be required. During this 
 same period, export availability from the United States is expected 
 to increase from a total of 4.5 billion pounds during 1955-57 to an 
 estimated low of 10.0 billion pounds. That would mean an increase of 
 about 6.0 billion pounds over 1955-57. 
 
 Including the additional import needs which western Europe will 
 require by 1975 (about two billion pounds), total consumption in 
 noncommunistic regions will increase about 9.3 billion pounds, which 
 would be well in excess of additional supplies expected to be available 
 from the United States by 1975. Increasing per capita incomes and 
 economic development in Africa, Latin America, and Asia (excluding 
 China) are also likely to increase per capita demands and consumption. 
 
 Major Problems in Expanding Export Markets 
 
 The salient features of the export market for fats and oils in the 
 primary importing countries of northwestern Europe are that per 
 capita consumption is relatively stable, and population is increasing 
 less than 1 percent a year. The United States can increase its share 
 in these markets only as the result of population increases, and by 
 displacing exports from other countries, especially from former 
 colonial dependencies or countries in the same currency areas as the 
 importing countries. 
 
 Increasing exports to southern Europe, Africa, Latin America, and 
 Asia (excluding China) involves many difficulties. A major one is 
 the need for changing tastes and preferences. In most of these 
 countries there is a long-established preference for liquid oils, a 
 preference largely based on climate since solid fats are subject to melt- 
 ing and rapid quality deterioration in many of these countries. 
 
 Soybean oil, one of the major oils exported from the United States, 
 is sometimes subject to rancidity in hot climates. This does not neces- 
 sarily mean, however, that such oil will be unsatisfactory because many 
 consumers, particularly in the less developed countries, are accustomed 
 to moderate amounts of rancidity. There are only a few countries 
 (primarily China and Japan) where consumers are habituated to soy- 
 
1961} STRUCTURE OF SOYBEAN OIL EXPORT MARKET 81 
 
 bean oil and it is possible that consumers accustomed to using non- 
 bland peanut or olive oil, for example, will not accept soybean oil. 
 Hydrogenation will solve the problem of flavor reversion, but getting 
 consumers to accept a new product will require time. 
 
 Animal fats such as lard and tallow will not find a ready market 
 in India because the prevalent religion discourages their use. The 
 same is true with respect to lard in the Middle East, North Africa, 
 Pakistan, India, most of Indonesia, and Israel. 
 
 The United States production of cottonseed oil is expected to in- 
 crease considerably less than soybean oil. Because cottonseed oil is 
 preferred for cooking use in the United States and northwestern 
 Europe, most of it will probably be used domestically or exported to 
 the countries of northwestern Europe, where higher per capita income 
 enables them to outbid the countries of Asia, Africa, and Latin 
 America. 
 
 Expansion of the export market for soybean oil in Asia, Africa, 
 and Latin America will also be greatly hindered by lack of equipment 
 for processing soybean oil into solid fats. Further, the marketing 
 system in most of these countries is not equipped to handle margarine, 
 soft candies, ice cream or mellorine, etc., and most households lack 
 refrigeration facilities for storing such products. 
 
 Transportation is a crucial factor in expanding the market for fats 
 and oils in the relatively undeveloped countries, where many of the 
 people live in the interior. Transportation facilities must be greatly 
 expanded to make possible exports to these regions. 
 
 Development of the marketing system, and shifts in consumer 
 preferences from liquid oils to solid fats will depend largely on 
 expanding the industrial base of the countries concerned, and increas- 
 ing productivity and per capita incomes. Expanding the export market 
 for food and soap fats and oils by industrial development programs 
 financed by the United States will be an expensive long-term propo- 
 sition. The cost would be prohibitive if the sole purpose were to 
 expand fats and oils exports. The practicability of this means must 
 therefore be determined on the basis of additional considerations. 
 Postwar development programs undertaken by most of the countries 
 themselves, assisted by capital loans, grants, and technical assistance 
 from the United States and other relatively industrialized countries, 
 have already forced per capita incomes upward. Although further 
 gains may be expected, progress is likely to be slow in most of the less 
 developed countries. But about 50 percent of the world's people live 
 in these regions (excluding communistic countries), and even a small 
 increase in per capita incomes will have a large effect on consumption 
 in relation to the expected volume of United States exports. An 
 increase of 3.0 pounds (from 12.0 to 15.0 pounds) in per capita con- 
 sumption would increase total consumption almost 4.0 billion pounds. 
 
82 BULLETIN No. 674 [August, 
 
 Competition With Other Exporting Countries 
 
 During 1955-57 the United States accounted for about 30 per- 
 cent of the world exports of food and soap fats and oils. During the 
 next decade or two, this proportion must be increased greatly if pro- 
 ducers are to receive a price in excess of the value of fats and oils as 
 poultry or swine feed (about 6 cents per pound, assuming a corn 
 price of 2 cents per pound or 112 cents per bushel). A lower price for 
 corn would further decrease the value of fats and oils as feed. 
 
 Primary markets for United States exports. The countries of north- 
 western Europe have long been primary markets for United States 
 exports of food and soap fats and oils. Prior to 1949 the United 
 States was generally a net importer of food and soap fats and oils 
 combined, but small amounts were usually exported to northwestern 
 Europe. As total exports increased during the postwar period, the 
 volume exported to these countries increased rapidly. In 1954, when 
 the United States began selling fats and oils for foreign currencies 
 under the provisions of Public Law 480, exports to southern Europe 
 increased rapidly. Exports to western Europe as a whole have been 
 maintained at a high level during recent years, amounting to almost 
 60 percent of total exports, including the oil equivalent of oilseeds, 
 during 1956-58. 
 
 The rapid increase in western Europe's gross imports during the 
 1950's through 1957 will probably be less marked in the future. Dur- 
 ing this time Europe was still recovering from the effects of the war, 
 and livestock and animal fat production did not regain prewar levels 
 until the latter part of the period. Livestock production may be 
 expected to increase as incomes increase, and in turn the production 
 of fats and oils will increase. 
 
 In this study, western Europe's import needs are estimated to 
 increase only gradually until by 1975 they will be roughly 2.0 billion 
 pounds above the average of 1955-57. It is clear that the United 
 States must get its share of this increasing market in addition to 
 developing other export markets. 
 
 Other primary markets for United States exports are Canada and 
 Japan. Exports to the other countries of noncommunistic Asia, Africa, 
 and Latin America are relatively minor, except occasionally when 
 domestic supplies in these regions are scarce as a result of short crops. 
 
 Price and the expansion of foreign markets. If United States 
 exports of food and soap fats and oils are to increase to more than 
 10.0 billion pounds (as estimated in this study) by 1975, markets in 
 Asia, Africa, and Latin America must be expanded, as well as those 
 in western Europe. 
 
 While the price elasticity of demand for food and soap fats and 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 83 
 
 oils in western Europe appears highly inelastic, prices can be effective 
 in increasing the United States' share of this market. The major 
 obstacle to overcome in increasing exports to western Europe is to 
 force a change in manufacturers' formulas in finished fats and oils 
 products. Manufacturers are reluctant to change the ingredients of 
 their products when relatively high prices for some of the major 
 ingredients appear to be only temporary, but when the commonly used 
 ingredients are relatively high-priced for long periods, substitution 
 occurs on a wide scale. A recent instance occurred during late 1958 
 and early 1959, when the price of coconut oil was relatively high in 
 relation to the price of soybean oil. At first, manufacturers were 
 reluctant to change long-established formulas by using less-expensive 
 soybean oil in .their products, because different processes would be 
 involved, and because consumer preferences had been established for 
 their products. At first the substitution of soybean oil for coconut oil 
 was rather limited, but became more widespread with evidence that 
 relatively high prices for coconut oil would persist. Now that the ease 
 and workability of substitution have been learned, it will be quicker 
 to interchange fats and oils. 
 
 A relatively low price for soybean oil in western Europe would 
 tend to keep competing exports out of this market. Slightly more than 
 two-thirds of the net imports into this region are from sources other 
 than the United States, most of them relatively low-income countries 
 in which per capita consumption is low, and fats, oils, and oilseeds are 
 expensive sources of nutrition. A lower price for fats, oils, and 
 oilseeds can be expected to increase consumption to a greater degree 
 in the low-income countries than in the higher because the factors 
 determining elasticity of demand tend to make the demand for such 
 products more elastic in the low-income countries. Increased con- 
 sumption in the countries of origin would tend to decrease their 
 exports to western European markets, enabling the United States to 
 increase its share. 
 
 The importance of relative expenditures for food in the low- and 
 high-income countries is given in Table 18 for those countries for 
 which data are available. In the relatively high-income countries of 
 northwestern Europe, North America, and Oceania, about one- fourth 
 of total consumption expenditures are for food, compared with about 
 one-half in the relatively low-income countries. In the undeveloped 
 countries, subsistence is the primary consideration, and such luxuries 
 as fats, oils, and oilseeds are often exported to obtain foreign exchange 
 with which to pay for essential manufactured goods. 
 
 Lower prices for fats, oils, and oilseeds in international markets 
 would affect the price of most oilseeds produced in the less developed 
 countries more than in the United States because most of these oil- 
 seeds contain a higher percentage of oil than oilseeds produced in the 
 
BULLETIN No. 674 
 
 [August, 
 
 Table 18. Percent of Total Private Consumer Expenditures 
 Spent for Food, Selected Countries, 1957 
 
 Region and country 
 
 Percent spent 
 for food 
 
 Region and country 
 
 Percent spent 
 for food 
 
 Northwest Europe 
 Relgium 
 
 28 
 
 Latin America 
 Chile 
 
 39 C 
 
 Denmark 
 
 27 a 
 
 Ecuador 
 
 49 b 
 
 France 
 
 35 
 
 Honduras 
 
 50 d 
 
 Netherlands 
 
 33 
 
 Panama 
 
 43 b 
 
 United Kingdom 
 
 31 
 
 Peru 
 
 39 b 
 
 South Europe 
 Austria 
 
 35 
 
 Asia 
 Ceylon 
 
 50 
 
 Italy 
 
 46 
 
 japan 
 
 51 
 
 Yugoslavia 
 
 53 b 
 
 South Korea 
 
 57 
 
 North America 
 Canada 
 
 23 
 
 Africa 
 Ghana 
 
 57 
 
 United States 
 
 24 
 
 Nigeria 
 
 71 a - e 
 
 
 
 Oceania 
 Australia . . 
 
 25 b 
 
 Includes tobacco and beverages. 
 1956. 
 
 1954. 
 > 1955. 
 
 1950. 
 
 Source: Statistical Office of the United Nations, Monthly Bulletin of Statistics, April, 
 
 1959, pp. 8-9. 
 
 United States (Table 7). A lower price for the oil fraction of high-oil 
 oilseeds would reduce the combined value of oil and meal more than 
 if the oilseeds had a lower oil content. 
 
 A lower international price for fats, oils, and oilseeds might 
 increase consumption in the less developed countries more than in the 
 high-income countries. In the low-income countries, where marketing 
 margins are relatively low, lower international prices would be largely 
 reflected back to the retail level. 
 
 In the low-income countries it would not be necessary to force the 
 cutting of production by means of relatively low prices because do- 
 mestic demand would increase with population and income growth. 
 Lower prices would, however, discourage the misallocation of produc- 
 tive resources to the production of fats and oils when they could be 
 more profitably employed in producing alternative crops. 
 
 Trends in Exports of Individual Fats and Oils 
 
 A rapidly expanding market for soybean oil has made possible 
 increased production and exports without large price declines during 
 the postwar period. From 1934-38 to 1958, world production of 
 separated soybean oil increased more than threefold, but prices fol- 
 lowed only a slight downward trend from their 1950-52 high to 1958 
 
STRUCTURE OF SOYBEAN OIL EXPORT MARKET 
 
 85 
 
 
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86 BULLETIN No. 674 [August, 
 
 (Table 19). The total volume of soybean oil exports (including oil 
 equivalent of soybeans) increased more than for any other oil. Only 
 exports of tallow and greases increased more on a percentage basis, 
 than did soybean oil (Table 20). 
 
 Table 19 shows that the percentage increase in production of soy- 
 bean oil from 1934-38 to 1958 was at least two or three times as 
 great as the increases for the other fats and oils shown, excepting 
 tallow and greases. It is striking to note that the price of soybean oil 
 remained strong in relation to the other prices, although volume of 
 production and exports of soybean oil increased more than production 
 and exports of the other fats and oils. 
 
 The relative strength of soybean oil prices was largely due to 
 demand for it as an ingredient of margarine and shortening in both 
 the United States and western Europe. 1 Table 19 shows the effect of 
 increased production of margarine and shortening on the price of 
 butter and lard. As margarine and shortening production increased, 
 largely due to availability of soybean oil as an ingredient, consumers 
 substituted these products for butter and lard. The relative weakness 
 in the price of tallow and grease was due largely to the substitution 
 of synthetic detergents for fat-based soaps in North America and 
 northwestern Europe. Exports of tallow and grease increased more, 
 on a percentage basis, than did those of any other oil, including even 
 soybean oil, but their prices were weakened by relatively low demand 
 in North America and northwestern Europe, and a large share of 
 the tallow and grease had to be exported to the low-income countries. 
 
 The rapid postwar expansion in exports of soybean oil to western 
 Europe has probably come to a halt. By the late 1950's, prewar per 
 capita levels of consumption had generally been exceeded in western 
 Europe, and domestic production in this area had regained prewar 
 levels. Further increases in the production of slaughter fats may be 
 expected as a result of the increased meat production. No further 
 gain from concessionally priced exports to western Europe under 
 Public Law 480 may be expected in view of the relatively high per 
 capita consumption and improved foreign exchange reserves. 
 
 Future increases in soybean oil exports, of the magnitude needed 
 because of the developing animal products industry in the United 
 States, must in large measure be made to the less developed countries 
 of noncommunistic Asia, Africa, and Latin America. These countries, 
 however, suffer from a chronic lack of foreign exchange. If exports to 
 them are to be greatly expanded, the United States must either relax 
 its import controls in order that these countries may be able to earn 
 
 The price of soybean oil was also greatly strengthened by exports, under 
 provisions of Public Law 480, amounting to 1.6 billion pounds from the inception 
 of the program in 1954 to March, 1959. 
 
1961] 
 
 STRUCTURE OF SOYBEAN OIL EXPORT MARKET 
 
 87 
 
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88 BULLETIN No. 674 [August, 
 
 the required foreign exchange by exporting to the United States, or 
 else the United States must subsidize exports to these countries. 
 
 Effect of subsidizing exports. One of the principal methods used 
 by the United States to increase exports to low-income countries lack- 
 ing in the necessary foreign exchange, is to sell fats and oils for the 
 foreign currency of countries that qualify under the provisions of 
 Public Law 480. Such sales result in increased exports to these 
 countries, and maintain world prices above levels that would prevail 
 if the fats and oils were sold for dollars. This encourages production 
 of fats and oils in other foreign countries, increases their exports, and 
 tends to restrict consumption in the less developed countries not 
 receiving such concessionally-priced exports. Maintaining prices at 
 higher levels than would otherwise prevail tends to restrict consump- 
 tion in northwestern Europe because manufacturers of finished fats 
 and oils products will use other oils, such as coconut, palm, palm 
 kernel, and peanut, in preference to the higher-priced soybean oil. 
 
 Lower soybean oil prices resulting from elimination of conces- 
 sionally-priced exports to selected countries, and establishment of free 
 prices or payment of a flat subsidy rate on all fats and oils exported 
 would (1) tend to lower world prices; (2) encourage the substitution 
 of soybean oil for competing fats and oils in manufacturing formulas 
 in northwestern Europe; (3) increase consumption of fats, oils, and 
 oilseeds in all less developed countries; and (4) tend to reduce produc- 
 tion in countries that compete with the United States for foreign 
 markets. 
 
 The chief advantage to be gained from eliminating concessionally- 
 priced fats and oils exports under Public Law 480 and establishing 
 a uniform subsidy or free prices would be to increase consumption of 
 fats, oils, and oilseeds in the less developed countries that do not 
 qualify for sales under the provisions of the law or which do not care 
 to buy under the provisions of Public Law 480. Lower export prices, 
 resulting from either a uniform subsidy or free prices, would also tend 
 to restrict production in other producing countries. Encouraging the 
 consumption of oilseeds in the low-income countries would also in- 
 crease the demand for soybeans and soybean meal exports from the 
 United States to northwestern Europe. 
 
 Long-Run Competitive Position of United States Exports 
 
 The United States is the only major noncommunistic country with 
 a rapidly expanding animal products industry, which produces its own 
 supply of high-protein concentrates. Because fats and oils are pro- 
 duced jointly with animal products and high-protein oilseeds, their 
 production is largely determined by the demand for animal products. 
 With increasing incomes and an increasing demand for animal prod- 
 ucts, the price received for byproduct fats and oils will tend to have 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 89 
 
 less influence on their production. The other major noncommunistic 
 countries with a rapidly expanding demand for animal products are 
 chiefly in northwestern Europe, an area generally not suited to pro- 
 ducing oilseeds except rapeseed, which yields an oil of low consumer 
 preference. 
 
 In most of the countries competing with the United States in 
 export markets, fats, oils, and oilseeds are produced primarily for 
 consumption in whole form, for export, or for their oil fraction. 1 The 
 oil content of most of their oilseeds is relatively high, and the price 
 of separated fats and oils may be expected to have a greater effect 
 on production than it does in the United States, where fats and oils 
 are byproducts of the animal products and cotton industries. 
 
 The low-income countries of noncommunistic Asia, Africa, and 
 Latin America depend much more on income from agriculture than do 
 the high-income countries of North America and northwestern Europe 
 (Table 21). In the low-income countries, a large share of the national 
 income comes from agriculture, as do the export earnings of foreign 
 exchange. With relatively low prices for fats and oils and reduced 
 profitability of production, fats and oils production may be expected 
 to decline in relation to production of alternative agricultural com- 
 modities. 
 
 Outlook for individual fats and oils. Comparison of Tables 10 and 
 20 indicates that, if postwar trends in production and exports continue, 
 future exports of food and soap fats and oils from the United States 
 must compete primarily with exports of palm and peanut oils. From 
 prewar to 1954-58, palm, coconut, and soybean oils and tallow and 
 greases 2 accounted for 83 percent of the total increase in all food and 
 soap fats and oils. During this period the volume of coconut oil 
 exports increased 334 million pounds, due in large measure to unusu- 
 ally favorable weather in the major producing countries. As a result, 
 production during 1954-58 was 1,259 million pounds greater than 
 prewar. Exports of coconut oil will probably tend downward during 
 the next decade or two because of increasing consumption in the major 
 producing countries (925-million-pound increase from prewar to 1954- 
 58), 3 and because of aging and diseased 4 groves in these countries. 
 
 1 As animal feeds, high-protein meals are particularly useful in producing 
 high-quality animal products, which are in high demand in the high-income 
 countries of the western world. For draft animals used in the low-income coun- 
 tries, or for production of low-quality animal products, grains, hay, etc., are a less 
 expensive source of animal feed. 
 
 * The net increase in exports of tallow and greases was due entirely to 
 increased exports from the United States. 
 
 1 In the major producing countries, coconut oil is generally consumed with 
 little or no further processing beyond extraction, and maintains its quality even 
 in the relatively warm climates where it is produced. 
 
 4 In the Philippines kadang-kadang disease, which kills infected trees, is 
 assuming major proportions. A cure for this disease is lacking. 
 
90 
 
 BULLETIN No. 674 
 
 [August, 
 
 Table 21. Ratio of Income From Agriculture to Combined Income 
 From All Sources, Selected Countries and Selected Years 
 
 Region and country 
 
 Percent agricultural 
 Year income is of income 
 from all sources 
 
 North America 
 
 Canada 1957 7 
 
 United States 1957 5 
 
 Latin America 
 
 Argentina 1957 19 
 
 Bolivia 1955 27 
 
 Brazil 1956 26 
 
 Colombia 1956 36 
 
 Paraguay 1956 
 
 Peru 1956 25 
 
 Northwestern Europe 
 
 Belgium 1957 7 
 
 Denmark 1957 18" 
 
 Finland 1957 20 
 
 Germany, West 1957 9 
 
 Luxembourg 1957 9 
 
 Netherlands 1957 12 
 
 Norway 1957 13 
 
 United Kingdom 1957 4 
 
 Southern Europe 
 
 Austria 1957 13 
 
 Greece 1957 34 
 
 Italy 1957 20 
 
 Portugal 1957 28 
 
 Spain 1954 26 
 
 Turkey 1957 43 
 
 Yugoslavia 1957 33 
 
 Asia 
 
 Burma 1957 42 
 
 Ceylon 1957 47 
 
 Formosa 1956 33 
 
 India 1956 50 
 
 Japan 1957 19 
 
 Korea, South 1957 45 
 
 Pakistan 1957 56 
 
 Philippines 1957 38 
 
 Thailand 1955 45 
 
 Africa 
 
 Egypt 1954 35 
 
 Kenya 1957 38 
 
 Morocco 1956 34 
 
 Nigeria 1952 66 
 
 Tanganyika 1957 64 
 
 Union of South Africa 1956 14 
 
 Middle East 
 
 Israel 1957 13 
 
 Jordan 1954 40 
 
 Lebanon 1956 19 
 
 Oceania 
 
 New Zealand 1952 27 
 
 Dairy manufacture and livestock slaughter included under "agriculture" instead of 
 manufacturing." 
 
 Source: Statistical Office of the United Nations, Monthly Bulletin of Statistics, Janu- 
 ary, 1959, pp. 10-14. 
 
1961] STRUCTURE OF SOYBEAN OIL EXPORT MARKET 91 
 
 Plantings of new groves have been relatively limited in recent years, 
 and replantings of over-aged trees are lagging. 
 
 During the next decade or two, exports of peanut oil from Africa 
 will probably increase further if prices are favorable. Postwar trends 
 in exports of peanut oil are obscured by the almost complete with- 
 drawal of India from the export market after 1955. India exported 
 over 700 million pounds of peanut oil prewar. The decline in Indian 
 exports has, however, been largely offset by exports from Africa, 
 which increased over 500 million pounds from 1935-39 to 1955-57. 
 The potential for increased African production is clearly present and 
 will probably be realized if modern production methods and improve- 
 ments in transportation are introduced, and if prices are favorable or 
 alternative uses for the available productive resources are limited. 1 
 
 Production and exports of palm oil have followed an upward trend 
 during the postwar period. Palm oil from Africa was formerly used 
 primarily as an ingredient of soaps because of its generally low 
 quality and because of inefficient extraction methods. But, with 
 premium prices for high-quality oil, quality rapidly improved, and 
 since the middle 1950's the oil has been largely used as an ingredient 
 of margarine and shortening in the importing countries. The produc- 
 tion potential of palm oil is clearly evident. 
 
 African production may be increased by clearing the underbrush 
 in native groves, expanding the area of native groves from which the 
 oil is gathered, planting cultivated groves to improved strains, ferti- 
 lizing cultivated groves, improving oil extraction techniques, increas- 
 ing the labor supply by providing incentives for the natives to work 
 more efficiently and for longer hours, and improving transportation 
 facilities. Production in the African territories is apt to increase with 
 the region's general economic development, which would improve 
 the transportation system and stimulate the natives to utilize the oil 
 palm more intensively. Jt has been observed that, in areas where 
 consumer goods are rea4Uy available, the natives become accustomed 
 to a higher standard pf living and are more willing to work for 
 increased income than ty preas where consumer goods are less avail- 
 able. 2 
 
 Since the oil palm ajso produces the kernel from which palm kernel 
 oil is produced, increased production of palm oil may also accelerate 
 production of palm kernel oil. The normal production of palm kernel 
 oil is, however, only one-third as large as the production of palm oil. 
 
 1 See "Oilseeds," /Organization for European Economic Cooperation, Paris, 
 1957, pp. 124-130. 
 
 Foreign Agrijculture Circular FFO 14-58, October, 1958. U. S. Dept. Agr., 
 For. Agr. Ser. 
 
 1 Ibid., pp. 296-298, 307. 
 
92 BULLETIN No. 674 
 
 Effect of relaxing trade restrictions. Since a large part of the in- 
 creasing supplies of food and soap available for export from the 
 United States must find a market in the relatively low-income countries 
 of noncommunistic Asia, Africa, and Latin America, it is important 
 that these countries obtain the foreign exchange with which to pay for 
 the imports. A general relaxation of trade restrictions, such as tariffs 
 imposed by the United States and other industrialized countries on a 
 wide variety of imports, would increase imports into the United States 
 and, in turn, increase the foreign exchange earnings of these countries. 
 Reduced tariffs on manufactured goods would in many cases result in 
 greater earnings of foreign exchange than would a reduction of tariffs 
 on agricultural goods, even though these low-income countries depend 
 largely on agricultural exports for foreign exchange earnings. Re- 
 duced tariffs on manufactures would enable the relatively industrial- 
 ized countries of northwestern Europe and Japan to export more to 
 the United States and thereby earn foreign exchange with which to 
 import agricultural goods from the low-income countries of Asia, 
 Africa, and Latin America. This would enable the low-income 
 countries to import more from the United States. 
 
 The United States, among others, applies import restrictions against 
 a wide variety of items, both manufactured and agricultural. Without 
 a general relaxation of trade restrictions by the United States and 
 other high-income countries, export subsidies will probably become 
 necessary if prices of food and soap fats and oils are to be maintained 
 above levels where they become competitive with feed grains as a 
 source of animal nutrition. The value of a pound of soybean oil, for 
 example, as an animal feed would be about three times the price of a 
 pound of corn, or 6 cents per pound when the price of corn is 112 
 cents per bushel. 
 
 3M 8-61 73995 
 
v V 
 
 
 
UNIVERSITY OF ILLINOIS-URBANA