Example – normalising market trends of sunflower oil and meal
Generic product activity or name
Sunflower oil and meal.
Vegetable oil and protein feed.
Context and background
The sunflower is an agricultural product that after harvest is subjected to oil extraction. The seeds are crushed and the oil is extracted from the solid meal, typically with the solvent n-hexane. Sunflower meal is used as animal feed.
The two main co-products are sunflower oil and sunflower meal, which supply the generic markets for vegetable oil and protein feed. It is the market trends of these generic markets that are normalised in this example.
Presentation of example
Finding the generic market trend data
First we need to localize the global generic market trends for vegetable oil and protein feed and several organisations describe these such as USDA and FAO.
In the FAO biannual report utilisation data and trends are presented using forecasted data as well as actual data (FAO 2014). All meal figures are expressed in protein equivalents, which allows comparisons across crops. In Table 2 of the report we find two utilization trends: 4.6% for oils and fats and 3.4% for meal and cakes. These trends are based on the latest year and a forecast.
Normalizing the market trend data
To normalize the above trends we need to know the relative outputs of actual by-product activity, which in our sunflower case is 0,4 kg crude protein meal for every 1kg of vegetable oil (Schmidt et al. 2013).
To normalize each trend we divide them by the relative outputs:
Oil: 4.6/1 =4,6
Meal: 3,4/0,4 = 8,5
We see that the co-product with the lowest normalised market trend is the sunflower oil. If the revenue from both oil and meal were required to exceed the marginal production costs, this could be used to unambiguously identify sunflower oil as the determining product. In practice, this information is not required for this identification, because the revenue percentage (87%) from the oil alone is already adequate to drive the production, while the revenue from the meal is only 12%.
Information sources used
We believe that the USDA, Foreign Agricultural Service and FAO provide the best current data on generic vegetable oil and generic protein feed markets. We have here chosen to use the FAO biannual report from May 2014 (FAO 2014), but the important thing is to ensure comparability between trends.
FAO (2014). Bi-annual market reports. http://www.fao.org/economic/est/est-commodities/oilcrops/oilcrops-oils-and-meals-market-assessment/en/. Accessed October 12, 2014
Schmidt J H, Dalgaard R, Brandão M and Muñoz I (2013). Study on the “Relative Sustainability of Vegetable Oils” – LCA of five different vegetable oils. The Roundtable on Sustainable Palm Oil (RSPO), Kuala Lumpur. Proprietary report.
Author of this example
How to reference this
Weidema B P (2014), Example –normalising market trends of sunflower oil and meal. Version: 2014-10-12 www.consequential-lca.org