Example – soybean and oil co‑product system
Generic product activity or name
Soybean oil and meal.
Vegetable oil and protein feed.
Context and background
The soybean is an agricultural product that after harvest is subjected to oil extraction with a solvent, normally hexane. The solid output from the extraction is soy meal that is used as livestock meal or to produce soy protein food products. This example demonstrates how to identify which of the two co-products is the determining product.
The two co-products oil and meal supply the generic markets for vegetable oil and protein feed) that will have different market trends.
Presentation of example
First we need investigate if either soy oil or meal alone can fulfil the condition of providing an economic revenue that exceeds the net marginal cost of changing the production volume. If we find this for one of the co-products only, this co-product will be the determining product. We do this by multiplying the mass of the co-products with their prices to obtain the revenue for each co-product (see Table 1).
As we do not know the marginal production costs, we apply the rule of thumb that a revenue for a co-product must exceed 80% of the overall revenue to make it likely that it covers the marginal production costs alone.
In our case we find therefore that none of the co-products alone provides sufficient economic revenue. We have to conclude that both co-products are needed to provide adequate revenue for the activity. Furthermore we see that the revenue percentages are more or less equal for the two co-products (42% and 57% respectively).
To identify the determining product, we now compare the normalised market trend of the general markets on which the two co-products are sold. The numbers in table demonstrate that the normalised market trend for soy meal is substantially lower than the normalized market trend for the soy oil. Since both products are required to provide enough revenue, the (lower) demand for soy meal imposes a constraint on the ability of the co-production activity to change its output. This means that soy meal is unambigously identified as the determining product.
Information sources used
The main source was Schmidt et al 2013 as well as other publications on the subject of vegetable oils.
Schmidt J H, Dalgaard R, Brandão M and Muños 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.
Schmidt J H, Weidema B P (2008). Shift in the marginal supply of vegetable oil. International Journal of Life Cycle Assessment 13(3):235‑239. http://lca-net.com/p/995
Schmidt (2015). Life cycle assessment of five vegetable oils. Journal of Cleaner Production 87:130-138 http://lca-net.com/publications/show/life-cycle-assessment-five-vegetable-oils/
Author of this example
How to reference this
Schmidt J H (2014), Example –soybean and oil co-product system. Version: 2014-10-17 www.consequential-lca.org