The Fats and Oils: a General View

By Carl L. Alsberg and Alonzo E. Taylor

IV. Conditions and Trends of Production

The Position of Dairying

Dairying is in quite a different position from other forms of animal husbandry, for several reasons. The cow is more efficient in converting feed into human food, in the form of milk, than is the steer or the sheep or even the hog. In addition to milk she produces veal as a by-product and is herself in the end turned into beef when she loses her efficiency as a producer of milk. While the hog stands closest to her in efficiency as a converter of feed into food, she has the great advantage over the hog that she thrives on fodder which is not suitable food for man, whereas much of the diet of hogs must consist largely of grains which are fit for human food. Finally, the dairy cow produces two food elements that are highly prized and therefore high priced. One is protein of high quality; the other is milk fat which in milk, cream, and butter carries a premium price that places it in a class by itself as compared with other fats. Because of its preferred position, butterfat in the United States has not felt as yet to any material degree the competition of the domestic or imported vegetable oils. To be sure there is some competition from the margarins, but unless existing conditions and legislation change greatly it is not likely soon to become much more severe. The consumption of margarin, about two pounds per capita per annum, is small as compared with the consumption of butter, about 20 pounds per capita per annum. Moreover, an appreciable fraction of the margarin consumed is used as a superior cooking fat and here competes rather with animal and vegetable shortenings than with butter.

Dairy farming, then, is in a favorable position because it produces a fat that is so highly prized that it stands to a considerable extent above the competition of other animal and vegetable fats. In addition it produces protein of the highest quality. Where the dairy farmer is so located that he has a market for whole milk he gets some return for the excellent protein his cows produce.

This is especially the case where there is a market for whole fluid milk as in the neighborhood of towns and cities. Formerly this was the only way the dairyman got much of a return for the protein of milk. Elsewhere milk was paid for on the basis of its butterfat content, for the major use was in the production of butter, the skim milk being wasted or fed to hogs and poultry. Even when milk was used for the making of cheese, which contains most of the protein of milk, the price received was based on the price of butterfat because cheese and butter factories competed with one another.

This situation has begun to change. More and more milk is marketed as whole milk because the percentage of the country's population that is living in towns is increasing and because there is an upward trend in the per capita consumption of fluid whole milk. The development of the condensed and evaporated milk business has a similar influence. But a great effect has come from the development of the powdered milk and concentrated buttermilk business. Buttermilk contains much valuable protein, milk sugar, and mineral salts. Formerly, as already stated, it was fed to hogs and poultry so far as local conditions made possible, and the rest was wasted. Much of such buttermilk is now condensed. The product is concentrated so that it can stand transportation charges; its keeping quality is such that it can be stored. In consequence it finds a wide market as feed, particularly for poultry. Powdered milk is mostly skim-milk powder made from skimmed milk, a by-product in the manufacture of butter. It contains all the valuable food elements of milk except the fat and is an excellent human food. It is widely used by bakers, confectioners, and chocolate manufacturers. It is saving for human food purposes many millions of pounds of milk protein and sugar that were formerly wasted. As these uses of buttermilk and skim milk grow, the net result ought to be a better return to the dairyman for his milk protein. He can therefore look forward to a steady strengthening of his economic position, and we may look forward not to a decreasing but to an increasing butter production, to be followed perhaps some day by a decline in butter production because of an insistent demand for whole milk.

Bearing of Methods of Producing Vegetable Fats

Reference has been made repeatedly to the competition between animal and vegetable fats. It has been pointed out that, irrespective of the relative costs of production of animal and vegetable fats on the same farms, it is more profitable for the farmer in countries like the United States to aim at the production of meat rather than animal fat because of the relatively high price of lean meat as compared with animal fat. It was pointed out further that it is really immaterial in the industralized temperate zone what the cost of producing vegetable fat is. The competition which animal fats have to face in these regions is not with vegetable fats domestically produced as primary products, but with domestic by-product oils like cottonseed and corn oils and with oils of foreign origin. It is therefore of interest to examine in what manner these competing vegetable fats are produced.

Vegetable fats are the products in part of annual plants, in part of perennial trees. Among the annuals we have cotton, flax, peanuts, soy bean, sesame, rape, sunflower, and corn. Olive and tung trees are grown in orchards; coconut palms and oil palms in groves, some native, some planted. The planting of annuals is adjustable to demand. Trees require time to come into bearing, and have thereafter a varying period of bearing.

In the production of the fats of the palm and coconut there is, so to speak, much more of nature and much less of man than in the production of fats and oils in the temperate zone. Originally palm and coconut fats were secured from native growths and the elements of costs were largely those of labor and transportation. Latterly, plantation development of tropical oil seeds has come to pass, enlarging the producing area. The labor requirements are widely different from those in temperate zones and the labor is of different type. Though some groves are cultivated, for the most part palm nuts and coconuts receive only harvesting and preparation for the market.

The oil-bearing plants of the temperate regions (apart from olive and tung) must be planted, cultivated, and harvested, often when other crops compete for labor. Moreover the labor costs vary widely with the different vegetable oils produced in temperate regions. We lack anything like accurate or comparable cost data for both tropical oils and oils of the temperate zone. Indeed for such by-product oils as cottonseed and corn, joint cost data necessarily would have to be arbitrary. In addition varying transportation costs, greatest for tropical oils, varying costs of extraction from the raw material, and varying costs of refining would need to be included in the calculation. A definite assertion concerning the relative production costs would therefore be unjustifiable. All that is justified, based on methods of production, is that it seems very probable that the outlays incident to production are materially lower for tropical fats than for vegetable fats produced in temperate zones. This finds expression in the decline of oil-seed crop culture in industralized countries except when it is a by-product like cottonseed or corn oil. (Cf. 0. E. Baker, Land Utilization in the United States: Geographical Aspects of the Problem, Geographical Review, January 1923, xiii, 24.)

Responsiveness of Production to Price Changes

Hitherto in the discussion of the competition between the various fats and oils only factors affecting long-time trends have been mentioned. There are, however, certain differences in methods of production that cause the several fats to react in different ways to abrupt changes in price levels. Production of some fats is more responsive to such stimuli than that of others. Hogs, for example, are more rapidly maturing animals than cattle. Moreover they multiply more rapidly. Any rise in the price of lard can be met more rapidly by increasing the swine population than a rise in the price of tallow can be met by increasing cattle population. Furthermore, for the same reason, the rapid growth of hogs, the lard supply can be increased more rapidly than the beef-tallow supply by feeding the hogs more heavily and marketing them fatter. Indeed, lard in the United States stands in a peculiar position, since together with hog meat it represents a major method of sending corn (maize) to market. The response to any stimulus to increase or diminish the lard supply must therefore be the resultant of at least three factors: the price of lard, the price of corn, and the number of hogs available. The relationships are complex, and will be analyzed in a subsequent study in this series. In the United States, moreover, carcass-fat production is responsive to changes in the general price level of fats to only a limited degree since, as already pointed out, the production of carcass fat under present conditions is not an independent enterprise but incidental to meat production. The response of production to price stimuli must therefore be comparatively feeble. Mutton tallow stands in a somewhat different position from lard and beef fat, for lamb and wool together are the major product of sheep raising and tallow is the by-product. The price of tallow affects the production of mutton tallow far less than do the prices of lambs and wool, indeed scarcely at all.

Among the vegetable fats, cottonseed oil and corn oil are in much the same position as the animal fats, the price of the fat being only a minor factor in determining the production. The production of other vegetable fats, however, is quite sensitive to changes in price levels. Those fats that are obtained from annual crops may be made to increase or diminish in supply by expansion or contraction of acreage. Such fats are linseed, peanut, rapeseed, sesame, sunflower, and soy bean oils. Fats obtained from perennials, usually trees, are naturally not subject to rapid changes in acreage. Trees take too long a period to come into bearing, and once arrived at this state they represent too heavy an investment to be displaced by another crop unless the producer has become convinced that fat production has become indefinitely unprofitable rather than temporarily so. The principal fats from trees are coconut, palm kernel, olive, and tung oils. The supply of these oils varies for one of two causes. In the case of palm, palm kernel, coconut, and perhaps also tung oils, the nuts are simply not gathered if the price is not remunerative. Coconut and oil palms, being tropical trees, are less affected by variations in weather than are oil-yielding plants of the more temperate zones, though of course hurricanes, plant disease, and labor conditions have from time to time some effect upon the potential supply of their fruits. The olive tree, on the other hand, is much influenced by weather conditions and the yield may vary greatly from year to year in any given locality. But the olive yields a superlative oil. The weather also greatly influences the size of the crop of oil seeds from annual plants of the more temperate regions, especially flaxseed.

The weather even influences the production of animal fats, including milk fat, though its influence upon this is perhaps less obvious. The weather determines from season to season the amount of feed available upon pastures and ranges, and this determines the production of milk fat and the numbers and state of nutrition of beef cattle. The corn crop is the most important single factor in lard production. The weather determines in large measure the size of the corn crop, and thus the weather is indirectly one of the factors that determine the magnitude of production of lard, of butterfat, and of tallow.

Cottonseed oil and corn oil stand in a peculiar position. Cottonseed is a by-product of cotton production. The volume of seed available depends therefore more upon the cotton crop than upon the price of cottonseed oil. But the cotton acreage depends upon the planter's estimate of the probable future price and supply of cotton. The actual production depends upon the acreage and the yield. The yield in turn depends upon the weather, and upon the boll weevil and other insect and fungous enemies of the cotton plant. The quantities of cottonseed available do not depend, therefore, upon the demand for and price of cottonseed oil. The supply may be diminished independently of the cotton crop but not increased. If prices of oil and therefore of seed are very low, farmers may elect not to sell their seed to the oil crushers but to use it for fertilizer or feed. In former decades this was a more important factor than it has been since the United States has ceased to export any considerable quantities of cottonseed oil. The factors that in those days, and to a lesser extent even today, determined whether all or only a fraction of the available cottonseed were to be crushed, were not merely the price of the oil but also the price of fertilizer and of feed, the cake being used for both of these purposes. Cottonseed meal must be fed with caution, but remains a most valuable protein concentrate.

The production of corn oil is relatively small. It is perhaps less affected by the various influences above enumerated than any other fat, for it is a by-product of the corn-products industry and to a lesser extent of the milling of corn meal. The principal articles manufactured by the corn-products industry are corn starch, dextrine and other adhesives, glucose, so-called gluten feed, corn oil, and a large number of other products of lesser importance used directly or indirectly in the arts. Starch and glucose and, to some extent, dextrine are used as foods, but a large part of the output of the industry is used in the arts. The demand for the majority of industrial corn products therefore tends to fluctuate with the business cycle. The raw material, corn, is always available in abundance for industrial uses, since the industry consumes an insignificant fraction of the crop, though at different prices because the crop varies greatly from year to year. The consumption of corn meal also represents an insignificant portion of the crop. Moreover, from much of the corn ground into meal no oil is produced; the oil-containing fraction of the grain goes to feed. All these are conditions that warrant the conclusion that the quantity of corn from which oil is obtained as a by-product does not fluctuate greatly from year to year. So far as fluctuations do occur they depend primarily upon general business conditions and secondarily upon the price of corn. Hence, unlike cottonseed oil, the supply of corn oil does not fluctuate violently from year to year with the weather, although the trend of production has been upward in harmony with the general expansion of industry and population growth.

Next: V. Conditions and Trends of Consumption

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