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Corn+Soybean Digest

Processor Ponders Oil Premium

Would you switch soybean varieties for an extra 5-10 cents a bushel? One regional processor is hoping growers in its area will consider it.

Ag Processing, Inc. (AGP), headquartered in Omaha, NE, is weighing the feasibility of offering a higher-oil premium, possibly starting this fall.

Western Corn Belt soybeans generally run around 18% oil. That means there are 10 1/2-11 lbs of oil in every bushel. If soybean oil sells for 25 cents/lb, (price usually fluctuates between 17 and 30 cents), each 0.5% increase in oil content (roughly 0.3 lb) represents an extra 7.5 cents, with hardly any additional costs.

Oil yield is an obvious benefit to the processor, but the protein content of the meal is just as important, says Charles Hurburgh, Iowa State University ag engineer. He points out that higher oil at the same protein content in beans increases the percentage of protein in the meal. But if higher oil content is reached at the expense of protein, the meal's protein content may be lower.

"The total of oil and protein is a useful measure of overall value of the soybean," Hurburgh says.

That's the basic theory behind a two-year study being completed by AGP, which buys soybeans from Missouri, Kansas, Nebraska, Iowa, Minnesota and South Dakota.

With help from Iowa State's grain quality team, headed by Hurburgh, AGP has been looking into the practicality and reliability of using near infrared reflectance spectroscopy (NIRS) to quickly analyze soybeans at delivery. During this time, every load of soybeans going through AGP's Eagle Grove, IA, plant has been tested for oil and protein. Data collected show enough variation in oil content that the company is considering a higher-oil premium.

Cal Meyer, AGP soybean processing and marketing vice president, says while preliminary testing of the NIRS equipment looks promising, he can't say whether the company will be ready to offer a high-oil premium this fall.

"We'll be making that decision in mid- to late August," he says.

But even if the premium isn't in place for this year's harvest, he's confident that, by the 2000 harvest, AGP will be able to reward growers who deliver higher-oil soybeans.

Meyer encourages growers who sell to co-op elevators that own AGP to gather information on the potential oil content of varieties they're planning to plant. AGP will have limited data on the oil content of some varieties from its own and Iowa State tests. He's anticipating that seed companies, too, will begin providing composition information along with potential yield data.

"This information will help them select a variety or varieties suited to their farms that will give them the highest yields and oil production per acre," says Meyer.

If other processors follow AGP's lead into premiums for composition, the result would be a "raising of the bar." More high-value soybeans would be produced, while varieties consistently lower in oil, protein or other traits desired by processors would fall by the wayside.

Meyer sees the real impact of this sometime down the road.

"Right now the variation in oil content between varieties is measurable, but not highly significant. Premiums for oil would probably not be large at first."

If the oil premium is successful, however, Meyer expects seed companies to focus their plant breeding programs more on oil and begin to deliver new varieties with even higher oil content.

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