Chems spark tallow price rise

18 June 2007 00:00  [Source: ICB Americas]

THE US tallow market is seeing unprecedented price surges this summer, fueled by higher demand and by the overall price rally of fats and oils worldwide.

Bleached fancy tallow prices in June were quoted at the mid-30 cents/lb. range, double the level seen last year, the Department of Agriculture (USDA) reports.

"Continued good chemical demand pushed prices higher on Chicago renderer bleachable tallow," says USDA oilseed analyst Mark Ash. "Tallow prices are also following the general uptrend for vegetable oil and fats prices, all of which are nearing record highs. The price of palm oil, a leading alternative for tallow in the oleochemical market, has soared," he adds

"Demand from the oleochemical sector is excellent," says Bill Hurley, president of Hurley Brokerage, which provides independent sales representation to the rendering industries.

"Demand from the feed sector has also been good but is starting to drift a little as fat prices approach and/[or] exceed 400% of corn prices. In countries where palm oil stearin is a major competitor such as Korea, tallow exports have doubled in the October 2006-March 2007 shipping period," Hurley adds.

Industrial consumption of inedible tallow and grease from January to April was estimated by the Census Bureau at 1.26bn pounds, up 8% from the year-ago period. Inedible tallow stocks at the end of April were 206.7m pounds, down 20% compared to last year's ending stock of 259.3m pounds.

"Supplies still look tight and inventories I believe for tallow and grease are quite tight," notes an official from Darling International, a major US tallow producer. "Right now the driver for corn and fats is ethanol and biodiesel. As long as subsidies stay in, we will see higher than average historical prices."

burning biofuel demand

Increasing demand for tallow in biodiesel production has also started providing market support to pricing, says USDA's Ash.

Consumption of inedible tallow and grease in biodiesel production totaled 26.1m pounds from January to April this year, the Census Bureau reports.

"The $1/gal. tax credit approval for animal-fats-based green diesel produced in petroleum refineries has caused buyers to stock ahead and run up tallow prices. The price surge is driving the soap manufacturers nuts," says John Baize, president of consulting firm John C. Baize and Associates.

"Tallow supplies are adequate thus far but it is the expectation of half of Tyson Foods' tallow and possibly supplies of others being converted into green diesel that has caused the price run-up. My outlook is for continued high prices unless the tax credit ruling is reversed," Baize adds.

flaming chem price hikes

The skyrocketing tallow as well as other fats and oils prices are driving chemical companies to raise prices for stearates, esters, fatty acids, amides, and other fat- and oil-based alcohols and surfactants.

For fatty acids, major producers such as Cognis, Uniqema and Procter & Gamble are seeking price increases ranging 2-8 cents/lb., depending on the product and producer.

With tallow now competing head to head with soy and palm oil prices, price premiums for vegetable-derived chemicals are expected to decrease, says one oleochemical distributor.

"Customers who require vegetable oils cannot use tallow but customers who use tallow can typically use vegetable-oil-derived chemicals," the official says. "However, we do not see a lot of people reformulating tallow derivatives because the alternatives are just as expensive or more," he adds.

Tallow prices for the rest of the year are expected to remain firm, some industry sources note. The average historical price for inedible tallow was said to be in the range of 15c./lb.

"With new fats and oils demand from biodiesel, increased grain prices due to ethanol and government legislation du jour, we are going to be looking at new and higher numbers for some time to come," says Hurley. "What's the new 15 cents in Chicago tallow? Is it 25 or 30? Time will tell."

Crude vegetable oils
Coconut oil, t.l. N.Y. lb. 48c
Corn oil, Midwest lb. 34.50c
Linseed oil, Minneapolis lb. 48.25c
Peanut oil, Southeast (rest.) lb. 67c
Soybean oil, Decatur, Ill. lb. 33.77c
Refined vegetable oils
Coconut oil, t.w. N.Y. lb. 56c
Corn oil, jumbo tanks, N.Y. lb. 44.75c
Palm oil, N.J. lb. 50c
Peanut oil, jumbo tanks, N.Y. lb. 66.50c
Soybean salad oil, N.Y. lb. 39.02c
Oil meals
Cottonseed, 41% bulk, West Texas ton $145
Linseed, ext., 34% bulk, Fargo, N.D. ton $125
Soybean, unrest., 48% bulk, Central Ill. ton $238.70
Fats & greases
Grease, white, choice, tanks, dlvd., Chic. lb. 32.50c
Grease, yellow, max, 10% dlvd., Chicago lb. 27.75c
Lard, loose, bulk, tanks, dlvd., Chicago lb. 33c
Tallow, inedible, fancy, tanks, dlvd., Chic. lb. 33.50c
Tallow, edible, bleach, tanks, dlvd., Chic. lb. 36.38c

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