US fats and greases feel biofuels squeeze

11 October 2007 22:50  [Source: ICIS news]

HOUSTON (ICIS news)--Rising soybean oil prices are reducing supplies and lifting costs in the fats and greases industrial segment, US biodiesel and glycerine market sources said on Thursday.

“These industries are linked and it is making a huge impact in the fats market,” a biodiesel representative with Rocky Mountain Biodiesel Consulting said.

A steady rise in refined soybean oil prices has caused a number of US biodiesel producers to try to mitigate the cost by substituting fats and greases for soy as feedstock, the source said.

The rise in soybean oil prices continues to pummel the US biodiesel industry, according to a growing number of sources within the biofuel segment.

October crude soybean oil futures on the Chicago Board of Trade (CBOT) settled Thursday, 11 October at 39.40 cents/lb, a 0.50 cent increase above the previous close.

Forward futures for December tracked this level, with CBOT’s close on the month hitting 39.97 cents/lb.

Adding the approximate 5-cent premium for refined soybean oil, today’s price for the preferred feedstock is almost 45 cents/lb. US biodiesel producers said 40 cents/lb for refined soybean oil is the breakpoint for sustaining competitive market positions and viable margins.

Yellow grease, poultry fat, and tallow are lower priced than soybean oil, with bleachable fancy tallow (BFT) the highest at about 32 cents/lb, market players said.

Biodiesel manufacturers bought these commodities as alternatives or replacements for soybean oil in biodiesel production and ease some of the cost burden, biodiesel sources said.

BFT prices subsequently rose by about 6 cents from 27 cents/lb to 33 cents/lb at one point over the past four-to-six weeks, hitting 32.50 cents/lb again this week, according to tallow and grease users.

More than one source is blaming biofuels for the higher prices in grease/tallow/fat commodities, pointing to biodiesel as the driver. 

By: Judith Taylor
+1 713 525 2653

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