Grease sales stall on fate of US biodiesel subsidy

08 March 2010 22:06  [Source: ICIS news]

HOUSTON (ICIS news)--Grease sales are stalled in the Chicago markets on sellers’ caution about moving animal stock into the system due to the Congressional hold up in extending the biodiesel subsidy, fats and grease traders said on Monday.

“Sellers are holding off right now to see if the subsidy comes through,” a trader source said.

“Sellers are reluctant to move stock right now,” another trader said.

Only about 10% of the fats and greases are used in technical applications such as biodiesel and fatty-acid production, with 90% of the material going into foodstuffs. As a result, when multi-feedstock biodiesel producers step into the market for yellow grease, poultry fats and other greases, prices become volatile.

Grease prices moved up this week on the back of the tightening supply conditions.  

Benchmark bleachable fancy tallow (BFT) prices hit 30 cents/lb ($661/tonne, €483/tonne) in Monday cash market trading, while traders said yellow grease prices were tracking about 5 cents/lb under the BFT value.

One trader said no yellow grease could be sourced on prompt basis in the current market. Another trader searching for export material said, “good luck finding any”.

The grease market affects a number of segments, ranging from foodstuffs to the production of oleochemicals such as tallow-based fatty acids, which use BFT as the main feedstock. 

Fatty acid prices assessed with BFT prices at 27 cents/lb ranged 50-53 cents/lb for triple-pressed stearic acid and 44-47 cents/lb for rubber-grade product, according to global chemical market intelligence service ICIS pricing.

Multi-feedstock biodiesel producers can use animal fats and greases as well as vegetable oils such as soybean and canola.

Reinstatement of the $1/gal (€0.19/litre) blending credit was recently introduced in the Senate as part of a broader legislative package. If passed, the subsidy would apply retroactively to 1 January and expire at the end of this year.

The 31 December 2009 expiration of the tax credit flattened the US biodiesel industry, with less than 10% production rates now estimated by some players.

($1 = €0.73)

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