US fatty acid producers grapple with high feedstock costs

30 March 2011 20:12  [Source: ICIS news]

HOUSTON (ICIS)--US fatty acid producers are grappling with high feedstock costs that are grinding margins into the negative zone, sellers said on Wednesday.

“Grease prices aren’t going down anytime soon,” one producer said.

Bleachable fancy tallow (BFT) prices on the Chicago cash market were circulating slightly above 50 cents/lb by midday Wednesday, up from the same time last week when the grease closed at 49.50 cents/lb ($1,091/tonne, €775/tonne).

BFT prices were in the high 30s cents/lb in mid-2010, having routinely been in the upper teens-to-high 20s cents/lb in previous years.

BFT is a rendered fat and part of the fats/grease segment that provides feedstock for several industries, including fatty acid production and biodiesel production.

“There is not a mad rush for biodiesel production to begin, but everybody is watching for it because of the grease prices,” an industry participant said.

Sources said of the five plants actually producing biodiesel, none were multi-feedstock units that used tallow because all were integrated to soybean crushing facilities, making soybean oil the preferred stock for those plants. 

But tallow suppliers were said to be holding back supply because of the expectation that multi-feed biodiesel production would ramp up in the second quarter.

This supply monitoring, plus good exports, were said to be the reasons for short US fats/grease inventories.

“We cannot keep up with the volatility in the grease prices,” a fatty acid supplier said.

“We need to have glycerine prices in the 50-cent range to keep margins with these feedstock costs,” another supplier said.

Contract prices for tallow-refined glycerine, the co-product of fatty acid production, were last assessed by ICIS at 34-43 cents/lb in first-quarter.

Second-quarter glycerine contracts were expected to move up by 2-5 cents/lb because of increased demand, but even a full 5-cent/lb increase would not be sufficient for the co-product credit to mitigate the high cost of tallow, sources said.

C18 tallow-based fatty acid contract prices rose 5 cents/lb between January and February.

March contracts would not be assessed until averaging of the BFT monthly prices is completed by producers, because the average number is an integral in the contracts. 

C18 Triple Pressed Stearic Acid (TPSA) contracts were last assessed at 65-71 cents/lb, with C18:1 Oleic acid assessed at 74-76 cents/lb.

Oleic acid prices averaged 58.75 cents/lb at the same time last year, with TPSA averaging 51.50 cents/lb.

US tallow fatty acid producers include Vantage Oleochemical, Dial and Twin Rivers Technologies.

($1= €0.71)

By: Judith Taylor
+1 713 525 2653

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