19 November 2012 19:06 [Source: ICIS news]
HOUSTON (ICIS)--US market prices are down for tallow fats because of clamped biodiesel production, fatty acid buyers and sellers said on Friday.
Fatty acid benchmark feedstock bleachable fancy tallow (BFT) prices held at 34 cents/lb ($750/tonne) over the past week, compared with prices on this feedstock fat at about 44-45 cents/lb a year ago, according to industry sources tracking fats/grease prices in the Chicago cash markets.
“It is all about the biodiesel,” one fatty acid distributor said.
The underpinning factor concerning biodiesel and its relationship to the tallow market is that multi-feedstock biodiesel producers can use tallow feedstock in warmer weather, but tend to use significantly less of the fat in the colder months.
This is because of the cold flow plug point (cfpp) of the biofuel following its creation from tallow.
“This will happen every year now because of biodiesel,” a fatty acid producer said.
Tallow itself is a solid at room temperature. The biodiesel fuel made from tallow can carry a lower cfpp than biodiesel made from soybean or canola oils, which are liquid at lower temperatures than the tallow.
Consequently, when the weather sufficiently cools in the northern and midwestern regions of the US, biodiesel producers tend to choose the vegoils as feedstock options.
Oleochemical market participants and traders associated with the biodiesel industry said that the federal government's 1bn gal production mandate for 2012 has been met and this discourages additional production of the biofuel for this year.
The National Biodiesel Board said the production mandate is likely met, but did not confirm fully because the tabulations lag about a month and the November numbers are not yet completed.
This year another factor is the drought that plagued the midwest, drying up crops and pushing cattlemen to put more animals into feedlots because of higher feed costs.
Tallow prices are seasonally lower in the fourth quarter because the outdoor grilling season is over and the protein choice shifts to poultry, grease traders have said.
Sources in the US oleochemical industry, which produces fatty acids from BFT, said tallow traders had excess material in inventories this year.
“No one would say it, but their tanks are full of the stuff,” one trader commented.
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