Animal Fats – International November 6th, 2014

Animal Fats – International November 6th, 2014

Prices in the EU jumped as sellers are seeing renewed demand after prices fell to lows in late September. Trading, in terms of US$, has jumped above the FOB Malaysian Palm Stearin price after trading at a discount over the last four weeks. UCO prices are unchanged into Rotterdam this week.

The price of Malaysian Palm Stearin FOB US$ is shown vs. Pure Beef Tallow 10ffa NW EU in US$.

North American export values are lower based on lower interior value, but there has been little activity reported. The Palm Stearin to tallow spread has piqued some interest, but sellers have been mum on trades this week. US yellow grease exports into the EU are off about 8% versus the same period last year. A higher US$ value against the EU the last few months as well higher US prices have limited interest from the EU.

Australian prices were unchanged this week with little activity reported. Sources have reported that renewable diesel interest from Singapore has returned, but at light volume and lower than anticipated prices. New Zealand is quiet as well and has reported the same, renewed Singapore interest but at steady pricing and in light volume. China is also showing some light interest, but at steady pricing.
Tallow trading in the US domestic market has been quiet. There has been some light offerings on BFT at $0.2900/lb ($640/MT) Chicago this week, but no bids. The softer grades, i.e. CWG and UCO have come under some pressure due to big drops in the oil and distillate markets. Heating oil values have fallen about $0.12/gal over the last week. The big drop has significantly affected the price biodiesel producers are willing to pay for feedstocks at a time when animal fats are already unfavorable due to cloud point concerns. With UCO trading around $0.2500 – $0.2600/lb FOB, the price into a facility is a rough $0.2900/lb or $2.18/gal. With heating oil at $2.43/gal, profitability is very difficult, if not downright impossible.
Feed buyers have also been reluctant to take on much material given the cash corn values around $3.00 – 3.10/bu, which translates to a fat value at 350% of $0.19/lb or roughly $420/MT.
The short-term outlook is bearish for the North American market as biodiesel and feed buyers look for lower prices. Australian and New Zealand markets appear to be in a balance of S&D right now. Buyers are taking small parcels at steady prices and production is enough to satisfy those demands, but not enough to create a surplus, which would force sellers to discount pricing.

US Exports – Fats

Exports were off in August from July by just over 5,000 MT. There were big drops seen in the inedible tallow market as well as yellow grease. The big buyers of inedible tallow were Mexico at 19.4 TMT, which accounted for 85% of the total US inedible tallow exports. Turkey and Canada took in 1,000 MT while Morocco, Honduras and Columbia each took in 500 MT. Yellow grease exports were off just under 6,000 MT from July. The big buyers were Mexico at 9400 MT and a mix of Germany, Netherlands and the UK taking in 8500 MT. The big in August was the other fats category and within it a 6,500 MT shipment of lard stearin oil to Nigeria.

Animal Proteins – International

Trading into China was reported as high as $535 on MBM, but most reports were steady into China this week. Sellers continue to express bearish sentiment as more proteins become available to buyers at lower prices. Buyers in both markets are pushing hard to lower values and this is apparent into Indonesia with sales reported as low as $505/MT from a number of directions.

Indonesian MBM values are shown over the last six months.

Australian values are unchanged this week with sellers reporting a bearish tone both domestically and for export. Buyers in the interior are seeing the poor export demand and may try to leverage this for lower prices in November. Blood meal is seeing support, although prices are unchanged this week.
Prices in New Zealand are mostly unchanged. Sellers are also reporting a bearish tone with buyers that were previously high-bidders now lowering ideas closer to the China/Indo market. Bovine 50 pro MBM fell from NZ$650 to a high of NZ$630 this week.
The US domestic market continues to see pressure with feather meal numbers now starting to crumble. A number of markets had been trading in the $770/MT range. Trading was of $55/MT in a few markets this week with some seeing only “minor” declines of $25/MT. Feed blenders are starting to push back on prices now that additional liquidity in the cash SBM market has arrived.
MBM prices, both porcine and ruminant, declined this week as sellers continue to struggle to compete with cheaper SBM. Additionally, cheaper porcine material is weighing down the ruminant market, which isn’t seeing a huge supply issue due to tight cattle kills.
Looking ahead, the picture is bearish as the market continues to search for a bottom. December soybean meal values at the CME have increased $30/ST over the last couple of weeks, which should help protein sellers. Prices, however, had gotten to such a high ratio versus SBM that market is likely to over correct. At $330/ST, ruminant MBM has a protein value of $345/ST or $380/MT.

US Exports – Proteins

Protein exports were off from July, but still strong for both meat meal and feather meal. Indonesia was the largest buyer of US feather meal, importing 10,258 MT in August. Chile and Canada followed at 6,000 and 3,451 MT, respectively. Indo was also the big meat meal buyer at 3,489 MT followed by Canada and China at 3,780 and 3,489 respectively.

Please contact Ryan Standard at 630.797.5046 or [email protected] with any questions, comments or trading.

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Footnotes All prices are FOB unless otherwise noted.
An asterisk (*) denotes a price correction/adjustment versus the previously reported price.

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