There were no changes in the Australian market this week for domestic or export pricing. Sellers are optimistic that prices can move incrementally higher in the next few weeks, possibly $5 to $10 on the basis of tightening supplies in a few local markets, but exporters are facing some strong headwinds by way of cheap palm stearin out of Malaysia, $535 FOB. Cattle slaughter out of both NSW and Victoria were sharply lower this past week. Sources have also reported that demand from the international biofuels market has weakened as buyers are starting to shift away from tallow in search of cheaper alternatives. These sources were non-committal as to which feedstocks may be displacing tallow, but suggestions have ranged from UCO out of China to palm and palm derivatives from the SEA market.

Export values for fat out of the New Zealand market are up in terms of NZ$ due to a continued rise in the US$ against the NZ$. With the NZ market in the midst of mid-winter tightness, spot availability for fat is near zero, but those with some liquidity have reported prices for BFT 4% in the NZ$845 – 880 range.

European prices have come under pressure this week as economic uncertainty roils the markets. On Monday, Brent crude oil futures for August dropped 9%, before regaining about half of those losses through this week. UCO prices have been quoted in a range of €640 – 655 DDP. Cat 1 tallow prices have been reported €450 – 465 DDP. Prices for Cat 3 are unchanged, but sources have suggested values are under pressure due to the sinking palm market.

North American exports remain fairly quiet with not much action reported. Tallow prices have drifted lower along with cheaper local prices. Tech tallow out of the Gulf market is in the $680 – 700 range. Sources have reported that buyers in Mexico continue to leverage cheaper palm for cheaper tallow prices.

Tech tallow prices in the US interior have dropped $0.02/lb or $44/MT in the last week. Sellers had reported difficulty in finding demand for some extra product that was available for the late July/early August position at the previous price of $0.3100/lb or $683/MT. Trading was done this week at $0.2900 or $639/MT. BFT remains at $0.2800 lb or $617/MT. Buyers seem to be seeing weakness on the horizon and aren’t willing to book product more than a few weeks out.

The biodiesel industry continues to be squeezed by poor macros with sinking oil markets and declining credits. The California Low Carbon Fuel Standard (LCFS) credits are down 10% in the last week and B15 RIN prices are down 7.5% over the last 4 weeks. Heating oil values had traded consistently weaker since the start the month before seeing some stabilization over the last two days. As a result, feedstock buyers have held a firm stance on lower prices for feedstock and the availability has been such that sellers have had to acquiesce.

Distillers corn oil supply in particular has been heavy with national production numbers of over 8 million pounds per day (3639 MT/day) consistently coming out of the ethanol industry. Values have come off around 16% over the last four weeks or close to $0.004/lb or $100/MT. With prices now trading in the neighborhood of $0.24/lb FOB or $530/MT, buyers have been able to pull the YG/UCO and CWG prices lower. The feed market hasn’t offered an alternative demand sector for the sellers as cash corn has a fat value of $0.2050 to $0.2375/lb ($450 – 525/MT) at 300 to 350%.

US Exports – Fats

Fat exports for the Jan – May period at 320,186 MT are the lowest on record dating back to 2008. Total fat exports for May were off 4.4 TMT compared to April, but there were a number of products that saw increases from April. The big drop came from the yellow grease market, which saw a 11.3 TMT drop in tonnage exported relative to April. The main destinations for yellow grease were Mexico at 6.2 TMT, UK at 3.1 TMT and Germany at 2.1 TMT. The German market imported 16 TMT of yellow grease in April.

Inedible tallow exports were up by 4.3 TMT compared to April. Exports of US inedible tallow were primarily destined for Mexico at 15.3 TMT, Morocco at 3 TMT, Turkey at 2.7 TMT and Canada at 1.3 TMT. Year to date, Mexico has accounted for 70% of US inedible tallow exports. During the same time period in 2009, Mexico accounted for just over 15%. Inedible tallow exports during the Jan – May period of 2015 are 17.7% of what they were during the same time period in 2009.

Animal Proteins – International

Indonesia remains somewhat quiet, but sources have reported there is interest in the market ahead of the shut down for the Eid al Fitr holiday. There has been some activity for MBM at higher prices $520 – 535 with sellers pushing for $540 – 545. Merchandisers moving product into Taiwan have reported sales at $535 – 545. Bids out of China have been steady to lower, with buyers trying to leverage bearish Chinese economic news into lower MBM prices. Sellers are seeing prices $30 to $40 higher into Indonesia and Taiwan and aren’t have to take the lower numbers out of China due to tighter supplies in the Australian and New Zealand markets.

Tighter kills in the south of Australia have translated into higher prices for local MBM while strong demand out of Taiwan has pushed export prices higher. The topside of the market is up as much as AUS$50, but due to the stronger US$, the increase would equate to US$25. The currency devaluation has helped push feather meal prices higher with trading reported AUS$600 – 650 DCT. Despite the sinking AUS$, prices for pet grade PBM traded sideways, but in a more narrow range. Cheaper US material continues to create difficulty for the Australian exporters.

Values out of NZ are higher on continued weakness in the NZ$ exchange rate. The US$ was worth around NZ$1.30 at the beginning of May this year, but has increased to NZ$1.50 this week. The $0.2000 swing equates to a 13.5% loss in currency valuation over the course of the last 10 weeks for New Zealanders. Sellers have adjusted prices accordingly, but have commented that US$ equivalent remains mostly steady. Product is tight with kills and production very low during the winter season.

US exports prices are up across the board. The biggest jump was in the poultry meal market, which saw increases as much as $200 compared the previous trading level. Sales were reported in a range, $730 – 780 this week. Feather meal trading was done at $550 – 560 and feed grade PBM was done at $600 – 625. Sources have reported that AI related fears have been calmed and buyers are anxious to get material on the books for the peak aqua season.

The local US market has gotten a boost this week in the ruminant MBM market. Sellers are starting to benefit from favorable ratios to soybean meal and have pushed prices up $10 to $20 compared to last week. The MBM to SBM ratio had gotten as low as 82% last week, which prompted feed buyers to step in and increase their MBM usage. Prices have been trading in a range of $300 – 310/ST ($330 – 342/MT) FOB.

Poultry by product meal supplies are still very heavy, but prices have started to rise. Last week’s $400 – $425/ST has become a $425 – 485/ST this week. Some buyers have taken note of the value and are increasing their intake.

Looking ahead, there is optimism from the sell side for higher prices. Sellers are anticipating an assist from the bean meal market, which is on its way back up this morning. With that stated, no one is overly bullish, rather many are prognosticating a $5 to $10 increase per week as MBM gets back into line with SBM.

US Exports – Proteins

Feather meal export tonnage was consistent with export numbers from April. Exporters reported 9,440 MT in May and 9,457 in April. The primary destinations for the exports were Indonesia at 5.0 TMT, Chile at 2.2 TMT and Canada at 1.7 TMT. Inedible meat meal tankage exports we up by 5.5 TMT from April. The main destinations were Indonesia at 11.5 TMT, China at 4.0, Canada at 3.1 TMT and Mexico at 1.9 TMT.

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