Volatility within Crude and Refined Glycerin May Present Opportunity

The crude and refined markets both appeared to bottom recently during the pandemic.  Export values for both products have been climbing in recent weeks and are working to underpin crude values.  Refined prices had been rising with the economic recovery but are now in flux again.

A large commodity conglomerate, according to multiple reports, has started forcing glycerin prices lower.  Market participants are reporting refined values for both Kosher and tallow moving lower while others are saying prices will quickly recoup and continue higher.  This could be a replay of what was seen early on in the pandemic when glycerin sellers found the market to be somewhat bifurcated between the pet food industry and the oleochemical industry.  The pet industry and grocery markets had seen strong demand for glycerin their sectors, but glycerin tied to restaurant and some oleochemical applications had been much weaker.

Crude glycerin prices have been rising in recent weeks as export demand improved, but the volatility playing out in various areas seems to be limiting any continuation in higher pricing this week. The crude export market should be acting as a five to six cents FOB floor in pricing for many producers. That floor may only apply to biodiesel producers that are near export terminals. The further inland the plant, the lower floor will likely become.  Freeze control purchases from the coal industry are reportedly generating values in the 9 to 10 cents delivered range which would likely net back to 6/ 6.5 cents FOB for certain producers.  There has also been talk of pricing at 8 cents FOB from at least one very credible source.  However, The Jacobsen has not been able to confirm this price or various other reports that indicate the market could be as low as three to four cents per pound.

Look for the market to remain volatile until there is more clarity to what is taking place in the food and oleochemical sectors.  If the export markets remain firm, which they appear to be, this should limit some of the market volatility moving forward.  However, the likelihood for below market spot purchases in the crude sector could be greater at the moment, given the volatility if an aggressive seller is found.  Expect crude prices to continue higher as biodiesel production slows and freeze control buying ramps higher.