Over the last two months the Bleachable Fancy Tallow, Choice White Grease and Yellow grease markets have fallen 16 percent. The price slide comes as a result of heavy supplies in the market and weak end of year demand. The downturn has been exacerbated by a lack of biodiesel demand. While it’s not unusual for the animal fat market to see autumnal weakness, this year has seen especially sharp declines. Compared to the prior three year average the Chicago Packer BFT price fell double the amount in September, relative to August this year. For the Missouri River CWG market, the prior three-year average was a drop of 3/100th of a cent, this year the drop was just shy of three cents. The pronounced declines in the market can be attributed to the heavy supply in the market. Hog slaughter in September and October have averaged 6.6 percent above 2018 levels. For the weeks following the Labor Day holiday, hog slaughter has averaged 2.66 million head per week. Cattle slaughter, while near even with 2018, is 2.5 percent above the prior three-year average at 645,600 head per week since the week ending September 7th.

While animal fat prices have fallen nearby soybean oil prices have increased 7 percent and corn 8 percent. This should help to establish a floor in the market, but well bought nearby positions for export and seasonal run downs in inventory from the oleochemical sector are likely to keep the downward momentum in the market rolling. In previous years the biodiesel industry has helped to soften the downside of the market, but this year has seen little interest from that sector due to poor production economics tied to low RIN prices and the continued lack of a blenders tax credit.

The two commodities in the low carbon-intensity (Low CI) market that have been immune to the price pressure are used cooking oil (UCO) and tech tallow. Despite the sinking animal fat prices, UCO prices have remained firm due to strong demand from the renewable diesel sector as well as demand from the European market for double counting credits. The LCFS market gives a premium to fuel produced from UCO. Technical tallow, which is limited in supply relative to the other animal fat markets, has seen strong demand from the renewable diesel sector as well as coprocessors needing premium feedstocks.