Strong US demand has helped prop up Brazilian beef tallow prices, supporting the market during a seasonal drop in consumption among domestic biodiesel plants.
Beef tallow exports from Brazil in May reached 10,000 metric tonnes (t), double the volumes shipped in the same month last year. Foreign appetite for the raw material was reflected in the price in Sao Paulo state, which reached an average premium of R71/t ($14.50/t), on a cif basis, in relation to soybean oil since the start of the year. The product traded at an average discount of R650/t in the same period in 2022, according to the Argus indicator. Tallow prices closed at R4,175/t on 9 June, compared with R4,200/t for vegetable oil.
Animal fat quotes in the domestic market usually drop in April and September because of seasonal slowdowns in the biodiesel and personal hygiene industries. As for biofuel, lower temperatures increase the chances of fat solidification because of the cold filter plugging point (CFPP) — the lowest temperature at which a given volume of biodiesel still passes through a standardized filtration device in a specified time.
Given the growing appeal of advanced biofuels such as renewable diesel and sustainable aviation fuel (SAF), North American and European companies are searching for feedstock to meet demand, especially in the Southern Cone.
To avoid a demand clash between fuel and food, regulations in the largest renewable fuel markets encourage using non-edible products, such as animal fat residue, and discourage using edible oils. EU countries that follow the Renewable Energy Directive (RED) are especially careful about issues related to the life cycle of raw materials.
That scenario has prompted more animal protein-producing companies in Brazil to prepare more animal fat for export, aiming to capitalize on market opportunities, notably in the US, market sources tell Argus.
The heated Brazilian tallow market also follows the change in tax collection framework — moving the state-level, VAT-like tax ICMS to a single-phase levy — which increased the cost of acquiring inputs for biofuel outside the plant's state of origin. The change has led many Brazilian suppliers to apply for certifications allowing them to export and supply products to the soap industry.
Brazil becomes a net exporter
Cumulative animal fat shipments from Brazil in January-May reached 41,000t, from 27,000t in the same period last year, according to preliminary trade ministry data.
The ports of Santos, in Sao Paulo state, and Rio Grande, in Rio Grande do Sul, are outliers in tallow shipments to foreign markets, according to trade ministry data between 2021-23 compiled by Argus. Tallow prices on a fob basis at Santos fluctuated between $960-1,200/t in the week ended 8 June, according to sources.
The figures suggest that Brazil is consolidating its role in a global market just months after entering the trade. The change is a reversal of the country's historical role as a net importer, a position based on a domestic animal recycling sector focused on producing animal feed instead of fat, which is consumed mainly by the biodiesel and hygiene and cleaning markets.
Tallow imports totaled 26,000t in January-May, around half of exported volumes. Exports throughout 2022 totaled 81,000t, while imports reached 75,000t. In 2021, beef tallow imports totaled 78,000t and exports 22,000t.
Because beef tallow solidifies at cold temperatures, transport and tanking infrastructure require heating components that can pose a logistical challenge. Suppliers with their own tank structure or captive space at ports have greater negotiating power with foreign buyers, one exporter told Argus.
