News
29/07/26
US tariffs to cut Brazil's tallow exports
Sao Paulo, 29 July (Argus) — New US tariffs are expected to curb Brazilian beef
tallow exports to its largest overseas market, increasing domestic availability
and potentially channeling more supply into biodiesel production. Brazilian beef
tallow now faces a combined 37.5pc import tariff into the US, comprising a new
12.5pc duty imposed by the administration of President Donald Trump on 24 July
and an existing 25pc tariff on Brazilian imports effective since 22 July. The
feedstock has lost its competitive edge in the US Gulf coast market, which is a
major demand center. Including beef tallow costs, freight costs for cargoes of
up to 5,000 metric tonnes (t), the recently imposed tariffs and the value
generated by the 45Z clean fuel production tax credit — which could be viewed as
an additional cost since it only applies to US domestic feedstocks — imported
Brazilian tallow carries an effective cost of around $1,936/t, according to
Argus calculations. By comparison, US tallow at the US Gulf coast is available
at roughly $1,700/t. Market participants expect only limited volumes of beef
tallow to continue flowing to the US, primarily to producers that can take
advantage of duty drawback provisions. These provisions allow some renewable
diesel and sustainable aviation fuel (SAF) producers to recover duties paid on
imported feedstocks when the finished fuel is subsequently exported to
destinations such as Canada, Europe and other international markets. 1H export
drop Brazilian tallow exports had fallen by approximately 40pc to 141,000t in
the first half of 2026 from the same period in 2025, according to trade ministry
Mdic data. This reflected the impact of previous US import tariffs, which
created market uncertainty and disrupted trade flows to the product's primary
export destination. Brazilian beef tallow prices are trending downward as export
demand weakens following the closure of the US arbitrage. Further losses,
however, are likely to be limited by production costs and slower cattle
slaughter rates after Brazil filled its beef export quota to China, reducing
tallow output. A drop in the price of the feedstock material will be
insufficient to reopen the arbitrage opportunity to the US in the short term,
according to traders. Falling beef tallow prices are likely to boost demand from
biodiesel producers with the flexibility to process waste-based feedstocks.
Tallow in Brazil's central-western Mato Grosso state is currently priced at
R5,150 ($1,009)/t, a discount of R625/t to soybean oil, according to Argus
indicators published on 24 July. But demand for the biofuel is not reacting as
expected, given the backdrop of the conflict between the US and Iran, which has
driven up fuel prices and altered economic dynamics worldwide. External demand
With Brazil facing the highest tariff burden, US biofuel producers could
increasingly turn to alternative sources of tallow, including Australia, New
Zealand, and potentially Europe and other South American countries. More
favorable tariff treatment for Asian suppliers could also support continued
imports of used cooking oil (UCO) into the US, displacing some demand for
tallow. But UCO arbitrage opportunities have narrowed in recent weeks, as the
spread between origin markets and the US Gulf coast has become less attractive
than it was in June. The US Environmental Protection Agency (EPA) finalized its
record-high 2026 and 2027 biomass-based diesel blending mandates in March,
covering renewable diesel, biodiesel, and SAF. The 2026 mandate represents a
60pc increase from the previous year, with targets set at 9.07bn renewable
identification numbers (RINs) for 2026 and 9.20bn RINs for 2027. The
announcement removed much of the uncertainty that had weighed on the industry
throughout 2025 and provided a clearer demand outlook for biofuel feedstocks in
the US. The higher mandates translated into stronger demand for feedstocks such
as tallow on the US Gulf coast, where prices climbed to a record high of
$1,995.81/t on 3 June. Elevated domestic prices opened arbitrage opportunities
for imports during the first half of the year, supporting a recovery in overseas
shipments. Although US tallow imports have yet to exceed their historical highs
in 2026, they have rebounded significantly from lower levels early in the year.
The recovery had boosted confidence among overseas suppliers, who expected
import demand to continue strengthening through the remainder of 2026. But the
new tariff measures have added fresh uncertainty to that outlook, raising
questions about future trade flows and the competitiveness of different
supplying regions. This has renewed attention on Europe as a potential
destination for Brazilian tallow. European traders do not expect the US tariffs
on Brazilian tallow to result in a significant increase in imports into the EU.
Market participants had explored diverting Brazilian volumes to Europe when US
tariffs reached 50pc in the second half of 2025, but shipments were limited,
partly because veterinary approvals, certification requirements and border
controls restricted market access. As a result, only small volumes arrived in
early 2026 despite concerns over a potential influx. The latest 37.5pc tariff is
therefore unlikely to change trade flows materially. Although Spain's RED III
implementation is expected to support category 3 demand from 2027 by rewarding
greenhouse gas emissions savings and leaving category 3 outside the 1.7pc Annex
IX Part B cap, traders said freight costs, high energy prices and regulatory
hurdles continue to prevent a viable Brazil-Europe arbitrage. Some market
participants instead expect lower US imports from Brazil to support European
exports to the US. Most European suppliers to the US do not expect an immediate
impact from the latest tariff measures, noting it is too early to assess any
shift in trade flows. Under EU animal-by-product rules, tallow is classified
into categories 1, 2 and 3. Categories 1 and 2 are recognized as waste
feedstocks under RED III Annex 9 Part B, while category 3, although not listed
under Annex 9, remains an established biofuel feedstock. Typically, lower-grade
category 3 tallow with 10-15pc free fatty acid (FFA) content is exported to the
US, while higher-quality material with 5pc FFA or below is consumed within
Europe. By Natalia Dalle Cort, Beatriz Pacheco, Anna Prokhorova and Jamuna
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