Global tallow trade is facing shifting dynamics in 2026, driven by US policy.
Washington's 50pc tariff on Brazilian imports — combined with no firm decision on halving renewable identification number (RINs) credits for foreign feedstocks and the 45Z tax credit favouring North American material — have curbed tallow flows to the US and prompted sellers to seek alternative markets.
Brazilian exporters with EU-compliant certification are positioning themselves for potential shipments to Europe early next year, while Australian suppliers are weighing opportunities in the face of high freight costs and volatile arbitrage conditions.
In Europe, short-term dynamics point to continued price pressure. Surplus concerns stem from weaker US buying, expected Brazilian arrivals early in 2026, possible Australian flows, and steady domestic supply from seasonal slaughter.
The EU's animal-by-products regulation divides tallow into three categories based on disease risk. Categories 1 and 2 — listed in Annex IX Part B of the Renewable Energy Directive (RED III) — benefit from double-counting in some countries and are mainly supplied for tallow methyl ester (TME) production.
Category 3, excluded from Annex IX, remains a key feedstock for hydrotreated vegetable oil (HVO) Class III and sustainable aviation fuel (SAF) production but faces compliance hurdles: the Netherlands plans to apply a 0.5 factor from 2026, France plans caps on category 3 tallow from 2027, and Germany excludes category 3 entirely from its greenhouse gas (GHG) reduction quota.
For now, Nordic countries, France, Italy and Spain continue to use a large share of category 3 volumes. But upcoming RED III transpositions into domestic law are creating uneven demand signals for 2026. Germany and the Netherlands are limiting category 3 usage, while southern and Nordic markets remain active buyers. Values may firm late in the first quarter next year on seasonal tightening and higher RED III targets. But near-term price pressure is likely to persist as buyers hold back amid uncertainty over imports.
In Brazil, demand for tallow cooled in the second half of November on a seasonal drop in diesel consumption, but prices were high compared with Australia and too steep to support strong exports to other markets.
The US used to be the main market for Brazilian tallow, taking 96pc of exports in 2024, according to the trade and development ministry. But exports dropped from September after the 50pc tariff on Brazilian imports took effect in August.
If the tariffs stay in place, most of Brazil's tallow output in 2026 will be absorbed by the domestic biodiesel industry, which has already raised its tallow use from 5pc in July to 9.5pc in October. But exporters are eyeing Europe as an alternative. Although prevailing arbitrage economics are unfavourable, animal fats tend to track soybean oil in Brazil, and a fall in soy oil prices next year could open the trade.
In Australia, the tallow market will likely stay volatile next year amid offshore policy uncertainty and potential domestic biofuel developments. US demand for Australian tallow has slumped since August as the feedstock loses tax credit eligibility from 2026. But reports the US EPA may indefinitely delay halving RINs for biofuels made with foreign feedstocks have renewed some US interest.
Singapore will likely remain the most stable outlet for Australian tallow, taking 27pc of exports in the year to September 2025, Australian export data show. Further Asian growth hinges on delivered cost competitiveness with other feedstocks. Increased SAF production could also boost regional feedstock demand, including tallow, if pricing stays competitive.
Australia's A$1.1bn ($730mn) Cleaner Fuels Programme will launch mid-2026. Industry hopes a federal biofuels mandate will follow, as previous aid has focused on supply grants. A mandate would provide certainty for investment, with guaranteed offtake typically required for final project decisions.
Tallow supply should remain ample, with a stable herd, slaughter rates up nearly 10pc year-on-year, and feedlot capacity at a record 1.7mn head.
