Brazil 1Q tallow exports triple on long-term contracts
Brazilian beef tallow exports totaled 73,930 metric tonnes (t) in the first quarter, a three-fold increase from the same three-month period in 2023 on rising demand.
Almost 93pc of outflows between January and March were shipped to the US, according to data from Brazil's trade ministry.
Long-term contracts explain the rising flow of exports, even though spot market arbitrage was closed throughout the first quarter (see chart). The price of tallow in the Paranagua and Santos ports was $960/t fob on 19 April, keeping the arbitrage closed to US Gulf coast buyers, where the reference product was at $901/t on a delivered inland basis.
Brazilian tallow is also negotiated at a premium against soybean oil, which closed at $882/t fob Paranagua on 19 April. This scenario has been observed since the 1 December 2023 start of Argus' tallow export price assessment.
Historically, vegetable oil in Brazil was traded at a discount to tallow, but strong demand has boosted the price of animal fat. Some biodiesel plants have been purchasing used cooking oil (UCO) or pork fat as an alternative.
In 2023, there were doubts about whether the outflow of tallow from Brazil would be constant. Market participants now believe that the 2024 start of operations at new renewable diesel refineries in the US should sustain exports.
Local suppliers that have already signed supply guarantee contracts — some up to three years — with American buyers are also considering export opportunities with Asia, including a new renewable diesel plant in Singapore that could receive Brazilian cargoes.
Expansion projects are propelling US demand, including work that would bring capacity at Marathon Petroleum's Martinez Renewables plants in California to 2.35mn m³/y (40,750 b/d)and the Phillips 66 Rodeo unit in northern Californiato 3mn m³/y. These and other new projects will increase annual US demand for tallow by 5mn t.
Maintenance on the horizon
Maintenance at US refineries has Brazilian sellers bracing for a short-term drop in prices. Between May and June the Diamond Green Diesel (DGD) unit in Port Arthur, Texas, will shut down for maintenance, a stoppage that could impact demand for Brazilian inputs.
Market participants have already observed a slight increase in domestic tallow supply, a change they attribute to maintenance at DGD.
The advance of the soybean crop in Argentina is also expected to increase the supply of feedstocks to North American plants, as some refineries are returning to soybean oil after a hiatus of several years. The soybean oil quote on the Chicago Board of Trade (CBOT) is an important reference for the price of tallow.
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Brazil to import rice due to southern floods
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BNDES vai auxiliar vítimas no Rio Grande do Sul
BNDES vai auxiliar vítimas no Rio Grande do Sul
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Floods delay, damage Brazil’s Rio Grande do Sul crops
Floods delay, damage Brazil’s Rio Grande do Sul crops
Sao Paulo, 10 May (Argus) — The unprecedented floods that have hit Brazil's Rio Grande do Sul starting on 29 April challenged the state's harvest progress and caused concerns related to crops conditions. The state leads Brazil's rice and summer corn production and is expected to be the second-largest soybean producer in the 2023-24 crop. Harvesting works for oilseed, corn and rice were approaching their final stretches when rainfall intensified. Rains have halted and in some cases completely paralyzed activities, while also ruining some crops. Soybeans Rio Grande do Sul's 2023-24 soybean crop is estimated at 22.2mn metric tonnes (t) by regional rural agency Emater-RS, while national supply company Conab expects 21.9mn t. Both forecasts would be a record for the state, which would become the season's second-largest oilseed producer. Rio Grande do Sul would account for approximately 15pc of Brazil's soybean production. 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Storage units were also damaged, which may lead to cuts in a portion of production already counted as safe. Farmers say that grain quality in the latest harvested areas is unsuitable and they have given up harvesting other remaining crops, as that has become economically unfeasible. The high humidity levels of these soybeans reduce their profitability considerably, hardly covering their production costs. For the remaining 22pc still on fields, Emater-RS projects losses of 20-100pc. The agency has yet to officially revise downwards its 3,329 kg/ha yield estimate, but expects its outlook to decrease. Rice Rio Grande do Sul is Brazil's largest rice producer and should account for over 70pc of the national output this season, according to Conab data. The progress of rice harvesting was severely compromised by the heavy rainfall, with Conab estimating that works remain halted at 83pc since 28 April. The location of remaining areas is another factor weighing on the delay. 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The rains and floods in the state have left at least 113 dead, 146 people missing and more than 165,000 people displaced, according to the civil defense. By Nathalia Giannetti Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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