Tallow feels the squeeze
14 September 2017
Australian tallow prices have been under significant downward pressure since the beginning of the year. This has been largely due to the downturn in global palm oil prices and lack of demand from Singapore for biofuel production, as biofuel mandates stipulated in the US remain unchanged.
Palm oil prices have declined following an increase in global production, as the El Nino conditions affecting south-east Asia (the largest palm oil production region in the world) eased. Additionally, competition from the US have pressured tallow prices, as US cattle slaughter recovers and soybean production increases in North and South America.
During August, prices for 4% FFA tallow dropped 25% from year-ago levels, averaging $624/tonne ex-works and represents a 37% decline from where prices peaked in February. Meanwhile, 2% FFA tallow eased 26% from August last year, averaging $642/tonne ex-works. 1% FFA tallow averaged $680/tonne, also 25% ($225/tonne) lower year-on-year.
However, the downward slide seems to have slowed in August, with 4% FFA prices for the month remaining steady with July levels. In August, 2% FFA registered a 2% decline from July, while 1% FFA recorded a 5% increase from the previous month.
Reports suggest the recent stabilisation of the market has been underpinned by the resumption of steady trade in the oleo and industrial markets, particularly with some more traditional tallow users such as China, Pakistan and Nigeria. Going forward, Australian tallow prices are expected to remain in check with the global palm oil market.
Recent reports from the Indonesian Palm Oil Producers Association indicate that, together with the Indonesian government, development will focus on lifting the productivity of privately held palm plantations (which account for 40% of palm oil producers in Indonesia) to increase production.
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