Investing in any business is always an ongoing process. So is devoting resources to an entire industry. This philosophy was the focus at the Australian Renderers Association (ARA) 11th International Symposium held in late July in Sydney, Australia. Whether it was the city’s appeal or the topic of discussion, a record 235 delegates, including many from faraway lands such as Europe, South America, and the United States, were drawn to the two day meeting.
Dorab Mistry, Godrej International, got the symposium underway with an outlook for vegetable oil and tallow markets. Although tallow has been banned in India for the last 30 years, that has recently changed with the increasing interest in biodiesel. Tallow has received preferential treatment because of its greenhouse gas benefits. Biodiesel produced from tallow has lower emissions than that made from other oils and fats.
As for world vegetable oil markets, palm trees are producing at “great velocity” this year and with an expansion in acreage over the past few years, Mistry is predicting a sizeable palm oil market. In Malaysia, crude palm oil is expected to exceed 19 million metric tons in 2011, two million more than last year. In Indonesia, palm oil production will surpass 25.5 million metric tons, three million more than in 2010. Mistry estimated world palm oil production will be at least six million metric tons more this year than last.
“I won’t be surprised, though, if I have to raise my figure by my next speech in September to 6.5 million,” he stated. Figures for other world vegetable oils shouldn’t be as dramatic, but all should still be up, including soybeans, which Mistry forecasts the crush to be up 12 million metric tons in 2011 over 2010 resulting in oil production to be up two million metric tons.
Mistry explained the “repercussions” of the U.S. renewable fuel standard is increasing biodiesel production. What is surprising, though, is that soybean oil use is staying “stubbornly” at 51 to 52 percent of all feedstocks, meaning producers are turning to other oils, especially tallow and used cooking oil. This demand is driving up animal fat prices and keeping soybean prices steady. Another world event that could drive animal fat prices even higher is the European Union’s (EU’s) conclusion on indirect land use change (ILUC). Although recently postponed, a decision is expected by the end of the year and “all eyes are watching,” Mistry warned. ILUC was determined by researchers and non-government organizations to be when a virgin or degraded forest has been converted to harvested land and causes a change in the land’s use it is now creating a carbon footprint instead of a carbon sync. Mistry said this is a dry but important topic that should be closely watched by renderers.
Current soybean prices will hold because of biodiesel demand in Brazil, and tallow and grease prices will be at a premium to palm oil because of biodiesel use. However, Mistry stipulated that if the EU’s ILUC ruling is detrimental to palm oil, “all bets will be off for tallow prices.” He said renderers should be thankful for biodiesel.
Jo de Roover, Oleon, presented the outlook for tallow from an EU perspective, especially for oleochemicals, which are the first victims when tallow prices increase. Currently, EU oleochemical producers cannot source tallow from the United States or Canada due to the bovine spongiform encephalopathy (BSE) situation that arose in those countries in 2003/2004 so 95 percent of tallow comes from EU countries. Australian tallow cannot be sourced because it has been deemed to not follow European rules.
Other threats to EU oleochemical producers are that EU tallow prices exploded after subsidies for biodiesel were put in place and the availability of tallow in the EU is not growing, but is in fact decreasing because of stable meat production, slaughter, and consumption rates. Switching from tallow to palm oil is not an option for oleochemicals because of the chemical make-up of palm oil.
Frank Ji, Gardner Smith, gave an overview of China’s demand for rendered products. As for vegetable oils, the country’s total oil crop output in 2010 was 32 million metric tons, up three percent, with 2011 predictions remaining flat. As for imports, China brought in 55 million metric tons of soybeans in 2010, up nearly 29 percent, while soy oil imports dropped 44 percent to 1.3 million metric tons. There is an upward trend this year with the country already importing over 351,000 metric tons of soy oil through the first five months of this year, an 82 percent increase.
China’s total meat production in 2010 was reported at 79 million metric tons, up 3.6 percent from 2009, of which pork accounted for 50.7 million metric tons, up 3.7 percent, and beef at 6.5 million metric tons, up 2.7 percent. Total aquaculture production was 53.6 million metric tons in 2010, up 4.9 percent. The price of live hogs, meat, and feedstuffs has increased in the first half of 2011 and the feed industry is showing strong demand for corn, barley, and oilseed protein meals.
On the rendered products side of business, in the last eight years, China has imported an average of 327,000 metric tons of tallow per year; however, the forecast for 2011 is 285,000 metric tons, mainly from Australia and New Zealand, due to more availability of locally produced tallow. Soap production accounts for 76 percent of tallow use with oleochemicals taking 13 percent because the industry relies more on palm stearine. China’s soap output in 2010 was 970,000 million metric tons, up from 703,000 million metric tons in 2003.
Ji stated that China introduced a food safety law in June 2009 resulting in more tallow from the country’s food sector going into industrial uses and more dealers collecting local fats and oils and setting up plants near end users. In addition, local tallow prices are more competitive than Australian and New Zealand prices because they are not subject to import duties of 17 percent, and delivery time is much shorter, usually two weeks for local tallow versus up to two months for importation. Also benefiting local tallow producers is the easier communication between buyer and seller. Ji estimated China’s tallow production capacity at 200,000 metric tons and believes it will only go higher.
China could begin importing tallow from Canada, banned since 2003 due to BSE, as early as this August, while U.S. authorities are still working on finalizing import requirements. Ji said China has never lifted its ban on EU tallow and except for a small volume from Uruguay, does not import tallow from Argentina or Brazil.
Ji highlighted the country’s meat and bone meal imports, showing 130,000 metric tons was brought in during 2010, up from 85,000 metric tons in 2009. He reported Australian imports at 70,000 metric tons, Uruguay at about 50,000 metric tons, and U.S. product at around 10,000 metric tons. Ji predicted imports will increase due to demand by the poultry industry.
Guilhurme Melo, Rabobank Brazil, addressed the cattle and rendering markets in South America, which account for 26 percent of world beef production. Brazil produces 62 percent of South America’s beef, Argentina 21 percent, Uruguay five percent, and other countries make up the balance of 14 percent. The cattle herd in Argentina has been affected by drought the last few years, resulting in a sharp drop in beef production, but herd rebuilding seems to be underway with 47.7 million heads of cattle reported in 2010.
As for Brazil, its cattle herd has grown steadily over the past 30 years to 176 million heads of cattle in 2010. The growth is due to expansion into new areas of the country and a rise in population and income leading to more beef consumption and higher prices. Technology has also helped to enhance productivity in Brazil, causing the cattle herd to nearly double since 1970 on basically the same pasture land. But as with Argentina, the country recently saw a herd liquidation and is also now showing signs of rebuilding.
Melo stated that Brazil has led the growth in South America’s rendering industry, which in total produces four million metric tons of animal proteins and two million metric tons of fats and greases. Brazil’s market share is worth $1.9 billion (U.S.) with fats and greases accounting for the majority of that at $1.2 billion primarily used in biodiesel and hygiene products. Animal meals account for $700,000 and are mostly used in non-ruminant animal nutrition.
Rendering companies are similar to those in Australia and the United States, with a mixture of integrated renderers with slaughter facilities and independent renderers.
Delving further into Brazil’s rendering industry was Alexandre Ferreira, ProFat Brazil, who reported the country has 512 federally inspected rendering plants – 169 independent processors and 343 integrated to slaughter operations, 80 percent of which are not continuous or automated plants. Those facilities produced 3.3 million metric tons of rendered products, with less than two percent exported showing a very strong local market. Of that total, 1.3 million metric tons was meat and bone meal, 836,000 metric tons was tallow, 450,000 metric tons was feather meal, 419,000 metric tons was poultry meal, 252,000 metric tons was poultry fat, 22,000 metric tons was fish meal, and 12,500 metric tons was fish oil.
In 2004, Brazil adopted new sanitary guidelines (IN-15 and IN-34) based on EU standards and a Biodiesel National Program was developed in 2005 creating increasing mandates beginning in 2008 with a two percent biodiesel blend, moving to a four percent in 2009, and a five percent in 2010. Forty percent of Brazil’s tallow goes to biodiesel production, although tallow only accounts for about 15 percent of biodiesel feedstocks; soy oil makes up 80 percent of the feedstocks used.
With the rising costs of production, renderers in Brazil are turning to more efficient technology, but small independent renderers are “terrified,” as Ferreira put it, of the current wave of consolidation by slaughter companies that are then proceeding to build integrated rendering facilities.
Sharing one renderer’s success with investment for growth was Erika Weltzein of Rothsay in Canada. She highlighted the challenges facing a mature rendering industry as being a flat to declining raw material volume due to drop in meat consumption; rising competition for raw materials by waste companies, composters, and biofuels producers; and growing environmental and food safety regulations. Rothsay uses a combination of approaches for sustainable growth, including continuous improvement in processes and finding new and novel uses and markets for rendered products. Weltzein highlighted the renderer’s emergence into biodiesel in 2001 as a new market for the tallow it produces after Canada introduced its feed ban in 1997. Quality has been key in the company’s success in biodiesel, which exceeds all international standards and is so clear it can’t be distinguished from a glass of water. Finding markets for the biodiesel “heavies,” a by-production of biodiesel distillation, over the past year has been another new innovative growth for the Canadian renderer.
Weltzein noted that customers want waste disposal solutions and renderers are well-suited to provide additional services, including collecting organics such as supermarket produce, food production and restaurant food waste, and wastewater sludge. She encouraged renderers to extract maximum value from waste to compete with landfills and composters and highlighted various waste-to-energy technologies, one of which, anaerobic digestion, is ideal for wet materials. Other growth opportunities include add-on services to existing business lines such as servicing and installing grease collection systems, grease trap servicing, and fresh oil delivery.
“Be an environmental solutions provider,” Weltzein said. “Become a waste management partner with the customer.”
Cam Wilkinson, A.J. Bush and Sons of Australia, followed with his strategies for controlling costs. He suggested abattoirs, or slaughter facilities, treat rendering plants as a separate entity and profit center and believes there is potential in making improvements to systems, which then need to be measured, recorded, and monitored. Over the years, A.J. Bush has made several major investments to control costs, such as converting its boilers from coal to natural gas, improving its odor control, and covering its anaerobic ponds to collect biogas. Process efficiency is another investment to help control costs and should involve waste heat evaporators to recover water soluble proteins and reduce wastewater loads, and high temperature finishing to provide a valuable and stable product. Wilkinson emphasized staff training as another cost savings investment as well as quality assurance, occupational health and safety, dewatering equipment, planned maintenance, and having spare parts and equipment on hand to minimize downtime from breakdowns.
Focusing on Australia’s biodiesel industry was Heather Brodie, Biofuels Association of Australia. She said that alternative fuels are not just about climate change, but also fuel security, including interruptions and threats to the global fuel supply, and air quality where vehicle emissions affect human health. Brodie then announced that Australia’s draft carbon tax legislation was released that morning, which includes a questionable modeling by the country’s treasury that anticipates biodiesel will replace more than 75 percent of the country’s fuel. She also revealed that the Australian government just implemented a 10 year excise tax waiver for biodiesel and ethanol.
Day two of the symposium focused on innovation and customer and environmental issues. Bill Trollope, Keith Engineering, began the session with a look at preventing fires in hammer mills, which suffer from a build-up of dust that could lead to a fire with just the right spark. He discussed a new kelly bag/sock that collects dust and is fire resistant, and examined installing a plenum chamber under the hammer mill and metal detection to remove spark potential.
Gwyn Askham, Kemin Australia, addressed measuring meal flow so that liquid antioxidants can be applied properly. He stated that current methods are not accurate but sensors mounted on a “buffer” bin can help control the meal flow by stopping and starting the in-feed and out-feed conveyors dependent on the level of the meal.
David Kassulke, A.J. Bush and Sons, focused on optimal energy consumption in rendering. He said that although some processing methods remain unchanged from 30 years ago, newer procedures and methods achieve more production with higher capacity using less labor, steam, and electric consumption while consistently producing better quality products. Kassulke shared A.J. Bush’s steps in producing more material with less energy, including installing disk dryers and cookers, a twin screw press to mechanically dewater the hydrolyzed materials, and a waste heat evaporator.
Shifting gears to focus on the customer was Mike Rodey, AFB International, who concentrated on the ever-changing pet food industry. He said the current requirements are quality, quality, and quality.
“It’s that simple,” Rodey declared. Renderers need to ensure their proteins and fats are fresh, stable from rancidity, and nutritious. Pet food manufacturers are altering their requests from the basic range of meals and oils, such as meat, poultry, and fish, to more specific species like beef, lamb, veal, chicken, turkey, tuna, salmon, and sardine. There is also an increased focus on security from a contamination point, and Rodey reiterated that quality and safety remain the challenge for renderers.
Mark Caddigan, Bakels Edible Oils New Zealand, said pricing pressure on tallow is becoming a concern for users who are beginning to turn to alternatives. While he is not a fan of biodiesel for a number of reasons, he understands it’s good for renderers as they are seeing increased prices. However, he questioned whether shipping Australian/New Zealand tallow to Asia for conversion to biofuels then shipping it to the United States or Europe is really good for the planet. Caddigan wants to keep pushing tallow as an edible food product for frying fats because it is stable and economic, as a pastry and cake fat, and as a specialty fat such as a butter substitute.
Highlighting the changing dynamics of protein markets was George Schinard, Gavilon Australia, who recapped the changing global regulation climate over the past 10 years, mostly due to BSE. Although Australia is classified as BSE-free, Japan, Australia’s second largest importer of meat and bone meal in 2000, still remains closed to all meat and bone meal. However, two other major markets – China and Indonesia – have now become Australia’s top two importers, but renderers down under are facing increased competition as these countries begin opening their borders to proteins from other parts of the world. Going forward, Schinard sees a number of challenges regarding market regulations, but encouraged renderers to approach them as opportunities.
Environmental issues wrapped up the symposium, starting with heat recovery applications presented by Graeme Don, Rendertech. He clarified that rendering is an energy intensive process and focused on recapturing waste energy, such as steam, as an option to improve energy efficiency. Newton Samarakoon, Energy Action, shared his experience with anaerobic digesters as a way to transform organic waste into a combustible gas.
August 2011 RENDER | back