“No matter where you are in the roller coaster of life, it’s important to keep a good sense of humor,” advised former U.S. Air Force Captain Scott O’Grady as he spoke at the National Renderers Association (NRA) 78th Annual Convention welcome luncheon in Tucson, AZ, in October. Addressing a record attendance of over 300 rendering industry representatives, O’Grady shared his story of survival in hostile territory after the F-16 he was piloting was shot down while helping enforce the North Atlantic Treaty Organization, or NATO, no-fly zone policy in the skies over Bosnia in 1995. He evaded capture by the Bosnian Serbs for six days before being rescued by the U.S. Marine Corps.
O’Grady is a very patriotic person and learned to appreciate three things while he eluded the enemy: his faith in God, love of family, and love of his country. “It ended up being the most positive six days of my life,” he declared. After giving 12 years of service to the U.S. military, O’Grady is now taking his love for country a step further by running for Texas’ District 8 Senate seat, which includes portions of Dallas and Collin Counties.
“Leadership is taking charge and doing what is right,” stated O’Grady, who is concerned about the economic future of his country and the rules of military engagement that are currently driven by political leadership. He noted that military generals must now sometimes consult lawyers before making crucial decisions, and encouraged renderers to get involved in the current presidential election.
Another inspirational, and humorous, speaker at the NRA convention was Mark Pearson, host of Iowa Public Television show “Market to Market,” who reported that the number one issue in the United States is too much government debt.
“We have been spending beyond our means for a long time, since 1985,” said Pearson, yet the world is worried about Greece’s government defaulting when that country’s economy is only one half of one percent of the world’s economy. He predicted there will not be a double dip recession in the United States due to indicators showing a slow recovery; warned that low interest rates, which should remain low for the next two years, hurt society because companies hold on to their cash; and pointed out that 10 “lousy” years in the stock market traditionally have been followed by 10 good years.
Pearson expects corn prices to remain high and ethanol demand to continue at current levels even if subsidies expire. Oil refiners have remodeled 1,000 refineries to accommodate ethanol and they like it because it can be transported via pipeline. Pearson then warned renderers to keep an eye on the rumblings in Saudi Arabia over the next 30 months.
Mike Miller, chief operating officer, Cattle-Fax, projected no expansion in the cattle industry any time soon due to the severe drought in Texas and other southern states. However, some level of growth is expected in the dairy industry over the next several years. He showed that steer and heifer slaughter is down 200,000 this year and is forecasted to be down 300,000 head in 2012 with a bigger decline of 600,000 head in 2013, but only if rains arrive in Texas and the industry begins to restock herds.
Offsetting the drop in cow numbers is increased carcass weights, which are up an average of six pounds a year since 1975 to 775 pounds in 2011, a trend that will continue, according to Miller. The beef industry is also enjoying record level exports due to the weakened U.S. dollar, with 75 percent of U.S. beef exports going to five countries: Mexico, Canada, South Korea, Japan, and Vietnam. Contrary to popular belief, the United States’ biggest export competitor is Australia, not Brazil as some would think.
On pork production, 2009 and 2010 saw declining numbers, the first time since the 1980s, but some growth is expected in 2011. Broiler production dropped in 2009, first time since the 1970s, but is up slightly in 2010 and 2011. Miller said meat producers are relying more and more on exports, which creates a big risk: in 2011, pork exports are up 22 percent, broiler exports up 19 percent, and beef exports up 11 percent.
Joel Newman, president and chief executive officer, American Feed Industry Association (AFIA), highlighted the Food Safety Modernization Act (FSMA) as the key issue being addressed by AFIA.
“The FSMA is significant because it affects all of the feed industry, from processing and manufacturing to pet food and ingredients, imports, and transportation,” stated Newman, who credited Steve Kopperud, Policy Directions and lobbyist for the NRA, for getting language included in the act that FDA may exempt or modify requirements for facilities that are “solely engaged in the production of food for animals other than man.”
Newman said NRA and AFIA are ahead of the curve with certification programs such as the Animal Protein Producers Industry (APPI) North American Rendering Industry Code of Practice and AFIA Safe Feed/Safe Food, affording opportunity for official recognition of these validation procedures under the regulation.
Rounding out the convention’s guest speakers was Hugh Whaley, U.S. Farmers and Ranchers Alliance, of which NRA is a contributing member. He stated that the alliance is a “long-term movement,” not a campaign, designed to educate and inform about total agriculture production.
“By and large, farmers and ranchers are well respected by the U.S. public, but what they’re concerned about is how farmers and ranchers go about their business,” Whaley reported. “Pesticides, antibiotics, hormones, and GMOs [genetically modified organisms] are the most contentious words consumers are worried about.
“Consumers want technology in their cars, iPads, homes, and televisions, but not in their food,” he continued, adding that consumers have become disconnected from food so farmers and ranchers need to get involved and have their voices heard.
Getting Down to Business
NRA committees met just prior to the convention’s opening session, beginning with the APPI Committee, where it was decided that after 25 years of Salmonella screening testing, recent events along with more stringent food safety requirements make it necessary to offer an alternative testing method, Enterobacteriaceae, or EBAC, to test the rendering process. Dr. David Meeker, senior vice president, NRA Scientific Services, reported that 111 rendering plants are now certified under the Code of Practice, which shows feed manufacturers and government regulators that renderers are committed to producing safe feed ingredients.
The Environmental Committee’s “depressing” news was jointly delivered by Chairman Bob Vogler, Valley Proteins, and Kopperud. Vogler explained various complicated regulations such as the Environmental Protection Agency’s (EPA’s) greenhouse gas (GHG) emissions reporting rule that targets sources capable of emitting 100,000 tons per year of GHG, and a new National Ambient Air Quality Standard for sulfur dioxide emissions that will be difficult, “if not impossible,” to meet. He said modeling will be done in the next three years to demonstrate attainment and may result in existing rendering plants having to retrofit to comply.
Another new EPA rule requires the reporting of hydrogen sulfide in excess of 25,000 pounds in annual toxic release inventories beginning in 2013 for data collected in 2012. And Kopperud reported that EPA is moving ahead with a dioxin risk assessment that will set a dose level for daily exposure, a level that could be exceeded by consuming beef, pork, and dairy. He warned that this effort could lead to prohibiting the use of rendered products as feed ingredients.
“It will be critical to get EPA to back down,” Kopperud stated. NRA is a member of the Food Industry Dioxin Working Group aimed at ensuring any dioxin regulation is based on sound science.
One bit of good news was that EPA has withdrawn its onerous ozone standard after pressure from the business community. However, “guidance” recently issued by the agency indicates plans to expand wetland regulations to virtually any waterway of any type that Vogler said could affect disturbance of wet areas, discharge permits, and spill prevention, control, and countermeasure plans. EPA has also issued a proposed rule that would require costly modifications to cooling water intake structures that affects not only power plants but also industrial facilities.
The Biofuels Committee shifted focus to the impact of the biofuels market on rendered fat prices. Chairman Chuck Neece, Farmers Union Industries, LLC, pointed out that brown grease currently has a value of 28 cents per pound, which was the value of yellow grease one year ago (and now running about 45 cents per pound). He noted that EPA’s Renewal Fuel Standard (RFS) 2 will create a demand for rendered fats through 2015, and that the blender’s biodiesel tax credit and alternative fuel mixture credit both expire at the end of this year. Kopperud chimed in that he believes tax credits and subsidies for biofuels and ethanol are dead and won’t be extended beyond 2011.
On that note, the committee voted to remain neutral on the extension or modification of biofuels tax credits and support biofuel mandates such as the RFS2 that create enough of a demand both in the United States and Canada.
“Laying an additional financial incentive aggravates the market,” commented Moser, adding that the need to renew the tax credits each year creates uncertainty for trading biodiesel as the end of the year and expiring credits are approaching. The NRA Board of Directors agreed with the Biofuels Committee to “remain neutral and abstain from support of extension of biofuels subsidies, but to actively support the continuation of mandates for biomass-based fuels using rendered products.”
International Markets Play Major Role
NRA International Market Development Committee (IMDC) Chairman Mike Gilbert noted that exports have played a role in the current high prices for rendered products. He also pointed out that the rendering industry has become more global as evident by the seven speakers from seven countries on the International Forum agenda. First up was Niels Leth Nielsen, president, European Fat Processors and Renderers Association (EFPRA), who said that EFPRA takes seriously its responsibility with food industry partners and has published a brochure and launched a Web site (www.papinfo.eu) to educate regulators and the general public about processed animal proteins.
Andrew Bennett, president, Australian Renderers Association, recapped changes in the land down under over the past 10 years. Consolidation has been one factor, with 24 meat/rendering establishments closed, 10 companies merged, and 26 acquisitions, with a key player being JBS S.A., which has bought out several companies. He informed audience members that despite the devastating floods of January 2011, Australia’s east coast has been severely impacted by drought over the past 10 years, although cattle numbers haven’t altered too much as animals are just moved around the country. However, sheep numbers have declined significantly, from a high of 118 million head in 2000 to 68 million head in 2010.
As for rendered products, from July 2010 to June 2011 Australia produced 550,000 metric tons (mt) of meat and bone meal, 500,000 mt of tallow, 75,000 mt of poultry by-product meal, 60,000 mt of poultry fat, 60,000 mt of blood meal, 35,000 mt of feather meal, and a small amount of fish meal. Australia’s exports of meat and bone meal and tallow has remained steady over the past five years, with 261,151 mt of meat meal and 353,346 mt of tallow being exported in 2010.
Australia’s biodiesel industry is struggling. Bennett commented that one problem is biodiesel producers are energetic but have failed to consult with feedstock suppliers. One producer anticipated using 45,000 mt of tallow in Western Australia; problem was the region only produces about 42,000 mt per year. Bennett then presented some of the challenges of the Australian rendering industry as being European Union (EU) audits, re-establishing the Philippine market, and the re-entry of non-ruminant meals into Japan. However, the biggest concern for renderers is a $26 per ton carbon tax for those emitting over 25,000 tons of carbon dioxide per year, which includes utility producers and transportation that could possibly pass on those costs to customers.
“Apart from that, everything is fine,” Bennett concluded.
Brazil was the focus of a presentation by Alexandre Ferreira, SINCOBESP, Brazil’s rendering association. He remarked that the country has the second largest population of pets in the world, but was only sixth in feed revenue at $6.25 billion U.S. With only 30 percent of pets consuming pet food, there is opportunity for growth in Brazil. The country’s poultry production has increased ten-fold in the past 30 years and exports about 30 percent of its production. Brazil’s rendering industry has adopted EU regulations.
Kent Swisher, vice president, NRA International Programs, discussed export markets after providing a snapshot of U.S. rendered product production in 2010: 2.2 million metric tons (mmt) of meat and bone meal; 1.5 mmt of inedible tallow; 1.1 mmt of poultry by-product meal; 827,600 mt of edible tallow; 638,300 mt of poultry fat; 603,500 mt of feather meal; 588,300 mt of “other grease”; 569,200 mt of yellow grease; and 130,400 mt of lard. About 14 percent of U.S. protein meal production was exported while 43 percent of animal fat produced was sent overseas.
Globally, Swisher showed that Asian countries have dramatically increased imports of animal protein meals. Over a five year period from 2005 to 2010, Indonesia increased imports 511 percent, Vietnam imports were up 208 percent, China up 177 percent, and Bangladesh up 155 percent. On the down side, Egypt has stopped accepting animal proteins after a high of 110,100 mt was imported in 2005. In an effort to regain this lost market, NRA has hired a consultant for Egypt who has already successfully opened the borders for feather meal.
Animal fats and used cooking oil exports are also enjoying a dramatic growth, primarily for use in biofuels production. Neste Oil’s new renewable fuel facility in Singapore imported over 62,000 mt of tallow from Australia through July until the facility switched to cheaper palm oil. However, two more renewable fuel facilities, one in the United States and one in Rotterdam, the Netherlands, offer opportunities for increased rendered fat usage.
German Davalos, NRA regional director for Latin America, said the largest poultry producer in Mexico, Industrias Bachoco, imports nearly 60 percent, or 100,000 mt, of U.S. animal protein meals exported to Latin America. However, one issue at hand is the Mexican government’s quest to be reclassified as “negligible risk” for bovine spongiform encephalopathy (BSE) by the World Organization for Animal Health, or OIE, in an effort to export beef. Currently, the country is classified as “controlled risk” along with the United States and Canada because Mexico, which does not have BSE, previously imported U.S. meat and bone meal. Mexico won’t reopen its borders to U.S. meat and bone meal because Canada doesn’t import U.S. product and the United States does not import Canadian product. However, poultry feed manufacturers in Mexico want to import more U.S. animal proteins, including meat and bone meal.
Peng Li, NRA regional director for Asia, updated the status of China’s tallow ban from controlled risk countries. Although the ban was lifted in July 2010, it has taken much time to iron out the import requirements for U.S. tallow that are now complete and awaiting signature. Meanwhile, in 2010, China imported 327,000 mt of tallow from Australia, New Zealand, and Uruguay. The biggest task at hand for NRA is reopening more Asian markets for meat and bone meal.
Bruce Ross, Ross Gordon Consultants, reported on the various activities in Europe, including dioxin legislation that has just been introduced (see page 14). Good news in the region is that the European Commission has put a proposal on the table to reauthorize swine and poultry processed animal proteins in swine, poultry, and aqua feeds. Now member countries must provide their input on the proposal.
Ross cleared up some confusion among U.S. and Canadian renderers on whether they can import tallow into the EU for biofuels, which is now authorized under new animal by-products regulations provided a specific marker is added to the tallow.
NRA’s next convention is October 22-26, 2012, in Laguna Niguel, CA.
December 2011 RENDER | back