George Schinard, of Wilmar Gavilon and an Australian Renderers Association director, reviewed the country’s production and consumption of rendered products at the group’s international symposium in late July.
In line with the decline in beef and lamb production from the highs seen in 2014/2015, production of rendered products suffered in 2016 and in the first half of 2017. Poultry and pork rendered products have seen increases but not enough to stem the downward trend in overall production, which was 15 percent lower in 2016 from 2015 levels. The expectation is that 2017 will be at the lowest level in recent years with another 5 percent drop expected from 2016. Based on forward production projections of each meat sector, Australian renderers should see levels start to increase slowly in 2018 and 2019 but will still remain well below the highs of 2015.
Animal Protein Meals
Australia’s animal feed sector produces over 12 million metric tons annually. Rendered products are an important ingredient in feed rations for poultry, pigs, fish, and pets. More than half of the animal proteins produced in Australia are used domestically with 43 percent exported, while 75 percent of tallow production is exported with the rest used in the country for pet food and industrial and edible applications. In years of lower production (2016 and 2017), the percentage of overall local usage increases and vice versa for higher production years (2014 and 2015) with local demand relatively stable.
For meat and bone meal, the top six markets in 2016 took over 80 percent of total Australian exports. Indonesia remains the largest export market for meat and bone meal, which makes up 40 to 45 percent of Indonesia’s imports. Taiwan volumes are fairly consistent year over year. Exports to the United States (US) and Canada have increased with more Australian producers segregating their ovine raw material for the lucrative North American pet food market. China volumes continue to slide predominantly due to market access issues. Some of Australia’s other export markets include the Philippines, Vietnam, Papua New Guinea, the Netherlands, Germany, and Bangladesh.
A similar export market spread is expected for 2017. Indonesia’s percentage could potentially scale back with very competitive pricing from the United States. With less export volume available, there may be an increase into other markets that have limited origins from which to procure product. China’s future market share has the potential for further decline with ongoing market access issues.
For poultry and feather meal, the top six markets took over 95 percent of total exports. Indonesia is once again the largest export market after lifting its avian influenza (AI) ban in May 2015. It has taken more than a year for these volumes to get back to historical levels after a number of Indonesian customers switched to more economical alternatives. Taiwan and Malaysia have had steady growth over the past five years while Thailand continues to grow, although the current system of plant registration is slowing down this expansion. Vietnam volumes have fallen as Australia regained access into the majority of historical markets after AI incidents. The only major historical market that has not lifted its AI ban on Australia is China. This is a significant market the industry is missing out on as it imports over 120,000 metric tons of poultry meal from the United States and New Zealand each year.
The expectation for 2017 is for a similar market spread. Indonesian volumes should remain high while the majority of US exports continue to be shipped into China. Taiwan and Malaysia demand should remain steady and there is potential for an increase to Thailand if market access can be improved to allow greater volume of Australian product into this region.
Australia’s main animal tallows are pure beef tallow, mixed species tallow, and poultry fat. The renewable fuel market in Singapore is by far the largest market, taking 77 percent of all Australian tallow exports in 2016, an exponential increase since 2010. Tallow has an advantage as a renewable fuel feedstock over other competing vegetable oils as it qualifies for additional subsidies and credits under the US renewable fuel structure. Singapore has taken market share largely from China but also from other historical markets like Taiwan, South Korea, and Australia’s own oleochemical and renewable diesel industries. China volumes have continued to drop as values for tallow have been too high compared to competing oils. Exports to Taiwan remain on a downward trend as a number of end users look to switch to alternative cheaper oils. Strict regulations for margarine in Taiwan have caused production to move offshore or an increase in usage of alternative oils to tallow. Korea volumes have remained steady while exports to Pakistan continue to fall.
Many variables will shape how 2017 and beyond look making it difficult to predict. Singapore’s demand for Australian tallow dropped in the first half of 2017 with its recent preference for either alternative feedstocks or tallow from other origins. The result is tallow values have fallen back in line to historical spreads to palm oil. Demand is extremely price sensitive in a lot of applications so as tallow prices fall, there has been previous demand coming back to the market in addition to new demand created. Traditional markets such as the Far East, Africa, Middle East, and the Pacific Islands have all resumed where they left off in 2011 while at the same time there is demand from North America that has historically been a net exporter.
The past couple of years have been extremely challenging for the Australian rendering industry. Raw material volumes have dropped, operating costs have increased, and there have been numerous changes in market access, both good and bad. The remainder of this year and next year are expected to be as difficult, if not more so, but with the work currently being done and future plans being implemented, the future looks very bright.
August 2017 RENDER | back