Palm shades tallow market

The Australian tallow market continued to fade during April, as competition with palm stearin heightens. Tallow serves as an alternative in bio-diesel production to palm stearin and as a result, prices between the two follow a similar trend.

Uncertainty surrounding bio-diesel credits policy in the US, and as consequence, palm stearin prices began to correct in February.

Interestingly, tallow prices actually peaked during January as increased bio-diesel demand stemmed from the US and Singapore. In addition, there was tight Australian cattle supply, decreased slaughter numbers and consequent low production at the same time. However, with those benefits subsiding, the weight of the price correction in palm oil prices has begun to take effect.

Reported in the most recent MLA Co-product report, the April average for 1% FFA tallow averaged $947/tonne, down $93/tonne from March, but remained $64/tonne higher year-on-year. Meanwhile, the latest data from the World Bank indicates that palm kernel oil prices averaged US$1,228/tonne during March, falling US$348/tonne month-on-month but remains similar to year-ago levels. The market has reportedly fallen even further throughout April.

Going forward, the USDA anticipates that palm oil production will increase, particularly in the two largest palm oil producing countries, Malaysia and Indonesia. Australian tallow production also is anticipated to begin to recover as the herd recovery gains traction, as it is in the US – the world’s largest tallow exporter.