TALLOW prices have taken a hiding on the back of changing United States biodiesel credits policy but buyers of other high-value Australian beef co-products appear to be willing to fork out heftier prices to secure supply.
Where tallow was making more than $1000 a tonne ex-works for one per cent free fatty acid three months ago, it is now trading in the mid $700s, said market consultant Dennis King, Southern Downs Management Services in Queensland.
Mr King prepares Meat and Livestock Australia’s monthly co-products report, the latest of which shows some offal categories such as halal-accredited beef lips, lungs and rumen pillars are enjoying a year-on-year jump in price well over 50 per cent.
While the typical large degree of offal price variability was still a strong feature, it was fair to say exporters appear to have been able to retain volumes to higher-end markets as prices have been pushed higher by cattle procurement costs, he said.
The consistent demand in Asian markets has meant buyers have generally been willing to pay more to secure supply, he said.
The observing of Ramadan (fasting) generally had an affect on the offal trade at this time of the year but traders seemed to have little trouble shifting product into other non-halal markets as needed, according to Mr King.
“Most have pretty good relationships now in a lot of different markets,” he said.
“There have been times during this year when we’ve seen different items have a major improvement in price.
“For quite a long time, for example, there were very good prices on skirts but that has now come back to average.
“The big one at the moment seems to be rumen pillars (the muscle at the end of tripe), which is used in a number of Asian dishes.”
It has jumped 64 per cent on this time last year, to return $13 a kilogram freight-on-board at port.
MLA analysts noted the Ramadan effect meant the halal co-product margin narrowed during May.
Kidneys, for example, were selling at just a 4c/kg difference compared to the 42c premium that halal kidneys enjoyed the previous month.
The big challenge at the moment is tallow. The renewable diesel refinery Neste in Singapore has provided a very attractive market for Australian product for many years.
The end product had been sold into the US but tax credits for imported biodiesel were removed at the end of last year.
Mr King said they continued unofficially until March so the effects were only now being felt.
“Hard work is being put in by traders to redevelop traditional tallow markets such as the chemicals industry for the manufacture of soaps and detergents in places like Pakistan, Africa and China,” he said.
“The hope is that the tallow price has bottomed out now.”
Australia’s largest exporter of offal to Asia and a major supplier to The Middle East, Africa and Russia, Adelaide-based Samax says across the range non red meat parts, price variability was always high.
Export manager Simon Linke said livers had been difficult to place this year, with one of the major markets, Egypt, experiencing significant currency devaluation.
“On the other hand, products like tails have been strong into Japan and Korea,” he said.
Samex sends co-products to more than 50 countries.
“Demand seems to go on when stocks run down, it is inventory based,” Mr Linke said.
“What volumes we are sending, and to where, is not always a reflection of rising or declining consumer demand or trends.”
Changing market access conditions in Indonesia continued to play a significant role, he said.
“If Brazil and Uruguay were to gain market access to the likes of Japan and Korea, which are premium markets for many products, particularly tongues, tripe and cheek meat, it would have a big effect on values,” Mr Linke said.
“We’re also continuing to work, as a country, on a protocol with China for tripe, which has the potential to lead to significant lifts in value.
“There is a large grey channel where tripe goes through Vietnam and Hong Kong to China so we know the demand is there.”
WHILE market analysis on how beef processor profits are travelling at the moment is jumping between a slight improvement courtesy of improved export returns and a general flatlining, industry representatives say 2017 is still on track to being one of the toughest on record for the sector.
Australian Meat Industry Council general manager processor group Patrick Hutchinson said
while ever supply and price of livestock remained the same as what we were currently seeing that would be the case.
Lower grain prices and lowered weights for Indonesian live exports was combining with the lowest cattle and sheep population in 50 years to intensify competition for livestock, he said.
“Our stable currency has assisted with managing this somewhat but increases in regulation costs along with inputs like energy have created the perfect storm,” Mr Hutchinson said.
The expected winter price rice in cattle prices does not seem to have kicked in just yet but there is no doubt the market is still red hot, historically speaking.
MLA analysts said the physical market continued to be driven by restockers, who paid an 8 to 10 per cent premium on comparable cattle to feeders and processors in the first half of June.
The supply constraint has seen Australian beef export volumes continue to travel at a rate below the same time in 2016.