Robust demand among North American biofuel producers contributed to a two-fold increase in beef tallow exports from Brazil in the first half of 2023 from the same period in 2022, a trend that has prompted suppliers and operators to invest in tankage.
Around 75pc of the 59,000 metric tonnes (t) shipped from Brazil in the six-month period was destined for the US. Brazil exported around 28,000t in the first half of 2022 and almost 81,000t over the course of the whole year, according to trade ministry data. Two companies exported 9,600t of animal fat to the US in the last two weeks.
The increase in outflows has spotlighted logistics constraints and tallow producers are struggling to secure tankage space at the Santos and Paranagua ports, in Sao Paulo and Parana states, respectively. An important exporter told Argus that the export momentum should continue in the second half of the year, giving companies with their own tankage structure or captive space in ports more leverage to negotiate with buyers.
Another producer recently shipped 5,000t of tallow to Houston and capitalized on the return freight by shipping a crude palm oil cargo from Colombia to Brazil. A Brazilian producer has signed a contract to export 20,000t of tallow in 2023, 60,000t in 2024 and 100,000t in 2025. Associated negotiations for tankage space at Santos dragged on for four months.
The main logistics bottlenecks for exporters are storage and finding trucks equipped with heating coils to maintain a minimum temperature the tank. The logistical challenges impact transport and port storage, as the product needs to stay heated to avoid solidification.
Attentive to export flows, large and medium-sized slaughterhouses are keeping an eye on the International Certification in Sustainability and Carbon (ISCC) while structuring to ship small loads and consider these operations' logistical costs and profitability. In line with current regulations, ISCC favors higher feedstock pricing for hydrous vegetable oil, known as green diesel, and sustainable aviation fuel (SAF) markets.
Investments
Given this scenario, companies are structuring investments to meet the consistent demand for exports leaving Brazil's southern and northeast regions.
In Itaqui, in the northeast Maranhao state, demand for tallow tanking has grown and market participants expect that the first batches will be moved by the beginning of 2024.
For now, exports are concentrated at the ports of Santos, Paranagua and Rio Grande, in Rio Grande do Sul state. At Paranagua, cargo volumes reached 162 twenty-foot equivalent unit (TEU) — a unit equivalent to a 20-foot long container — in the first half of 2023, an almost threefold increase from the same period in 2022, according to TCP, the port's container terminal manager.
TCP invested in expanding the area where temperature-controlled containers are powered, known as the reefer area, also used for transporting animal fat. The expectation is that by the end of 2023, the number of storage spaces in the area will increase from 3,572 to 5,126, expanding capacity by 43pc.
The positive trade balance consolidates Brazil's position as a net exporter of animal fat, countering a historical position as a net importer. The change is mainly the result of a shift in focus in Brazil's meatpacking industry away from animal meals. Producers recently shifted gears to increase their animal fat rendering capacity to meet growing demand from the biodiesel and hygiene and cleaning products industry.
Robust North American demand, led by advanced biofuels, was a tipping point for Brazilian suppliers.
