Oil is dear, grains are scarce and now add poultry fat to the list of commodities that buyers are bidding up in price for energy. The same market forces driving up the energy and feed costs for U.S. poultry processors are boosting demand for poultry fat as a low-cost alternative to soybean oil in the manufacture of biodiesel fuel. Today, in the Southeastern United States, there is hardly a drop of low-free-fatty-acid poultry fat on the market that’s not being bid for by biodiesel producers. "Most major poultry processors and rendering companies are selling poultry fat to the biodiesel industry today," said Eric M. Bowen, president and CEO of Tellurian Biodiesel, Inc.  

 

Premiums for low-FFA fat

 

Currently, biodiesel producers are not able to use higher FFA (5 percent or more) poultry fat due to technical limitations in their processes, though those issues may one day be resolved. Meanwhile, low-FFA poultry fat is scarce and commands a premium. b"Poultry fat low in free fatty acids is being bought by the biodiesel industry at a premium," Bowen told attendees at the Poultry Processor Workshop. "The biodiesel companies are willing to pay a higher price than feed customers because we are making a high-value renewable fuel, and thus can afford to pay more than buyers in the feed industry." Rendered poultry fat (sub 2 percent FFA) purchased from a renderer in the Southeast in May was in the high 30-cent or low 40-cent range per pound delivered. Prices had risen by about 10 cents a pound over the December-May period, according to Bowen.

 

Market disruptions

 

As recently as two years ago, 90 percent of the biodiesel made in the United States came from soybean oil, but the run-up in soybean prices has changed this. Since feedstock comprises between 70 percent and 90 percent of the cost of a finished gallon of biodiesel, producers are scouring the market for lower-cost alternatives. Of the four viable alternatives – used cooking oil (yellow grease); beef tallow; choice white grease; and poultry fat – poultry fat is the most attractive. It tends to have the fewest impurities and the lowest gel point, or pour point, which is important for transportation fuel. "In order to redirect that poultry fat towards our industry, we’re willing to pay some premium," Bowen said.

 

Opportunity or threat?

 

Before the biodiesel industry began buying significant volumes of poultry fat, which is a 24-month phenomenon, it had other uses, including as an ingredient in poultry feed and pet food. To some extent, this is disrupting established market patterns. "Is biodiesel’s interest in poultry fat an opportunity or a threat? The answer is that it is a bit of both. But properly worked through, it should be a big opportunity," Bowen said. "Is there a way to change your feed mix so as to use less poultry fat back in feeding chickens so more of that poultry fat would be available for a biodiesel producer to recycle it back for fuel in your truck fleet?" he asked. That’s exactly what Fieldale Farms is doing, he said. "This is really an exciting time for the biodiesel industry," Bowen said. "The last couple of years we’ve seen 200 percent and 300 percent growth. That’s probably going to fall back a little this year because of the substantial increase in feedstock prices. "The industry is transitioning from the use of higher-cost soybean oil to lower-cost recycled cooking oil and animal fats. "The industry last year produced around 450 million gallons of biodiesel and will produce at least 1 billion gallons by 2012 just by federal mandate. It will probably exceed that level. You are going to see companies knocking on your door interested in poultry fat. This is a good opportunity for your industry."