The world of animal fats (part 2)

The world of animal fats (part 2)

Monthly bulletin on Oils & Fats by Aveno
April 21st 2020

A big black box.

When looking at the global production and consumption of animal fats we notice a lack of reliable statistical material. For years the global production is reported to be stagnant and in relation to the growing production of vegetable oils and fats, the market share percentage of oils & fats of animal origin keeps decreasing in spite of a growing population and growing animal numbers. 

Vegetable oils and fats production did grow much faster to satisfy demand; but when it comes to animal fats some parts of the world are a big black box and some consumption remains under the radar. Some regions have no or little rendering industry and “on farm slaughter” is still very common. Consumer preferences may also differ: lean meat (leaving the fat for the renderer) or meat with lots of fat. 

There may also be swings in animal slaughter depending on diseases like African swine fever in China or Eastern Europe, or plain economics when it is no longer profitable to keep milking cows or rearing calves. And the simple fact of exporting whole carcasses to 3rd countries instead of cut meat also results into less fat “left in system”. 

One very well-organized market is the dairy market and last year’s global milk production estimated at 858 million metric tons is expected to reach 1 billion MT by 2030 with India to remain the biggest producer. In 2019 India produced about 202 million MT of milk and unsurprisingly the biggest milk producer is by far the biggest butter producer in the world! 

European animal fats consumption. 

Looking more in depth to Europe where, in 2019, out of a total oils & fats consumption of 35.7 million MT, 5.6 million MT was of animal origin. Deducting butter and fish oil leaves us with 3.4 million metric tons domestic disappearance. 

Every year some 330 million pigs, sheep, goats, cattle, and some 6 billion chickens, turkeys, ducks, etc. are slaughtered in the EU. Roughly speaking a total of approximately 3 million tons of animal fat is produced as a BY-PRODUCT of the meat industry. That is all inclusive: all animals and also the cadavers that are collected. That is category 1, 2 and 3. 

About 34% of a pig, 42% of bovines and 25% of poultry are processed by the processors of offal and fat smelters: roughly 3 million MT of fat and 4.5 million MT of animal meal are made from 17 million tons of material. 

Cat 1 and 2 are not suited for food nor feed and go to biodiesel or direct combustion (5-600.000 MT). 

CAT 3 is the largest part and suitable for food and feed (approx. 2.5 million MT). 

These figures are based on historical averages and biodiesel has grown spectacularly in the last years! There is a certain core demand in certain applications, but price elasticity also plays a role. For example, oleo chemistry is directly competing with palm products, processed here or in the Far East.
Pet food is fairly core. Feed can swing. Food will be fairly core and demand for biodiesel is “regulatory driven”. 

Cat 3 consists for about 50% of multispecies animal fat because the butchers do not sort their waste by type of animal and there is no separate collection! Then there is quite a bit of pure poultry fat because chickens are processed separately. There is LARD, pig fats and pigskin fats. And also bone fat from all kinds of bones from all kinds of animals. And finally, there is TALLOW, dripping or beef tallow. We estimate that 12.5% ​​of 2.5 million tons is pure lard and pure tallow. Lard is little more than tallow. A conservative estimate is then 5% or about 125,000 tons for pure tallow. 

Source: Oil World (without beginning and ending stocks) 

Trends to watch. 

Less meat consumption in some parts of the world would mean less byproducts such as animal fats. As opposed to meat eating bicycle riders, today, trendy climate-conscious vegan hybrid-SUV drivers (without leather seating) are setting the tone in the media. There is a downward trend in meat consumption most marked in cities like Amsterdam, Brussels, Berlin, London and New York. According to one study in Brussels the population consists of 1 percent vegans, 9 percent vegetarians and 9 percent flexitarians (eat vegetarian at least three times a week). Health is their most important driver, animal welfare ranks second, while the environment comes third. The food industry is following the trend but the messages about the "booming market" of plant-based foods must be put in perspective, this segment is still only a small part of the total and some vegetable meat substitutes have undergone heavy processing and are full of flavor enhancers. On the other hand, there seems to be a shift to more meat consumption out of home and as emerging economies get richer their meat consumption goes up… 

We may see a shift to more poultry meat consumption and less beef. 

A further increase in feedstock requirements from biodiesel producers in EU, U.S. and Singapore will be supportive to prices of animal fats. 

Omega-3 in fish oil drives consumption in aquaculture (70% of global production) and for human health! 

Butter is regarded by some as a healthy, natural, authentic, luxurious product! 

Many epicureans (people devoted to sensual enjoyment, especially that derived from fine food and drink) claim that the best fries are baked in tallow!

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Unless otherwise mentioned the crude oil values quoted in these documents are prices landed in EU without import duties, handling, storage, financing, refining, packing, transport or any other cost related to bring the product to market. They are used as market trend illustration. Substitution of oils is possible but different oils have different fatty acid profiles and are not all interchangeable for all applications. One can make biodiesel from all oils and fats but one cannot make mayonnaise from coconut oil. This document is exclusively for you and does not carry any right of publication or disclosure. This document or any of its contents may not be distributed, reproduced, or used for any other purpose without the prior written consent of AVENO. The information reflects prevailing market conditions and our present judgement, which may be subject to change. It is based on public information and opinions which come from sources believed to be reliable; however, AVENO doesn’t guarantee the correctness or completeness. This document does not constitute an offer, invitation, or recommendation and may not be understood, as an advice. This document is one of a series of publications undertaken by AVENO and aims at informing broadly a targeted audience about the edible oils & fats market. AVENO’s goal is to keep this information timely and accurate however AVENO accepts no responsibility or liability whatsoever with regard to the given information.

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