Fueling Livestock Profitability - Economics of Biofuels - Alan Weber, Economist and Founding Partner, MARC-IV, from the 2015 Animal Agriculture Alliance Stakeholders Summit, The Journey to Extraordinary, May 6 - 7, 2015, Kansas City, MO, USA. More presentations at http://www.trufflemedia.com/agmedia/conference/2015-the-journey-to-extraordinary

1. Fueling Livestock
Profitability
Alan Weber
Economist and Founding
Partner MACC-IV
1

3. Impacts on animal agriculture

4. Animal Fat Markets
• Declining export
markets
• Approximately 25%
of U.S. animal fats
utilized for biodiesel
production
• AFs are significant
feedstock source
for biodiesel
producers
Biodiesel
45%
Other Uses
(feed,
oleochemical)
55%
CWG Demand, Biodiesel (2014)

5. Biodiesel Demand for Animal Fats
Generates an Additional Revenue
Stream for the Livestock Industry

6. Meat Market Price Dynamics
Demand for beef increases
and prices increase.
Higher beef prices
stimulate production.
Beef supply increases and
prices moderate.

7. Tallow Market Price Dynamics
Higher tallow demand
leads to higher prices.
Higher tallow prices do
little to stimulate higher
beef production.
Tallow supply is basically
fixed, and prices remain at
elevated levels.
Tallow
Tallow prices increase and remain
at higher levels because increases
in demand do not stimulate
corresponding increases in supply
(inelastic supply).

8. Estimated Biodiesel Impact
on Inedible Tallow Prices
10
15
20
25
30
35
40
45
50
55
60
Cents/lb
Month
Observed Inedible Tallow Price vs. Predicted Price
(January 2009 - May 2014)
Observed Inedible Tallow Price Predicted Inedible Tallow Price (No Biodiesel Impact)
Average Inedible Tallow Price Increase: 10.584 ¢/lb
Adjusted R2 = 0.869
Standard Error = 3.313
Source: Centrec

9. Animal Fats and Yellow Grease Prices
Discount Relative to Soybean Oil
Source: Informa

10. Increased Use of Animal Fats for
Biodiesel Has Improved Returns for the
Livestock Industry
Beef Tallow
Poultry Fat
Pork Lard and Choice White Grease
• $0.01 increase in value per head
• $51.20 MM estimated aggregate contribution to
industry from biodiesel demand in 2013
• $1.24 increase in value per head
• $165.59 MM estimated aggregate contribution to
industry from biodiesel demand in 2013
• $16.08 increase in value per head
• $567.59 MM estimated aggregate contribution to
industry from biodiesel demand in 2013

11. Biodiesel Production Lowers
Soybean Meal Costs for the
Livestock and Poultry Industry

12. Co-Product Demand Linkage
This leads to more crush to
meet the oil demand, thus
increasing the demand for
soybeans which in turn leads
to higher soybean prices.
The increased crush also
produces a greater supply of
soybean meal, causing the
price of meal to decline.
Biodiesel creates more
demand from vegetable oils.
The price of soybean oil
increases since there is more
demand at a given level of
supply.
More Biodiesel
Demand
Higher Soybean
Production
Lower Meal
Prices
The following 6 studies have all analyzed the relationship between greater soybean
oil demand from biodiesel and soybean meal prices.

13. Impact Range on SBM for
Domestic Livestock Feed Price
Source: Informa

14. Estimated Impact of Biodiesel Production
on the Pork Industry’s Meal Costs
Wean-to-Finish Hog
Production Meal Savings
Breeding Sow Meal
Savings (Annual)
Meal in Complete Ration
(T/hd)
0.07
Soybean Meal Cost ($/hd)
$25/T Meal Price Savings
$1.69
Meal in Complete Ration
(T/hd)
0.10
Soybean Meal Cost ($/hd)
$25/T Meal Price Savings
$2.50

15. Estimated Impact of Biodiesel Production
on the Dairy and Beef Industry’s Meal Costs
Feeder-to-Finish Steer
Production Meal Savings
Dairy Cow Meal
Savings (Annual)
Meal in Complete Ration
(T/hd)
0.16
Soybean Meal Cost ($/hd)
$25/T Meal Price Savings
$3.90
Meal in Complete Ration
(T/hd)
0.22
Soybean Meal Cost ($/hd)
$25/T Meal Price Savings
$5.41

16. New Uses: Crude Glycerin
Fuel Sources: burns well at high temperatures
Animal Feeds: can be applied directly to feed or used to
manufacture pelletized feed
CrudeGlycerin
Pharmaceuticals: cough syrups, elixirs, and gel caps
Oral Care Products: gives products such as toothpastes and chewing
gums a sweet taste without contributing to tooth decay
Personal Care Products: helps prevent moisture loss, ideal
ingredient in makeups, skin lotions, shampoos, and deodorants
Industrial Uses: used in the production of plastics, foams, explosives,
resins, and coatings
Food and Tobacco Products: used to add moisture and sweetness to
these products. It also has preservative qualities.
USPGradeGlycerin
Technical
Grade

17. Beneficial Impacts (example)

18. Alan Weber
Senior Advisor
National Biodiesel Board