In 1946, four brothers from Illinois enlisted into military service to serve the United States in World War II-but one was turned away. That lone sibling was needed on the home front because of his experience with rendering fats and oils, a skill that was in high demand. "Rendering was vital to the war effort," says Dave Kaluzny II, vice president of Kaluzny Bros. Inc. in Joliet, Ill. "One reason was that tallow and other oils were being used to make certain specialty products, especially nitroglycerin."

All of the brothers survived the war and, after they were released from service, joined their brother in the rendering business. Today, more than 60 years later, Kaluzny Bros. has offices around the globe and strong ties to the biodiesel industry. In one of its latest and largest projects, KBI Energy, a Kaluzny Bros. affiliate, is providing $4 million in project equity financing for Houston's Nova Biosource Fuels Inc. to build a 60 MMgy biodiesel plant in Seneca, Ill. Lipid Logistics LLC, also affiliated with Kaluzny Bros., is contracted to provide all the feedstock requirements for the plant, which broke ground in mid-April. The plant is being built on 54 acres in the Shipyard Industrial Park of Seneca, offering excellent access to truck, rail and barge transportation.

Supported by inexpensive recycled feedstocks and attractive transportation options, it wasn't long after the groundbreaking in Seneca, that Nova Biosource announced a move from being an over-the-counter stock listing to a listing on the American Stock Exchange. The change went into effect in mid-May, and Nova Biosource has since then been highlighted in several newspapers and financial journals as a company to watch in the energy realm.

Nova Biosource chose Lipid Logistics as its primary feedstock supplier because of the cost benefits of using animal fats to produce biodiesel. "It's real easy," says Nova Biosource President J.D. McGraw. "The cost of animal fats is about 10 cents a pound cheaper than your virgin soybean and other vegetable oils." Edible tallow, yellow greases and other rendered feedstocks could provide an even larger chunk of the biodiesel industry's feedstock needs over the next few years as supplies of virgin vegetable oils tighten. Currently, rendered products account for nearly one-third (11.6 billion gallons) of the nation's entire lipid production, with vegetable oils accounting for the remaining two-thirds (22.4 billion gallons), making the resource a viable option as the biodiesel industry looks to expand its feedstock base.

A Valuable Service
The rendering sector and the services it can offer biodiesel producers may be underutilized in the soy oil dominated market as only a handful of biodiesel plants in the United States are using tallow, animal fats and yellow greases as feedstocks. Kaluzny Bros. however, seems to have added considerable strength and legitimacy to Nova Biosource's business plan. Other companies may need to think outside of the traditional soy oil templates to find success in the future, as well.

With 273 facilities in the United States, the rendering industry processes 60 billion pounds of raw materials a year and generates billions of dollars in revenue. The raw materials include offal, bones and fat, blood and fallen animals. Recycling fallen animals, which are the animals that die on the farm or in transport before they can be slaughtered, is an important part of the company's services. Collecting expired animals is essential to public health and, at the same time, provides a revenue source by adding value to a waste product. "Kaluzny Bros. is dealing with off-spec product like dead cattle, and is also recycling other low-value material," McGraw says. "These are the low-end, high free-fatty-acid feedstocks we're using to make biodiesel at a low cost." Indeed the biodiesel plants in DeForest, Wis., and Clinton, Iowa, that use Nova Biosource processing technology, are using this material as a feedstock.

Although it might not sound attractive, material from rendering plants is an important and perhaps often overlooked recycled resource. Nearly half the live weight of the 35 million cattle produced in the united states every year, as well as a large percetage of hog, turkey and chicken production, is used for something other than human food. If the material that doesn't go into food processing isn't used somehow, animal production would be extremely wasteful. Rendered products, including edible tallow, lard, refined greases and poultry fat are used to manufacture a myriad of products ranging from pet food to paints and varnishes to biodiesel.

Material from rendering plants is also considered a choice feedstock for the production of renewable diesel, a product that has caused controversy and concern among biodiesel producers. The National Biodiesel Board (NBB) is lobbying to prevent oil companies from benefiting from what it calls a loophole in the biodiesel tax incentive. Essentially, the U.S. Department of the Treasury decided to allow oil companies that use a small amount of biomass in the production of diesel fuel to collect a blending credit, which was designed to stimulate biodiesel and renewable diesel production. "We're totally neutral on renewable diesel," says Kaluzny, whose company is a founding member of the NBB. "This is just another outlet for our product."

The NBB is supporting legislation introduced by Rep. Lloyd Doggett, D-Texas, called the Responsible Renewable Energy Tax Credit Act of 2007 that would prevent oil companies from claiming the $1 dollar-per-gallon blending credit for producing renewable diesel.

Kaluzny believes there will be competition between renewable diesel and biodiesel producers for feedstock supplies. As the largest rendering firm in the Midwest, however, he is not averse to selling its products to companies that produce renewable diesel, even with its considerable stake in the biodiesel industry. "You're always looking to expand your customer base," he says, indicating that he has few, if any, worries about renewable diesel hurting the biodiesel industry.

Market Dynamics
The rendering industry depends heavily on export markets because it generates more product each year than the United States can use. "We have offices in London, Africa and Hong Kong," says Kaluzny, who is chairman of the National Renderers Association Inc. "We want to maintain a presence in all of those different areas." On the world stage, China receives the most attention because of its growth potential. "When you're looking at the Chinese market, you're looking at one of the largest markets in the world, and an economy that is growing by double digits every year," he says. China won't be a big market for biodiesel, however, until it starts to embrace more environmentally friendly practices, he says.

In regard to the world market, it's important to note that because Europe has mandated the use of more biodiesel than it can produce from its own resources, it is looking to import additional feedstocks. "This has buoyed the price of yellow grease," Kaluzny says. The rising cost of energy has also helped boost the price of yellow grease, which is now being used to fire boilers and in other low-grade fuel applications.

Kaluzny believes the same market factors at work in the rendering industry are also true for other commodities. Strong export performance doesn't always translate into shortages in the United States, he says, adding that production of most commodities is outpacing demand despite reports indicating otherwise. "There's a market anomaly," says Kaluzny, whose interest in renewable fuels goes beyond biodiesel. "We're seeing some of the highest prices for corn occur at a time of the lowest usage-there was leftover corn last year." Those high corn prices were reportedly taking a toll on cattle producers who primarily use corn, however, there are many products that can be used as cattle feed, Kaluzny points out, including yellow grease and sorghum.

He blames distorted media reports and the media's inexperience reporting on agriculture and renewable fuels for the food versus fuel debate, which he believes has been blown out of proportion. He cites the Mexican tortilla crisis that was attributed to U.S. ethanol production, as an example. The corn crop in Mexico was a miserable failure last year that is why the price was so high there, Kaluzny says. "There was no shortage of corn in the United States," he says. "Hype moves markets. Much of this has no bearing on reality. Most people are so far removed from agriculture that they don't know a thing about it." While most of the focus regarding the food versus fuel debate has been on corn and ethanol, it's no different for biodiesel. "It would take a heck of a lot of biodiesel to be able to suck up all the excess soybean oil in this country."

In addition, because of technological developments, specifically genetic engineering, soybean and corn yields are increasing every year. "America is so preoccupied with the short term, it sometimes fails to consider things like this," Kaluzny says.

Nicholas Zeman is a Biodiesel Magazine staff writer. Reach him at nzeman@bbibiofuels.com or (701) 746-8385.