Meat processors find synergy in biodiesel industry

By | January 24, 2007
When Tyson Foods Inc. announced the formation of its biofuels division called Tyson Renewable Energy in November, it joined the ranks of meat processors that have made the same connection between their own waste products and biodiesel.

Tyson, which processes and markets chicken, beef and pork, produces 2.3 billion pounds of animal fat per year. "We have more feedstock on the animal fat side basically than anyone else," said Jeff Webster in a presentation to business analysts and company investors in New York City. Webster, who is Tyson's senior vice president of strategy and business development, estimated that the company's potential feedstock supply could produce 300 million gallons of renewable energy, including biodiesel.

Tyson's advantages aren't just in supply, but also in cost, according to Webster. "We have the lowest cost of all the domestic feedstocks compared with soy, palm oil or anything else," he said. "In fact, typically fat trades at about two-thirds the cost of soy. So, on a per-gallon basis, that's an advantage of 70 to 80 cents a gallon from a feedstock standpoint."

Webster also stressed Tyson's geographical advantages. "We're either in or very close to the high diesel consumption states," he said. "We also overlap very well with where our key refineries, pipelines and terminals are."

In addition to biodiesel, Webster discussed options for renewable diesel, synthetic diesel, biogas and chicken litter. He said the company has spent time researching what types of fats would best be converted into the various fuels.

Webster explained that Tyson's biofuels division was formed because the company was exploring ways to commercialize its vast supply of animal fat. "The charter of the division is consistent with our 'value-up strategy' since it's focused on increasing margins on our by-products," he said.

Tyson wasn't the first to discover these advantages for meat processors. Kenosha Beef International Ltd. started a biodiesel production technology company called Biosource Fuels in 2000, and it completed the design and construction of a continuous-flow biodiesel pilot refinery in January 2003. In 2006, the company was absorbed into Nova Biosource Fuels Inc. On a larger scale, Smithfield Foods Inc. built a 12 MMgy biodiesel production facility in Cleburne, Texas. Smithfield BioEnergy LLC began production in 2005.

Another meat processor has also announced intentions to evaluate biodiesel production. Perdue Inc., which processes chicken among other functions, announced the formation of Perdue BioEnergy LLC last summer, but it didn't list animal fat as one of its feedstock options.

The involvement of these large agribusiness companies such as Tyson and Smithfield could contribute more to the biodiesel industry than just biodiesel production. "Being a strong player in the ag sector means that we can leverage that type of support, and garner that support on the federal and state level as we go into the Farm Bill," Webster said. "One of our goals is to make sure that the animal fat side of the ag sector is well-represented in that Farm Bill and takes the prominent position within this renewable space."
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