Tallow & Byproduct Markets

By Corentin Britten, Founder

Why Beef Byproducts Matter to Buyers

When cattle are slaughtered, the valuable cuts are only part of what is produced. The remaining material, fat rendered into tallow, blood processed into bloodmeal, and bones into meat and bone meal, is sold into separate markets. These byproducts are a meaningful part of the total economics of beef production, and they matter to procurement teams in two ways:

1. Processor economics. Strong byproduct values improve processor margins. Better margins let processors bid more aggressively for cattle and can make them more flexible on finished-goods pricing; weak byproduct values do the opposite.
2. Feedstock markets. Tallow is a major raw material for biofuels (renewable diesel and sustainable aviation fuel). Energy-policy shifts can swing tallow prices sharply, and those swings ripple back into processor economics.

What Tallow Is and How It's Graded

Tallow is rendered beef fat. It is graded chiefly by free fatty acid (FFA) content: lower-FFA tallow is the higher grade, suitable for food and premium industrial uses, while higher-FFA tallow is lower-grade material destined for technical and feed uses. The grade determines which end markets a parcel can serve, which is why the same rendering plant produces several tallow streams at different values.

The Biofuel Connection: Why Energy Policy Drives Tallow Prices

The single biggest driver of tallow price volatility is not beef supply and demand, it is US clean-fuel policy. Tallow and other animal fats are prized feedstocks for renewable diesel and sustainable aviation fuel because their saturated profile hydrotreats well.

The pivotal mechanism is the Section 45Z Clean Fuel Production Credit, which rewards low-emissions transportation fuel produced in the US. Two features make it decisive for tallow:

• Feedstock origin now matters. For fuel produced from 2026 onward, 45Z requires the feedstock to be grown or produced in the United States, Canada, or Mexico. That change disadvantages imported tallow (for example, Australian and New Zealand product) relative to domestic fat, and it has been a major swing factor for imported-tallow demand and price.
• It concentrates demand on domestic fat. As renewable-diesel and SAF capacity has scaled, US-origin tallow has become a contested feedstock, tightening its availability for traditional buyers (soap, cosmetics, oleochemicals, feed).

The practical takeaway: a single policy announcement on clean-fuel rules can move tallow prices within days, independent of anything happening in the beef market. Watch US biofuel policy as closely as cattle supply when you are reading processor margins.

Used Cooking Oil and SAF

Tallow competes with used cooking oil (UCO) as a biofuel feedstock; when UCO prices spike, tallow becomes relatively more attractive to fuel producers, and vice versa. Sustainable aviation fuel is an emerging, growing source of demand for both, adding a second policy-driven pull on the fat complex.

Other Key Byproducts

• Meat and bone meal (MBM). Protein-rich rendered material used in animal feed (not for ruminant feed in most markets, due to BSE rules) and fertilizer.
• Bloodmeal. High-protein dried blood used in pet food and premium animal feeds.
• Hides. Beef hides are sold to leather tanners; hide values contribute to net return per head. USDA publishes weekly hide and tallow/protein reporting.
• By-products drop value. USDA tracks the weekly By-Products Drop Value, the aggregate value of all non-beef products from a slaughter (tallow, hides, offal, variety meats). A higher drop value improves processor economics and supports what they can pay for cattle.

What Procurement Teams Need to Know

1. Tallow is a secondary signal for processor health. Strong tallow means processors recover more per animal, which can cushion high cattle costs; weak tallow adds margin pressure and can lead to reduced processing days and tighter finished-product supply.
2. Monitor US biofuel policy. Clean-fuel credit rules are the primary driver of tallow volatility. Policy moves show up in tallow prices within days and then feed into processor economics.
3. Tallow does not set cut prices directly, but it shapes the economics of the processing sector, which eventually feeds back into cut pricing and supply availability.

Related Articles

• Australian Beef Export Market
• Geopolitical & Freight Risk
• Feed Grain & Feedlot Economics
• US Packer & Processor Landscape

Frequently Asked Questions

What is beef tallow?

Tallow is rendered beef fat, graded mainly by free fatty acid content, and used in food, oleochemicals, animal feed, and increasingly as a biofuel feedstock.

Why do biofuel policies move tallow prices?

Tallow is a feedstock for renewable diesel, so clean-fuel rules, such as which feedstock origins qualify for credits, can swing tallow demand and price within days.

What is the by-products drop value?

The combined value of everything other than the cuts from a slaughter (tallow, hides, offal). A higher drop value improves processor margins.