In the hottest US job market in decades, the hottest job of all right now might be fat trading.
hat is right – animal fats. And fats too.
They are, it turns out, essential ingredients in the production of climate-friendly diesel, a business that’s suddenly booming as fossil-fuel giants like Exxon Mobil Corp of California and Canada landed.
The prices for vegetable oils, used cooking oils and fats are rising and with them the wages of those who can procure the bulk quantities required. It’s a job that requires many relationships with farmers, restaurant owners, and processing plants across America.
Few traders have Rolodexes large enough, and those that do now boast upwards of $800,000 a year. Of course, that might not compare to the money a top-tier bond trader can make on Wall Street, but for a vegetable oil expert, that’s double or even triple the usual salary. For decades, trading in fats was a niche, an obscure part of the commodities business that nobody gave much thought to.
“They were just by-products,” said Patrick Bowe, CEO of The Andersons, a 75-year-old plant trading company based in Maumee, Ohio. Now, he says, “they have the hottest jobs.”
Bowe himself recently set up a desk just to trade the ingredients.
In addition to Big Oil jumping on the green diesel bandwagon, more and more companies are making plans to reach net-zero emissions by half a century, and increasing use of biofuels is key. The trend is boosting demand for commodities like soybean oil, helping futures prices surge to an all-time high on Wednesday.
Prices for used cooking oil and discarded animal fats, both prized in California’s low-carbon fuel market, have reached “unheard of” levels over the past year, according to David Elsenbast, president of Iowa-based AgriBio Consulting LLC, which specializes in them is to assist customers in navigating through such supply chains.
The US used cooking oil market has grown from about $700 million a decade ago to as much as $2.5 billion this year, Elsenbast estimates.
The scramble for these so-called “raw materials,” or ingredients used to make biofuels, is likely to intensify as the war in Ukraine disrupts trade.
Fossil fuel companies are learning how different trading crude oil is from the wild west-like world of green diesel. While buyers and sellers of vegetable oils, used cooking oil and animal fats can be found in the agricultural and food sectors, only a handful of US traders are adept at all.
Unlike petroleum, which constantly gushes out of the ground, flows through pipelines and is traded in huge quantities, the availability of biofuel feedstock varies greatly and must be sourced from numerous farms, restaurants and processing plants. Traders also deal in relatively small volumes of products that are transported by truck, rail or barge and are vulnerable to supply chain disruptions, from driver shortages to excessive ice.
“The complexity and broad knowledge base to run these moving parts concurrently reduces the skilled pool of traders for companies looking to grow their trading desks,” said Billy Burns, risk management consultant at StoneX Financial Inc., who specializes in fats, oils and oils fats.
To produce renewable diesel, the chemical composition of natural fats and oils is changed in a process that involves the use of high-pressure hydrogen and the removal of oxygen. The result is a fuel that can be dripped into existing pipelines and engines as a direct replacement for its petroleum counterpart.
A vegetable oil expert from a major agribusiness, who asked not to be named, said job offers come in from energy companies at least once a week. Traders taking on new jobs are doubling their current earnings, which the person at the top says can hit the $800,000 mark a year. With deeper pockets and typically more competitive pay packages than agribusinesses, energy companies in many cases offer bonuses of up to 20% of base pay, according to a tallow trader who was considering switching.
To catch up, fossil fuel companies are starting to simply buy out biofuel producers. Oil giant Chevron Corp. plans to buy Iowa-based Renewable Energy Group Inc. for $3.15 billion, or nearly 10 times the company’s estimated earnings this year.
“That resource system and relationships have been a huge driver of value in the business,” said John Campbell, managing director of Ocean Park, a boutique investment bank specializing in the biofuels industry.
Chevron’s takeover bid came months after Renewable Energy Group CEO Cynthia “CJ” Warner warned of legal action, invoking the employee’s non-compete clause to prevent a top dealer from accepting a lucrative job offer at an oil refinery assume, according to those familiar with the matter . The move underscores the increasing competition for talent.
Top producers like Diamond Green Diesel, a partnership of Valero Energy Corp. and Darling Ingredients Inc., argue that the new companies entering the space will not all make it.
“When these oil companies go out there and say we only buy used cooking oil, soybean oil and animal fats, they still have no idea what they’re talking about,” said Randall Stuewe, CEO of Darling Ingredients. “You haven’t studied what it takes.”
https://www.independent.ie/business/farming/agri-business/agri-food/traders-pocket-100-raises-in-booming-corner-of-fuel-markets-animal-fat-41572934.html Dealers are raking in 100% raises in the booming corner of the fuel markets – animal fat