Continued biofuel demand will support growth for cooking oil recycling operators
Los Angeles, CA (PRWEB) May 15, 2013
The landscape of the Cooking Oil Recycling industry has transformed over the past decade. Once considered a waste, cooking oil became a valuable and sought-after commodity as its use as an input into biofuel production became widespread. Aided by government-mandated biofuel production standards, the industry has generally been immune to recessionary effects. “Although per capita disposable income dropped in 2009, slashing demand for fast food and restaurant meals and, therefore, cutting the need for cooking oil recycling, the quick recovery in disposable income spurred industry revenue growth in four of the past five years,” says IBISWorld industry analyst Agiimaa Kruchkin. As a result, IBISWorld expects revenue to grow at an average annual rate of 1.4% in the five years to 2013.
The adoption of genetically modified seeds in corn and soybean farming offers greater yields and, therefore, poses a threat to the Cooking Oil Recycling industry, as biofuel producers demand the lowest-cost input. However, unlike farming industries, cooking oil recycling operators are virtually unaffected by poor weather conditions. “When the 2012 drought in the continental United States harmed farming industries across the board, the price of biofuel inputs such as soybeans skyrocketed,” adds Kruchkin. “Meanwhile, recycled cooking oil resurfaced as a viable alternative input into biofuel production.” On the back of growing biofuel demand, industry revenue is expected to rise 1.9% in 2013 to an estimated $1.3 billion.
The industry is highly concentrated, with the top four companies in the industry accounting for a large majority of its revenue. Acquisitions by the major industry operators, including Darling International, Baker Commodities and Valley Proteins, have increased concentration even further during the past five years. The industry features steep barriers to entry, due to its competitiveness and well-established supply-chain contracts. Major players compete among themselves for large contracts, while smaller players stick to operating on a local basis, servicing regional restaurant chains.
During the next five years, recycled cooking oil is anticipated to maintain its position as a significant biofuel production input in the United States. The recycled commodity's primary uses (in livestock and pet feeds, soap manufacturing and biofuel production) are unlikely to change, even in the medium- to long-term. Still, the Cooking Oil Recycling industry is heavily exposed to external competition from alternative inputs into biofuel production, including soybeans and sugarcane. Furthermore, government subsidies provide an additional boost to these rivals. Consequently, profit margins may fluctuate from year to year. Despite this uncertainty, continued biofuel demand will support a steady rise in demand for cooking oil recycling operations. This trend, in turn, will attract new entrants to the industry. IBISWorld forecasts industry revenue to increase through 2018. For more information, visit IBISWorld’s Cooking Oil Recycling in the US industry report page.
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IBISWorld industry Report Key Topics
This industry collects and recycles yellow grease that is produced from used cooking oil and other fats and oils collected from food service establishments. This cooking oil is either vegetable oil or animal fat that has been used to cook meat or vegetables. The used cooking oil is collected by rendering companies and manufactured into yellow grease, which, along with lard and inedible tallow, is used to make biodiesel fuel, animal feed additives and other products.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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