2007 Annual Meeting of the National Institute for Animal Agriculture

BioFuels Energy:

Animal Agriculture at the Crossroads

April 2, 2007

2007 Annual Meeting of the National Institute for Animal Agriculture

BIOFUELSAND RENDERING PARTNERSHIPS

ADDRESSING POTENTIAL SOLUTIONS

David J. Kaluzny, IIChairman, National Renderers Association

BIOFUELS AND RENDERING PARTNERSHIPSADDRESSING POTENTIAL SOLUTIONS

What is Rendering?

Rendering 101 Volumes Rendered

Products of ProductionRendered Product Usage

Animal Production Usage Biofuel Production with Fats

Biodiesel Production 100

Biodiesel by-productsGlycerin for feed use

Feed vs. Fuel – What Now?

Rendering is Cooking and Drying.

Rendering is Recycling.

Rendering is Essential to Public Health.

What is Rendering?

Rendering is Cooking and Drying• Continuous flow or batch

• Steam cookers

• 245º to 290º F. for 40 to 90 minutes

• Inactivation of bacteria, viruses, protozoa, and parasitic organisms.

The Rendering Industry (U.S. and Canada)• 273 Facilities in the U.S. and 29 in Canada• $3.5 billion annual revenue• 60 billion lb raw material each year• 164 million lb raw material each day

• 35 million cattle (49% of live wt. not used for human food)

• 100 million hogs (44% not used for human food)• 8 billion chickens (37% not used for human food)• 280 million turkeys (36% not used for human food)

U.S. Animal Agriculture Annual Production

Raw Materials

• Offal• Bones and fat• Blood• Animals dead on

arrival, in transit or on farms

• Restaurant grease• Feathers

“Fallen” Animals (Died On Farms)

1.91 million adult cattle/yr2.92 million calves/yr18 million swine/yr350 million lb poultry/yr

Total = 4.4 billion lb/yrApprox. 2.2 billion lb/yr (50%) is rendered.

Approx. 4.5% of rendered products come from fallen animals.

Raw Material

Tallow

Meat & Bone Meal

Soap

Oleic Acid Glycerin

Livestock Feed

Poultry Feed

Pet Food

Hides

LeatherShoes

GarmentsUpholstery

EstersLubricants

Paints

Linoleic Acid

Stearic Acid

LubricantsTextiles

ShampooEmulsifiersCleansingCreams

InksGlues

SolventsAntifreezeExplosives

RubberTires

LubricantsEsters

Greases& Oils

Fuel

The U.S. industry converts more than 54 billion pounds of animal by-products into usable

commodities annually.

• Highly valued protein supplements for livestock, poultry, pets

• Tallow for the manufacture of fatty acids and as a source of energy in feed rations.

Tallows and Greases

• Edible Tallow 1.6 billion lb/yr• Inedible Tallow 3.9• Lard and Grease 1.3• Yellow Grease 2.6• Poultry Fat 2.2• Total 11.6 billion lb/yr

• Meat Meal• Meat and Bone Meal (can be species specific)• Blood Meal (Flash/Spray/Ring/Batch Dried)

–Can be whole or only hemoglobin

• Poultry By-Product Meal• Poultry Meal• Hydrolyzed Poultry Feather Meal

Protein Meals – 9.2 billion lb/yr 125 AAFCO-defined animal by-products

Stabilized Poultry Fat

Stabilized Pet FoodPoultry Fat

Hydrolyzed Poultry Feather Meal

Stabilized Poultry Protein Meal

Low Ash Pet FoodPoultry Protein Meal Pet Food

Poultry Protein Meal

Examples of a Few Finished Products

Total U.S. Lipid Production

• Edible Tallow 1.6 billion lb/yr• Inedible Tallow 3.9• Lard and Grease 1.3• Yellow Grease 2.6• Poultry Fat 2.2

Subtotal 11.6 billion lb/.yr.

•U.S. Vegetable Oil Production 22.4 billon lbs./yr. ( Soybean, corn, canola, etc.)Grand Total Lipid Production 34 billon lbs./yr.

WHAT ARE THEY? • Edible Tallow

• Edible Lard

• Tallow, Bleachable Fancy Tallow (BFT)

• Choice White Grease (CW)

• Poultry Fat (PF)

• Yellow Grease (YG)

• Brown Grease• Listed in order of highest quality and price to lowest.

Biodiesel Production from Fats & Oils

Biodiesel is defined as mono-alkyl esters of long chain fatty acids derived from vegetable oils or animal fats.

Biodiesel is made through a chemical process called transesterification whereby the glycerin is separated

from the fat or vegetable oil in the presence of methanol and a catalyst.

The process leaves behind two products -- methyl esters (the chemical name for biodiesel) and glycerin

(a valuable byproduct usually used in cosmetics, soaps and other products).

Transesterification

Oil

Crude Glycerin

Reactor 1 Reactor 2

Biodiesel

GlycerinWaterEvaporation

WashColumn

Methanol

Catalyst

MethanolRecovery

GlycerinWater

Catalyst

GlycerinCROSS-FLOW

(Patented)

Closed WASH-WATER loop

Biodiesel Production is Increasing

0

50

100

150

200

250

Mill

ion

Gal

lons

1999 2000 2001 2002 2003 2004 2005 2006 est.

Glycerin is a By-Product of Biodiesel Production

0

20

40

60

80

100

120

140

160

180

200

Mill

ion

Poun

dss

1999 2000 2001 2002 2003 2004 2005 2006 est.

Glycerin

One pound of glycerin is produced for every gallon of biodiesel refined.

– Glycerin is used in soaps, toothpaste, cosmetics, pharmaceuticals

– Glycerin is a substitute for other glycols• Antifreeze, concrete conditioner etc.

– Glycerin is a GRAS feed ingredient• High metabolizable energy source

Glycerin

Glycerin has 90% of the energy value of feed fat.

Feeding trials are going on with glycerin being used as both a energy source and a binder in feed pellets.

Just as with Dried Distillers Grains (DDG’s), numerous feeding trails are going on with cattle, hogs and poultry and

added glycerin.

FEED vs. FUEL

It is not a zero sum game.

Market dynamics do not operate in a vacuum.

Supply and demand move decision makers.

Planning for the future.

Scenarios already in play

David J. Kaluzny, II

Vice President, Kaluzny Bros., Inc.

President, K.B.I. Energy, LLC

Vice President, Lipid Logistics, LLC

1528 Mound Road

Joliet, IL 60436

815-744-1453

815-729-5069 Fax

dkaluzny2@aol.com