Darling Ingredients diversifies DGD renewable fuel feedstock supply with acquisitions

Darling Ingredients added to its low carbon feedstock supply system with two major acquisitions to help support renewable fuels growth for its jointly owned Diamond Green Diesel renewable diesel venture.

"Diversifying our feedstock supply to support DGD from a multi-continent arbitrage has been our focus," CEO Randall Stuewe said during the company's May 11 Q1 results call.

So far in May, Darling Ingredients closed on the purchase of Valley Proteins, acquiring 18 rendering plants and used cooking oil facilities in the southeastern and Mid-Atlantic US and agreed to buy Brazil's FASA, the country's largest rendering company with 14 rendering plants and two under construction.

"We look at the ability of the feedstocks we can run and originate from around the world that gives us an incredible competitive advantage," Stuewe added.

Conversion of food waste

Darling Ingredients' purview is to turn food waste into sustainable products and renewable energy, including renewable diesel from its DGD 50-50 joint venture with refiner Valero Energy, an early mover in the renewable fuel space.

The acquisition of Valley Proteins produces enough fat to produce about 125 million gal/year of renewable diesel, Stuewe said.

"FASA will augment our supply of low-carbon feedstocks to Diamond Green Diesel and will also be immediately accretive upon closing," he added. "We expect to close by the end of the year."

Darling Ingredients it is already importing fats from Brazil into Diamond Green Diesel, he said.

"The feedstock supply position that we've established around the world in today's marketplace would cost an insurmountable amount of money for anybody else to come in and try to replace," Stuewe said.

Some renewable diesel projects are feeling the sting of higher than originally anticipated feedstock costs.

The price of soybean oil and tallow are rising as renewable projects planned several years ago come online, creating in some cases supply issues and lower economic returns for the projects.

So far in Q2, Platts assessed beef tallow and soybean oil prices at 76.63 cents/lb and 81.04 cents/lb, up from the Q1 prices of 70.08 cents/lb and 68.23 cents/lb.

DGD and SAF

Darling is working with partner Valero to complete DGD 3 site at Valero's Port Arthur, Texas, refinery by Q4 2022.

Upon completion, it will increase by DGD's total renewable fuel output by 470 million gal/year to 1.2 billion gal/year of renewable diesel and 50 million gal/year of renewable naphtha when combined with renewables fuel production from DGD1 and DGD2 -- at Valero's St. Charles, Louisiana, refinery.

DGD is considering adding the ability to make sustainable aviation fuel to the Port Arthur facility, but it is waiting for a policy decision that would give special credits to SAF manufacturers before finalizing any project.

"We're right now working on trying to complete DGD 3," Sandy Dudley, head of renewables at Darling Ingredients, said. "But that said -- while there's not an investment decision on the table -- we purposefully left space at Port Arthur that would work well for a DGD 4 or SAF if the marketing conditions are right."

"And I think if you look at both us and our partner, it would be a huge underestimation to say that DGD 3 is the limit for us. I mean, if you look at our partners, they've done a whole lot beyond just petroleum."

"So I think that there's a lot more for us. I think we purposefully positioned ourselves within the market and how we built DGD3 to take advantage of whatever opportunities make sense for us going forward."