Pet food inflation in the U.S. for May 2023, compared to May 2022, stood at 13.8%. While that’s still more than three times higher than the overall U.S. consumer price index (CPI), which fell to 4% year over year (YOY) in May, and more than twice as high as inflation for “food at home” (encompassing most human food grocery categories, at 5.8% YOY), the good news is the pet food inflation figure is down from 14.6% in April.
In fact, U.S. pet food inflation had been stuck at more than 14%-15% since late 2022; 13.8% isn’t much of a decline, but in this case, going down is much better than going up.
Will pet food prices follow falling human food prices?
The latest inflation data from the U.S. Bureau of Labor Statistics comes courtesy of John Gibbons, aka the Pet Business Professor. He shared that for the overall U.S. pet care category, comprising all pet products and services, inflation in May was at 10.3% YOY, down only slightly from April’s 10.4%. Besides pet food, higher prices in veterinary services are driving inflation in the total pet category, to the tune of 11% inflation YOY vs. 10.2% in April. Prices for pet supplies are also trending up; while that sector’s 5.7% YOY inflation in May is lower than the other pet sectors, it’s a relatively large leap over April’s 4.8%.
Though pet food inflation is still far outpacing that for human food, perhaps the decline in prices for the latter category provides a harbinger of hope. For example, the price of eggs — which had been soaring due to a global outbreak of avian influenza layered on top of all the supply chain issues affecting almost every other consumer category – decreased nearly 14% in May, the largest drop since January 1951.
An article in the New York Times by Madeleine Ngo quoted a consumer, Hanna Hensley, expressing relief over falling food prices. “When egg prices shot up to around US$5 a carton a few months ago, she stopped buying them,” Ngo wrote. “But she said a dozen eggs now cost her about US$2.50, and on Sunday, she picked up a carton of them.”
Let’s hope that will soon happen with pet food, too. Packaged Facts surveys of U.S. dog and cat owners from early 2023 showed 41% consider the high cost of pet food the most significant challenge to pet ownership currently (outpacing the usual top concern, the high cost of pet health care), while 74% agreed they are concerned about rising pet food prices.
Pet food producer pricing on a roller coaster
Another potential sign of an improving situation lies with the pet food producer index (PPI), though, like inflation, it has proven to be somewhat of a roller coaster. After appearing to be falling, down to 13.5% YOY for dog and cat food in March 2023 and 13.3% YOY in April, the April figure has since been adjusted upward, to a whopping 17.4%, according to Gibbons. (He has explained previously that the numbers typically aren’t finalized until four months after initial release.)
So May 2023’s original PPI, at 14.3% YOY for dog and cat food, seems to be another decline, but we’ll have to wait for the final figure to see if that holds. One thing that has remained consistent is that wet dog food is the primary driver behind rising producer prices the past few months. For May, those prices rose 31.5% YOY.
In their “Pet Industry Overview, Spring 2023” report, Bryan Jaffe, managing director, and John Gulvezan, vice president, of Cascadia Capital, provided comparative pricing data on specific producer categories that show why the pet food PPI has been a pain point driving higher pet food retail prices. (Cascadia Capital is an investment firm that closely tracks the pet industry.)
For example, average producer prices for meat processed from carcasses have increased nearly 31% since the end of 2017 and remained at peak levels as of April 2023. Similarly, prices for rendered meats and meat by-products soared 77% from December 2017; the good news is that those have started to fall slightly this year. The same with transportation and warehousing costs, which have risen 31% over 2017. Jaffe and Gulvezan see a silver lining in some of those price trends. “Cost stabilization, but not necessarily relief, may be in sight for producers as PPI metrics for meat processors, renderers, resin and transportation have plateaued and appear poised to deflate,” they wrote.
