Adventures in Pet Food

Debbie Phillips-Donaldson, editor-in-chief of Petfood Industry, shares her insights and opinions on all things pet food, addressing market trends as well as news and developments in pet nutrition, food safety and other hot topics for the industry.
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Pet food inflation hits new high, with many reasons why

Pet food inflation in the U.S. rose to 9.1% in May 2022 versus May 2021, exceeding the 8.6% increase in the total Consumer Price Index (CPI) for May 2022. While year-to-date (YTD) through May, pet food inflation is at 5.7%, lagging the 8.2% for the CPI, pet food appears to be catching up as the year goes on.

“Inflation is growing stronger, especially after deflation in 2021,” wrote John Gibbons on his PetBusinessProfessor.com blog, where he has been compiling and analyzing “petflation” data since fall 2021. For pet food, the May increase is “more than triple the pre-pandemic 2.8% increase from 2018 to 2019,” he added.

‘Petflation,’ human food inflation also on the rise

For the total pet care sector, inflation reached 8.1% year over year (YOY) in May 2022 and is at 6.7% YTD. Besides pet food, other segments experiencing high inflation include veterinary services and pet services, though both fell below pet food for the month of May.

In addition to the total CPI, Gibbons has also compared “petflation” to categories such as food at home, which seems relevant to pet food. In May 2022, food at home inflation soared to 11.9% YOY, and YTD is up 9.8%.

Expanding the review period from 2019 to 2022 YTD, Gibbons showed pet food at 7%, compared to 10.8% for pet care overall, 12.9% for the CPI and a whopping 15% for food at home. So pet food stacks up better by that measure; but pet owners, like all other consumers, have likely been feeling the pinch of higher food prices for some time, and now pet food is just adding to the pain.

How human food and animal food compete with biofuels

A significant contributor to the rising CPI—where consumers are particularly feeling the effects—are soaring gas prices. The spike is driven by many factors, including the effects of the pandemic, the war in Ukraine and the resulting sanctions against the invading Russia, a major oil producer and exporter.

There’s another fuel-related inflation scenario perhaps not getting as much attention but that also impacts the costs of food and food ingredients and, ultimately, pet food. That’s U.S. federal and state government policies on renewable fuels, such as the Renewable Fuel Standard (RFS) which incentivize or mandate the use of common crops and foodstuffs to make biofuel, especially diesel.

“These myriad government policies have been a boon to farmers, who appreciate commanding higher prices for the corn and soy they grow for biofuel production,” wrote Matthew Sedacca on TheCounter.org, adding that the Biden administration has “championed RFS as it seeks to address climate change and develop fossil-fuel alternatives. Energy companies are also cashing in on RFS and other renewable fuel policy incentives. Agricultural economists and analysts suggested that the renewable diesel industry’s ever-expanding appetite for various fats and oils is indeed ratcheting up competition for vegetable oil, particularly soy in the U.S. That increased demand threatens food processors’ supplies while also raising their costs.”

That’s the link to pet food, since it uses so many ingredients or by-products from the human food stream. “We’re having to compete with renewable diesel or energy to be able to source our ingredients, and that’s not something that we have experienced,” said Dana Brooks, CEO and president of the Pet Food Institute (PFI), in a Trending Pet Food podcast episode on supply chain challenges. “It adds a layer of complexity to our purchasing and procuring of products.” (The podcast is hosted and created by my colleague, Lindsay Beaton, editor of Petfood Industry magazine.)

Unbalanced supply and demand: Competing with the government

“What we’re seeing is the challenge that renewable diesel doesn’t just take products that would be what you could call waste and turn it into energy; it’s using food stock,” Brooks explained. “It’s using ingredients that are used in human and animal food—from soybean oils to fats and oils and tallows from animal fats. That’s where this is a bit different from other renewable sources, and that creates imbalance for us in the marketplace. We recognize if we were competing one-to-one on the market with ingredients, then we’re willing to pay more. But what the situation with renewable diesel is, it’s also incentivized, and there are mandates from Congress and the administration. So we’re competing against the government, so to speak, rather than also in the market.”

A new renewable diesel facility has gone online, significantly affecting prices, Brooks added. “We’re seeing unprecedented pricing on soybean oil and other ingredients that go into both human and animal food.” And there are four more facilities planned to go online in the next two or three years. “We’re really concerned about where this is going to put us as an industry in that competition for product. Or, it’s not even just the competition for the product; it will be the availability of the product that’s very much in question at this point.”

In response, PFI has started a campaign called “Feed People and Pets First,” asking the administration and Congress to take a look at the challenge and delay additional incentives, programs and mandates in the near future “until we get that balance back in supply and demand,” Brooks said. “Give us a little time to catch up on some of the stocks for ingredients.”

If you would like to join PFI in the campaign, you can use a form they’ve set up to contact your representatives in Congress.

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