WASHINGTON, D.C. — Pet Food Institute (PFI) submitted public comments to the US Department of Agriculture (USDA) on June 21, detailing supply chain constraints seen by pet food and treat manufacturers, including those exacerbated by the COVID-19 pandemic.
The White House issued an Executive Order (14017: America’s Supply Chains) on Feb. 24 on the basis of better understanding and addressing supply chain issues seen throughout the United States economy. PFI’s public comments are meant to inform the executive office of challenges specific to the pet food processing industry.
“As the entire food system faced incredible disruption during the COVID-19 pandemic, US pet food makers were also forced to address new ingredient sourcing and transportation challenges,” said Dana Brooks, president and chief executive officer of PFI. “America’s dog and cat food makers responded with resiliency and are hard at work making nutritionally balanced food for our pets, but PFI is asking the Biden administration to identify policy solutions that will help further strengthen all of American food and agriculture for the future.”
The association pointed to several issues in transportation and supply chain infrastructure, as well as how the interconnected nature of the pet food industry’s relationship to other US markets caused supply shortages and other disruptions in 2020 and continuing into 2021.
Ingredient and equipment challenges
According to Pet Food Institute, much of the pet food industry’s ingredient supply — including plant- and animal-based ingredients — are linked directly to human food production. In the height of the COVID-19 pandemic, businesses in the hotel, restaurant and institutions (HRI) market were shut down for public safety. When this occurred, many pet food manufacturers were cut off from the supply of these ingredients.
For example, many manufacturers source poultry by-products from the HRI sector and, without them, were unable to source those ingredients for their formulations. This devolved into pet owners unable to find their usual pet food brands or products due to ingredient shortages.
Ingredient and equipment prices and availability challenges have also been amplified by the pandemic. Overall, ingredient costs have risen between 8% and 20%, with significant increases for corn and soybean ingredients used in most pet food formulas. Corn prices have risen 67% this year compared to 2020, and meat, poultry and fish ingredient prices are up 6.3%, according to PFI. These price hikes directly impact formulation costs for pet food manufacturers.
Although these shortages and price increases were largely caused by COVID-19, they are expected to continue through this year and possibly beyond. The USDA has forecasted an additional 1.5% to 2.5% increase in meat, poultry and fish prices through 2021.
Sources for animal- and plant-based fats and oils are also seeing “increasingly fierce competition,” PFI stated. Prices for these ingredients, as well as for palatants, have doubled as renewable fuel demand increases. Suppliers have responded by issuing “raw material product allocations,” meaning processors can only purchase a limited amount of each particular ingredient for their formulations.
“PFI supports responsible efforts to address climate change, including government efforts to encourage the development and use of renewable fuels,” PFI stated in its public comments to the USDA. “However, we urge the Biden administration to consider that renewable fuel mandates and incentives create an unfair government-driven market advantage to the energy sector and a disadvantage to companies sourcing ingredients for pet food.”
The association also shared lead times and pricing for major processing equipment have been “rising astronomically,” including manufacturing components such as valves, motors, pumps, coupling, stainless steel systems, piping and other equipment.
Transportation and infrastructure frustrations
“Systemic factors” have also contributed to distribution challenges for pet food and treat producers, PFI reported. While global exports totaled $1.7 billion last year and are expected to continue rising, domestic bottlenecks at US ports have interrupted the supply of certain imported ingredients — namely vitamins and minerals — to these manufacturers.
These bottlenecks have resulted in production scheduling challenges, higher costs and inefficiencies across the sector, and could hinder trade “with lucrative markets in Asia,” the association stated.
Driver shortages and “crumbling infrastructure” are also causing issues in distribution, with labor and turnover shortages reaching as high as 15% on a monthly basis, as reported by PFI members. Additionally, more than 10% of trucks are failing to show up to pet food plants on a daily basis, and a shortage of pallets is causing disruptions even if a driver and truck are already secured.
Additionally, poor conditions along US riverways, as well as networks for power generation and distribution, have interrupted the pet food supply chain. The winter storms that swept the United States earlier this year uncovered critical conditions and much-needed improvements to these systems.
“The fragility of the US power generation, transmission and distribution network was exposed by winter storms that wreaked havoc on U.S. food and agriculture producers’ ability to keep their facilities up and running,” PFI stated. “…Our nation’s inability to share electric power and natural gas across the national grid in its entirety is an acute weakness and vulnerability and it calls out the urgent need for massive investment to update and secure the nation’s power grid.”
Supporting an interconnected industry
To stress these points, PFI reiterated the important relationship between pet food producers and the overall agricultural economy. A first-of-its-kind study commissioned by PFI, North American Renderers Association (NARA) and the American Feed Industry Association’s (AFIA) Institute for Feed Education and Research (IFEEDER) showed pet food makers purchased $6.9 billion worth of ingredients from domestic suppliers and farms in 2019, including commodity crops, meat, poultry and fish products, and rendered animal proteins.
More than 25,000 Americans are employed by pet food and treat manufacturers across 32 states. PFI emphasized the importance of hiring and retaining skilled workers to support growing production levels and heightened demand for an increasing level of quality pet food products.
In February, PFI joined more than 70 other agriculture and forest product association — including AFIA, NARA and the National Grain and Feed Association (NGFA) — in a letter urging the Biden administration to address an ocean freight crisis hindering agriculture, food and forestry product exports from the United States.
Additionally, port congestion on the West Coast has been an issue for consumer goods industries, affecting food and food ingredient imports from Asia and the Pacific nations. Port authorities expect the situation to deescalate before ramping up again in August ahead of the winter holiday months.
Read more about supply chain topics affecting the industry on our Operations page.