December 12, 2016

2017 Petfood Industry Ingredient Outlook

As AFB International’s director of procurement, I’m responsible for tracking factors that can affect the supply chain for key ingredients used in the pet food industry. At the end of each year, I take a look back at the events that unfolded during the past year and try to anticipate trends and hurdles in pet food and palatant raw materials markets for the next year and beyond.


Over my 30 years in this line of work, predicting raw materials supplies has become increasingly complex. Markets are more globally focused than ever before and politics can affect supply chains as much as weather, pests and disease. For example, in the last few years, the European Union imposed sanctions on Russia due to their engagement in Ukrainian affairs. Russia retaliated by imposing a ban on imports of European food products.

As noted in my 2016 ingredient outlook blog, my insights come from a number of sources, each of which explains a part of the larger pet food ingredient outlook. Among them are:

  • Weather forecasts from commercial weather services and elsewhere
  • Regular conversations with poultry, pork and other producers in markets around the world
  • Analyst reports and industry conferences on wide-ranging issues related to the supply chain


Here’s how some of the key markets have evolved over 2016 and where they appear to be going:

  • Soybeans: As a key protein in many human and pet food products, soybeans are often used as a basis for valuing other proteins, including animal proteins. In spring 2016, there were concerns the El Nino weather pattern would create—or exacerbate—drought conditions in the top soybean production regions in the United States and South America.

    However, growing conditions in the U.S. Midwest were optimal and the region experienced the largest soybean crop on record, driving down U.S. soybean prices. However, weather did suppress production in Brazil in 2016 and flooding early in Argentina’s planting season may lower March 2017 harvests. These reductions and increased imports by China have resulted in no improvement of global soybean stocks, despite record U.S. production. That will continue until China produces more soybeans, which may be in the offing.

    For 2017 soybean production, a number of risks come into play. The La Nina weather pattern may bring in cooler temperatures and possibly dryer conditions across key South American growing regions. Argentina’s recent removal of its export tax on corn will likely increase corn production and reduce soybean production in that region, unless the country follows suit to drop the export tax on soybeans.

  • Fishmeal: Just as soybean prices can determine the value of other proteins, the price of fishmeal derived from anchovies can influence the value of other fishmeal sources. Anchovies are the preferred source for fishmeal, in part because of the historic abundance off the coast of Peru. To avoid overfishing, Peru tracks biomass of these fish schools and reduces quotas when biomass is lower. 

    El Nino tends to reduce the quantity of anchovies, because fish don’t school well in warm water, making them harder to catch. The fish that are caught tend to be juveniles, which can lower fish populations in subsequent years. Largely due to this El Nino effect, the second anchovy season of 2015/2016, and the first season of 2016 were below both the Peruvian government’s quota and predicted levels, driving up costs. For the second season continuing into 2017, it’s unlikely the quota of 2 million metric tons will be met, resulting in continued higher fishmeal prices. 


  • Pork and poultry: Signs indicate the U.S. poultry industry is starting to contract somewhat after high production rates, partly due to normal seasonal adjustment. However, broiler flocks are now at lower levels than the previous year, suggesting the fall in broiler meat prices and the high inventories of meat in storage are being noticed by the U.S. poultry industry.

    Unlike the poultry industry, the pork industry is not showing signs of letting up. Inventories have declined, so the continued high rate of production will likely be sustained, particularly with predicted increased exports to China. The largest pork producer in China now owns the largest U.S. pork producer—another important factor to consider in evaluating the direction of pork production in Europe and the U.S. going forward.


  • Oils and fats: A drought in Indonesia and Malaysia reduced palm oil production in late 2015 and early 2016. While palm oil price trends can affect poultry fat prices, the high slaughter rates for pork and poultry likely suppressed that effect. In the first few months of 2017, we should see upward pressure on the fat markets as both palm oil and poultry slaughter begin their seasonal declines. Additional upward pressure may come from increased fat exports.

Predictions are, of course, not assured. In our ever-changing world, new factors arise daily that could affect these and other commodities.


Join us in looking ahead. What are your predictions for the 2017 global pet food market or commodities that affect it? Post your thoughts here or contact me at


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