We expect pet food prices to increase about 5% during the first quarter of 2011. The primary reasons are:
a) Weak Dollar
b) Poor harvest in Russia
c) Increased demand for commodities from China and India
The weak Dollar means that US commodities are relatively inexpensive on the world market. This results in increased demand for US commodities which pushes pricing higher. For instance, corn which traditionally trades for under US$ 3 per bushel is now trading at over US$ 6 per bushel. Although most of our pet foods do not contain corn, corn prices influence the price of all other grains, not to mention livestock prices as corn is a main ingredient in many livestock feeds. The weak Dollar also results in increased fuel costs.
Traditionally, Russia is a net exporter of grains. However, this year, due to a poor wheat harvest, Russia is a net importer of grain. This results in increased demand for grain in the world market.
China & India
As the Chinese and Indian economies continue to grow, there is increased demand for commodities and foodstuffs.
As a result of all these factors (and more), pet food prices will increase in 2011 and in talks with a number of companies, we believe the increase will be about 5%. Some may be more and some may be less. However, if you are a pet food importer, you should expect a price increase during the first quarter of 2011 and begin making plans accordingly. Please keep in mind that if your currency has appreciated against the Dollar, your costs may actually decrease!