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2025 proved to be the year of volatility that procurement leaders had long feared. Trade disruptions, shifting policy landscapes, and escalating geopolitical tensions converged to create a turbulent environment for the pet food and animal feed industries.
From erratic commodity price swings to unpredictable logistics and tightening sustainability mandates, the year underscored the urgent need for a more resilient and strategic approach to procurement.
Pet food manufacturers and animal feed producers face a convergence of challenges. Soybean oil prices have swung significantly over the past 12 months; tallow has experienced a wide price range, and bloodmeal has surged from its trough to its peak. Meanwhile, logistics disruptions, sustainability mandates, and geopolitical uncertainties compound the pressure on procurement teams tasked with maintaining margins and supply security.
The traditional playbook – spot buying, reactive sourcing, and reliance on historical price patterns – no longer suffices. The most successful procurement organizations have moved beyond reactive buying, embracing proactive strategic category management where data is embedded at the core of every decision. By integrating advanced risk mitigation tools, dynamic formulation strategies, and sustainability frameworks, these leaders are not just responding to market shifts; they are anticipating them.
Navigating a changing world requires more than observation; it demands data-driven strategies that turn insights into competitive advantage. This article provides a comprehensive procurement playbook for navigating today’s volatile feed-ingredient markets, offering actionable frameworks that procurement directors, commodity managers, and supply chain leaders can implement immediately to achieve cost predictability and maintain competitive positioning.
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The numbers tell a stark story. As of early February 2026, soybean oil trades at over 55 cents per pound – up 8% from January alone and 20% above 12 months ago. Canola oil has shown an even wider range, while corn and soybean meal continue to show price volatility. For a mid-sized feed producer purchasing thousands of metric tons annually, even a 5% price move translates to hundreds of thousands in unplanned costs.
This volatility stems from a complex web of forces that extend well beyond traditional supply-and-demand fundamentals. Shifts in US biofuel policy, macroeconomic uncertainty, and intensifying geopolitical tensions, particularly between the US and China, have become dominant market drivers.
The soybean market offers a clear example: in early February, a single tweet from President Trump suggesting just the intention of more Chinese purchases of US soybeans sent futures surging, despite a record-breaking South American crop. The market’s swift reaction underscores how sentiment and political signaling can override supply-side logic, reinforcing the need for procurement strategies that are not only responsive but also grounded in real-time data and scenario planning.
Futures and options strategies: Forward-thinking procurement teams are implementing structured hedging programs using futures and options contracts. For example, a pet food manufacturer anticipating soybean meal needs for upcoming quarters could establish a hedge position using futures contracts today, effectively locking in a price ceiling near current levels. Should spot prices rise, the hedged position offsets physical market losses with gains from futures.
Options strategies provide additional flexibility. Purchasing call options on corn futures allows buyers to cap upside price risk while retaining the benefit if prices decline, essentially, insurance against adverse moves. During past rallies, companies with hedged positions maintained budget accuracy within a narrow band, whereas unhedged competitors showed wide variances.
OTC derivatives and customized solutions: Beyond exchange-traded instruments, over-the-counter derivatives enable customized hedging for specific feed ingredients or delivery locations. Working with financial institutions or specialized commodity brokers, feed producers can structure swaps that directly mirror their physical procurement needs.
Physical forward contracts with suppliers represent another critical risk management tool. By negotiating six- to twelve-month supply agreements at fixed or formula-based prices, procurement teams secure both price certainty and guaranteed supply, particularly crucial for specialized ingredients, where spot markets can be thin.
To ensure fairness and transparency in these agreements, it is essential to anchor pricing formulas to independent, trusted benchmarks. Incorporating robust, market-reflective assessments from providers like Fastmarkets into contract structures not only strengthens negotiation positions but also reduces disputes and enhances predictability.
The optimal approach balances commitment with optionality: covering 40–60% of anticipated needs through forward contracts while reserving the balance for spot purchases allows companies to capitalize on market weaknesses without compromising supply security.
Sophisticated procurement organizations build comprehensive cost-of-production models that integrate not just commodity prices but also energy, freight, and processing costs to forecast true landed costs. These models enable scenario planning: What happens to total feed costs if natural gas spikes? How do logistics disruptions affect delivered pricing?
To be truly effective, these models must be forward-looking, providing visibility not only into current cost structures but also into where pressure points may emerge in the months ahead. That level of foresight depends on accurate, timely, and independent data for key feed inputs.
While some companies may attempt to build these models in-house, many are turning to specialized partners like Fastmarkets, whose robust forecasts for agricultural commodities help procurement teams anticipate market shifts with greater confidence. By embedding these forecasts into their planning, companies can identify margin risks early and make proactive adjustments to formulations, sourcing strategies, or customer pricing before volatility erodes profitability.
Geographic diversification has become a foundational principle in modern feed procurement strategy, not just as a cost lever but as a resilience imperative. While price remains a critical factor, procurement leaders are increasingly prioritizing supplier reliability, geopolitical stability, and logistical agility in their sourcing decisions.
For decades, lean inventories, just-in-time logistics, and single-source procurement were the gold standard – efficiency was king. But the cascading supply shocks that began during the pandemic and continue today have exposed the fragility of that model.
What were once considered rare disruptions – climate shocks, export bans, and geopolitical flashpoints – are now structural features of the global operating environment. As a result, the efficiency paradigm is under growing scrutiny, and the conversation is shifting toward building supply chains that can withstand volatility rather than just optimize for cost.
Consider soybean meal sourcing in the US: domestic producers offer premium quality and reliable logistics, while international alternatives may offer discounts but introduce currency volatility, longer lead times, and exposure to infrastructure bottlenecks. The optimal strategy often involves a balanced portfolio: leveraging domestic sources for stability while selectively incorporating international suppliers to capture cost advantages without overexposing the business to concentrated risk.
In vegetable oils, palm oil from Southeast Asia remains competitively priced, but procurement now requires navigating complex sustainability regulations, including those related to deforestation-free certification. For companies with global pet food distribution, this adds compliance burdens but also creates opportunities for differentiation through traceable, responsible sourcing.
To navigate this landscape effectively, procurement teams must evaluate suppliers across a multidimensional risk framework that includes:
· Geopolitical Stability
· Financial Health
· Logistics Reliability
· Currency Exposure
When comparing domestic versus imported ingredients, it’s no longer sufficient to focus on price alone. A comprehensive analysis must account for shipping costs, hedging requirements, regulatory compliance, and the potential for disruption. In this new era, the ability to maintain supply continuity is becoming just as valuable as securing the lowest price, and the next major disruption may well redefine how markets value that capability.
Global freight costs remain elevated due to ongoing disruptions from geopolitical tensions, port congestion, and capacity constraints. For bulk feed ingredients, ocean freight can account for a significant share of delivered costs, making freight procurement a strategic imperative.
Forward booking of vessel space, negotiating annual contracts with preferred carriers, and maintaining relationships with multiple freight forwarders provide buffers against rate spikes and capacity crunches. The freight landscape remains volatile, with container rates and bulk carrier costs subject to sudden shifts driven by global events and seasonal demand.
The most agile feed and pet food producers have mastered the art of dynamic formulation optimization, continuously adjusting ingredient mixes based on relative pricing while maintaining nutritional specifications. This requires sophisticated least-cost formulation software that balances nutritional requirements against real-time ingredient costs.
The strategic opportunity emerges from relative price movements. When soybean meal trades at a premium to canola meal or sunflower meal on a protein-adjusted basis, formulation flexibility enables cost reduction without compromising product quality. Similarly, energy sources can be substituted based on cost and nutritional value.
Protein meal substitution: Soybean meal remains the gold standard, but alternative protein sources offer compelling economics when price spreads widen. Nutritionists should evaluate canola meal, DDGS, and corn gluten feed as partial replacements in non-critical applications.
Fats and oils substitution: The fats and oils complex presents particularly dynamic substitution opportunities. Procurement teams must continuously evaluate the energy value and fatty acid profiles against relative pricing. When vegetable oils trade at significant premiums to animal fats, the economics favor including animal fats where product specifications permit.
Energy source flexibility: Corn is a staple energy source, but wheat, sorghum, and barley are viable alternatives. When price spreads deviate from historical norms, agile formulators can capture value. The challenge lies in managing nutritional variations while capturing economic gains.
Sustainability has transitioned from aspirational to operational. New regulations now require companies importing or exporting certain commodities into specific markets to demonstrate deforestation-free supply chains traceable to specific land plots.
For feed and pet food companies with international distribution, this demands a fundamental transformation of the supply chain. First-in-line operators must conduct due diligence and submit statements confirming the product’s origin and compliance with the laws of the country of origin. Downstream operators must capture and retain reference numbers throughout the supply chain.
The market is already reacting. In October, soybean meal prices rose sharply as traders began to front-load purchases in anticipation of the European Union Deforestation Regulation (EUDR).
The move reflected growing concern over future compliance risks and the potential tightening of supply from uncertified sources. This preemptive behavior underscores that sustainability regulations are no longer abstract: they shape market dynamics and influence procurement timelines.
Leading procurement organizations are implementing digital traceability platforms that integrate supplier certifications, geographic data, and chain-of-custody documentation. Certification programs provide recognized standards, though new regulations may extend beyond existing frameworks to mandate deforestation-free verification. The investment in traceability infrastructure generates multiple returns: regulatory compliance, brand reputation protection, and customer demand satisfaction.
Certified sustainable ingredients typically command premiums over conventional alternatives. However, strategic approaches can minimize cost impacts:
· Long-term contracts
· Supplier development
· Portfolio approach
Sustainability is increasingly influencing commodity pricing, with certified deforestation-free ingredients potentially commanding persistent premiums. Early movers capturing certified supply now position themselves advantageously versus competitors, not only to meet compliance requirements but also to secure access to constrained, high-integrity supply chains in a tightening regulatory environment.
The pet food and animal feed markets of 2026 demand a fundamentally different procurement approach. Volatility has become the new normal. Layered atop price uncertainty are supply chain complexities, logistics bottlenecks, and sustainability compliance requirements that multiply risk exposure.
Yet within this challenging environment lies opportunity. Procurement organizations that evolve from reactive buyers to strategic category managers: deploying hedging tools, optimizing formulations dynamically, diversifying supplier bases intelligently, and building sustainable supply chains proactively, transform market volatility from threat to competitive advantage.
Success requires integration of these elements into a cohesive procurement strategy, supported by robust data and market intelligence. By leveraging pricing data and analysis, feed industry leaders can identify substitution opportunities earlier, structure hedges more precisely, and negotiate supplier contracts more effectively.
The market winners of 2026 and beyond will be those who recognize that procurement excellence has evolved from tactical buying to strategic risk management and competitive positioning. The playbook is clear; the opportunity is now.
To explore how pricing data, market analysis, and procurement risk management tools can enhance your organization’s strategic capabilities, contact our team for a customized consultation and platform demonstration.
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