FALL AAFCO REGULATORY UPDATES - BALCHEM CORP

Explicit Guidance:

• No financial revenue, earnings, or capital expenditure guidance provided.
• Timeline Projections:
  • AFCO Official Publication: The 2027 edition is currently available for pre-order; ingredients approved in the 2025 cycle (e.g., zinc L-selenomethionine complex, rice protein concentrate) will be listed here.
  • Enforcement Discretion (Cat Food): A six-year enforcement discretion period for revised feline calcium and phosphorus requirements is established to last until 2030.
  • FDA GRAS Rule: A final rule is projected as possible in 2027 following comment review, though timelines are uncertain; a one-year transition period for existing self-affirmed GRAS ingredients is proposed.
  • Pet Food Label Modernization: Currently six-year implementation period (Jan 2024–2030); annual reviews may extend this timeline if dietary fiber issues arise.
  • Facility Registration: Food facility biennial registration window is open for even-numbered years (Oct 1–Dec 31).

Business-Segment Outlook:

• Ingredient Approvals: New ingredients expected in the 2027 AFCO Official Publication include zinc L-selenomethionine (broilers), xylooligosaccharides (swine/poultry/fish), lytic bacteriophage (pets), Aztec marigold extract (dogs/cats), and beta-mannan (swine).
• SRIS Process (Special Regulatory Innovative Substances): Two initial ingredients (serine endopeptidase enzyme, grass-derived alkali lignin) moved through committee review in late 2025; pending membership vote in January (Orlando) for inclusion in a spring revised publication.
• Cat Food Profiles: New maximum phosphorus limit of 5g/1000 kcal and a 1:1 calcium:phosphorus ratio established; new footnote limiting highly soluble phosphates (>80% solubility) to <1g/1000 kcal in complete foods.
• Raw Pet Food: A new definition for "raw" in relation to High Pressure Processing (HPP) is being developed by an ingredient definitions work group; expected for membership vote in January.
• State Adoption: 9 states have adopted Pet Food Label Modernization changes; 13 states are currently in the rulemaking process.

Market and Competitive Outlook:

• E-Commerce Growth: Accelerating speed of market entry and complex distribution channels via e-commerce identified as a primary challenge for regulatory oversight and sampling.
• Global Harmonization: Increased collaboration with international regulators (ICCF, Brazil, Latin America) to align technical requirements and facilitate cross-border ingredient movement.
• Regulatory Shift: FDA pre-market programs moving toward stricter documentation transparency; potential shift from voluntary to mandatory GRAS notifications could increase compliance costs and scrutiny.
• State Funding: Continued challenges regarding state regulator staffing and funding, leading to potential burnout and variable enforcement capabilities across jurisdictions.

Macro / Industry Outlook:

• Legislative Watch (2027):
  • Innovative Feed Act: Senate Ag Committee advanced language (as part of Farm Bill 2.0) to update FDA review for non-nutritive/taste/feed additives (e.g., enzymes); House version did not include this. Status dependent on lame-duck session outcome.
  • PER Act: Current iteration in House Appropriations Bill (HR 8646) includes a preemption clause that would override state labeling authority; industry opposes this, seeking revisions.
  • Animal Health Supplement Act: Proposed by NASC to create a distinct legal category for supplements; expected to be introduced or sponsored in the new Congress starting January.
• FDA Reorganization: Split of Office of Surveillance and Compliance into "Office of Veterinary Product Surveillance and Compliance" and "Office of Animal Foods" to streamline pre-market reviews and post-market surveillance.
• ICCF Collaboration: FDA advancing internal harmonization with the International Cooperation for the Convergence of Technical Requirements for the Assessment of Feed Ingredients (ICCF) to standardize global assessment requirements.

Strategic Initiatives:

• Voluntary Label Review Program: AFCO considering a pilot program for 2027 offering free label reviews (cap: 10–12 products per company, max 300 total); potential transition to a fee-based system post-pilot.
• Ingredient Certification Program: Proposed voluntary audit scheme allowing firms to use an AFCO seal on labeling upon demonstrating compliance with AFCO definitions and food safety standards.
• Laboratory Certification Program: Proposed voluntary audit for laboratories participating in proficiency testing to demonstrate higher competency levels.
• Educational Resources: On-demand pet food labeling workshop materials scheduled for rollout in 2027; live labeling workshop planned for the January annual meeting.

Risks and Headwinds to Outlook:

• Legislative Uncertainty: The "lame duck" legislative session and funding bills may delay or alter the inclusion of the Innovative Feed Act or Animal Health Supplement Act language.
• GRAS Compliance: If the FDA GRAS proposed rule is finalized as mandatory notification, firms relying on self-affirmed GRAS status face increased enforcement risk and documentation burdens.
• Regulatory Preemption: Passage of the PER Act with current preemption language could void state-level model bill requirements, creating a regulatory vacuum and consumer protection risks.
• Implementation Delays: Pet Food Label Modernization adoption is uneven across states; potential decoupling of the 2030 phosphorus deadline if the label modernization timeline extends.
• Staffing Constraints: FDA and state agencies are currently rebuilding post-2025 staff losses; delays in review timelines or enforcement capacity remain possible.

Management Tone on the Future:

• Cautiously Optimistic: Management expresses excitement regarding new regulatory tools (e.g., second amendment opportunity in GRAS process, ICCF harmonization) and new service offerings (certification programs).
• Transparency Focus: Emphasis placed on FDA's new Policy and Procedures Manual (1244.3425) providing transparent benchmarks to reduce uncertainty.
• Active Engagement: AFCO actively soliciting industry feedback on the GRAS rule (comments due Dec 9) and preparing to share draft positions with members.
• Adaptability: Recognition of the "speed of change" regarding technology (AI, genomics) and e-commerce, with a commitment to updating definitions (e.g., HPP, raw) to maintain market integrity.

Miscellaneous:

• AFCO 2027 Mid-Year Meeting: Scheduled for January in Orlando, Florida.
• Upcoming Balchem Lectures:
  • Nov 24: Dr. Elaine Burgers (Wageningen) on extending lifespans/lactations.
  • Dec 1: Dr. Francisco Penegaricano (UW) on methane emissions.
  • Dec 8: Dr. Lani Hobbs (KSU) on the economic landscape of the US pet food industry.