🔎 The US is amid a baby formula shortage, meaning that most parents of infants are unable to find any formula on store shelves. What happened? How did this come about?
🎙 Tridge's Global Market Analysts Bea Shim and Prince Yawson discuss the situation.
📖 For more information on the baby formula shortage in the US, take a look at our Analysis.
💻 Want more agricultural insights? Get smarter and stay updated on the most important agricultural updates on https://www.tridge.com/intelligence-data.
0:00 Hey, this is Free on Board a podcast by Tridge.
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0:16 [Bea] Hi, welcome to the last episode of Free on Board.
0:20 [Bea] I'm your host Bea Shim.
0:22 [Bea] The U.S. has been experiencing a baby formula shortage, a crisis that has hit all infants in the US.
0:28 [Bea] As much as the composition of baby formula is designed to be roughly based on a human mother's milk at approximately 1 to 3 months postpartum,
0:36 [Bea] the baby formula shortage has hit all babies that are vulnerable, just by virtue of being born, but preemies, medically complex babies, and low-income families in particular.
0:47 [Bea] Despite President Biden's efforts to support low-income families, urging more states to take advantage of the waivers the USDA has been offering,
0:55 [Bea] shelves have continued to remain empty, causing parental anxiety to reach new peaks by day.
1:00 [Bea] As of May 14, nationwide out-of-stock rates were reported to be 43%, and by May 22 these rates had surged to 70%.
1:11 [Bea] Among many states, Delaware, Kansas, and Tennessee were the most hard-hit states.
1:15 [Bea] And more recently on May 27, FDA Commissioner Robert Califf reported to the Senate Health Committee that shortages would continue well into July of this year.
1:25 [Bea] Today we have our very own Prince Yawson, a Senior Global Market Analyst specializing in the dairy market giving an autopsy on how the baby formula shortage in the US really came about
1:37 [Bea] so join me in welcoming Prince Yawson to the podcast.
1:41 [Bea] Hello Prince, how are you doing?
1:42 [Bea] Hello Bea, I'm very well. How are you?
1:45 [Bea] I'm well, Prince, thanks for asking.
1:47 [Bea] So Prince, you're located in London, the United Kingdom currently.
1:52 [Bea] And before we dive into our conversation about the baby formula shortage in the United States, I want to ask how Europe, or more specifically, the UK's baby formula situation is like.
2:03 [Prince] Thank you, Bea. At the moment, I'm not the one who goes to the shop to buy baby milk.
2:10 [Prince] So, but over the past few days I've walked around, I've gone to a few shops in London. last week.
2:18 [Prince] Last week, I was in Milton Keynes.
2:20 [Prince] I've tried as much as possible to go to a few shops to check whether.
2:23 [Prince] And so personally, I've been to the shops, there are enough supplies, reading, and speaking to other market analysts within the market as well,
2:31 [Prince] there seems to be ample supplies.
2:33 [Prince] the USA, as you'll be aware, is self sufficient.
2:36 [Prince] So what's happening there is not having any effect whatsoever to the situation in the UK or in Europe.
2:42 [Prince] So supplies are ample, parents are able to get what they want on their shelves.
2:47 [Prince] So that's the situation in the UK and europe, as a whole, at this point in time.
2:52 [Bea] I see that's really good to hear.
2:54 [Bea] And as with the events that have been unfolding in the US, we can tell that the current crisis is not exactly the result of a single event, but this crisis has been coming along for quite some time now.
3:06 [Bea] So Prince, what factors would you say contributed the most to the stopping point.
3:10 [Prince] Thank you, Bea.
3:12 [Prince] Of course, we know that those who work within the industry or within the dairy markets are aware that this has been long coming.
3:20 [Prince] The first thing is to talk about the COVID crisis that we have.
3:25 [Prince] So when COVID broke out and we saw cases in the USA
3:29 [Prince] Of course parents panicked and everyone panicked.
3:32 [Prince] So what happened was that parents tried as much as possible to halt.
3:36 [Prince] They went into retail shops or they bought their products and they bought so much to the extent that the demand just shut up at a point in time.
3:46 [Prince] Then after them making their purchases out of the panic, the demand went down, right.
3:52 [Prince] And so, of course, it became difficult for manufacturers or suppliers to be able to determine how much supply for any particular month.
4:02 [Prince] And that's that's when the problems started as well.
4:05 [Prince] I mean when Covid came in, we we saw labor shortages all around the world and it was the case in the USA as well.
4:13 [Prince] So manufacturing companies struggled to find labor to work on their plants to produce baby milk.
4:22 [Prince] And it's quite difficult, as well, to actually buy baby formula from abroad, because the FDA have got very stringent regulations that needs to be adhered to.
4:32 [Prince] So you either buy from the USA or you cannot actually buy anywhere else.
4:36 [Prince] So this has been the problems that's that's existed
4:40 [Prince] Also, we are aware that for example after the new trade agreements that came into force in July 2020 when Trump put in place between the USA, Mexico, and Canada.
4:53 [Prince] It became difficult, for example, for Canada to a export SMP, right, or baby milk from that side to the US of A
5:03 [Prince] And Canada used to be very huge trading in terms of dairy trading partner with USA.
5:08 [Prince] So any disruptions in the trade between the two countries would have some significant effects on whichever dairy commodity product.
5:16 [Bea] Absolutely.
5:17 [Bea] And you also wrote in your analysis about the Abbot baby formula fiasco in Michigan where they had a bacterial infection. Can you tell me more about that?
5:27 [Prince] Thank you, Bea.
5:28 [Prince] What happened somewhere in February of this year was we saw some infection in some babies about four babies that are taken baby formula.
5:37 [Prince] And so the FDA, the US Food and Drug Administration started probing into that issue to see whether there was any infection that had come from maybe a plant.
5:48 [Prince] And when they started the investigation they found a pathogen, which I will try to pronounce, which is Cronobacter Takasaki.
5:58 [Prince] So they found a pathogen in the Abbott nutrition's plant in Michigan, and therefore they ordered them to close their plants.
6:06 [Prince] And then Abbott nutrition then had to recall some of their products in the market.
6:11 [Prince] So that caused that tightness within the market, because, of course, most products were a recalled, but there's always recall that happens in markets in the US.
6:23 [Prince] But at this point, it became very difficult and tight on the back of the supply snags or the supply chain snags that we saw during the COVIDpandemic.
6:33 [Prince] And so that's been the situation that's developed.
6:36 [Bea] I see, I see. Well that must have been a terrible time because I know that Abbott, you know, supplies a large portion of the US’s baby formula.
6:45 [Bea] Another factor you mentioned in your analysis was the supply chain crunch, largely brought about by the pandemic and the conflict in Russia and Ukraine.
6:54 [Bea] Can you speak more on that, Prince?
6:56 [Prince] So the supply chain snags, it's just on the basis of COVID-19.
7:01 [Prince] So of course, we know when COVID came in all around the world, there were supply chain disruptions and transportation of products from one place to the other but became a problem.
7:12 [Prince] But in the case of baby milk or baby formula in the USA, when COVID came there was panic and as I said,
7:19 [Prince] so some parents panicked and hoarded most baby formula and that's happened.
7:24 [Prince] So it became difficult after harden the demand of that product went down.
7:30 [Prince] So when these sudden demand disruptions happens within the market, it becomes difficult for manufacturers or suppliers to predict how much it produced for every or any particular month.
7:41 [Prince] And so they were not producing, for example, how much they had to produce over the past few months to feed the growing population.
7:49 [Prince] And so, definitely, we began to see tightness within the market in terms of baby formula.
7:56 [Bea] the US government resulting lee opened up baby formula imports.
8:00 [Bea] And this is a pretty historic moment in time because it shows how dire the situation is.
8:05 [Bea] So can you speak on the steps that the biden administration has taken to alleviate the situation?
8:10 [Prince] The first thing that the US government did was invoke the Defense Production Act as a short-term solution to the problem that was unfolding.
8:19 [Prince] And so what they did as well was to ask all federal agencies to engage the Defense Department contracted commercial aircraft to transport baby formula from Europe and Australia and many other jurisdictions to the USA
8:33 [Prince] Also, they asked the FDA to reopen the the closed Abbott nutrition plants and also for some manufacturers to produce baby milk.
8:44 [Prince] And so that's been ongoing.
8:45 [Prince] And maybe within the next few weeks or so, we might see a lot of baby formula that's imported from around the world,
8:54 [Prince] from Europe, from Australia, and any other places that they can fly baby formula into the USA.
9:00 [Bea] I see. And this has progressed quite rapidly, Prince. So they've authorized imports pretty quickly after they invoked the Defense Production Act.
9:09 [Bea] And so baby formula shipments from other countries like Australia and Germany are set to make their way to the USA right now.
9:14 [Prince] Thank you Bea. Already, we've seen some shipments from Europe.
9:20 [Prince] In my last conversation with one of my colleagues who work within the industry in America, he did tell me that with Bubs Australia is planning to ship around 1.25 million tons of baby formula.
9:35 [Prince] And that if you look at it in terms of baby bottles, that is around 27 million baby bottles of baby infant milk, right
9:43 [Prince] So that will go a long way to alleviate the tightness that we've seen within the baby formula market in the USA.
9:50 [Bea] So I would assume Prince that the 27 million bottles of infant formula milk would have real implications on end-consumer shelves in the US.
10:00 [Prince] That's very true.
10:01 [Prince] So the US government keeps importing baby formula from abroad.
10:05 [Prince] And definitely that would find themselves onto the shelves of shops and retail outlets and so on and so forth.
10:12 [Prince] So any parent who goes out within the next few days and few weeks will then find what was nonexistent on the shelves weeks before.
10:21 [Prince] And so that should go a long way to losing the supply crunch that we've seen in the recent past.
10:29 [Bea] Absolutely.
10:30 [Bea] Well thank you so much for your insight and time today, Prince,
10:34 [Prince] Thank you so much, and we hope that the situation does get better. Thank you.
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