The Baby Formula Shortage Explained

It’s about a 6 or 7 tweet thread. This is a very concise story told by a guy who knows how two companies in America have an oligopoly of 90% of the baby formula business in the country. Downthread you learn one of the companies had problems with machinery contaminating forumula and they had so shut down. It is asserted that money which should have been spent on maintenance of the machinery was spent on stock buybacks. Interesting look at baby formula here:…

So, about this baby formula shortage…

My company did some work for Abbott way back in the day.

Abbott and its main competitor each knew that new moms who used formula would likely continue on whatever the hospital started their baby on…


I think you should post this over at METaR.

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A logical solution to this over concentration is antitrust to break them up. Or at least force diversification by limiting production to 20% market share per plant. Companies with more than 20% share should have multiple plants.

Biological incidents are a known risk in food processing. Industry leaders should plan for incidents and build in diversification to deal with the risk.


Jim Wright, not copyrighted:
So, why can’t we just import baby formula?

Ever heard of the United States Canada Mexico Agreement? That bit of legislation Trump and Republicans proudly replaced NAFTA with?
Remember Trump bragging about that? Remember?
That. That’s why.

Three (or four, depending on your point of view) American companies control 90% of the global infant formula market, chief among them is Abbott Nutrition. When a Chinese company announced it was investing in a Canadian manufacturing facility to make powdered baby formula from excess Canadian skim milk powder (Canada makes a lot of butter, so they have a lot of leftover skim milk), Abbott and the US diary industry spent millions lobbying congress to change the trade rules – claiming increased Canadian production of formula would “negatively impact U.S. dairy trade and jobs.”
Here’s the actual 2018 lobbying statement from the International Dairy Foods Association (which despite the name, is a lobbying group for the AMERICAN dairy industry):

And so, when the Trump Administration backed by a Republican congress wrote and implemented the USMCA to replace NAFTA, they imposed new regulations restricting commercial importation of baby formula from Canada (you can still import it for your own personal use, though you’ll have to pay extra for it and there are limits. Also, I’d think twice about buying it from Canada and then trying to resell it at jacked up prices on eBay without checking that law first).

This is part of the US government’s long history of protecting the very powerful US dairy industry, which has always imposed very high tariffs on importation of dairy products from Europe and Asia. And even previous free trade agreements (such as NAFTA) imposed pretty specific restrictions on the import of formula from our free trade partners, such as Canada, to protect the American monopoly by companies such as Abbott. The USMCA significantly increased those restrictions and imposed draconian fees. A good breakdown of this entire complex situation is here:…

There’s a lot more to it, such as FDA restrictions on nutritional standards and labelling, but that’s the basics.

So when Abbott contaminated its production line and was forced into a massive recall, well, for Americans, there just ISN’T any other place to get infant formula. And you can thank the dairy industry, and their lackies in Congress (and, yes, the former White House) for that.

American industry, unfortunately, CAN’T just spin up to replace the lack of supply from Abbott. Because the Dairy Industry has worked very hard over several decades to ensure the supply of infant formula is strictly managed to maintain a steady profit margin. Couple that to suppliers and retailers who are right now hoarding and/or restricting supplies to (allegedly) prevent panic buying (but are really just increasing their profits in the traditional manner of supply and demand capitalism), AND add in supply chain problems, including those deliberately imposed to INCREASE lack of supply (like the actions of a certain Texas governor) and here we are.

Oh, by the way, the problem that led to contamination at the Abbott plant in Michigan? Instead of investing in sanitation and upgrades, Abbott spent the last few years and $3 billion buying back its own stock.

That’s the gestation (I’m not sorry) of the current crisis.

So, when you see members of Congress who WROTE THOSE LAWS right now blaming the CURRENT president for the lack of infant formula on store shelves…

When you see the very same pundits and news anchors blaming Joe Biden for a crisis caused by the very same trade agreement they themselves cheered two years ago…

Well, you know where that full diaper you’re smelling came from.


Linda, I’ve got another article on this mess which I’m about to post under a new headline here. If you would like to share it with people elsewhere, please do. And you don’t have to X Post. Just take the archived link and run with it, making your own headline. Let me work that up now. I saw this on Twitter not an hour or so ago.

  • Rock
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Rock - I know Jim Wright can be aggressive in his language, but that text I posted upthread was restrained for him. And I thought he had links and background that people need to know. Not that I think the right people will accept it here, but a person has to try!

If Dems don’t make it clear where much of the baby formula crisis came from, they are idiots. But then, I already think that.


p.s. this is a Macro issue but politics just automatically has to be involved since the issue revolves around a trade agreement from the last administration.