The Truth About the Baby Formula Shortage

Moms have had a rough few years. 

Lockdowns and school closures made it tough for many to get their kids fed and educated… 

And now, we have the other side of the coin as inflation has stuck around for a long time.

Here’s a chart of wheat futures that went limit up:

And elevated soybean prices are holding up well:

So why, exactly, are these two markets so important for moms?

Let’s talk about the baby formula shortage going on right now, an issue that finally broke into the mainstream. 

We started talking about the “empty shelves” problem facing the world back in Fall 2021… 

But because I’m a 38-year-old guy, I was worried more about beef prices than how to feed a baby.

Right now, politicians are looking for who to blame for the shortage (I’ve heard plenty of “It’s Putin!” lately)... 

But from where I stand, it’s just an extension of what we have seen in so many other things: 

Supply shortages due to failing systems. 

There’s not much the Fed can do besides try to attack the demand side to break pricing.

But there’s one issue that’s making it even worse… 
The United States can not import baby formula from the EU. This isn’t a new issue — this news article from 2021 shows how US customs seized baby formula from Europe:

This is a stupid regulation that borders on evil. 

I’ve read some claims saying it has to do with “labeling,” but I have another theory: 

This is an extension of the disastrous policies they’re forcing on businesses and citizens under the guise of “ESG.”

If you’ve been in the investing space for a while, you’ve probably seen the ESG acronym floating around. It stands for Environmental, Social, and Governance.

Sounds fancy, but it’s an investing philosophy that, in effect, tries to make rich people feel better about themselves.

Here’s where it gets wild, though.

Below is a label for US-based baby formula:

The top two ingredients are corn syrup and vegetable oil.

This is like taking a Coke and blending it with some Cheetos. 

I can go deeper into the health issues, but let’s contrast this with the European formula that uses ingredients like… well… MILK.

This is where I put my tin-foil hat on. I think one reason US baby formula is so bad is that it doesn’t contain dairy. 

For many, that makes it “green.” But I think it’s evil. We are trading a reduction in carbon emissions for the long-term health of our kids. 

It’s a child sacrifice to the ESG gods.

And this is where I return to the futures charts from earlier. Corn and soybean prices staying bid could mean continued rising costs for new families.

When markets get this unstable, we usually see a massive transfer of wealth and power. 

Think about how the oil shock in the late 70s gave more power to the Middle East, or how the financial elite scooped up shares after the 2008 financial crisis. 

Or, to come full circle… how certain tech overlords made obscene sums of money while small businesses were demolished during 2020.

That kind of wealth and power transfer is happening now. The inflation spike will create new winners and losers — not just in geopoliticals, but in the stock market, too.

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