Baby Food Prices Jump by Most on Record to All-Time High

(Bloomberg) — US prices of baby food and formula jumped by the most on record to an all-time high last month, data from the Bureau of Labor Statistics showed Wednesday.

Prices in the category rose by 4.3% in April from the prior month. From a year ago, they are up 8.8%.

Parents across the US had to cope with soaring prices of baby formula during the pandemic as supply-chain disruptions and contamination concerns led to out-of-stock rates of above 70% and prompted the White House to intervene. Shortages have since eased, but prices remain above pre-pandemic levels.

Several factors could be influencing prices. Last year, the Biden administration suspended tariffs on imported infant formula to keep costs low as shortages persisted, but the waiver expired in December. Lawmakers warned that could send prices soaring. 

Bringing back the tariffs is “guaranteed to increase the price of these products,” US Senator Tammy Duckworth of Illinois said in February. 

By March, consumers were reporting price hikes for various baby formula products, like best-selling Enfamil, on social media. 

Government agencies have been working to fix various long-standing issues within the baby formula industry in hopes of heading off another crisis. This has put more pressure on formula suppliers to better comply with production and manufacturing standards. 

The Food and Drug Administration in March outlined the latest steps it was taking to improve supply-chain resiliency. They include inspecting all infant formula manufacturers at least annually, increasing training for inspectors and improving communication with formula makers.

Perrigo Co (NYSE:)., a major manufacturer of infant formula, said this week it was making investments to modernize its production infrastructure and refine its sanitation procedures, changes that will “significantly” raise costs.

“These actions will negatively impact supply and significantly raise the cost of producing infant formula,” Chief Executive Officer Murray Kessler said in a call after reporting quarterly earnings Tuesday. The cost of adhering to higher production standards “will be offset with a price increase,” Kessler said.

In an emailed statement, the FDA said that while the agency doen’t have authority over pricing, it encourages companies to ensure essential foods like infant formula are affordable. “Unfortunately, in a consolidated marketplace, there’s less need for companies to choose to lower their prices to compete for customers,” the FDA said.

Experts have warned that without improvements, another formula shortage is a very real threat. Last year’s crisis was spurred by issues at one of Abbott Laboratories’ plants, but other producers have come under fire for contamination concerns as well. 

Perrigo recently recalled some of its baby formula products in Canada due to potential bacterial contamination. That recall followed a separate one in February from Reckitt Benckiser Group Plc (LON:).

Neither Perrigo nor Abbott Laboratories (NYSE:) responded to requests for comment.

Overall consumer price growth cooled last month to an annual rate of 4.9%, down from a peak of 9.1% last June. 

Read More: US Inflation Slowdown in Sight as Key Drivers Show Cooling

(Adds comments from the FDA in the 11th paragraph.)

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