Baby formula makers rushing to address shortages in the U.S. are facing another big obstacle: A key ingredient comes largely from Ukraine.
Many formula manufacturers use sunflower-seed oil to add critical fats to products. Ukraine has been the No. 1 exporter of the oil, according to the U.S. Department of Agriculture. Yet shipments have slowed to a trickle during since Russia invaded the country.
The bottleneck has added a tricky complication to frantic efforts to increase U.S. stocks of formula, which ran short for several months due to supply-chain issues, then worsened after Abbott Laboratories shut down a plant.
Companies have been scrambling to increase supply of sunflower oil, as Russian soldiers hold up Ukrainian supplies at ports, according to industry consultants. Yet finding alternative sources, or rewriting recipes to replace sunflower oil with similar oils will take time, the industry experts said.
A sunflower-seed processing plant in Velyka Kostromka, Ukraine, was damaged by a Russian attack last week.
PHOTO: FRANCISCO SECO/ASSOCIATED PRESSIt will also cost more. Sunflower oil sold for $2,276 per metric ton in April in Rotterdam, up from $1,500 in February, according to the World Bank.
“It does just add an additional cost, complexity and in some cases delays,” said Lyman Stone, director of research for Demographic Intelligence, which consults for formula manufacturers including Abbott and Nestlé SA .
Reckitt Benckiser Group PLC, which makes the Enfamil brand formula, said the war in Ukraine has impacted sunflower oil supplies, but is working with suppliers “to continue sourcing this ingredient in the quantities necessary to help us address the formula shortage.” Other major U.S. formula manufacturers declined to comment.
“Without question it’s high on their list” of problems, said Per Hong, senior partner at Kearney, a global management consultant. Formula makers could eventually find U.S. sources of sunflower oil, he said, but that could take months.
The Biden administration announced plans last week to invoke the Defense Production Act to get critical ingredients to formula makers, but a senior administration official said there weren’t plans to use the act for sunflower oil.
The first air shipment of baby formula, originating from Zurich, was delivered at Indianapolis International Airport on Sunday.
PHOTO: KAITI SULLIVAN/BLOOMBERG NEWSBaby formula includes a blend of oils to add the healthy fat that babies need to grow. Sunflower has been a popular option because historically it was easy to source, has a high amount of essential fatty acids and doesn’t throw off the taste of the drink too much, said Kristi King, a senior pediatric dietitian at Texas Children’s Hospital.
Ukraine had been one of the major—and least expensive—sources of sunflower oil for many U.S. food manufacturers. The country was known as a good source of sunflower oil high in oleic acids, a source of healthy fats.
Michael Bleyzer, president of SigmaBleyzer LLC, a Houston-based private-equity firm with investments in Ukrainian agriculture, said his company normally produces 50,000 tons of sunflower seeds a year, but this growing season, working around cratered fields and shelled equipment in the Kharkiv region, he expects to grow only half that.
Russia’s blockade of Ukraine’s ports has meant that much of the oil in the country can’t get out. That has pushed up prices for sunflower oil and its typical replacements, such as palm and rapeseed oils.
The issues arose amid a shortage of baby formula in the U.S. partly due to supply-chain issues created by the pandemic. The situation worsened after Abbott recalled some formula and closed its Sturgis, Mich., plant in February, after Food and Drug Administration inspectors found bacteria and other violations. Abbott reached an agreement with the FDA this month that would allow it to reopen the plant in coming weeks under agency supervision while making improvements to the facility.
Abbott Laboratories’ baby formula plant in Sturgis, Mich., last week.
PHOTO: SYLVIA JARRUS FOR THE WALL STREET JOURNALTo ease the formula shortage, companies have been looking for new sunflower-oil suppliers outside Ukraine, according to industry consultants. The second biggest exporter of sunflower oil, however, is Russia. Other sources include Turkey, Germany and several Eastern European countries. Securing new supplies takes time, to sign contracts and assure the quality of the product, industry experts say.
Farmers in the U.S. grow sunflower seeds but much fewer than in Ukraine, and most wind up as snacks or get crushed into oil used to make popcorn and potato chips. The National Sunflower Association, a U.S. trade group, expects growers to plant about 20% more of the crop this year than they normally do.
“There’s more demand for sunflower oil right now than there is product,” said John Sandbakken, executive director of the association. “Growers are definitely looking at taking advantage of the opportunity.” Yet the plantings won’t increase supplies until October, when the harvested seeds would first be crushed for oil, Mr. Sandbakken said.
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Formula makers are also looking at substituting another oil for sunflower, industry experts said. But palm oil, another popular choice for infant formula, is also hard to come by. Indonesia, the top producer of palm oil, cut off exports of the product in April after price pressure from the Ukraine war began to make the oil scarce for its own citizens, though the country rescinded the ban Monday.
Rewriting formula recipes to use a different oil can take months for a closely regulated health product, industry experts said. Recipe changes must meet FDA standards and often require safety testing in animals. It also could change the taste and odor of the formulas, industry experts said, which could upset babies and their parents.
Sourcing other oils would have the same supply-chain issues that sunflower oil faces: few trucks, few workers, few available shipping routes.
“Not only is the formulation sensitive but there is not an existent supply chain to get those things,” said Amy David, clinical associate professor of supply-chain management at Purdue University. ”You don’t have a lot of real good options.”
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