Britain asks food industry to prepare for CO2 price shock

LONDON, Sept. 22 (Reuters) – Britain on Wednesday warned its food producers to prepare for a 500% rise in carbon dioxide prices after extending state emergency aid to avert a shortage poultry and meat products caused by soaring wholesale natural gas prices.

Natural gas prices have skyrocketed this year as economies reopened after COVID-19 lockdowns and strong demand for liquefied natural gas in Asia has lowered supplies in Europe, sending shockwaves through industries dependent on natural gas.

Carbon dioxide (CO2) is a by-product of the fertilizer industry where natural gas is the biggest input cost.

This has forced some factories to close in recent weeks, leading to a shortage of gas used to put fizzy in beer and soda and stun poultry and pigs before slaughter. Read more

As CO2 stocks dwindled, Britain struck a deal with US company CF Industries (CF.N) to restart production at two factories that were closed because they had become unprofitable.

“We need the market to adapt, the food industry knows there is going to be a big increase in the cost of carbon dioxide,” Environment Secretary George Eustice told Sky News.

He would have to accept the price of CO2 rising sharply, from 200 pounds per tonne to around 1,000 pounds ($ 1,365) per tonne, Eustice said, adding, “So a big, big hike.”

The three-week support to CF, which provides around 60% of Britain’s CO2, would cost “several millions, maybe tens of millions, but that’s to support some of those fixed costs,” Eustice said. .

The government has given few details on the agreement to take over part of the fixed costs of CF, based in Deerfield, a suburb of Chicago, highlighting the seriousness of the distortions caused by the surge in prices. of European natural gas.

It was not immediately clear how state intervention by one of Europe’s more traditional laissez-faire governments would affect the price of fertilizers – another key cost for food producers – and if it would fuel or not the demands of other energy intensive industries for a similar state. Support.

FOOD CRUNCH?

British ministers, including Prime Minister Boris Johnson, have repeatedly dismissed suggestions that there may be a shortage of traditional Christmas dishes such as roast turkey, although some vendors have warned.

Business Secretary Kwasi Kwarteng, who is also Energy Minister, said there would be no going back to the 1970s, when Britain was plagued by power cuts that left the “sick man of Europe” economy, with three-day work weeks and people unable to heat their homes.

But the Icelandic supermarket boss said the temporary deal to supply carbon dioxide would not solve the food industry’s problems.

“A three-week deal will not save Christmas,” said Richard Walker, chief executive of Iceland. “And certainly won’t solve the problem in the long run – we need a permanent solution to keep the wheels turning for the supply of fresh food.”

Eustice said some of the UK’s meat and poultry processors would run out of CO2 within days.

“We know that if we don’t act, then by this weekend or certainly early next week, some of the poultry processing plants will have to close,” he added.

“And then we would have animal welfare issues, because you would have a lot of chickens on the farms that couldn’t be slaughtered in time, and probably would have to be euthanized on the farms, we would have a similar situation with pigs.”

He said the impact on food prices would be negligible.

Yara (YAR.OL), the world’s largest ammonia trader, sources in Europe from facilities in Trinidad, the United States and Australia to support fertilizer capacity after soaring wholesale prices gas, its CEO said. Read more

($ 1 = 0.7328 pounds)

Reporting by Guy Faulconbridge and Kate Holton Editing by Alexander Smith and Mark Potter

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