CO2 Price Hikes Could Threaten Food Security
Fears are growing over another carbon dioxide crisis after the temporary closures of two leading producers. The gas used to stun pigs and chickens for slaughter, extend the shelf life of fresh food and give beer and soda their fizz, could be in short supply, adding further cost pressures to the food and drink sector.
Chicken’s relative affordability has helped make it the country’s meat of choice, but this could soon change. Some of the UK's biggest chicken producers have warned that food security could be under threat, and shoppers could be facing a "price shock" after the cost of carbon dioxide (CO2) surged more than threefold.
Pig farmers, soft drink producers, brewers and bakeries are also feeling the pinch, as CO2 is used to stun animals before slaughter, as well as in packaging and as an ingredient. Businesses have called on the government to take rapid action and consider price capping the CO2 market to ensure supply.
The UK requires 2,000 tonnes of CO2 a day, with CF Fertilisers' Complex plant in Billingham and the Ensus ethanol plant in Wilton accounting for 1,300 tonnes between them. However, both plants are temporarily closing, which has caused the price of CO2 to soar.
CF said it was closing its plant because the price of natural gas, was now twice as high as a year ago making it uneconomical to produce ammonia, the fertiliser which has food-grade CO2 as a by-product. The Ensus plant is closing for routine maintenance.
These rises will add to the pressure on food prices, which rose by more than 9% last month, according to the latest data from the British Retail Consortium. The resumption of grain exports from Ukraine has caused a slight drop in global food prices, but they remain almost 8% higher than they were a year ago. The main reasons for this are the ongoing war in Ukraine and the hot dry weather seen across Europe, which has severely disrupted maize production. As a result, global cereal demand is expected to outstrip supplies, driving up prices even further. This could lead to more inflationary pressure on households, as well as adding to the cost of living for consumers.
Nick Allen, chief executive of the British Meat Processors Association, said his members were "looking at a difficult month to six weeks" while the plants producing CO2 were closed. Gavin Partington, director general of the British Soft Drinks Association, said the price rise was a "cause for concern" although CO2 made up only a small percentage of costs for drinks makers. He said the industry required "more than a temporary fix".
Considering this news, the Chair of The Environment, Food and Rural Affairs (EFRA) Committee has written a letter to the Secretary of State for Environment, Food and Rural Affairs, Rt Hon George Eustice MP, requesting information on the length of the production stoppage. He has also asked how this will impact the resilience of the UK’s food supply chain, and whether the Government is considering providing financial support – as it did in September 2021, when there was a similar risk to CO2 supply.
Furthermore, the Chair also asked what assessment the Government has made of the possible impact on fertiliser prices from a halt in ammonia production and the switch to imported ammonia and how it will prioritise the use of CO2, should there be a reduction in supply. In September 2021, there was a risk to CO2 supply due to a production stoppage at an ammonia plant in Teesside. The Government provided financial support to keep the plant running. However, it is unclear what contingency plans are in place should there be a repeat of this incident or a longer-term reduction in CO2 supply.
Commenting on the correspondence, Rt Hon Sir Robert Goodwill MP, Chair of the EFRA Committee, said:
“Recent reports that CF Fertiliser will be halting production of ammonia are worrying, given the knock-on impacts this decision will have on CO2 production in the UK. Any disruption to CO2 supply could have serious effects on food production, national food secu