Britain asks food industry to prepare for CO2 price shock – .

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Britain asks food industry to prepare for CO2 price shock – .


  • CO2 prices will increase sharply, according to the minister
  • UK pays fertilizer maker CF to reopen factories
  • Poultry factories shut down, Britain says
  • Iceland says 3-week deal won’t save Christmas
  • Poultry industry says turkey production will decline further

LONDON, Sept. 22 (Reuters) – Britain on Wednesday warned its food producers to prepare for a 500% increase 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 the energy source.

Carbon dioxide (CO2) is a by-product of the fertilizer industry – the main source of CO2 in Britain – where natural gas is the biggest input cost. Industrial gas companies, including Linde, Air Liquide (AIRP.PA) and Air Products and Chemicals (APD.N), derive their CO2 mainly from fertilizer factories.

Soaring natural gas prices have forced some fertilizer factories to close in recent weeks, leading to a shortage of CO2 used to put fizzy in beer and soda and stun poultry and pigs before slaughter. Read more

As CO2 stocks dwindled, Britain struck an agreement with US company CF Industries (CF.N), which supplies around 60% of UK CO2, to restart production at two factories that were closed because they had become unprofitable due to rising gas prices.

“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 for CF 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 cover part of CF’s fixed costs.

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 whether 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 boss of the Icelandic supermarket said the temporary deal to supply CO2 would not solve the food industry’s problems.

“A three-week contract won’t save Christmas,” said general manager Richard Walker. “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 poultry processing plants will have to close,” he added.

He said the impact on food prices would be negligible.

The British Poultry Council welcomed the deal, but said the industry still faced enormous pressure from labor shortages. He estimates that Christmas turkey production will be down 20% this year.

Likewise, the British Meat Processors Association expressed “immense relief”.

“We are focusing on restoring (CO2) supplies before Friday this week, when about 25% of pork production was at risk of shutting down,” he said.

The British Food and Beverage Federation said there would still be shortages of some products “but these will not be as severe as previously feared”.

Britain’s opposition Labor Party has said the government needs to explain contingency plans in place in case the C02 problems are not resolved in three weeks.

($ 1 = 0.7328 pounds)

Reporting by Guy Faulconbridge and Kate Holton; Additional reporting by James Davey and Nigel Hunt Editing by Alexander Smith, Mark Potter and Jane Merriman

Our Standards: Thomson Reuters Trust Principles.

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