Soaring energy and labour costs threaten the UK’s food security, industry leaders have warned, as pressure grows on ministers to find an urgent resolution to a set of deepening crises facing British businesses and households.
The National Farmers’ Union said British farms were in an “even more precarious position” than they had been in the early days of the pandemic when close to a third of the food industry was forced to close down overnight.
“We have a very real risk now of exporting parts of our farming industry overseas and reducing the capacity of UK agriculture to feed the country,” said the NFU’s vice president, Tom Bradshaw.
The British Meat Processors’ Association said that supermarkets faced with rising farm prices could start sourcing more food from overseas but “the UK’s food security would suffer”.
The warnings came as Kwasi Kwarteng, the business secretary reached a deal with US fertiliser firm CF Industries to fix the price of CO2, a gas that’s crucial for UK food production. Industry insiders criticised the deal to fix prices for CO2 as “opaque”.
Mr Kwarteng submitted a bid to the Treasury on Monday calling for emergency support for energy-intensive industries hit hard by a spike in gas and electricity prices.
Farming is not understood to included in the package, despite the fact that it faces severe pressure on costs. The cost of producing a pint of milk has shot up 20 per cent this year as farmers battle with a surge in energy prices and rising wages due to a shortage of workers.
Some tomato and cucumber growers have already shut down production because they cannot afford to heat greenhouses while potato farmers are struggling to absorb massive increases in the cost of cold storage, the NFU said.
Wholesale gas prices spiked to record levels last week and remain significantly above pre-pandemic levels with analysts forecasting they will not begin to return to normal for several months. Fertiliser, another major outlay for farmers, has also shot up in price as a result of higher gas and electricity costs.
The energy crisis adds to a host of problems facing British food suppliers and comes after shoppers have experienced weeks of gaps on supermarket shelves caused partly by a shortage of lorry drivers. Retailers have advised households to stock up early to avoid disappointment at Christmas.
The NFU’s Tom Bradshaw said supermarkets would soon need to increase their prices and pay suppliers more or British farmers would begin to go out of business.
“We have to accept these costs need to go up the supply chain if we want a farming industry for the future.
“With climate change and political instability around the world there has never been a more important time to focus on self-sufficiency, but there’s a risk that farmers are not being taken seriously.”
Farmers are currently locked in “very intense” negotiations with major retailers about the need for price increases, Mr Bradshaw said.
“Supermarkets are trying to deliver what they think is in the best interests of the consumer in terms of low prices, but there comes a point where you have to realise that these inflationary pressures are so real and so dramatic that the costs have to go up the supply chain.
“Supermarkets will be doing everything they can to try and keep a lid on prices but ultimately I think we are at a point now where we’ve got the perfect storm. Prices have to go up.”
Tim Lang, professor emeritus of food policy at City University, said the problems showed how British farming had become “disastrously” dependent on high energy consumption.
“The entire farming system depends on nitrogen-based fertilisers, which are very energy intensive,” he said.
He added: “We need to be concerned. There is a crisis and it isn’t being dealt with. Farmers are right to be angry with the government.”
Tomato grower Phil Pearson said conditions were worse than at any time since his grandfather founded the family business in 1948.
"We have already decided that we will not be planting on 10 per cent of our land next year," he said. "We can't afford to heat our glasshouses and we don't know if we will have the labour."
His company, APS, has already been forced to throw away produce because there have not been lorry drivers to transport it.
He added: "There will be shortages of tomatoes at Christmas. UK consumers will have an inferior product, imported from overseas that has less flavour."
Tomatoes produced in the UK can be allowed to ripen on the vine rather than picked when they are still orange and then developing their red colour in transit, Mr Pearson said.
While indoor vegetable growers are being hit hardest by the energy price spike, all sectors of the farming industry have been hit by rising costs. Pig farmers have warned they will have to cull up to 120,000 animals because there are not enough butchers.
Mr Bradshaw said pig farmers were facing an “absolutely tragic” situation. “It is inexcusable. We desperately need solutions from government to avert an absolute crisis.”
Meat processors said they too were being squeezed.
“We can’t keep absorbing these costs through what are already tight margins,” said Anna Proffit, of the British Meat Processors’ Association. “Up to a point the dam can hold, but at some point it will burst.”
“If supermarkets source more meat from overseas they might cut down on some labour costs but the UK’s food security will suffer. It would hollow out the industry and have knock-on effects for British farming.”
The warnings came as ministers agreed a deal with CO2 producers to hike the price of the gas which is crucial for packaging meat and other fresh produce.
Kwasi Kwarteng, the business secretary, hailed the agreement with US firm CF Industries, which supplies 60 per cent of the UK’s CO2.
The company had shut down production at its plant last month because high gas prices meant it was no longer profitable.
“Today’s agreement means that critical industries can have confidence in their supplies of CO2 over the coming months without further taxpayer support,” Mr Kwarteng said.
However, food industry sources described the deal as “opaque”, saying that it had been struck between CF Industries and government without input or scrutiny from the businesses that would be forced to pay the new, higher price.
One source said: “They have been able to name their price but we haven’t been told anything. We don’t know what the price is yet, we haven’t been told how it’s been calculated, we don’t know CF Industries margins, what model has been used, or how the price will fluctuate.”
“We assume some sort of equation has been used and we’d like to know what it is.”
The British Poultry Council welcomed the announcement, adding: “We are waiting for more information from Government on the deal and look forward to working with them upon hearing further detail.”
A government spokesperson said: “The UK’s high degree of food security is built on access to a diverse range of sources including robust supply chains across a range of countries, in addition to strong domestic production.
“We will continue to support our farmers to produce high quality food to some of the highest standards in the world.”