Food supplies at risk as gas prices soar

Food supplies are at risk of being hit by serious disruption as soaring energy prices threaten to create a shortage of carbon dioxide crucial to farming, industry bosses have warned.

The British Meat Processors Association (BMPA) said companies' stocks of carbon dioxide could run out in less than 14 days, meaning some will have to "stop taking animals and close production lines."

Supplies of the gas, which is used to stun animals, preserve packaged meat and add fizz to drinks, have been curtailed due to the temporary shut down of two globally significant fertiliser plants in the UK in the face of soaring gas prices. Carbon dioxide is captured as a by-product of fertiliser production for use in the food and drink industry, as well as by the NHS and in nuclear power plants.

Nick Allen, chief executive of the BMPA, said: “We’ve had zero warning of the planned closure of the fertiliser plants and, as a result, it’s plunged the industry into chaos.

"The British food supply chain is at the mercy of a small number of major fertiliser producers (four or five companies) spread across northern Europe. We rely on a by-product from their production process to keep Britain’s food chain moving.”

Zoe Davies, chief executive of the National Pig Association, said: "This is the absolute last thing pig farmers need right now. They are already having to accommodate and feed more pigs on farms than they have the space for due to reduced throughput of abattoirs caused by the existing labour shortages.

"For many this will be the final straw."

Concern over the shortage in Whitehall is such that Civil Contingencies Secretariat - used for emergency planning - met on Thursday to try and contain the fall-out from the shortages.

On Thursday, major fertiliser producer CF Industries Holdings shut its fertiliser plants in Ince and Billingham, which produce about 1.2m tonnes of fertiliser annually.

Norwegian fertiliser producer Yara followed suit a day later, curtailing about 40pc of its ammonia production capacity in Europe after several plant closures.

Both blamed gas prices which are surging due to a global supply crunch, reaching more than five-fold their level last year in Britain.

Gas is used to make ammonia, which is used to make fertilisers including ammonium nitrate and urea.

Julia Meehan, at commodities market specialist ICIS, said the announcements had caused “panic” in the fertiliser market, warning others could follow.

She said: “Availability [of fertiliser] is low and that will sell really quickly. There is talk about ‘let’s bring it in from elsewhere’ - but you need special licences and haulage ports.

“If the plants aren’t given the right nutrients, they are not going to grow very well so you wouldn’t have the great quality we are all used to on our shelves.

“Less harvest, less crops - that’s when we will potentially see the food on our tables next year costing a lot more money than now. This going to have implications globally.”

The high gas prices have also meant rocketing electricity prices, as a lot of power is still made in gas-fired power stations.

Wind output has also been low while some nuclear plants are offline for maintenance, putting further pressure on prices in Britain.

Electricity hit a record high on Monday of £540 per MWh - more than ten times the average over the latest decade. It has since fallen back but remains well above normal levels.

Kwasi Kwarteng, the business secretary, is understood to be planning further meetings with industry over the weekend to get a handle on the energy crunch.

Prices showed signs of settling on Thursday and Friday, with day-ahead British gas prices falling 4.5p per therm to 160p per therm. They are still well ahead of prices a year ago of less than 40p per therm.

Tim Dixon, at energy consultancy Cornwall Insight, said: “Demand [for gas] still looks tight fundamentally despite the retraction in price over the last few days.

“Gas storage levels across Europe are still well below levels we would expect them to be heading into the winter season - about 70pc full compared to a normal level heading into winter well up to 90pc.

“There is still uncertainty around Russian gas supply. Liquefied natural gas prices remain high and there are other supply outages.”

The British Soft Drinks Association said drinks producers are "monitoring the situation" and working with suppliers to mitigate any impact.

A Government spokesman said: “We are monitoring this situation closely and are in regular contact with the food and farming organisations and industry, to help them manage the current situation.

“The UK benefits from having access to highly diverse sources of gas supply to ensure households, businesses and heavy industry get the energy they need at a fair price.”