Fears for CO2 supplies as deal comes to an end

Food industry bodies say they have been “left in the dark” over supplies of CO2 as a deal to maintain production of the vital gas ends on 31 January.

In September the UK government stepped in and committed tens of millions of pounds to cover the cost of natural gas for three weeks at CF Industries – the country’s biggest producer of CO2.

A deal was then brokered to fix the price of CO2 for three months to ensure profitability for CF but that deal runs out at the end of January, leading industry bodies to warn of potential impacts on food and beer supplies.

A Food and Drink Federation (FDF) spokesperson said: “We are concerned that with just days now remaining before that agreement comes to an end, and energy prices still very high, there will be further CO2 shortages once again.

"This could lead to shortages in the products we find on our supermarket shelves – adding further pressures to families already coping with high food-price inflation.

“We will continue to work with the government on this. It is critical that together we ensure supply can continue and that we build long-term resilience into the production of food-grade CO2.”

Tom Bradshaw, president of the National Farmers' Union, told Supply Management CO2 shortages “have highlighted a key fragility in the UK food system, and by extension the vulnerability of UK food security”.

Bradshaw said: “The continued high fertiliser prices, running at more than 200% in some cases, has been driven by the huge increases in the global cost of gas. This, combined with availability issues following a scaling back in production at factories here in the UK and around the world, has left farmers facing uncertainty and could significantly impact on farmers ability to produce home-grown food during the coming year.

“This highlights the need for government policy to build resilience into the supply chain, ensuring a diverse range of products are available, and empowering farmers to optimise their use of farmyard manure as fertiliser.”

The government agreed in October to support CF Industries’ two UK fertiliser plants, which account for 60% of the UK’s production of CO2, which is a natural by-product from the fertilising process. The company had announced it was temporarily suspending production as soaring gas prices made CO2 production untenable.

Leader of the House of Commons Jacob Rees-Mogg told Parliament on 20 January the government had “not forgotten” about the issue.

He said: “The issue with carbon dioxide was one that came before in the autumn and the government worked quickly to make sure carbon dioxide supplies continued.

“What I will promise to do is highlight his concerns to the secretary of state [for business, energy and industrial strategy, Kwasi Kwarteng] but I can assure him that this is not something Her Majesty’s government has forgotten about.”

A spokesperson for CF Industries would not say if CO2 production would continue at the end of January and told SM it “continues to negotiate with our industrial gas customers to extend CO2 offtake and pricing agreements”.

A government spokesperson told SM additional supplies of CO2 have become available since the shortages in autumn, and insisted "it is for the CO2 industry to ensure supplies to UK businesses".

“The Government’s three week arrangement with CF Fertilisers was necessary to immediately restart operations while a longer-term industry-led agreement was sought without further taxpayer support. Without Government intervention, the CO2 shortage could have severely impacted the food processing sector, the National Health Service and nuclear power generation.

“We welcome industry’s agreement in October to ensure CF Fertilisers on Teesside can continue to operate even during the current period of high global gas prices. It is for the CO2 industry to ensure supplies to UK businesses.

They continued: "We are continuing to work closely with the food and drink industry, and do not expect any significant disruption to essential food supplies.”

Source: Supply Management