Fresh chaos to UK food supplies

The fallout from Europe’s energy crisis is sending fresh shockwaves through the food sector, after online grocer Ocado stopped supplying frozen products to customers and the meat industry warned that businesses could “grind to a halt” within two weeks.

Food prices are likely to soar next year after record-high gas prices forced fertiliser manufacturers to halt production, experts have warned.

Farmers face paying sky-high prices for fertiliser and may struggle to secure supplies at all, raising the prospect of weak crop yields that will affect food supplies, according to industry specialists.

The latest shock to the industry comes from a sudden shortage of carbon dioxide, used to stun pigs and chickens for slaughter, as well as in packaging to extend shelf life and the ‘dry ice’ that keeps freezer items frozen during delivery.

Supplies have been hit after fertiliser maker CF Industries Holdings Inc. responded this week to surging natural gas prices by closing fertiliser plants that make carbon dioxide as a by-product. Rival Yara International ASA said Friday it will also curtail European capacity.

The food industry is already battling to keep shelves and menus stocked due to a lack of workers and now the disruption to carbon dioxide supplies is adding to the pressure. The British Meat Processors Association warned that CO2 supplies could run out within two weeks, forcing slaughterhouses to close just as pig producers are already facing the imminent prospect of culling animals.

The government officials are in talks with the meat sector about the CO2 issue, according to a person familiar with the matter, who asked not to be identified.

Ocado, the online grocery retailer, had to stop supplying frozen products to customers on Friday a result of the dry ice shortage. The company said in a statement on its website that it is working with suppliers to “get things back to normal soon.”

“It’s quite alarming,” said Nick Allen, head of the meat association. “We’re talking between days and weeks from this really hitting hard, unless somewhere in the world there are supplies of this that can replace that amount of CO2 very quickly.”

Carbon dioxide -- a by-product of fertiliser production -- is also used in packaging products such as meat and vegetables. Beef and lamb would be less affected by a CO2 shortage, but could lose five days of shelf life due to the packaging issues, the BMPA said.

The halted production in the fertiliser sector shows the impact exorbitant energy prices are having on UK energy intensive industries, the Energy Intensive Users Group said. It urged taking immediate steps to keep British industry competitive as energy costs rise.

Earlier this week, CF Industries said was halting two UK plants due to soaring energy costs.

On Friday, Norwegian fertiliser maker Yara said that it will by next week have curtailed about 40% of its European ammonia output capacity as record-high gas prices are hurting its production.

Yara trades about one-third of the world’s ammonia, which is used in fertilisers, but also relied on in industries such as automotives, textiles, healthcare and cosmetics.

Higher nutrient costs risk exacerbating global food inflation at a time when hunger is on the rise, particularly in poorer nations.

Source: Bloomberg