Food & Beverage updates
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The UK food industry is bracing for disruption after a second fertiliser group announced production curbs, as the impact of Europe’s gas shortage threatens to ripple through the supply chain.
Norway’s Yara International said on Friday it would curb production at several facilities in the EU and UK, adding to the shuttering this week of two large UK fertiliser factories owned by CF Industries of the US.
Soaring natural gas prices are causing chaos among makers of ammonium nitrate, a staple fertiliser derived from the fuel. As well as the potential impact on crop yields, the fertiliser industry is critical to the supply of carbon dioxide, a byproduct of the production process.
The UK government held an emergency meeting on Thursday with the meat sector amid fears it could be severely hit by a shortage of CO2, which is used to stun animals before slaughter.
Industry groups and processors were told that 60 per cent of the UK’s CO2 supply had been cut. They also heard that nuclear power plants and the NHS, which use the gas as a coolant, would take priority in securing what remained, according to two people briefed on the meeting.
Nick Allen, chief executive of the British Meat Processors Association, said the government had asked him to gather data on what was a potentially “massive” problem for meat producers. “We are hearing that there are no definite plans to reopen” the plants, he added.
Zoe Davies, chief executive of the National Pig Association, said pig farmers had already been weeks away from culling healthy animals after labour shortages hit meat plant capacity, leaving 100,000 surplus animals backed up on farms.
She warned that an inability to stun livestock for slaughter would hugely exacerbate the problem, saying the industry was “now at advanced stages of having to discuss what a welfare cull might look like and how it might be done”.
Richard Griffiths, chief executive of the British Poultry Council, said the UK’s chicken supply chain — which processes 20m birds a week — was five to seven days away from “significant issues”.
He called on the government “to consider stepping in with financial support for continuing production . . . the next step is getting that political buy-in”.
The carbon dioxide crunch threatens to have other consequences for the food and drink industry. CO2 is used in packaging to extend the shelf life of meat and foods such as salads, a critical function during a period of supply chain disruption, and to create the “fizz” in soft drinks and some beers.
Gas prices in the UK and Europe have surged to new highs in recent weeks, with traders warning that the region is heading into winter with record-low inventories.
Yara, one of the world’s largest fertiliser producers, said 40 per cent of its European production capacity for ammonia would be curtailed by next week to protect its margins.
It plans to source some of the ammonia needed to produce ammonium nitrate from outside of Europe or third parties, and said “the impact on finished products is currently minor”.
Of the company’s 4.9m tonnes a year of ammonia production in the region, it plans to halt approximately 2m tonnes in the Netherlands, Italy, UK and France. Plants in Germany and Norway were already scheduled for maintenance, further reducing production capacity.
The length of the curtailments would depend on the price of ammonia’s two key inputs, natural gas and nitrogen, the company added.