UK bails out an American company to prevent food supply crisis

By Hanna Ziady, CNN Business

The UK government has agreed to subsidize a major US fertilizer manufacturer at a cost of several million pounds to taxpayers in order to restart carbon dioxide production vital to Britain’s food supply.

The government announced the extraordinary intervention in a statement late on Tuesday. The plan should allow Illinois-based CF Industries to restart one of its two UK plants and resume CO2 supplies to the food and drink industry. Safely restarting the ammonia plant is expected to take “several days,” CF Industries said in a statement.

CF Industries decided last week to halt operations at its UK fertilizer plants because soaring natural gas prices had made them unprofitable. That announcement sparked warnings of a food supply crisis because its plants also produce about 60% of Britain’s food-grade carbon dioxide.

The gas is used to stun animals for slaughter, as well as in packaging to extend the shelf life of fresh, chilled and baked goods, and in the production of carbonated drinks. The British Meat Processors Association warned Friday that the supply shock could cause food shortages within 14 days once current stocks of CO2 gas run out.

The UK government said Tuesday that it will provide “limited financial support” for CF Fertilisers’ operating costs for three weeks, after which food producers will have to pay more for CO2 to reflect higher global natural gas prices.

UK natural gas futures have increased nearly fourfold since April, according to data from the Intercontinental Exchange. Prices for gas are also rising sharply elsewhere in Europe, due to depleted stocks, competition with Asia for liquified natural gas and low supplies from Russia.

Food supply ‘fragility’

The arrangement with CF Industries will cost UK taxpayers “many millions of pounds,” according to environment secretary George Eustice. Without government intervention there would have been a risk to Britain’s food supply chain, Eustice told the BBC on Wednesday.

He said he believed that the increased cost of CO2 was unlikely to lead to higher food prices, which are already rising due to higher global commodity price inflation and pressure on wages linked to worker shortages.

The National Pig Association (NPA) said last week that its members were facing their biggest crisis in two decades as a result of labor shortages tied to Brexit and the pandemic.

A dearth of truck drivers and slaughterhouse staff meant that pig farms were running out of space to house their herds and were two weeks away from having to cull animals, the association’s chief executive Zoe Davies told ITV News on Monday.

“Many EU workers have gone home due to a combination of new Brexit restrictions and Covid and are unlikely to return,” the NPA said in a statement last week. Meat processing plants say that efforts to recruit labor domestically have been insufficient to fill “thousands of vacancies across their sites,” according to the NPA.

The looming CO2 shortage “highlighted starkly the fragility in the [food] supply chain,” National Farmers’ Union president Minette Batters said in a statement on Tuesday.

“Users of carbon dioxide were given little to no warning that supplies were going to be cut off — an indication of market failure in a sector supporting our critical national infrastructure,” she added.

CF Industries CEO, Tony Will said the company will work with the UK government to develop a “longer-term solution” to constrained CO2 supply.

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