UK to bail out US company to avert food supply crisis

CNN, CNNBUSINESS

By Hanna Ziady, CNN Business

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

The government announced the extraordinary intervention in a statement Tuesday evening. The plan is expected to allow Illinois-based CF Industries to restart one of its two UK factories and resume CO2 supply to the food industry. The safe restart of the ammonia plant is expected to take “several days,” CF Industries said in a statement.

CF Industries decided last week to shut down operations at its UK fertilizer factories because soaring natural gas prices had made them unprofitable. The announcement triggered warnings of a food supply crisis, as its factories also produce around 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 products, and in the production of carbonated drinks. The British Meat Processors Association warned on Friday that the supply shock could lead to food shortages within 14 days of current CO2 stocks depleted.

The UK government said on Tuesday it would provide “limited financial support” to the operating costs of CF Fertilizers for three weeks, after which food producers will have to pay more for CO2 to reflect the rise in global fuel prices. natural gas.

UK natural gas futures have nearly quadrupled since April, according to data from the Intercontinental Exchange. Gas prices are also rising sharply elsewhere in Europe, due to depleted stocks, competition with Asia for liquefied natural gas and weak supplies from Russia.

The “fragility” of the food supply

The deal with CF Industries will cost UK taxpayers “several million 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 believes the rising cost of CO2 is unlikely to lead to higher food prices, which are already on the rise due to global commodity price inflation and pressure on wages linked to labor shortages.

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

A shortage of truck drivers and slaughterhouse staff meant hog farms were running out of space to house their herds and were two weeks away from having to slaughter animals, the association’s executive director Zoe said on Monday. Davies, at ITV News.

“Many EU workers have returned home due to a combination of new Brexit and Covid restrictions and they are unlikely to return,” the NPA said in a statement last week. Meat processing plants say efforts to recruit nationwide labor have been insufficient to fill “thousands of vacant positions at their sites,” according to the NPA.

The imminent shortage of CO2 “has highlighted the fragility of the [food] supply chain, ”National Farmers Union president Minette Batters said on Tuesday.

“Carbon dioxide users have received little or no warning that supplies will be cut – an indication of a market failure in a sector supporting our critical national infrastructure,” she added.

CF Industries CEO Tony Will said the company would work with the UK government to develop a “longer term solution” to the limited CO2 supply.