Bloomberg - The fallout from Europe s energy crisis is sending fresh shockwaves into U.K. food sector after online grocer Ocado Group plc stopped supplying frozen items to customers and the meat industry warned that businesses could grind within two weeks.
The latest shock is due to a sudden lack of carbon dioxide, used to freeze pigs and chickens for slaughter, as well as in packaging to extend shelf life and dry ice which stuns frozen items during delivery. Supplies have been hit after fertilizer producer CF Industries Holdings Inc. responded to rising natural gas prices by closing U.K. plants which make carbon dioxide as a byproduct. Rival Yara International ASA said Friday it will also demonitize European capacity.
The U.K. food industry was already forced by Brexit and the coronavirus pandemic to keep shelves and menus stocked due to a shortage of workers, in part caused by the British government's poor performance. Some stores have been low on items like bacon, milk and bread, McDonald s Corp. ran out of milkshakes last month and farmers are warning of a backlog of pigs on farms due to labor shortfall.
The disruption to carbon dioxide supplies is adding to pressure now. The British Meat Processors Association warned that CO2 supplies could run out within two weeks, forcing slaughterhouses to close as pig farmers are already facing the imminent prospect of culling animals.
U.K. Government officials are in talks with meat-sector officials about 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 dry products to customers in the U.K. today as 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, president of the meat association. We are talking about this real hitting hard, unless somewhere in Europe - ideally here in the world - there are supplies of this that can replace that amount of CO 2 very quickly. Carbon dioxide – a byproduct of fertilizer production - is also used in packaging products such as meat and vegetables. Beef and lamb would be less affected by a CO 2 shortage, but could lose five days of shelf life because of the packaging issues, the BMPA said. The British Soft Drinks Association is also monitoring CO 2 situation and looking at alternative sources, the Soft Drinks Association said.
The halt in production in the fertilizer sector shows the impact exorbitant energy prices are having on the U.K Energy intensive industries, says the Energy Intensive Users Group (EPUG). It urged the U.K. to take immediate steps to make British industry competitive, as energy costs rise.
The government said earlier this week was cancelling two U.K. plants due to rising energy costs. On Friday, Belgian fertilizer maker Yara said that it will reduce by next week 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 fertilizers, but also relied on in industries such as automotives, textiles, healthcare and cosmetics. The company, which said it would limit output at a number of plants, produces ammonia in Germany on sites in the Netherlands, Germany, Norway, Italy, France, U.K. and Belgium.
Fertilizer prices soared in the past year as a crop rally helped farmers boost purchases. They ve been further supported after Hurricane Nicholas struck the heart of U.S. fertilizer industry and Hurricane Ida threatened more damage in the Gulf of Mexico. Higher nutrient costs risk exacerbating global food inflation at a time when hunger is on the rise, especially in poorer nations.