UK could face food shortages as rising energy prices hit CO2 supplies

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Britain could face empty shelves at supermarkets and a shortage of turkeys for Christmas after government talks to secure carbon dioxide (CO2) supplies stalled.


CO2 is used to stun animals before slaughter and by supermarkets in chilled food deliveries, but a number of suppliers have shut factories down as a result of the rising price of natural gas.


READ: Government considers loans to energy suppliers as gas crisis worsens


The UK’s largest CO2 supplier, CF Industries, which supplies the gas as by-product of its fertiliser production, closed two of its plants in northern England last week as a result of the rising price of natural gas.


Business Secretary Kwasi Kwarteng tweeted at the weekend that he had held talks with CF Industries chief executive Tony Will and “discussed the pressures the business is facing and explored possible ways forward to secure vital supplies, including to our food and energy industries”.


However, the talks ended without a decision on when the two fertiliser plants will reopen.


CF Industries said it did not “have an estimate for when production will resume”, according to the BBC.


Bringing echoes of the shortages in 2018, supermarkets are now scrambling to secure CO2 supplies as fears over empty shelves and food shortages rise.


“This is no longer about whether or not Christmas will be okay, it’s about keeping the wheels turning and the lights on so we can actually get to Christmas,” Iceland boss Richard Walker told the BBC.


“This could become a problem over the coming days and weeks, so this is not an issue that’s months away.”


The head of another supermarket chain told the Times that companies are hunting around to find other sources of CO2, but as the gas is vital for various sectors such as nuclear power, healthcare, and food production, “like in musical chairs, someone will be left without a seat”.


The CO2 shortage could also affect the supply of turkeys for Christmas.


Slaughterhouses hold between one and five days of CO2 stock, but currently no deliveries beyond 24 hours are being scheduled, the British Poultry Council said, with spokesperson Kerry Maxwell telling the Times there was “no doubt” that Christmas will be affected.


Any shortages of CO2 “could have a short-term impact on volumes and add to short-term cost inflation”, said analysts at Jefferies, seeing Britvic PLC as the most exposed of the fizzy drinks makers, with 70% of sales coming from the UK.


“Large companies with broad supply chains should be better able to absorb volatility,” the drinks analysts added, including the Coca-Cola bottlers and Heineken. “Although potential CO2 shortages could weigh on sentiment, we would expect any potential near-term impact to be transitory, with limited effect on long-term equity values.”


Ian Wright, the chief executive of the Food and Drink Federation, said that although the UK would not run out of food, the government would need to take an “innovative” approach to dealing with the shortage of CO2, such as subsidising producers of CO2 over the next month or so.


“Or the knock-on effects of this may well be felt right the way through to the end of the year and particularly over the key Christmas trading period,” he said.


Ranjit Singh Boparan, who owns Bernard Matthews, which farms nearly seven million turkeys a year, said at the weekend that the CO2 supply problems combined with labour shortages would hit poultry supplies in December, the Times reported.


The shortage of CO2 is yet another supply chain issue causing problems for the British food and drinks industry, which is already struggling with the lack of lorry drivers and a labour crunch.


Meat-processing group Cranswick PLC (LSE:CWK) warned that the shortages of CO2 and labour could halt production throughout the supply chain ahead of Christmas.


Cranswick chief Adam Couch urged the government to act now to avert a crisis in the food industry, according to a report by Reuters.


“The industry is already at tipping point ahead of the demanding Christmas period,” Couch said. “We have worked tirelessly throughout the pandemic to keep food on the shelves, but there is a real risk of product shortages across the country if the government does not act immediately to address these issues …. C02 shortages could effectively bring production to a halt.”


Andrew Opie, director of food and sustainability at the British Retail Consortium, said: “This could not come at a worse time, with the shortfall of 90,000 HGV drivers already putting severe pressure on food production and distribution. Retailers are working with their suppliers to resolve this issue, but government must investigate this issue as soon as possible and work with industry to ensure a solution is found quickly and problems don’t escalate further.”


Shares in Cranswick PLC (LSE:CWK) and meat packing group Hilton Food Group PLC were down 3% and 1.2% in early afternoon on Monday, while fizzy drinks makers AG Barr (LSE:BAG) PLC and Britvic PLC (LSE:BVIC) were down 2.6% and 1.5% respectively.

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