Energy Crisis Brings Fresh Chaos for Battered U.K. Food Supplies

(Bloomberg) -- The fallout from Europe’s energy crisis is sending fresh shockwaves through the U.K. food sector, after online grocer Ocado Group Plc stopped supplying frozen products to customers and the meat industry warned that businesses could “grind to a halt” within two weeks. 

The latest shock to the industry comes from a sudden shortage of carbon dioxide, used to stun pigs and chickens for slaughter, as well as in packaging to extend shelf life and the ‘dry ice’ that keeps freezer items frozen during delivery. Supplies have been hit after fertilizer maker CF Industries Holdings Inc. responded this week to surging natural gas prices by closing U.K. fertilizer plants that make carbon dioxide as a byproduct. Rival Yara International ASA said Friday it will also curtail European capacity.

The U.K. food industry was already battling to keep shelves and menus stocked due to a lack of workers, in part caused by Brexit and the coronavirus pandemic. Some stores have been low on items like bacon, milk and bread, McDonald’s Corp. ran out of milkshakes last month and farmers have warned of a backlog of pigs on farms due to the labor shortfall.

Now, the disruption to carbon dioxide supplies is adding to the pressure. The British Meat Processors Association warned that CO2 supplies could run out within two weeks, forcing slaughterhouses to close just as pig producers are already facing the imminent prospect of culling animals.

U.K. government officials are in talks with the meat sector about the 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 frozen products to customers in the U.K Friday 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, head of the meat association. “We’re talking between days and weeks from this really hitting hard, unless somewhere in the world -- ideally here in Europe -- there are supplies of this that can replace that amount of CO2 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 CO2 shortage, but could lose five days of shelf life due to the packaging issues, the BMPA said. Soft-drink makers are also monitoring the CO2 situation and looking at alternative sources, the British Soft Drinks Association said.

The halted production in the fertilizer sector shows the impact exorbitant energy prices are having on U.K. energy intensive industries, the Energy Intensive Users Group said. It urged the U.K. to take immediate steps to keep British industry competitive as energy costs rise.

Fertilizer Cutbacks

Earlier this week, CF Industries said was halting two U.K. plants due to soaring energy costs. On Friday, Norwegian fertilizer maker Yara said that it will by next week have curtailed 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 will curb output at a number of plants, produces ammonia in Europe at sites in the Netherlands, Germany, Norway, Italy, France, U.K. and Belgium.

Fertilizer prices jumped in the past year as a crop rally helped farmers boost purchases. They’ve been further supported after Hurricane Ida struck the heart of the U.S. fertilizer industry and Storm Nicholas 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, particularly in poorer nations. 

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