Food producer warns of ‘price shock’ as carbon dioxide price quadruples

Food producer warns of ‘price shock’ as carbon dioxide price quadruples

Poultry processor Ranjit Singh Boparan says increase will add £1m a week to his business costs

cylinder of food-grade carbon dioxide

One of the UK’s biggest chicken producers has warned food security could be under threat and shoppers exposed to a “price shock” after a more than threefold surge in the price of carbon dioxide (CO2).

Pig farmers, soft drink producers, brewers and bakeries are also being hit by the increase in the cost of the gas, which is used to stun animals before slaughter, as well as in packaging and as an ingredient.

Ranjit Singh Boparan, who owns 2 Sisters Food Group and the turkey processor Bernard Matthews, called on the government to take rapid action and consider price capping the CO2 market to ensure supply as the price rise would add £1m a week to his businesses’ costs.

He said the UK required 2,000 tonnes of CO2 a day, with CF Industries’ fertiliser plant in Billingham and the Ensus ethanol plant in Wilton, both of which are temporarily closing, accounting for 1,300 tonnes while just 600 tonnes could be imported.

CF said it was closing its plant because the price of natural gas, which is used to make fertiliser, was now twice as high as a year ago making it uneconomic to produce ammonia, the fertiliser which has food-grade CO2 as a by-product. The Ensus plant is closing for maintenance.

Boparan said: “This is a very serious situation we are facing. Once again, UK food security is under threat and the shopper ultimately loses – we simply have no choice other than to pay to keep supply. CO2 suppliers are saying these increases happen immediately. They say it’s a take it or leave it situation.”

Industry insiders said prices had risen to as much as £4,500 a tonne, up from about £1,000 last week and just £200 last year as two major suppliers temporarily close their facilities maintenance. That comes after a third site prepares for permanent closure having temporarily shut in September last year.

The costs surge is likely to add to pressure on food prices, which rose by more than 9% last month, according to the latest data from the British Retail Consortium.

The resumption of grain exports from Ukraine prompted a fall in global food prices in August from the all time highs of earlier this year but prices remain almost 8% higher than a year ago. Global cereal demand is expected to outstrip supplies partly as a result of hot dry weather in Europe which, together with the war in Ukraine, has hit maize production.

Boparan said his company had no choice but to pay the new price of CO2: “When poultry cannot be processed, it means birds must be kept on farms where there is a potential implication for animal welfare. The overall effect is welfare is compromised, and there is a reduced supply.”

He added: “What is very sad is that it’s the UK shopper who will ultimately pay the price and CO2 suppliers are, in effect, holding consumers hostage.”

Nick Allen, the chief executive of the British Meat Processors Association, said his members were “looking at a difficult month to six weeks” while the plants producing CO2 were closed. “Price increases on this scale will really hit them hard,” he said.

Abattoirs and hospitals will have priority of supply, but those producing drinks may struggle to find a key ingredient when they are already struggling with higher energy bills and labour costs.

Gavin Partington, director general of the British Soft Drinks Association, said the price rise was a “cause for concern” although CO2 made up only a small percentage of costs for drinks makers. He said the industry required “more than a temporary fix”.

“It can’t be right that a company whose products are critical to the food and drink supply chain can be allowed to close a key plant without adequate warning or apparent consideration of the wider impacts including another primary supplier of CO2 closing for maintenance at the same time.”