An energy crisis is exposing the vulnerability of food shortage.
As soaring gas and power prices hit industries across Europe, fertilizer plants halted or curbed output in the past week or so, threatening even higher crop nutrient costs and potentially smaller harvests if farmers cut back on the key input.
In the U.K., it also raised the specter of an almost immediate shortage of carbon dioxide, a by-product of fertilizer production and widely by the food and drink industry.
A lack of CO2 would force slaughterhouses — which use the gas to stun animals — to close, at a time when staff shortages have left British farms crammed with roughly 100,000 extra pigs. It’s hitting grocery stores, too, because CO2 is used in packaging to extend the shelf life of food and for the “dry ice” that keeps items frozen during delivery, as well as giving soda and beer their fizz.
The risk to food shortage is so great that the U.K. government stepped in to help get a fertilizer plant running again, at least for a few weeks.
But the threat may be far from over. About half of Europe’s ammonia capacity is probably at risk of shuttering or curtailing output, or already closed, consultancy CRU Group said.
Tighter fertilizer and CO2 markets may further push up global food prices, which are already near a decade-high. At some point farmers may refuse to buy the nutrient or Europe will increase imports, IHS Markit said. In China, authorities have been urged to ensure stable prices and prioritize supplies of raw materials and energy to chemical fertilizer companies.
Crop trading giant Cargill has offered a ray of hope. High food costs driven by supply-chain snarls and other disruptions hurting the sectors will prove “transitory” and should dissipate in time, its chief said.
More than 1.5 million households in Britain are being forced to switch energy suppliers as soaring gas and power prices cause retailers to collapse. The crunch is forcing large industrial uses to curtail output and roiling the country’s food sector.
Originally published by Bloomberg