The UK government official who blamed carbon dioxide consumers for the soaring bills they face for supplies is “pig ignorant”, Shore Capital said, warning over the availability of fertilizers too.
The broker said that the UK is confronting a “clear sense of market failure” in carbon dioxide, which is made largely as a byproduct of nitrogen fertilizer manufacture, and used for the likes of stunning animals before slaughter, as well as for extending the shelf life of packaged food and making fizzy drinks.
The extent of the carbon dioxide “challenge” prompted by CF Industries’ announcement of a production shutdown at the UK’s biggest nitrogen plant has been highlighted by 2 Sisters Food Group, the country’s top chicken producer, which announced an extra £1m per week in its CO2 costs.
A big supplier had in the wake of the announcement by CF, reportedly responsible for about one-third of UK carbon dioxide supplies, raised prices of the gas by “up to 20 times current levels”, 2 Sisters founder Ranjit Singh Boparan said.
Against that backdrop, the UK food and drink industry “will have observed… with a sense of severe apoplexy” a comment by an unnamed government official, as reported by the Financial Times.
“… it is for the industry to resolve this. If they haven’t sort[ed] out their supplies since October then that’s their problem,” the official was quoted as saying.
Shore Capital said: “Such a comment is pig ignorance, and that official should be ashamed of their words.”
Terming such comment as “appalling thinking”, the broker said that “the UK has one of the finest food production systems in the world, one that was heroic through the pandemic, and, frankly, deserves much better from government at a time of external market failure”.
It added: “Fundamental change for better is needed at Defra,” the UK agriculture and food ministry, “to urgently bring capability and competence to key issues around food security, including the effectiveness of the fertilizer and carbon dioxide markets in the UK.”
‘Direct measures, emergency measures’
On fertilizer, Shore Capital, whose food and agriculture analysts are well respected, said that Defra should be “very concerned about the output and effectiveness” of the UK nutrient sector, given the threat to Black Sea supplies posed by the Ukraine war.
Seeing “market failure” in the fertilizer sector too, the broker said that if this situation “persists, then food inflation not be the only concern, the availability of affordable food will rise as a political concern”.
The comments came as the Conservative Party announced Liz Truss as its leader, who will on Tuesday take over from Boris Johnson as UK prime minister.
“In the case of CO2 and the food system, we sense that direct measures, emergency measures that the state can institute as need to bring order to the market,” Shore Capital said.