Higher prices of CO2 will lead to further rise in food prices, warns industry leaders

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The recent deal struck by the government with the carbon dioxide (CO2) industry to ensure sustained supplies is commendable but it might add to further price rise, food and drink industry has said.

A trade body representing food and drink manufacturers has welcomed the deal to ensure consistent supply in the run-up to Christmas but said the increased cost represented “yet another burden” on the industry which is already under “enormous stresses”.

It was reported on Monday (11) that US firm CF Industries, a key CO2 producer in the UK, has agreed to continue supplies. Firms will now have to pay more for their CO2, but it is unclear how much, reports said.

“CO2 suppliers have agreed to pay CF Fertilisers a price for the CO2 it produces that will enable it to continue operating while global gas prices remain high, drawing on support from industry and delivering value for money for the taxpayer,” the government announcement said.

Commenting on the deal, Ian Wright, chief executive of the Food and Drink Federation, said that this should ensure a consistent supply through the vital food and drink production period in the run up to Christmas.

“Although welcome news, the increased cost of buying CO2 is yet another burden on the food and drink industry which is already facing enormous stresses,” Wright said.

“This will of course add more pressure on prices for shoppers and diners.”

Andrew Opie, director of food & sustainability at the British Retail Consortium, also pointed to a price impact.

“This is yet another example of cost pressures in the supply chain, along with rising transport costs, higher energy and commodity prices, and ongoing labour shortages,” Opie said, adding that price rise is already looming over the industry. 

He cited a survey of retailers that showed that three in five expected prices to go up over the next three months.

The British Meat Processors Association said the agreement provided “some reassurance that supplies will be maintained”.

“However, industry has been given no detail on what the price will be or how it will be calculated going forward,” a spokesperson added.

The arrangement stands until January 2022, ensuring CO2 supplies for food processing. 

When CF had shut its facilities after making fertiliser became uneconomic because of the rising price of wholesale gas, it cut off a vital source of CO2 for other sectors.

Supermarkets had began reporting limited stocks of some food items, while the pig industry warned that if slaughterhouses could not process animals, then farmers would have to cull their stocks.

Environment Secretary George Eustice had warned the British food industry last month saying carbon dioxide prices would rise from £200 per ton to £1,000.