Farmers already grappling with surging input inflation have been dealt a further blow with the announcement that fertiliser and CO2 gas provider CF Fertilisers is to close one of its UK factories.
The shuttering of the plant at Ince in Cheshire – where operations have been on hold since last September – was put down to high natural gas prices “presenting a constant challenge to the sustainability of current operations”, according to a CF Fertilisers UK statement.
NFU deputy president Tom Bradshaw said the closure represented “a further blow for farmers already suffering from incredibly high inflation for fertiliser costs”. The NFU warned earlier this week that fertiliser prices had climbed from £281/tonne in April 2021 to £785/tonne a year later – leading to mounting concerns the inflationary situation could have a significant impact on crop output.
Bradshaw said CF’s decision to close its Ince plant came at a time of “unprecedented risk” and would likely “further restrict global supply” of fertiliser, with soaring costs due to high energy prices exacerbated by the war in Ukraine.
Natural gas was “a key feedstock used to produce fertilisers, and the continual growth in natural gas prices is driving fertiliser costs to record highs”, added Mintec analyst Alice Witchalls.
A spokesman for CF Industries – CF Fertilisers’ US-headquartered parent company – said the plant at Ince, along with its sister facility in Billingham in Durham, were “high-cost production facilities in an intensely competitive global market”. Domestic sales of fertilisers produced by CF had fallen by 30% compared to pre-pandemic levels, the company added.
CF stressed the Billingham plant would stay open and would “have the capacity to produce enough AN [ammonium nitrate] to meet all forecasted domestic customer demand”. However, Bradshaw said the NFU was “seeking urgent clarification from CF on production capabilities” at the site.
CO2 gas concerns
A shutdown at Billingham and Ince last September amid soaring energy prices had led to concerns over shortages of CO2 gas – which is a by-product of fertiliser production and is used widely across food manufacturing, in areas such as slaughtering, packaging and drinks manufacture.
Several deals have since been struck to keep the Billingham plant open and keep gas supplies moving.
But a spokeswoman for the British Meat Processors Association said that while CF Industries had given assurances of “no disruption to CO2 supplies to the meat industry”, closing one of the nation’s few sources of the gas meant “future supplies will become somewhat less secure” due to likely dependence on the Billingham factory.
Billingham’s coastal location near the North Sea meant the factory could, compared to the Cheshire plant, more readily receive imported ammonia, a key component in making fertiliser, CF said.
Asked about the closing of the Ince plant, the company’s spokesman said it had “made government officials and ministers aware of our proposals in the appropriate way and we will continue to engage them in whatever way is required and in line with our statutory obligations”.
Richard Griffiths, CEO of the British Poultry Council, said the terms of the closure showed “government and CF Fertilisers recognising the importance of CO2 to food production”.
But he added that poultry suppliers were also “looking at other sources of CO2 and at ways to reduce reliance on CO2”, before adding that issues around the supply of the gas were currently “down the priority list” compared to a litany of other problems, listing “bird flu, Brexit effects, trade barriers, labour shortages, welfare pressures, food security, etc”.
Fertiliser producers on the European continent also announced temporary stoppages last September and in March this year, the latter hiatuses coming after further cost spikes and component shortages linked to the Russian invasion of Ukraine were felt across the industry.
According to Mintec’s Witchalls, “the already high costs of fertiliser, natural gas, petrol and electricity have been exacerbated in response to the war amid increased supply concerns, weighing on farm margins”.
Energy costs had reached “unprecedented highs as Ukraine is an important transit route for Russian gas into Europe, and Russia is the largest supplier of gas to Europe”, she said.
It comes as the UN’s Food and Agriculture Organisation said on Thursday that soaring fertiliser prices were helping drive a likely $51bn rise in global food import costs to $1.8tn this year.
The FAO said in its twice-yearly food commodities overview that “the world bill for imported agricultural inputs in 2022 is currently forecast as $348bn, which would represent a 21% increase from 2021”, adding that last year in turn saw a 58% rise compared to 2020.
