The government has said it cannot provide “the whole solution” for British food suppliers and farmers should prices of gas and fertiliser rise further in the wake of proposed rationing elsewhere in Europe.
Some 24 hours after the European Commission told member states to cut gas use by 15% due to alleged “weaponisation” of supplies by Russia, a Defra spokesman said it had already “set out a package of measures to help farmers with the availability of fertiliser”. This included suspending planned limits on urea-based products, he said.
“While those measures are not the whole solution, they will help,” the spokesman said, acknowledging that “farmers are facing increased input costs, including manufactured fertiliser, feed and fuel”, which he said “closely correlated” to gas prices.
Russian state gas giant Gazprom on Thursday said it had restarted piping gas west via the controversial Nord Stream pipeline into Germany. However, the resumed flow was less than half the pipeline’s capacity and came after a 10-day stoppage, which Moscow said was due to western sanctions imposed as punishment for its invasion of Ukraine.
The Russian announcement came a day after the Commission announced it wanted “all consumers, public administrations, households, owners of public buildings, power suppliers and industry” to “take measures to save gas” in the face of Russian threats to cut supply ahead of winter.
According to a report by political risk consultancy Eurasia Group, Russian gas supplies to the EU would be down 40% this year compared with 2021. The pipeline stand-off had caused “a high degree of uncertainty” across the bloc, to which Russia is the biggest supplier of gas, Eurasia Group added.
Gas is key to fertiliser production and prices, which by June had been climbing worldwide for around a year, first in the wake of China imposing restrictions on fertiliser exports as gas prices rose and later after Russian curbs further tightened supply ahead of its invasion of Ukraine.
The war led to further uncertainty, with European producers such as Yara International closing factories temporarily in March and CF Industries more recently saying one of its two fertiliser plants in the UK would not be reopened, after what was at first billed as a pause in operations starting in September last year.
CF’s other plant, in Durham, was kept open with government funding, but food industry representatives again recently warned domestic production could be left “vulnerable” if the closed factory in Cheshire was not reopened.
The EU’s gas rationing push was welcomed by several pan-European food and farm organisations. Pekka Pesonen, secretary general of Copa-Cogeca – which includes the NFU among its members – said the Commission’s statement “sends a clear message to member states: give the agri-food sector priority access to gas supplies, right behind households and hospitals”.
Huub Scheres, president of industry body Primary Food Processors, said if food was “not prioritised in case of gas rationing”, it would lead to “strain on the availability and prices of a large array of products, both food and essential non-food”.
The gas plans were announced after the Commission earlier in the week proposed temporarily scrapping EU tariffs on imports used to make fertiliser, saying Russia’s invasion of Ukraine had seen a “profound negative impact on the production of nitrogen-based fertilisers in the EU”.
Russia and ally Belarus, another major source of fertiliser components, would not be included in the proposed tariff cut, the Commission said.
The Commission’s announcements came after the US last week said banks, as well as shipping and insurance companies, would not be in breach of war-related sanctions by facilitating food and fertiliser exports from Russia.
Russia’s food exports themselves have largely not been sanctioned, though the US earlier banned Russian seafood and the UK this week imposed a postponed 35% tariff on whitefish from Russia and Belarus. Estimates by the US Department of Agriculture showed Russia on track to retain its position as the world’s biggest exporter of wheat this year, despite the war and the sanctions-related challenges of doing business in the country.
