Natural gas prices have spiked this year as economies reopened from COVID-19 lockdowns and high demand for liquefied natural gas in Asia pushed down supplies to Europe, sending shockwaves through industries reliant on the energy source.

Carbon dioxide (CO2) is a byproduct of the fertilizer industry — Britain’s main source of CO2 — where natural gas is the biggest input cost. Industrial gas companies, including Linde, Air Liquide and Air Products and Chemicals, get their CO2 mainly from fertilizer plants.

The natural gas price surge has forced some fertilizer plants to shut in recent weeks, leading to a shortage of CO2 used to put the fizz into beer and sodas and stun poultry and pigs before slaughter.

As CO2 stocks dwindled, Britain struck a deal with U.S. company CF Industries, which supplies some 60 per cent of Britain’s CO2, to restart production at two plants which were shut because they had become unprofitable due to the gas price rise.

“We need the market to adjust, the food industry knows there’s going to be a sharp rise in the cost of carbon dioxide,” Environment Secretary George Eustice told Sky News.

It would have to accept that the price of CO2 would rise sharply, to around 1,000 pounds (C$1,739) a tonne from 200 pounds a tonne, Eustice said, adding: “So a big, sharp rise.”

The three-week support for CF would cost “many millions, possibly tens of millions but it’s to underpin some of those fixed costs,” Eustice said.

A spokesperson for Prime Minister Boris Johnson said the government was giving CF the difference between its total production costs and what it receives from the sale of CO2.

Business Secretary Kwasi Kwarteng, who also serves as energy minister, told lawmakers he was confident the country could also secure other sources of the gas.

It was not immediately clear how the state intervention by one of Europe’s most traditionally laissez-faire governments would affect the price of fertilizer — another key cost for food producers — and whether or not it would stoke demands from other energy-heavy industries for similar state support.

Christmas shortages?

Ministers, including Johnson, have repeatedly brushed aside suggestions there could be shortages of traditional Christmas fare such as roast turkey, though some suppliers have warned of them.

Kwarteng has said there would be no return to the 1970s when Britain was plagued by power cuts that made the economy the “sick man of Europe,” with three-day working weeks and people unable to heat their homes.

Eustice said without the deal some of Britain’s meat and poultry processors would have run out of CO2 within days.

“We know that if we did not act, then by this weekend or certainly by the early part of next week, some of the poultry processing plants would need to close,” he added.

He said the impact on food prices would be negligible.

But the boss of supermarket Iceland said the temporary arrangement would not solve the food industry’s problems.

“A three-week deal won’t save Christmas,” said managing director Richard Walker. “And certainly won’t resolve the issue in the long term.”

The British Poultry Council welcomed the deal but said the industry was still facing huge pressures from labour shortages and estimated Christmas turkey production will be down by 20 per cent this year.

Similarly the British Meat Processors Association expressed “huge relief.”

“We are focused on re-establishing (CO2) supplies before Friday this week which is when around 25 per cent of pork production was in danger of shutting down,” it said.

Britain’s Food and Drink Federation said there will still be shortages of some products though they will not be as bad as previously feared, while the British Soft Drinks Association warned it would take up to two weeks before production from CF made any positive impact on market conditions.

Marks + Spencer, which typically sells one in four fresh turkeys consumed in the United Kingdom at Christmas, struck a more optimistic note, saying it was confident of full supply.

Britain’s opposition Labour party said the government needed to explain the contingency plans in place in case the C02 issues are not resolved in three weeks.

— Reporting for Reuters by Guy Faulconbridge, Kate Holton and James Davey; additional reporting by Nigel Hunt and Elizabeth Piper.

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As Britain prepares to end its transition out of the European Union on Dec. 31, it has negotiated multiple rollover bilateral deals to maintain trade, with many simply replacing the terms the bloc had already agreed.

British Prime Minister Boris Johnson joined Canada’s Justin Trudeau and their respective trade ministers on an online call to mark the deal, which paves the way for a tailor-made agreement covering more areas such as digital trade, small businesses, the environment and women’s economic empowerment.

“Today’s agreement underpins 20 billion pounds worth of trade and locks in certainty for thousands of jobs,” Liz Truss, the U.K.’s international trade secretary, said in a statement.

Her Canadian counterpart Mary Ng said the transitional agreement “largely replicates” the EU deal on tariff reductions and provisions for labour and environment. “We do want an ambitious, high level comprehensive trade agreement with the U.K.,” Ng said, signalling Canada wanted similar terms to the EU deal.

Canada’s Parliament must approve legislation that would enable the deal to come into effect.

Britain is Canada’s fifth largest trading partner after the United States, China, Mexico and Japan.

Johnson is trying to shape a new “global Britain” that can strike out alone and negotiate better trade agreements than the EU as part of what he says is the benefits of its historic decision to leave the world’s biggest trading bloc.

In less than two years it has agreed trade deals with 53 countries, accounting for 164 billion pounds (C$284.62 billion) of British bilateral trade. Johnson’s critics point out that many are largely the same as the EU deals.

The U.K.-Canada Trade Continuity Agreement will be subject to final legal checks before it is formally signed. “This is a good moment,” Trudeau said.

Export-oriented ag groups in Canada said the deal provides clarity and ensures continued market access for some agrifood exporters.

For those sectors, the deal provides “temporary certainty and stability,” Canadian Agri-Food Trade Alliance president Dan Darling said in a release Saturday.

“However, for other agrifood exporters, a transitional arrangement simply reinforces a situation that remains unacceptable under CETA (the Canada-E.U. free trade pact) due to the persistence of trade obstacles that continue to hinder Canadian exports.”

CAFTA called on the parties to “return to the negotiating table as soon as possible in order to reach a comprehensive and more ambitious pact that removes tariffs and non-tariff barriers, provides liberal rules of origin and creates a level playing (field).”

Cereals Canada CEO Dean Dias, in a separate release Saturday, said the continuity agreement “is a positive outcome for Canadian wheat farmers and exporters, especially those operating in a highly integrated supply chain with important U.K. millers and food processors.”

— Reporting for Reuters by Kate Holton and Amran Abocar. Includes files from Glacier FarmMedia Network staff.

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Retailers such as Tesco have warned that leaving the European Union on Oct. 31 without a transition deal would be problematic as so much fresh produce is imported and warehouses are stocked full ahead of Christmas.

The industry — which employs 450,000 people in the United Kingdom — views Brexit as the biggest challenge since the Second World War, dwarfing previous crises such as the horse meat scandal of 2013 and the BSE outbreaks of the 1980s and 1990s.

“We’re not going to starve but there will be shortages of fresh food and some specialist ingredients. It’s going to be a little bit unpredictable,” the Food and Drink Federation’s chief operating officer Tim Rycroft told Reuters.

“Given that food very often is perishable and has a short shelf life, we expect that there will be some selective shortages of food in the weeks and months following no-deal Brexit,” Rycroft said. “There will be some shortages and price rises.”

Part of the problem is that Brexit could change everything — or, possibly, nothing.

Ahead of the original Brexit deadline of March 29, supermarkets and retailers spent millions of pounds preparing for Brexit and working with suppliers to increase stocks of dried goods including pasta, bottled water and toilet paper.

After three years of Brexit discussion, it is still unclear on what terms the United Kingdom will leave the European Union with options ranging from a last-minute exit deal or delay to an acrimonious divorce that would knot the sinews of trade.

Prime Minister Boris Johnson has repeatedly warned the European Union that unless it agrees to do a fresh divorce deal then he will lead the country out of the bloc on Oct. 31 without a deal.

Brexit at Halloween

As winter approaches, the United Kingdom becomes more dependent on imported food so a Halloween no-deal Brexit is potentially more disruptive.

Britain imports around 60 per cent of its food by the beginning of November — just the time that delays caused by a no-deal Brexit could be clogging up ports and motorways, Rycroft said.

Fresh fruit and vegetables, which have a short shelf-life of only a few days, cannot be stored for long so any checks at Calais could lead to significant disruption at Dover, Britain’s biggest port.

Michael Gove, the British minister responsible for no-deal preparations, said he was confident that a resilient food supply system would ensure people would have “a wide range and the choices that they need” whatever happened.

“If we do leave without a deal on Oct. 31 there will inevitably be bumps in the road,” Gove told BBC TV on a visit to Dover.

“I have been talking to people who manage this port, I’ve been talking to people who are responsible for freight that travels to Europe and I’ve been talking to those who manage other ports in order to make sure… that people can receive in their supermarkets and shops everything that they need.”

Rycroft said they estimated that the cost of preparing for a no-deal exit, including reserving warehouse space, using alternative distributors and losing orders in congested ports, would cost the industry up to 100 million pounds (C$161 million) a week.

“A lot of money will be spent,” Rycroft said, referring to how the industry prepared for two previous Brexit deadlines in March and April.

The U.K. food and drink industry accounts for 19 per cent of the manufacturing sector by turnover and employs over 450,000 people in Britain across 7,000 businesses including Associated British Foods, Nestle and PepsiCo.

Some of the bigger companies have tested different ports to avoid the main route of Dover-Calais while pharmaceutical companies have reserved air freight capacity to fly in supplies if needed.

The trade body has urged the government to waive some competition rules to allow retailers and suppliers to be able to work together to provide the most effective coverage for the country in such a situation.

Rycroft said the industry had repeatedly asked the government to provide a guarantee that companies would not be fined for engaging in anti-competitive behaviour.

Brexit supporters say there may be short-term disruption from a no-deal exit but that the UK will thrive if cut free from what they cast as a doomed experiment in integration that has led to Europe falling behind China and the United States.

Rolls-Royce said on Tuesday it was ready to cope with the fallout from a disorderly Brexit after the aero-engine maker spent around 100 million pounds to increase inventory among other preparations.

— Writing for Reuters by Guy Faulconbridge and Kate Holton.

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This year, he fears uncertainty around Britain’s departure from the European Union will keep his eastern European workers away and the asparagus will stay in the ground.

Asparagus grown in Britain is feted by chefs as among the world’s best but the seasonal worker shortage threatens the country’s asparagus industry and the viability of Chinn’s Cobrey Farms business.

It is a predicament shared by many British fruit and vegetable farmers, almost totally reliant on seasonal migrant workers from EU member states Romania and Bulgaria taking short-term jobs that British workers do not want.

At Chinn’s farm, which turns over more than 10 million pounds (C$17.7 million) a year, the workers pick the premium asparagus spears that can grow up to 20 cm a day by hand. Sometimes they pick them twice a day before dispatching them to customers such as Marks and Spencer, and Britain’s biggest supermarket, Tesco.

“It is incredibly clear cut — there is no U.K. asparagus on your supermarket shelves without seasonal migrant workers,” Chinn, whose great grandfather started as a tenant farmer in 1925, told Reuters.

“We’re really at the point where we either import the workers or we import the asparagus.”

Britain’s asparagus season is short and early — traditionally running from April 23, known as Saint George’s Day, to Midsummer’s Day in mid-June. It will be the first big test of the 2019 seasonal labour crisis.

No-shows

This year Chinn’s team has had to work much harder to recruit Romanians and Bulgarians who are perplexed by the long Brexit process as Prime Minister Theresa May seeks parliament’s approval for a divorce deal with the EU. They are also wary of the welcome they will receive from Britons, who voted in 2016 to leave the EU.

Though Cobrey Farms has signed up 1,200 workers who are due to start arriving at the end of this month, Chinn fears many will not turn up. He does not think he will be able to harvest the entire crop, meaning valuable asparagus will be left in the fields.

“If we’re 20 per cent short of people then we will harvest 20 per cent less asparagus,” said Chinn. “U.K. agriculture’s not a high-margin game, so 20 per cent less means we’re in loss-making territory. Fifty percent could sink us.”

Chinn’s concern grew after 20 of the 100 or so workers due to help cultivate the crops in January failed to turn up.

Of 247 workers due to arrive between March 31 and April 6, 125 are yet to book flights, he said. They include 38 who have worked at Cobrey Farms before and stayed in the dozens of static caravans that stand at the foot of the hills on the farm.

Chinn, who voted Remain in the 2016 Brexit referendum, said uncertainty over eastern Europeans’ employment rights and how long they can stay, combined with a fall in the value of the pound, meant Germany and the Netherlands were now considered more attractive destinations.

“They go somewhere which is most straightforward and any, even minor, hurdles you put in their way is just nudging them ever closer to going somewhere else,” he said.

With just 11 days to go until Britain is due to leave the EU, the government is yet to agree a withdrawal arrangement or an extension, meaning the risk of a disorderly “no-deal” Brexit cannot be ruled out.

If Britain agrees on a divorce deal, a transition period will kick in, maintaining freedom of movement until the end of 2020. In the event of no deal, EU citizens arriving after March 29 would need to register to work for more than three months.

Elina Kostadinova, a 28 year-old harvest manager at Cobrey Farms who is from Varna on Bulgaria’s Black Sea, said many workers were worried about coming to Britain because of Brexit.

“They don’t know if they will be welcomed in the country, how long they may be able to stay, how they may be able to travel and what the future may hold,” she said. “It would be wonderful if the U.K. government could make a decision, so we can relay this message.”

British farms typically pay workers the national minimum wage of 7.83 pounds (C$13.90) an hour plus performance-related bonuses.

Chinn said the idea of British workers plugging the gap was fanciful. He does not expect much help from the supermarkets, where sales volumes have already been negotiated for the season and prices have been fixed, barring exceptional circumstances.

Permit trial

Britain’s fruit and vegetable sector relies on up to 80,000 seasonal workers from the EU each year. Having previously been inundated with applications, labour agencies say interest dropped off in 2017 and 2018 as workers from Romania and Bulgaria opted to go elsewhere in the EU.

For the last two seasons, Britain has been short by around 10,000 workers, threatening the food supply and forcing farms to pay higher wages and bonuses. At the end of the summer as workers want to leave, farms will offer free accommodation and to pay the cost of flights to try to persuade them to stay on.

Concordia, a labour agency charity that finds EU pickers for British farms, said it now has to work much harder to recruit.

“U.K. agriculture is definitely entering into a crisis. No labour means no harvesting, which means no fruit and no vegetables on shelves in British supermarkets,” Chief Executive Stephanie Maurel told Reuters.

She was speaking in Moscow after the British government sanctioned a pilot trial for 2,500 workers to enter the country from Russia, Ukraine and Moldova for up to six months over the next two years.

Chinn, who has 3,500 acres of land, wants the government to increase the numbers to 10,000 this summer and over 50,000 in the next couple of years.

“We can’t change this natural cycle of the crop… the crop will come out the ground when it warms up,” he said. “So the key is about not waiting for a total disaster that wipes out large swathes of UK horticulture.”

— Reporting for Reuters by James Davey and Kate Holton.

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Farming unions from across the country were meeting in London to urge the government to provide more help for an industry that has seen a 25 per cent year-on-year drop in the amount farmers are paid for milk.

The National Farmers Union (NFU) estimates that the majority of dairy farmers are now selling milk below the amount it costs to produce it. “I was earning a pittance,” said Peter Parkes, a farmer who pulled out of dairy produce 18 months ago.

Farmers around the country have been protesting against depressed prices for over a week, with videos online showing them entering supermarkets and clearing the shelves of milk.

On Sunday a group of protesters entered a supermarket in Stafford, central England, with two cows, to “show” the animals just how cheap their milk was.

“If the milk stays this cheap in six months time, 12 months time, there will be no fresh milk left in this country,” one protester said in a video posted online, as bewildered shoppers looked on. “We cannot afford to sell milk at this price.”

AHDB Dairy, the industry body, said the collapse in prices, sparked by lower demand from China and a price war among British supermarkets, had resulted in more than one milk producer going out of business per day in the last year.

“The situation many of our members are experiencing has become a crisis,” said NFU president Meurig Raymond. The NFU said farmers in the livestock and dairy sectors were “facing financial devastation.”

Britain’s supermarkets have been engaged in a vicious price war in recent years, as the success of discount chains Aldi and Lidl has prompted the more established names in the sector to slash prices for certain basic produce.

The NFU said retailers Tesco, M+S, Waitrose, Sainsbury’s and Co-op paid farmers a price based on the cost of production, but others — including Morrisons, Asda, Aldi and Lidl — did not.

The fall in milk prices has had global ramifications, with producers from New Zealand to Ireland struggling in the new economic environment. Agriculture, fishing and forestry together account for 0.6 per cent of U.K. GDP.

— Kate Holton is Reuters’ deputy U.K. bureau chief, based in London.

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