Agricultural Fertiliser and Feed: Rising Costs

Baroness Bakewell of Hardington Mandeville Excerpts

Wednesday 29th June 2022 Lords Chamber

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I congratulate my noble friend Lord Redesdale on securing this important debate and on his excellent introduction. The cost of agricultural fertiliser and feed has rocketed in the last three months, and it is not difficult to see why this has happened.

First, wholesale gas prices have risen by 284% in 12 months—a phenomenal increase. The use of gas is a critical component of fertiliser production, contributing 90% of the cost. Currently, the UK produces only 40% of its fertiliser requirements. There were two fertiliser plants, one of which has now closed. The second is owned by the same company, CF Fertiliser. There is, therefore, no competition in the UK market in terms of our own fertiliser production. This is a critically important industry for the agriculture sector. What are the Government doing to ensure that the remaining plant remains open and operational? The noble Earl, Lord Devon, and the noble Lord, Lord Northbrook, have referred to this.

Secondly, the war in Ukraine is having a dramatic effect on the UK. Ukraine was a crucial supplier of sunflower oil and wheat, the supply and price of which have been affected. The shortage of sunflower oil does not adversely affect the British housewife, but it is a vital ingredient in sunflower meal for animal feed. In 2019, Russia was the world’s biggest exporter of wheat and Ukraine the fourth biggest. The conflict is hitting hard and is not likely to be resolved quickly. AHDB figures show that UK pelleted wheat feed prices rose by 60% in the 12 months to May this year. Our farmers accommodating or budgeting for this into the future is unsustainable.

The other side of this equation is the effect on countries in north Africa and the Middle East which rely heavily on grain from Ukraine. We are aware of severe food shortages in Eritrea, Kenya, Somalia and Sudan—countries which may face starvation as a direct result of the Russian invasion. It is therefore imperative that the Government do not allow our own production of climate-friendly food to drop, but put in place measures to ensure that neither escalating energy prices nor fertiliser shortages affects crop yields where this can be avoided.

There is another method of producing fertiliser, in the form of green ammonia using CO₂ from renewable resources. This has a minimal impact on the environment and is produced with little waste. In the normal course of events this method of production would be ruled out due to the cost, but with the exponential rise in cost of traditional fertilisers, this could come into its own. We do not have a plant in the UK that is currently capable of producing green ammonia, but there is one in Germany. Green ammonia production makes use of renewable energy sources such as hydro-electricity, solar power or wind turbines, through the Haber-Bosch process. Are the Government having discussions with those producing green ammonia and seriously considering this more environmentally friendly method of producing fertiliser to help our farmers?

The Minister could commit to establishing a gas fertiliser price index to increase transparency in the market, as the NFU has requested. Are the Government considering this? Despite the difficulties being well-trailed, Defra has yet to announce whether it is likely to respond to rising animal feed prices. On 26 May, responding to a Written Question from Daniel Zeichner MP on action to tackle animal feed inflation, Minister Prentis said that she had

“already set out measures to support farmers and growers in England ahead of the coming growing season”

and that the UK was

“largely self-sufficient in cereal production, growing 88% of all the cereals that we need”.

The debate this evening demonstrates that this statement is not correct. Not only are we not able to grow sufficient cereals for our needs, but the cost of producing them far outweighs the price paid for the end product. What are the Government now going to do to make a positive contribution to tackling the current crisis?