Soaring natural gas prices across the UK have disrupted companies from operating. The latest is slaughterhouses that use carbon dioxide, a byproduct of fertilizer derived from natural gas.
Richard Griffiths, chief executive officer of the British Poultry Council, told Bloomberg surging natural gas prices is a massive blow for poultry companies, which frequently use a byproduct of fertilizer production -- carbon dioxide -- to incapacitate birds at slaughterhouses.
CO2 supplies are incredibly tight, Griffiths said, adding that any further shortages could create massive headwinds for the industry and hinder chicken production. Already, weekly chicken output has dropped 5-10%, and Christmas turkey production could drop by a fifth.
The unintended consequences of natural gas shortages are the effects on the food industry and how it may result in rising meat prices if slaughterhouse output continues to decline.
On Thursday, we outlined how CF Industries Holdings' fertilizer plants, one in Billingham and another in Ince, suspended operations "due to high natural gas prices."
"I would expect it to be having impacts very quickly," Griffiths said by phone. "At the moment, we've got all the Brexit effects, including labor shortages, all the Covid add-ons. And now, we're seeing these supply-chain problems emerge at a time when we really don't need it."
Energy inflation could be a company's worse nightmare in the UK -- prices for the fuel have already doubled this year, while power costs are on a record-breaking run thanks to the lack of renewable energy output.
More companies could be impacted by soaring natural gas prices and elevated electricity prices. This problem isn't likely to fade anytime soon as gas inventories remain low ahead of the winter season.
All of this is feeding into inflation across the continent. European Central Bank President Christine Lagarde recently said energy markets are a significant driver in higher inflation. To solve this, Germany has to certify Russia's Nord Stream 2 to begin receiving shipments - but as we recently noted, that could take months and may suggest European inventories won't be resupplied in time for winter.