Agri-supply industry needs further energy bill support, AIC tells EFRA Select Committee
The agri-supply industry needs the certainty of continued Government support next year to counter the crippling effects of energy price inflation and allow businesses to plan ahead, the AIC told a Committee of MPs today (8 November).
The AIC's Head of Policy Ed Barker gave evidence to the Environment, Food and Rural Affairs (EFRA) Select Committee in Westminster this afternoon, where the full impact of the energy crisis on the UK agricultural industry was laid bare.
The AIC was asked to give evidence and answer questions from MPs on how rising production costs affecting farmers, processors, retailers and consumers.
Speaking at the Committee, Mr Barker called on the Government to consider extending its Energy Bill Relief Scheme (EBRS) beyond its current cut off of March 2023.
The EFRA Select Committee, chaired by Sir Robert Goodwill MP, brought together industry experts to examine how rising prices are affecting what farmers decide to plant, who is paying for the high cost of production, and how higher costs are affecting what consumers are buying.
MPs also examined what further support the Government could consider in order to secure fertiliser supply given the current market volatility caused by the unpredictable wholesale price of gas.
Watch the summary video below.
Energy price inflation
When asked about the Government's Energy Bill Relief Scheme (EBRS), Mr Barker told the Committee that the support was welcomed by industry but it will be needed beyond March next year.
"The Energy Bill Relief Scheme was hugely welcome, we were looking at triple-digit inflation increases in energy across the board for agri-supply sectors," he said.
He pointed out that the EBRS is currently only a six-month scheme, and businesses need to know what will happen beyond March 2023 "because they are buying their energy forward but not being given a price."
"Clearly we need to be able to look beyond March, there are a lot of agri-supply businesses that are unable to price beyond then. A lot of businesses actually have a significant draw on energy after March, grain drying and in the arable marketing sector, for example.
"How do you plan for the future to be able to advise farmers what prices are for inputs if you can't fix your own energy costs?" he added.
Fertiliser supply
Extreme volatility in the wholesale price of gas is playing havoc with fertiliser manufacturers' ability to plan ahead and budget for production, Mr Barker told the Committee.
"The variation and volatility in the gas market has been so difficult for the industry to work with. We estimated that within the European market for every €1 (£0.87) change per therm, it adds about €500,000 (£436,283) per day in cost for a fertiliser plant to run."
This August alone, the wholesale gas price rose by around £3/therm in just three days, which pushed up the daily cost of fertiliser production by almost £1.5m according to the AIC's own calculations.
"You can't just turn fertiliser production on and off, it is a constantly produced product. We need farmers to have the confidence to make purchases," he said. "If no-one's buying your product, there is serious difficulty in justifying the continuation of production."
Asked by MPs if Government should consider ways to secure the supply of fertiliser, Mr Barker explained that competitor countries had already taken action.
"Given that all of our competitors in Europe and the United States are intervening in their own fertiliser sectors directly, it seems completely remiss for the UK to do nothing."
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Oli Hill
As Communications Manager, Oli creates and oversees the content published on AIC's website, emails, Member briefings, print publications, and social media.