Asked by Lord Redesdale To ask Her Majesty’s Government what steps
they are taking to combat the rising cost of agricultural
fertiliser and feed. Lord Redesdale (LD) My Lords, I thank all
noble Lords taking part in this short debate. I declare an
interest: I own two tenanted upland farms. When I mentioned to one
of the tenant farmers that I was bringing forward this debate, I
had a conversation that lasted considerably longer than the debate
will take. That is...Request free trial
Asked by
To ask Her Majesty’s Government what steps they are taking to
combat the rising cost of agricultural fertiliser and feed.
(LD)
My Lords, I thank all noble Lords taking part in this short
debate. I declare an interest: I own two tenanted upland farms.
When I mentioned to one of the tenant farmers that I was bringing
forward this debate, I had a conversation that lasted
considerably longer than the debate will take. That is the issue
we have with many farmers: discussing the price of feed, lamb or
anything else takes quite a long time, because a lot of them are
gambling on whether the costs meet the return on investment.
Indeed, what I found worrying from talking to a number of farmers
was that many of them are looking at whether the economic model
they have been working from works in a period of such rising
costs, which of course affect other people. An issue that they
raised, which I have not heard them raise before, was carbon
off-sets for trees and moving away from farming as a viable
alternative because of the uncertainty that many farmers feel at
the moment.
This debate is an opportunity for the Government to give any
indication they have about how they are looking to deal with
certain issues around the rise in fertiliser costs. I agree that
this subject is not at the top of everyone’s priority list,
although it came up frequently on the doorstep at the recent
by-election in Tiverton and Honiton. I very much hope the
Minister, like me, will welcome the excellent new MP for Tiverton
and Honiton to the other place—or, then again, perhaps not.
We are of course in the midst of a cost of living crisis. The
Government will face a large number of debates from many sectors
about how to deal with issues raised by the cost of energy. From
looking at the figures, one can see that the rise in the cost of
energy has exceeded that of the 1970s, which led to an economic
depression. The fallout from that rise will be seen throughout
the sectors. The food sector is particularly vulnerable through
fertiliser and other costs.
I shall set out the cost of fertiliser at the moment. According
to the Agriculture and Horticulture Development Board’s latest
market update, covering May 2021 to May 2022, the cost of
ammonium nitrate produced in the UK has risen by 152%, imported
ammonium nitrate by 171%, potash by 165% and phosphates by around
120%. This has a major knock-on effect, because fertilisers are
used not only for cereal crops but mostly in this country for the
production of feedstock for animals. This will lead to an
increase in the cost of meat generally for consumers. Focusing on
one foodstuff—the nation’s favourite, chicken—I thought it
interesting that Steve Murrells, the chief executive of the
Co-op, said that it is quite likely that the price of chicken
will be the same as the beef going forward because of the cost of
feed, but also the energy costs of heating chicken farms and
pens, and of cooling chicken sheds.
Of course, that has to be put into context. We have had a period
of extremely low food costs in this country, which has been of
benefit to all, and a chicken still costs less than a pint of
beer, as has been pointed out in the press recently. However, the
recent rise will be noticed by many consumers and will probably
move people away from some of the eating habits they have at the
moment.
This raises a question that the Government might have to look at.
In the past, as prices have risen rapidly, supermarkets have
often pushed the cost on to producers, rather than consumers, but
with such rapid rises I do not believe that that situation can be
upheld. I think there will be question marks over contracts
between supermarkets and producers, especially in areas such as
milk. I wonder whether Defra sees that it has a role in any of
the discussions that are taking place.
Rising food costs will lead farmers to look carefully at their
options. They could raise the price of their produce. However,
there is a question mark about that. I have seen a number of
farmers who, with such rapid rises, cannot predict whether the
prices they think they can charge will meet production costs.
Farmers could also consider switching crops. According to Farming
Online, there has been a recent move away from certain crops to
legumes and peas. The benefit is that they fix nitrogen in the
soil. Most legumes and peas are exported, so that would perhaps
be an issue for the food security of the country. Farmers could
avoid using fertiliser at all, but that would lead to a 20% crop
reduction, and while there are other, more sustainable
fertilisers produced on farms, looking at the availability and
feasibility of that method, it is more beneficial for smaller
holdings than for large ones. Farmers could avoid planting crops
altogether if they do not believe that the return is going to
match the investment, and that will have an effect on prices, as
the amount of food produced will reduce.
While asking the Government, as often is the case, for a
short-term solution, I am not sure they have anything in place at
the moment. The Minister might say there will be intervention on
fertiliser prices, but I doubt it. However, the Government need
to look at a longer-term plan for a fertiliser strategy. I know
Defra has been looking at the use of land in its recent review of
agricultural policy, but there are two main issues on fertilisers
that need looking at. The first is climate change. This was
raised by the IPCC and the Climate Change Committee this morning
as an issue that, if not addressed, will mean that we will break
our carbon target quite badly.
Fertilisers are a major emitter of CO2 in their production and
use. Ammonia production accounts for 1.8% of global CO2
emissions. It also consumes between 3% and 5% of global natural
gas production totals. Virtually all the ammonia produced today
is made using the Haber-Bosch cycle. Natural methane gas is used
to produce hydrogen, releasing 6 tonnes of CO2 for every 1.1 ton
of hydrogen, and then this hydrogen is reacted with atmospheric
nitrogen to produce ammonia.
There is a ray of hope in this area, which is the work being done
in Australia by Monash University. The noble Baroness, Lady
Worthington, brought this to my attention recently. It is working
on a way of producing ammonia without using natural gas but using
electrolysis powered by energy from wind. I would like to pass
that information to the Minister and his department, because it
is an area where we could vastly reduce the amount of emissions
from ammonia.
In my last 15 seconds, I shall finish on the other area, which is
security of supply. The Government may not be looking to
subsidise fertilisers, but are they taking steps to secure a
reliable supply? Ammonia is reliant on natural gas and there is a
real risk that there will be a shortage of gas on the continent.
The largest producers of ammonia locally are Ukraine, Germany,
Poland and the Netherlands, and the second largest producer in
the world is Russia. With the shortage of gas next winter, is
there a real risk that we might run out of fertiliser?
The Deputy Speaker () (CB)
My Lords, the noble Lord, , is taking part
remotely. I invite the noble Lord to speak.
8.06pm
(Lab) [V]
My Lords, the best way to combat
“the rising cost of … fertiliser and feed”
is to end a war which I have opposed since before it began. An
early settlement, which I have argued in detail over nine
contributions in debates, would have saved thousands of lives,
billions in cash and enabled a post-pandemic economic revival,
with an early restoration of the international economy,
particularly in the area of agriculture.
These days I have limited knowledge of agriculture, although in
the early 1990s I had shadow ministerial responsibilities for
agriculture in the Commons. With market stability in mind and on
the advice of cattle breeders, I promoted a national cattle
identification scheme. Following a five-year campaign, in 1997
the Labour Government rewarded my efforts with the establishment
of the British Cattle Movement Service in my Workington
constituency, which at its peak hired 1,200 people. With
efficiency savings and developments in technology, its workforce
of 578 helps maintain stability in the market. The crisis in
Ukraine is undermining that stability across the world. Price
stability is critical in agricultural markets.
My work on the BCMS helped foster my long-term interest in the
fortunes of Cumbria’s farming community, to which I have turned
for comment on this debate. In the words of one farmer, “It’s
breaking my heart. An extra £3,000 a month in cattle feed costs,
fertiliser up from £300 to £800 a tonne, and when they say you
can spread more manure, they forget we are already doing that. My
red diesel price doubled from 60p to 120p a litre. My electricity
bill has gone from £24,000 to £70,000 a year. My extended credit
terms have ended. Suppliers of feed and other agricultural inputs
demand 28-day settlements. Yes, the milk price has risen to an
all-time high, but it doesn’t cover my additional costs”.
Add to that testimony the increase in tariffs, reduced fertiliser
supply internationally, banking restrictions, the international
energy crisis, poor harvests and drought, export bans and other
controls, and you have a crisis spiralling out of control. Then
add to that a period of hyperinflation, with unimaginable
potential consequences: starvation in the third world, certainly
in rural Africa; millions in the advanced economies driven into
not only fuel poverty but real poverty; millions cutting back on
food and children suffering worldwide. You will then get the
picture.
This is far too high a price to pay, yet we all know the war will
end up in a costly compromise. Yes, there will be a peace of
sorts, but historians will judge it all with a more critical eye.
A brutalised Russian people appear unaware of the atrocities
being carried out in their name by a desperate, brutal Putin
leadership and a military establishment that is out of control
and fearful of defeat. We need cool heads to think through an
alternative strategy. We need a military build-up so that we can
negotiate from a position of strength and avoid an escalating
war.
Farmers throughout Europe are paying a very heavy price indeed
for the failure of leadership in the civilised world. I suspect
that all they want is an early end to the war and the return of
stability. A settlement cannot be left to the Government of
Ukraine; their agenda is not necessarily ours. Putin will not be
there for ever. Our mistake has been to underestimate the
potential for reform in a modernising Russia earlier this
century. It is still not too late, but it will never happen while
Europe lacks vision and sees the resolution of the conflict on
the proxy battlefield and not in the conference room.
8.10pm
The (CB)
My Lords, I am grateful to the noble Lord, , for securing this important
debate. I note my interests as a Devon farmer and a lawyer
working for a firm with an agricultural law practice.
The noble Lord, , highlighted the
humanitarian catastrophe unleashed by Russia’s invasion of
Ukraine, from the devastation on the ground to the blockade of
the Black Sea, which has held hostage so much of the world’s
wheat, sunflowers and other key food commodities on which so many
rely. As we focus our attentions on the unprecedented impact of
these events on our own food and farming sectors, let us not
forget the unimaginable suffering that will be experienced by the
Middle East and north Africa over the coming months and years.
The Government have my support in urgently seeking to unlock
routes to market for Ukraine’s produce.
I turn specifically to the impact on UK fertiliser costs. The
numbers are stark, as we have heard, with fertiliser prices
increasing fourfold or more. I am aware that the Government have
taken preliminary steps to address these costs, but ammonium
nitrate has gone from £200 to £800 a tonne, and I understand that
the cost of gas suggests it may reach £1,000 a tonne soon.
At the same time, domestic fertiliser production has plummeted as
one of only two fertiliser factories in the UK has shut. I was
totally unaware of the fragility of our domestic fertiliser
production, and I ask the Minister to explain what steps the
Government will take to ensure that domestic production recovers
and that we establish better resilience and variety of production
in the years ahead. It seems highly risky to allow a single
company to control all domestic fertiliser production, and it
suggests a severe market failure in a strategically crucial
agricultural input. Will the Government undertake to monitor this
and ensure it can never happen again?
Given that fertiliser cost and supply are likely to remain tight
for months, if not years, and that the cost of imported animal
feeds will also remain prohibitive, what steps are the Government
considering to promote domestic production of alternatives? We
have already heard about legumes, such as peas and beans, which
are well suited to the UK climate. They are an excellent
alternative to soya, they are flowering plants that support
biodiversity, they fit well into a combinable rotation and,
crucially, they are not dependent on nitrogen fertiliser.
I understand that Northern Ireland has run a protein crops
payment pilot in recent years. Will the Government consider
expanding this across the UK in response to the fertiliser and
feed cost crisis, or perhaps as part of ELMS or the sustainable
farming initiative?
Talking of sustainable farming, I went back to Professor Dieter
Helm’s work, Green and Prosperous Land: A Blueprint for Rescuing
the British Countryside, which I bought in 2019 when we began to
consider the Agriculture Bill. His was the seminal work that
inspired the agricultural and environmental revolution that we
are currently undertaking. In his chapter on food production and
self-sufficiency, the professor notes the farming industry’s
concerns that farming is about food production and food security
first, and then about nature. Dismissing this, he noted:
“Food security is largely an empty slogan of lobbyists. It should
not be taken seriously.”
How times have changed. Following the hard Brexit, the pandemic,
escalating climatic catastrophe and now the war in Ukraine, the
world has turned on its head. Food security, famine and the
migration and misery they cause are now top of the agenda.
I have been a keen proponent of the environmental and
biodiversity agenda in recent years but have always sounded a
word of caution, particularly given the excessive demands being
placed on our island’s limited reserves of natural capital. Many
of us called for longer to complete the agricultural transition
from BPS to ELMS, citing the considerable stresses that would be
placed on the fragile farming community. Those requests were
rebuffed, with the Government confident that seven years would be
sufficient. With fertiliser and feed prices now at unprecedented
and wholly unsustainable levels, are the Government giving any
further thought to the timing of our agricultural transition?
Noble Lords will recall plenty of debate over the merits of
rewilding and the concept of sparing productive land for nature,
rather than sharing it. Given the crisis in food production, will
the Minister finally confirm that government policy favours the
sharing of land and will not support the wanton destruction of
productive and essential farmland in pursuit of expensive dreams
of an impractical prehistoric wilderness that never truly
existed?
Does the Minister agree that environmental benefit will be
achieved not by condemning farmers and punishing them but by
ensuring their operations remain profitable and productive, while
improving environmental and biodiversity outcomes through
agri-environmental schemes and agritech solutions? Our academic
research institutions are leading the world in these two sectors,
and we need to support them better.
I am looking for some silver lining. This crisis may present an
opportunity to fast forward the development of environmentally
friendly alternatives to existing production methods. Of
particular significance is the need to find natural, organic
alternatives to the polluting and energy-hungry application of
nitrogen fertilisers. For instance, what steps are the Government
taking to encourage the development and application of
seaweed-based fertilisers? Seaweed is rich in nitrogen, potassium
phosphate and magnesium. Given our extensive coastline, surely
this is an area ripe for expansion.
Likewise, our green and pleasant land delivers one thing, grass,
better than almost anywhere else on earth. Given the cost
inflation and the environmental degradation inherent in
soya-based animal feeds, will the Minister endeavour to provide
better support to the pasture-fed meat and dairy industry? Of
particular concern in Devon is the ongoing uncertainty regarding
the farming rules for water, which remain opaque and unclear.
Their uncertain and punitive enforcement is preventing the
application of much-needed organic matter to Devon’s
pastures.
Finally, conscious once more of the terrifying hunger that will
result from the war in Ukraine, are the Government making any
efforts to ensure that UK farming produce is available to assist
those hungry and in need around the world?
8.17pm
(Con)
My Lords, I declare interests as an arable farmer and NFU
member.
The war in Ukraine has brought home the importance and fragility
of food security for the UK. As an island nation, being able to
grow enough food to feed a substantial proportion of our
population is a key measure of food security and national
resilience. I had not anticipated the Ukraine crisis when I moved
an amendment to the Agriculture Bill asking for government
support for the domestic production of food and agricultural
products. This was voted against by my own party and Labour. I
had no great foresight in having been ahead of the game on this
issue, as it already seemed to be a pressing matter even before
the war.
I will focus my remarks on the fertiliser situation. As already
stated, the latest figures from the Agriculture and Horticulture
Development Board show that fertiliser prices have more than
doubled since May 2021 and imported fertiliser prices are up by
171%.
Fertiliser is a key input related to crop yields. A severe
tightening of supply will lead to a reduction in the output of
commodities. Gas, the main input in producing fertiliser, and
ammonium nitrate play major roles in successful crop growth. Gas
prices have increased fourfold over the last year and ammonium
nitrate prices have also increased fourfold since January 2021.
As a result, fertiliser is in tight supply for 2022, with impacts
expected to become more serious next year. The significant
increase in cost and reduced physical availability of this key
input will likely reduce the crop yield from UK farms in the
coming years.
The Government are helping the situation but can do more. I
welcome the consultation on reducing ammonia emissions from solid
urea fertilisers admitting that a full ban is unfeasible. I am
also pleased that the Government made an agreement for one UK
fertiliser plant at Billingham to be reopened after both had
closed. However, on 8 June CF Fertilisers announced that it
intends to close its fertiliser plant in Ince, Cheshire. There
were only two plants overall in the UK, so this is a serious
problem.
The NFU recommends that the Government and industry help farm
businesses to plan for next year’s crop by publishing fertiliser
prices. At the moment, I hear from my tenant farmer that they
will publish them only daily, due to volatility. The NFU suggests
the publishing of a gas fertiliser index; it also recommends
mandatory food resilience impact assessments for new regulations
or policy. How can the Government help in this regard, and does
the Minister agree with the NFU’s proposals?
I welcome the advance payment of this year’s BPS, which will help
farmers’ cashflow. I also welcome the recent announcement of some
measures to try to support the agriculture industry, including
the formation of a market monitoring core group and steps to
assist farmers with the availability of fertilisers. The NFU
acknowledges parliamentary support for these changes.
What is not helpful are remarks, maybe taken out of context,
alleged to have been said by the Minister from the other place.
These were that “there is no shortage of organic matter to
replace all the manufactured fertiliser we currently use in the
UK”. Mike Neaverson, a potato farmer from Lincolnshire, wrote in
Farmers Weekly in April:
“Using Defra’s own documents—and ignoring its rules about …
spreading it—we can deduce that to replace all the UK’s
manufactured nitrogen with manures would require, for example, an
extra 2.5 billion laying hens, or 10 million dairy cows. Taking a
hybrid of both, this would mean that every man, woman and child
in the UK”
would have to have
“an 18-egg omelette, washed down with five pints of whole
milk”
every day of the year. Neaverson continued:
“We could eliminate all of our manufactured nitrogen tomorrow but
… it would reduce our yields very significantly, to be replaced
by imports.”
The Government could take a leaf out of the assistance programme
of the US Department of Agriculture, USDA. In March this year, it
announced that it would support additional fertiliser production
for American farmers to address rising costs. USDA will make
available $250 million through a new grant programme this summer
to support independent, innovative and sustainable American
fertiliser production to supply American farmers. Additionally,
to address growing competition issues, USDA will launch a public
inquiry seeking information regarding seeds and agricultural
inputs, fertiliser and retail markets. The new programme will
support fertiliser production that is independent—outside the
dominant fertiliser suppliers —increasing competition in a
concentrated market. It will support fertiliser made in America,
produced by domestic companies in the United States, reducing the
reliance on potentially unstable or inconsistent foreign
supplies.
One idea I would put to the Minister is assistance for smaller
farms in buying fertiliser. The problem comes when banks refuse
to increase overdraft facilities to help farmers with this. They
then have to decide whether to use less to keep within their
banking limits, while facing the uncertainty as to whether crop
prices will hold up. Some sort of Covid-type loans would be an
important idea here. Will the Minister give this some
thought?
Finally, the Government need to wake up to the fact that they are
losing support in rural areas, as evidenced by the Tiverton
result. Not taking farmers for granted would be a good way to
start addressing this, and careful awareness of the fertiliser
problem is a hugely important issue. Does the Minister agree?
8.23pm
(CB)
My Lords, I declare my interest as a farmer, as set out in the
register. I too welcome this timely debate, as farm input prices
have risen by between 25% and 30%, depending on the farming
sector, whereas the price index for UK agricultural products has
risen by around 12%. I want to concentrate on the sharp rise in
fertiliser prices, which other noble Lords have already
underlined, as this has the largest impact on the cost of animal
feed and, ultimately, the food we eat. There are many types of
fertiliser but, basically, we are talking about nitrogen, for
which there are very few effective substitutes, particularly in
the short term.
Nitrogen is the essential multiplier of growth in all our major
crops. To give a clear example of its importance to food
production, let us take the dairy industry. In January 2018, the
cost of 1 tonne of fertiliser was covered by the production of
900 litres of milk. In March 2022, the cost of 1 tonne of
fertiliser required the production of 2,280 litres of milk. On
dairy farms, 82% of crops and grass receive a dressing of
artificial nitrogen fertiliser. Certainly, dairy farmers produce
plenty of organic manures which help crop nutritional needs with
potassium and phosphate, but this manure contains a mere fraction
of the nitrogen needed to optimise crop quality and growth.
Alternatives to nitrogen fertiliser are already used by most
dairy farmers in the shape of legumes, nitrogen-fixing plants,
herbal leys, compost et cetera but they are not as effective.
Saving costs by reducing artificials results in reduced forage
production, an increased cost of bought-in food and lower milk
output. With lower milk yields and rising input costs other than
fertiliser, dairy farmers will experience lower margins and
questions on the viability of their businesses. Without increased
milk prices to reflect this, we will experience a reduced dairy
sector and the offshoring of production. The AHDB estimates a 2%
reduction in producers and a 1.6% reduction in herd size in the
year to April 2022.
Turning to arable farmers, the outlook for the current
harvest—weather permitting—looks good, with input costs less
affected by the fertiliser hike and a high market price for their
crops. For the 2023 harvest, the outlook is less clear but
probably okay as although fertiliser prices are likely to remain
elevated, output prices will probably remain firm. However, with
rising input costs, the gross margin is likely to be
substantially lower, resulting in farmers reducing fertiliser and
other inputs, with the consequence of lower production and,
probably, increased imports. For harvest 2024, the outlook is too
opaque for any farmer to make any decision on cropping, stocking
rates or other investment.
The simplest answer to protecting our domestic farming industry
is either to pass the necessary rise in food costs on to
consumers or for the Government to subsidise farmers. Neither
option is likely to be wholly desirable, although the argument
for a rise in food prices becomes more telling by the day.
Government actions to date have been helpful. The acceleration of
the payment of BPS money is good, while changes in the farming
rules for water and urea applications are all welcome, together
with various generous grants for technological improvements,
slurry storage and processing, but none of these will move the
dial in the current situation. As with the pig industry, speedy
and targeted support should be introduced to other sectors when
in difficulty. The call by the NFU for greater transparency in
the fertiliser market must be correct and is, I hope, being
looked at by the market monitoring core group.
We need to support the neediest people in our country in the
purchase of their food, among other necessities, but surely we
need to address the power of supermarkets and processors in the
pricing of food so that growers get a fair deal and those who can
pay for food pay the right price. The GCA covers the
supermarkets, but no such mechanism exists for processors and
growers. There have been increasing complaints of unfair
practices in the supply chain. I would be interested to hear from
the Minister how market monitoring and any necessary intervention
can be strengthened using the powers under the new Agriculture
Act.
With the rise in global input costs, we need to ensure that our
producers are paid a fair price by the market and not squeezed.
With other countries experiencing similar issues, we need to
maintain sustainable domestic food production. This means the
continued use of artificial fertiliser while alternatives are
explored and developed.
8.29pm
of Hardington Mandeville
(LD)
My Lords, I congratulate my noble friend 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, , 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 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?
8.33pm
(Lab)
My Lords, I thank the noble Lord, , for initiating this timely
and important debate and thank all noble Lords who have
contributed. We are all acutely aware that these very specific
extra agricultural costs are driving food inflation at a time
when the cost of living crisis is already causing widespread
hardship. More than 1 million people are already regularly using
foodbanks and over 2 million are regularly forced to go without
food. The impact of food insecurity at a household level is all
too clear. It is a real and pressing issue for millions of people
in this country.
The tragedy in Ukraine is more than a story of an illegal
invasion and thousands of civilians being murdered at the whim of
a Russian tyrant. It has also upset our reliance on international
sources of fuel, food, fertiliser and labour, and has laid bare
the weaknesses of our global markets. Arguably, given how
fundamental food security is to the welfare of our nation, the
Government should have had more robust contingency arrangements.
Instead, an air of complacency has been allowed to creep in.
While tensions were mounting between Ukraine and Russia last
year, the Government’s landmark food security report
concluded:
“Real wheat prices are expected to decline in the coming years
based on large supplies being produced in the Black Sea
region”.
So, we have to question what the purpose of this report is if it
does not factor in the most obvious upcoming risks. Farmers are
taking a major hit from the Government’s lack of effective
contingency planning and reliance on world markets. This is why
we have argued for a robust food security policy with a
commitment to higher UK food production levels, to give better
assurance that in a crisis we can feed the nation.
Meanwhile, as noble Lords have said, our farmers are suffering a
double whammy on food and fertiliser costs. Prices for
agricultural fertiliser in the last year have doubled, and in
some cases trebled. As well as price increases, fertiliser is in
short supply, with impacts expected to become more serious in the
new crop year for 2023. This will lead to higher food prices and
lower yields. That is why it is so frustrating that the
Government have allowed the permanent closure of the Ince
fertiliser plant to go ahead, leading to a major loss of
production as well as 350 jobs lost. Removing a large proportion
of the UK’s CO2 supply as a by-product is causing further food
production chaos. The owner of the plant, CF Fertilisers,
restarted its other operation in Billingham after the Government
intervened. Why, therefore, are the Government not intervening on
the Ince plant as well?
The fact is that the Government’s measures to address fertiliser
inflation are too little, too late. Industry round tables,
revised guidance and far-off plans to develop less gas-reliant
fertilisers will do little to help the farmers struggling right
now. We should use this opportunity to implement the growing
scientific evidence that shows that farmers could continue to
produce high-yield crops with far less artificial fertiliser if
they adopted environmentally sustainable practices, such as
rotating peas and beans, which we heard about earlier.
Meanwhile, the Ukraine invasion and the humanitarian tragedy are
also impacting on feed costs. Ukraine and Russia produce 30% of
the world’s wheat and 50% of its sunflower oil, seeds and meal
exports. This is having a direct impact on the cost of animal
feed in the UK: for example, the NFU has warned there will
definitely be a turkey shortage at Christmas as a result of wheat
prices doubling. Pig farmers have also seen a significant rise in
costs, with feed prices now contributing up to 70% of costs. So,
for a sector that has been struggling anyway, the outlook for pig
farmers is dire.
What are the Government doing about this crisis? Obviously, it is
welcome that the payments of the basic payment scheme have been
brought forward. This might help with cash flow, but it is money
to which farmers were entitled anyway; it is not new money. Other
than that, the Government’s policy can best be described as “wait
and see”. In response to a Question from my honourable friend
Daniel Zeichner in the Commons, the Minister, whom the noble
Baroness also quoted, said:
“We continue to keep the market situation under review, by
working closely with industry-led groups and key stakeholders to
monitor the position on animal feed.”
This really is not good enough. This crisis is hitting not only
farmers but consumers, as the price of food rockets, and it needs
action now. Farmers have no option but to pass on the additional
costs, which will fuel further inflation, food shortages and
suffering. It should be a national priority to address these
issues.
So I hope that, when the Minister responds, he is able to provide
greater assurance the Government intend to act on these issues. I
look forward to what he has to say.
8.39pm
The Parliamentary Under-Secretary of State, Department for
Environment, Food and Rural Affairs () (Con)
My Lords, I refer noble Lords to my entry in the register. I
congratulate the noble Lord, , on securing this debate and
the clear passion with which he introduced this subject. I am
grateful to other noble Lords for their contributions. The
Government are of course more than sympathetic towards and
understanding of the plight and costs that farmers face now, as
they try to plan for the future.
I hope that the noble Lord will put pressure on his Front Bench
to dump the idea of suspending the transition in farming from BPS
to the new farming future, because that would precisely help the
arable farmers who will see their gross margins double and
perhaps even treble in certain areas this year. Suspending it
would not help the chicken farmer that he mentioned or small
tenant farmers, upland farmers or the family farmers who have
grown up around me, and it would perpetuate a system that gives
55% of the money to the largest 10% of the landowners. It is
deeply unfair, and now would be completely the wrong time do
this.
Agricultural commodities are closely linked to global gas prices,
as the noble Baroness, Lady Bakewell, and the noble Lord, , pointed out. Farmers
are facing increased input costs, including manufactured
fertiliser, livestock feed, fuel and energy. Natural gas is a key
input in the manufacture of nitrogen-based inorganic fertilisers,
which include the two main mineral fertilisers used in Great
Britain: ammonium nitrate and urea. A combination of global
demand and supply pressures has caused the price of gas to
increase dramatically since the end of summer 2021, causing
significant issues for both the global and the domestic
fertiliser industry. As has been said, the invasion of Ukraine by
Russia this year has obviously further disrupted global supply
chains.
We want farmers to be able to keep running a viable business and
continue producing food. This is right at the top of the
Agriculture Act, which requires Secretaries of State today and in
the future to have the production of food at the heart of what
they do. We recognise that increasing input costs, particularly
fertiliser, animal feed, fuel and energy, are creating short-term
pressures on cash flow. On 30 March, the Government announced
measures to address the cost pressures impacting farmers as a
result of the global instability of demand and price increases. I
remind the noble Baroness, Lady Jones, that changes to the use of
urea fertiliser have been delayed until at least spring 2023—this
was one of the many actions that we have taken and will continue
to take. When restrictions are introduced, they will include the
use of protected or inhibited fertilisers, rather than a complete
ban. Farmers will be further supported through new slurry storage
grants as of this year, helping to meet the farming rules for
water and reducing dependence on artificial fertilisers by
storing organic nutrients.
We have published additional details of the sustainable farming
incentive, which will help farmers move towards sustainable
farming practices over time, supporting them to build the health
and fertility of their soil and to reduce soil erosion. This is
essential for sustainable food production, helping to bolster
food security and the longer-term resilience of the sector.
On 6 May, we agreed to bring forward half of this year’s BPS
payment as an advance injection of cash to farm businesses in
England from the end of this July. I appreciate that many noble
Lords on all sides have mentioned that. Payments will also now be
paid in two instalments each year for the remainder of the
agricultural transition period, to help farmers with their cash
flow. Sympathy and understanding are easy; action is what matters
and is what this Government are doing.
An industry fertiliser task force—previously known as the
fertiliser round table—has been formed, made up of key sector
bodies including the National Farmers’ Union, the Agricultural
Industries Confederation, the Agricultural and Horticultural
Development Board, and the Tenant Farmers Association. A lot of
work has been done on innovations, much of which has been
mentioned in this debate. I make the point that CO2 is a
by-product of fertiliser industries; we need CO2. One of the
measures we took in supporting a factory last year was to sustain
the CO2which is needed in food production in other sectors,
particularly in abattoirs.
The task force has met regularly and continues to work on issues
around fertilisers, identifying solutions to better understand
the impact of current pressures on farmers. Actions need to be
informed by facts, and that is what we are doing. We continue to
keep the market situation under review through the UK Agriculture
Market Monitoring Group, which monitors UK agricultural markets,
including price, supply, inputs, trade and recent developments.
We have also increased our engagement with the industry to
supplement our analysis with real-time intelligence.
Fertilisers are vital for food production, providing essential
plant nutrients, such as nitrogen. It is estimated that
approximately 50% of human-edible protein produced globally is a
direct result of mineral fertiliser usage. Mineral fertilisers,
when used appropriately—tailored to the soil and crop
requirement, with correct application timing and techniques—are
highly efficient. Organic materials applied to agricultural land,
such as livestock manures, biosolids, composts, anaerobic
digestates and waste-derived materials are also valuable sources
of plant nutrients.
Data from the 2020 British Survey of Fertiliser Practice
suggested that around 65% of Great Britain’s farmers used at
least some manure, slurry or biosolids. Careful recycling to land
allows their nutrient value to be used for the benefit of crops
and soil fertility. We are supporting farmers in making more
efficient use of these mediums. However, we know that poor
application of any fertiliser is bad for the environment. The UK
has environmental objectives published in the Clean Air Strategy,
the 25-year environment plan and the net-zero strategy. These aim
to make farming more sustainable and to reduce the polluting
effects of fertiliser use by developing further policies.
However, I accept that this is the medium and long term; we have
a current crisis to deal with.
The current increased cost of fertiliser provides a very strong
incentive for farmers to increase their nutrient use efficiency
to include every ounce of fertiliser—I have spoken to many who
are doing this. Farmers in the UK, concerned about high prices
and future supply, did not buy at their usual rates from autumn
2021 through to May 2022, which resulted in delayed or reduced
fertiliser application. However, the UK has a highly resilient
food supply chain, as demonstrated throughout the Covid-19
pandemic. It is well equipped to deal with situations with the
potential to cause disruption.
Every year, yield is heavily affected by the weather—the amount
of rain and sunshine that crops receive. It is not yet clear the
exact impact on crop yields for the 2022 harvest, but, as has
been said, it looks pretty good in many areas—although we must
not count our chickens before they are hatched. After a largely
dry April, welcome rain was seen in May, so let us hope for the
best.
Farmers aim to produce food while also providing themselves with
a profit for their livelihood. However, to produce a profit, it
is understood that farmers have to reduce crop areas in favour of
different land use, sow different crops with lower fertiliser
requirements, or choose to apply less fertiliser to get a lower
quality yield. Our supply chain providing imports of fertiliser
to the UK has remained dynamic in sourcing products. As has been
said, CF Fertilisers continues to produce ammonium nitrate
fertiliser from its plant in Billingham.
I understand noble Lords’ concerns about access to affordable
animal feed, particularly in the context of high inflation. For
the livestock sector, animal feed is a vital input, with
increases in price and problems in availability impacting
variable costs and productivity. Cereals and oilseeds make up a
significant proportion of animal feeds, most of which are
internationally traded commodities. Subsequently, their supply
chains are dynamic and responsive to global market developments
in price and availability. These developments may be influenced
by both the war in Ukraine and additional factors unrelated to
the conflict, such as weather conditions and currency
fluctuations.
The question of what we are doing to make the UK more
self-sufficient in fertilisers was raised. As I have said, it is
a global market; the UK sources fertiliser from a wide range of
countries and already produces fertilisers such as ammonium
nitrate. While global fertiliser prices have risen, we are still
producing it here and we are working very closely with the sector
to make sure that it is happening.
We must also look at alternatives. The Secretary of State and I
have, at different times, visited a company called CCm, which
produces such technology. It is an absolute game-changer. CCm
produces fertiliser that can be used in the same way as prilled
inorganic fertiliser, but it is produced from sewage sludge,
potato peelings and so on, and it is an entirely circular
economy. I would commend a greater understanding of it, because I
think it has great possibilities for the future.
Our dependence on inorganic fertilisers is something that we have
to face in the medium term. We have suspended many of the changes
on the farming rules for water, which was a point made by the
noble Earl, Lord Devon.
On fertiliser market transparency, Defra is working with the
AHDB, the AIC and the NFU on how fertiliser price transparency
can be improved in order to aid farmers in their decision-making.
Defra is also looking to review fairness in the supply chain
across the agri-food supply chain business, which was a point
raised by the noble Lord, .
The noble Baroness asked for action now, but she did not in fact
say what action she was talking about. I think I have proved that
we are taking action. We are aware of the pressures on farmers
caused by rising fertiliser and feed costs and we have taken
active steps to mitigate these. We continue to work in
partnership with key sector bodies, so that any wider impacts on
the food supply chain are minimised and to ensure the UK is well
equipped to respond to the global forces that continue to drive
the supply and price issues that we are facing. We are deeply
mindful of this very serious issue for farmers. We are taking
action and working with them and the whole supply chain. I hope
that I have answered the questions.
(LD)
The Minister made the assertion that we are against ELMS and for
BPS. I can happily say that, after massive pressure, we are quite
clear that we are for ELMS, rather than BPS.
(Con)
I am aware that, across this House, there is great support for
the environmental land management scheme, but there was a
suggestion by his Front Bench in another place that it should be
suspended. Now is not the time to do that; now is the time to
make the farming industry more secure and more sustainable to
withstand these kinds of global impacts, and make it fit to
produce food in the future.
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