Home Commodities The salad days are over for European food producers as energy costs fall

The salad days are over for European food producers as energy costs fall

by SuperiorInvest

Tony Montalban’s family has been growing vegetables in south-east England for decades, never interrupted by recessions, economic shocks or bouts of high inflation.

But this year, skyrocketing greenhouse heating costs in the wake of an escalating energy crisis sparked by Russia’s war in Ukraine have forced him to consider abandoning his usual crop of cucumbers.

“The price is out of control, it’s ridiculously high,” Montalbano, 40, said of his energy bills. This year’s production from his Essex County farm would be half the normal size as he tries to cut costs, he added. “The gas just shot up and that’s something I wasn’t prepared for.

Farmers and food businesses across Europe are cutting production as they struggle to cope with rising energy costs. Montalbano said his energy bill was about five times what it was at this time last year. The prospect of seasonal food shortages has prompted industry warnings and frantic calls for government support as Russian President Vladimir Putin cuts gas flows in response to Western sanctions.

Crops that require intense heating in colder climates, such as cucumbers, tomatoes and lettuce, are most affected. But the energy crisis is affecting Europe’s food chain more widely, with bakers, dairy farmers and other producers, including sugar beet and olives, also struggling to pay their bills as costs rise far faster than the prices they can secure from wholesalers.

Pekka Pesonen, secretary general of Copa-Cogeca, which represents EU farmers, said this week that the knock-on effect of the high bills was more severe than expected. Prices of inputs such as fertilizers and animal feed have soared, while rising costs of cooling, heating and transport have discouraged farmers from planting.

EU discusses plans for restrictions energy price for businesses and households, but also to order reductions in use that could affect farmers. The UK introduced a plan that would support businessesbut only for six months.

Tony Montalbano: ‘If I Don’t Grow How Will I Pay My Bills?’ © Grainne Quinlan/FT

But for many it is already too late. Jimmy Russo, co-owner of UK-based Valley Grown Salads, said: “I suspect 75-80 per cent of UK salad growers will not plant next year. . . because it makes no economic sense. It’s fair to say that the salad sector has been abandoned.’

This summer’s hot weather has exacerbated the problem, and Russo has been unable to grow most of his regular crop. But natural gas, which cost him 50p a therm last year, now costs £3.75 and he has been offered £5 a therm for the winter.

“You can’t sell a cucumber for £2.50,” he said.

In the Netherlands, they make up almost a fifth world export of tomatoes, many greenhouses darken. Companies that normally use lighting to grow tomatoes “will most likely not do so in the coming winter because of the high price of electricity,” said Alexander Formsma, an energy specialist at Glastuinbouw Nederland.

Alfred Pedersen & Son, the largest tomato supplier in Sweden and Denmark, which operates 350,000 square meters of greenhouses, said it was also shutting down this winter. It supplies supermarkets with 20,000 tons of tomatoes annually, of which roughly a quarter is produced in winter.

Energy costs have risen tenfold over last year, said Torben Roll, its chief operating officer. “There will be a huge amount of tomatoes missing” from the northern European supply chain, he said, adding that growers in warmer climates such as Spain and Morocco may not be able to fill the gap.

Some French sugar beet growers had to submit their harvest due to fears of a potential winter gas shortage. Tereos, France’s biggest sugar producer, said it would soon begin the energy-intensive process of turning beets into sugar.

“There was concern among industry groups that if there was a gas shortage, they could be cut off,” said Timothé Masson, an economist at the French Union of Beet Producers.

While rising energy prices most directly affect the use of heated greenhouses in colder climates, farmers in warmer climates are still affected by higher input costs and extreme weather.

In Italy, where growers have already struggled with drought over the summer, roughly a third of farmers are running at a loss, according to a survey by the Italian agricultural union Coldiretti, conducted by data analysis firm Centro Studi Divulga.

Filippo De Miccolis Angelini, a Coldiretti member who grows grain and vegetables including olives on his farm in southern Puglia, said his monthly energy bill had almost tripled compared to last year, while fertilizer prices had quadrupled. “We are definitely pressing olives, but we are very worried about the cost,” he said.

Some farmers also decided to sell the electricity they had committed to buy at a fixed rate instead of using it for farming. “I know farmers who have a fixed-price contract for two years. . . and they calculated that there is no point in using it, rather than selling it, exchanging it with someone else. It’s a business decision,” said one of them.

Back in south-east England, Montalbano said some growers nearing retirement age were pulling back, while those who owned land were also cashing out. But as a junior tenant, he said, he has little choice but to look for less energy-intensive crops. , such as peppers.

“If I don’t grow, how will I pay my bills?” he said. “I’m going from my savings, that means I’m going backwards.” So where should I go?”

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