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?