By Guy Faulconbridge and Kate Holton

LONDON (Reuters) -Britain warned the food industry on Wednesday that carbon dioxide prices would rise sharply after offering tens of millions of dollars of state support to a fertiliser company to avert a food supply crunch.

Wholesale gas prices have soared this year as economies reopened from COVID-19 lockdowns and high demand for liquefied in Asia pushed down supplies to Europe, leading to a shortage of carbon dioxide (CO2) in the food industry.

Britain reached a deal to allow CF Industries (NYSE) to resume production of carbon dioxide in two British plants. The plant in Billingham was shut down due to high gas prices.

Sky News was told by George Eustice, Environment Secretary. “We need to get the market to adapt. The food sector knows that there’s going be a steep rise in carbon dioxide prices.”

The price of carbon dioxide will rise dramatically to approximately 1,000 pounds per tonne (from 200 pounds per tonne), Eustice stated. Eustice stated that it was a “very large, sudden rise.”

Eustice explained to Sky that the three-week support needed for CF could cost many millions or even tens of billions. However, it is necessary in order to offset some fixed costs. These are two very expensive plants.

Many of Britain’s poultry and meat processing plants would run out CO2, which is also used to make beer, cider, soft drinks, within days. They were forced to stop producing.

Eustice stated that “if we don’t act by next weekend, or at least by Monday of next week,” some poultry processing plants will have to shut down.

We would then have issues with animal welfare, as you would have many chickens that could not be killed on time and would need to be probably put to death on farms. The same situation would occur for pigs. This would create a serious problem and disrupt the food supply chain. So we decided to take action.

According to him, the effect on food prices will be minimal.

($1 = 0.7328 pounds)