A significant growth in energy prices has driven up the cost of running greenhouses in the UK to a financially unsustainable level for many producers. According to the British Tomato Growers’ Association (BTGA), several farmers have therefore opted out of planting energy-intensive winter crops, which is causing supply shortages and consequently driving up some vegetable prices. The price of cherry tomatoes in the UK rose by 58% year on year (y-o-y) in March 2022, reaching an average of GBP 3.83/kg. Growers in Europe are also facing similar challenges, thus supplies of imported vegetables are likely to decline, potentially causing shortages in supermarkets in the upcoming months.
Greenhouses are essential for the sustainable cultivation of various vegetables, including tomatoes, peppers, cucumbers and root vegetables. Natural gas, electricity and diesel are all required to keep greenhouses running, largely for the heating, maintenance and watering systems. Tight supply combined with firm demand has driven the cost of these inputs to unprecedented levels this year. The supply shortage has recently been exacerbated by the Russia-Ukraine geopolitical conflict which has contributed to a further peak in energy prices as Russia is the largest exporter of natural gas globally. The price of natural gas (NBPI UK) peaked at an all-time high of GBP 4.02/Therm, up 900% y-o-y on the 8th March 2022. Prices have since declined, reaching GBP 2.53/Therm on 11th April, yet remain well above 2021 levels (+430% y-o-y).
The substantial pressure of rising costs has resulted in many vegetable producers being forced to cease production for winter 2022, thus leading to a lower availability of supplies, particularly for tomatoes. Fast food chain, McDonald’s has been hit by the UK tomato shortage, and consequently is rationing the ingredient by only including one slice of tomato rather than two in some burger options. Mintec estimates that supplies will remain limited over the short-term, potentially resulting in further difficulties for fast food outlets and retailers to source ingredients, and firmer prices.