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The closing of a single U.K. fertilizer plant in 2022 squeezed supply of CO2, resulting in shortages of beer. (Hollie Adams/Bloomberg News)

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A 1.4 billion-liter tide of cheap U.S. biofuels threatens to wipe out both of the U.K.’s domestic ethanol producers, and could also disrupt a range of British industries from meatpacking to making beer.

The Vivergo Fuels and Ensus plants in the north of England face imminent closure after a trade deal with Washington removed tariffs on imports of American ethanol.

The U.K. industry has little time to adapt to competition from U.S. imports. Aided by genetically modified crops and yeasts, antibiotic usage during the extraction process and various subsidies, American volumes dwarf British production and undercut on price.

“We were informed right at the last minute,” said Ben Hackett, managing director of Vivergo Fuels, which is part of Associated British Foods Plc. The industry “had no indication whatsoever that this was coming,” when the trade deal was agreed on May 8, he said.

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Ethanol is mainly used as a biofuel that’s blended with gasoline, but Britain’s domestic producers are part of a supply chain that reaches far beyond motor vehicles. As the two plants make their case for government support to offset the impact of the trade deal, Hackett said there needs to be more understanding on the broader implications of the industry’s potential collapse.

Shutting down the Vivergo and Ensus plants would eliminate as much as 80% of the U.K.’s output of carbon dioxide, which is a co-product of the ethanol fermentation process, according to estimates by various industry groups.

The gas has two major applications in the meatpacking industry. It is used to stun pigs and chickens at slaughterhouses, and also put in the sealed packaging of high-quality cuts of meat to improve their shelf-life at supermarkets.

Supplies of CO2 are already tight in Europe, according to the European Industrial Gases Association. The closing of a single U.K. fertilizer plant in 2022 squeezed supply of the gas, resulting in shortages of beer and hurting food producers.

CO2 produced by Ensus and Vivergo helped to plug that gap, so their shutdown could cause “chaos right the way through the supply chain,” said Nick Allen, CEO at the British Meat Processors Association.

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Cattle eat winter feed from troughs at a dairy farm near Thame, U.K. (Chris Ratcliffe/Bloomberg)

If abattoirs are unable to stun and kill animals on a quick turnaround, localized shortages of meat could emerge, he said. The cuts that do make it into supermarket shelves would spoil more quickly, resulting in more food waste.

Makers of some beers and soft drinks are reliant on CO2 for the bubbles in their products.

Not all sources of CO2 can meet the high grade requirements for foodstuffs, meaning a supply squeeze could quickly force drinks makers to search for alternative supplies from Europe. In addition to the ethanol plants, another source of high-grade CO2 is ammonia production, a process that itself is experiencing commercial pressures due to high natural gas prices since Russia’s invasion of Ukraine.

“It’s a very disjointed supply chain,” said the BMPA’s Allen. If one or two sources of CO2 supply close, even temporarily for cleaning and maintenance, “then immediately you get a shortage that reverberates.”

The medical field also relies on CO2, albeit in smaller volumes. It’s used during keyhole surgery to create more space within the body cavity, and its solid form is used to keep vaccines, blood and tissue samples cold.

Another byproduct of the ethanol production process is dried distillers grains with solubles, which is used by farmers as a high-protein cattle feed. Vivergo’s Hackett estimates that 20% of U.K. dairy herd feed requirements come from their plant alone.

The product “has become a functional way of us meeting their nutritional needs at an affordable rate,” said dairy farmer Paul Tompkins, who has a 450-strong herd in the Vale of York. DDGS is a “small part of our cows diet, but an important proportion of their protein requirement.”

If the ethanol plants close and there’s a supply squeeze, Tompkins would have to seek alternative feed from oilseeds processors or whiskey production. The Agricultural Industries Confederation estimates that without a domestic source of DDGS, cow, sheep and goat farmers would face an additional 35 million pounds ($47 million) of input costs a year.

British grain farmers are worried about losing a key revenue booster if the ethanol plants close.

Selling wheat to Vivergo or Ensus adds value “to otherwise sort of fairly basic commodity that is traded and exported all the way around the world and has no real product differentiation,” said James Mills, a grain farmer from just outside of York.

The additional consumption from the ethanol plants adds about 10 to 15 pounds to the price of a ton of wheat in the U.K., he estimates. If this source of demand disappears, U.K. farmers would have to sell their surplus grain on volatile global markets, compounding two consecutive seasons of challenging weather conditions.

“The price of wheat for the U.K. farmer will have to drop to make sure that we are export competitive,” said Mills. “We are already producing at potentially a loss at the moment.”