Memorandum submitted by J & H Bunn
Limited (O49)
1. SUMMARY
This is a submission from J & H Bunn Ltd,
an independent fertiliser manufacturer and distributor of agricultural
fertilisers throughout the UK. The company is headquartered in
Great Yarmouth and employs over 200 people with annual sales of
£80 million. We recommend that the UK agriculture must continue
to be able to grow sugar beet economically by retaining the EU's
Option 1 from 2006. This submission attempts to quantify the effect
on our real-life manufacturing business should this not occur.
The supply of sugar beet fertilisers in East Anglia, Lincolnshire
and East Yorks is the cornerstone of our retail business and the
ability for farmers to grow sugar beet in UK gives our company
scale and contributes heavily to our business. Compared with other
arable crops, sugar beet requires relatively high amounts of fertiliser
so has a disproportionate effect on the scale of our business.
Should beet become uneconomic to grow and fertilisers therefore
not demanded by growers, the direct impact on our business would
be a devastating blow of at least 60 jobs and nearly £5 million
sales in our firm, which is based in an Objective 2 area. The
effect of the cessation of sugar beet growing would also have
significant knock-on effects on our key suppliers (most of whom
are also located in EU Objective 2 areas in the North East of
England). A decision to render sugar beet production uneconomic
would not just affect the rural East Anglian economy. Downstream
effects would be felt in some of the UK's less-favoured industrial
heartlands too.
Members will probably be unaware of the complexity
and competitiveness of the sugar beet fertiliser market. This
submission details how the sales and distribution process for
sugar beet fertilisers also helps deliver other Defra policy objectives,
particularly environmental monitoring, agronomic efficiency and
the sustainable use of fertilisers. We are sure that submissions
from others will identify strong macro-economic and environmental
benefits arising from the growing of sugar beet in this country.
Others will depict the current policy as undefendable.
Our position is that we see no point in destroying
a UK sugar industry and its allied trades when there is strong
UK demand for sugar of which the UK can only produce 50%. The
alternative to the existing regime is likely to lead to the wholesale
destruction of virgin land to grow cane-sugar in non-ACP countries.
We are strongly in favour of retaining Option
1.
If Option 2 is favoured, we recommend a price
reduction no greater than 15%, small enough to ensure that sugar
beet production in the UK will still be economic to grow. Members
should appreciate that an Option 2 that makes UK sugar beet production
uneconomic is really Option 3 by stealth.
Option 3 totally unacceptable as it would destroy
our own business, would damage the viability of agriculture in
our region and on a world-stage will lead to the abandonment of
ACP countries with favoured access to EU sugar markets in favour
of LDCs with no existing sugar infrastructure.
2. THE ECONOMIC
IMPORTANCE OF
SUGAR BEET
AND SUGAR
BEET FERTILISERS
2.1 Company Profile
J & H Bunn Ltd are independent fertiliser
manufacturers and agricultural merchants based in Great Yarmouth
since 1816. The business now operates 15 production facilities
across the UK from Montrose, along the east coast, the West Country
and Cornwall. Over 200 people are employed in the business. The
group turnover is over £80 million per annum. At our headquarters,
a £2 million payroll contributes to the Great Yarmouth economy,
an Objective 2 area. In turn we trade with other organisations,
for example the Great Yarmouth Port Authority, of whom we are
their largest customers. Our own customers are primarily farmers
and merchants or farmer controlled-businesses who in turn sell
direct to farmers.
2.2 The Importance of Sugar Beet Fertiliser
to our Business
The sugar-beet season provides a solid base
and a rhythm to our business: In the late autumn and winter, the
main focus of our business is the manufacture, distribution and
contract application [picture of Ship, Bulk Lorry, BigA] of fertilisers
to sugar beet fields. Compared with other arable crops, sugar
beet requires relatively high amounts of fertiliser so has a disproportionate
effect on the scale of our business. These fertilisers are manufactured
at Great Yarmouth and to a much lesser extent in Kings Lynn, Sharpness
in Gloucestershire and Howden in East Yorkshire.
Owing to the large sugar beet growing areas,
in East Anglia our business is heavily vertically integrated and
we operate our own stevedoring, production, distribution by lorry
and contract-application via a fleet of self-propelled fertiliser
spreaders from Great Yarmouth.
Directly attributable turnover and staffing
for the sugar beet fertiliser enterprise is approximately:
| Activity | Turnover (£ per annum)
| Staff (number directly employed) |
| Stevedoring | 100-150K |
5-6 |
| Sales and Manufacture | 3,500,000-4,000,000
| 25 |
| Distribution | 250,000 |
15 |
| Contract Application | 500,000
| 15 |
| Total | 4,300,000-4,800,000
| 60 |
| |
|
Should beet become uneconomic to grow, the direct impact
on our business would be of 60 jobs and nearly £5 million
sales in our firm, which is based in an Objective 2 area.
2.3 The Importance of Sugar Beet Fertiliser to our Suppliers
Most sugar beet fertilisers are UK-sourced from companies
that also happen to be based in Objective 2 areas in the North
East (eg Cleveland Potash at Redcar and Terra Nitrogen in Middlesbrough).
Rock salt is a sugar beet fertiliser and is mined in Cheshire.
Imported fertilisers like "Kainit" are mined from special
deposits in Germany and are transported to the UK by ship. Unlike
synthesised agrochemical sprays, most of the constituents of sugar
beet fertilisers are dug out of the ground from natural ore deposits
and require minimum processing (eg crushing) before they can be
blended together and used as sugar beet fertilisers.
We trade locally too and we use the Great Yarmouth Port Authority,
a trust port extensively. Alex Woods, General Manager, tells us
that Bunns are largest the port user importing 250,000 tonnes
over the quay annually.
A decision to render sugar beet production uneconomic would
not just affect the rural East Anglian economy. Downstream effects
would be felt in some of the UK's less-favoured industrial heartland
too.
2.4 The Effect of Option 2 or Option 3 Sugar Beet Reform
to Farmers
For historic reasons, our business also runs a small farm
which grows sugar beet so we are farmers too. Our own farm suffers
from low rainfall and yield potential so our cost of growing is
higher than normal at £26 per tonne of sugar beet. An Option
2 that delivered a sugar-beet on-farm price less than this would
make production in our real-life case uneconomic. The sugar beet
price is currently £30-32.
The maximum acceptable reduction in sugar beet price is 15%.
An Option 2 that delivered a sugar beet price in the range £18-28
would drive our own farm and others away from sugar beet production.
3. OTHER POLICY
IMPLICATIONS
3.1 Environmental and Sustainable Agriculture: The Soil
Analysis of Each Field for Fertility
It is a Defra requirement that farmers analyse their fields
every four to five years for soil fertility. It is the custom
and practice that every field that will receive sugar beet fertilisers
has a Soil Fertility Analysis Report conducted by an independent
laboratory. The resulting analysis report identifies the base-fertility
so the correct fertiliser can be "prescribed" for each
field. Thus, the sugar-beet field prompts the farmer to comply
with best-environmental practice. As a company we undertake well
over 10,000 samples per year at a cost to our business well in
excess of £100,000 pa.
Best practice is not just a question of blanketing each field
with a standard fertiliser. Members may be surprised to know that
every beet field frequently has a different custom mix of fertiliser
applied according to Defra recommendation tables to optimise crop
performance with minimal excess use of nutrients.
In our business, 15 people rely on their employment for the
technical sales and advice relating to sugar beet fertilisers.
In addition, a similar number are employed by merchants and farmer-controlled
businesses.
4. PRACTICAL EFFECTS
IN OUR
BUSINESS
4.1.1 Production
The majority of Sugar Beet fertilisers are blended together
in a giant mixer from as many as 10 different granular raw materials.
Remarkably, we sell more than 2,000 "standard" recipes
for sugar beet fertilisers each containing a different combination
of plant nutrients. This is a sophisticated and well-developed
market.
There is a small market for liquid suspension fertilisers
able to use the fine dust-fertiliser separated by sieve and which
is unsuitable for granular application (it blows away in the wind
if spread) so the re-use of this dusty by-product in liquid fertilisers
has an enormous environmental benefit by avoiding disposal in
landfill. In our business, 25 people rely on their employment
in the sales and production of granular and liquid sugar beet
fertilisers.
4.1.2 Distribution
As every field may have a unique mix, specialist bulk transport
with custom-design partitioned trailers are employed. The value
of sugar beet haulage is at least £500,000 per year and we
have invested £120K in specialised equipment just this year.
In our business, 15 employees (drivers, traffic staff, billing
etc) rely totally on the sugar-beet fertiliser haulage for six
months of the year.
4.1.3 Contract Application
We operate a comprehensive fleet of self-propelled fertiliser
spreading machines. The machines use the latest satellite guided
technology with forward speed control ensure even application
of fertiliser . . . important for the crop and also to prevent
excess application. This hi-tech response helps place what fertilisers
are required in the correct place polluting watercourses, hedges
or ditches.
In our business, 20 people are employed in this enterprise
that derives 80% of its income from sugar beet fertiliser application.
5. COMMENTARY ON
THE SUGAR
BEET FERTILISER
MARKET
This submission demonstrates that the UK sugar beet fertiliser
market is technically advanced, is economically driven and environmentally
responsible and helps the farmer end-user deliver other Defra
policy objectives regarding frequent fertility monitoring and
the sustainable avoidance of waste.
Our business relies on the sugar beet fertiliser market to
provide scale to our business. It directly supports 60 jobs and
£5 million sales.
As well as supporting the rural farming economy, sugar beet
fertiliser production disproportionately helps supports firms
in Objective 2 areas in the industrial heartlands outside traditional
rural areas.
6. OUR RECOMMENDATION
We are strongly in favour of retaining Option 1.
If Option 2 is favoured, we recommend a price reduction no
greater than 15%, small enough to ensure that sugar beet production
in the UK will still be economic to grow. Members should appreciate
that an Option 2 that makes UK sugar beet production uneconomic
is really Option 3 by stealth.
Option 3 totally unacceptable as it would destroy our own
business, would damage the viability of agriculture in our region
and on a world-stage will lead to the abandonment of ACP countries
with favoured access to EU sugar markets in favour of LDCs with
no existing sugar infrastructure.
31 March 2004
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