A scheme set up to streamline the harvest and haulage of East Anglia's sugar beet crop has been criticised over the transparency of its tendering process – which smaller contractors fear could affect their ability to either join or compete with it.
The Industry Harvest and Haulage Scheme (IHHS) was created by British Sugar in 2010. But following concerns expressed by farmers about the operation of the scheme, in 2017 British Sugar and NFU Sugar jointly funded an independent assessment of the haulier appointment process.
The resulting Douglas report says although the consultant found 'no evidence of wrongdoing within the scheme's operation', areas of concern include 'fractured relationships' between operators and British Sugar, and 'fragmentation' – alleged appointment of separate harvester, cleaner/loader and haulage contractors, which could risk resource inefficiency and go against the core aims of the scheme.
It also gives alleged examples of 'grooming', where operators claim to have been encouraged to invest significantly in new equipment to grow their capacity – only to find they are not guaranteed tonnage after the annual tender process.
The report says: 'A lack of security of tonnages for hauliers over multiple years leads to either a reluctance to invest in resources for the future or potential over-exposure by those having invested, then not securing high tonnages in subsequent campaigns, whether through reluctance to reduce rates or through British Sugar selecting competitors for other reasons.
'This then allegedly creates bad feeling towards British Sugar and a perception among those unsuccessful of having been played off against local competitors.'
British Sugar has announced it will implement changes ahead of the 2018/19 sugar beet campaign and, along with growers' representatives NFU Sugar, has agreed three operating principles: Optimising efficiencies by focusing on maximising yield potential from farm to factory; encouraging and rewarding best practice; and creating an industry perception of a scheme which is 'well run and operated fairly and transparently'.
Paul Kenward, managing director of British Sugar said: 'I take the recommendations of the Douglas report very seriously and we are committed to implementing them. The IHHS has the potential to drive further efficiencies and yield improvements for our growers and we will continue to work with NFU Sugar to deliver a better scheme for the future.'
FARMING INDUSTRY RESPONSE
NFU Sugar board chairman Michael Sly said: 'NFU Sugar has maintained for some time that the IHHS has focused on cost reduction at the expense of value to the industry.
'Talking with growers there are plenty of examples of fragmentation in the most recent campaign, which not only goes against the core aims of the Scheme, but has been a real financial and logistical burden.
'To remain competitive in the post-quota world, our industry must focus on maximising yield potential from farm to factory. I am pleased that British Sugar has committed both to implementing the Douglas recommendations, and to work with NFU Sugar to make further changes necessary for it to operate against the agreed principles. Only by doing both of these things can we ensure that the IHHS will be fit for the future.'
CASE STUDY: EASTONS
The Easton family been growing and hauling sugar beet for more than 80 years from its base at Bunwell, near Attleborough..
The firm runs between two and six agricultural tipper trailers – depending on the seasonal nature of the work – but also runs 20 milk tankers across East Anglia and the Midlands in a diverse business which also includes about 2,000 acres of arable farming.
Eastons is currently tendering for its fourth season in the Industry Harvest and Haulage Scheme, and last year it hauled 39,000 tonnes of beet for British Sugar – but it also carried 30,000 tonnes for its own independent customers.
Director Charles Easton said: 'My chief concern is about the sustainability of the transport scheme. The concerns raised in the report show there are people in our camp, who recognise that there is no point in spending money on new equipment if there is no guarantee you will get that work next year.
'So we have not made any additional capital investment, which is what British Sugar would like us to do.
'Then there are people in the other camp who, in good faith, went out and invested heavily in machinery and then it turns out they have not won the work because they cannot afford as competitive a price as their rivals, so they are saddled with depreciation costs and are having to take work on at a loss just to cover their standing costs.
'A Ropa Maus [a self-propelled cleaner loader] costs £360,000 new. You need to be shifting more than 200,000 tonnes a year to cover the standing and running costs of a new Maus.
'If the one company with complete control over the supply chain tells you that the future is moving towards a very small number of large contractors then, unless we gambled and genuinely believe we could become one of that small handful of lucky people, then there is no sense in investing and attempting to grow the portfolio.
'We work extremely hard to ensure the prices we quote to our independent growers are competitive with the scheme haulage on price and value.
'We have demonstrated as best as we can what the value is, but if people are just making decisions on price it does not seem to be a fruitful endeavour.
'The decision we are facing at the moment is: Do we persevere with it, or do we do something else? If we solely relied on this haulage scheme, based on the margins, it is unsustainable at present. I have publicly said that I see little future in the haulage scheme for us and I would hope that my perception is incorrect.
'The scheme is not all bad. What we have learned from the scheme about telematics has been very helpful from a productivity point of view. That all factors into their aims to make it more efficient and to get the greatest capacity out of their hauliers.'
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