American Crystal Sugar cut acresMOORHEAD, Minn. — American Crystal Sugar Co.’s board of directors on March 26 approved a 15 percent to 19 percent cut in beet acreage for 2008 — a decision influenced both by excess production in the past two years and by profit potential on other crop commodities.
By: Mikkel Pates, Agweek Staff Writer
MOORHEAD, Minn. — American Crystal Sugar Co.’s board of directors on March 26 approved a 15 percent to 19 percent cut in beet acreage for 2008 — a decision influenced both by excess production in the past two years and by profit potential on other crop commodities.
Shareholder-growers learned about the decision in mailings, starting March 27. Co-op officials will discuss details in factory district meetings next week.
“There are many factors that influence this,” says David Berg, president and chief executive officer of the Moorhead, Minn.-based farmer-owned cooperative. “Whether it’s the right decision or not, we had to put a stake in the ground.”
Crystal plantings will range from 404,000 to 424,000 acres of beets — down from about 498,570, or 81 percent to 85 percent of 2007 plantings.
Berg says one factor in the decision is that Crystal carried forward excess sugar from the 2007 crop.
Kelly Erickson of Hallock, Minn., president of the Red River Valley Sugarbeet Growers Association, says farmers will accept the cutback without complaint, especially with the competing prices. “This would definitely be the year to cut, if Crystal has to clear out some stocks and fix up factories.”
Another factor is expected increases in yields because of the advent of Roundup Ready beets, which is new to the Red River Valley this year. Up to 55 percent of the beet acres will be Roundup Ready, although environmental groups have threatened legal action.
Crystal has 3 million hundredweight of sugar in “block stock” storage, which compares to its annual production of about 34 million hundredweight. In a sense, the company is working down its overallocation sugar.
Berg declines to speculate whether Crystal still might have sugar production in excess of marketing allocations for 2008. “We’re balancing those numbers carefully and have to see how the year plays out,” he says.
Part of Crystal’s equation is an expected cutback at the co-op’s Sidney Sugars Co. subsidiary in Sidney, Mont. In Sidney, growers are contract growers and not members of a co-op. Crystal recently completed negotiations with Sidney Sugars, but growers board members there projected acreage will plummet from the 35,200 acres planted in 2007 to as few as 15,000 to 20,000 in 2008.
Competition from other commodities, with record-high wheat prices, was having an impact, even with the anticipated cutback in acres in 2008.
Beet stock shares, which had traded in the $2,000-plus range last winter, have declined until some shares were offered in the $1,350 range. Share prices listed on Alerus Financial March 27 listed four blocks of shares for sale in the $1,850 to $2,060 range.
“I like to think it says a lot about growers who have confidence in this company,” Erickson says. “We need the company 25 years from now.”
This decline is related to the fact that some people own beet shares but do not personally plant them, several growers told Agweek. They enter into “joint venture” deals with farming partners. While a joint venture deal may have commanded $250 an acre last year, there are some that declined to $100 an acre, or even $50, according to some sources. Most of those deals today have recovered to $100 to $150 per acre.
Tom Knudsen, vice president of Minn-Dak Farmers Cooperative in Wahpeton, N.D., confirms earlier plans to raise 109,000 acres of beets. That’s about the same as last year. Market analysts are also reporting stable numbers at Southern Minnesota Beet Sugar Cooperative in Renville, Minn.
Berg notes that the current processing season is going about as planned, despite a roof collapse at the company’s East Grand Forks, Minn., and boiler problems in Hillsboro, N.D. The slice campaign is expected to run into mid-May in Minnesota and into June in North Dakota.