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Published December 10, 2012, 10:50 AM

Minn-Dak shareholders will get strong payout

Big 2012 crop outweighs declining sugar prices.

By: Mikkel Pates, Agweek

FARGO, N.D. — The big 2012 sugar beet crop will offer a record-high payout for Minn-Dak Farmers Cooperative shareholders, with growers expected to receive about $225 million in gross payments, company officials announced at the group’s annual meeting in Fargo, N.D., on Dec. 4.

The co-op, celebrating 40 years of existence, reported a 2012 crop yield at nearly 27 tons per acre and sugar content at more than 19 percent, allowing the co-op to process some 3 million tons of sugar beets.

Farmers are projected to be paid more than $70 per ton for those beets, although the co-op doesn’t report that. (The figure has been compared to the $67 projection at American Crystal Sugar Co., in the company’s unresolved dispute with its labor union, but David Roche, Minn-Dak president and CEO, declined to compare the two.)

Minn-Dak growers harvested about 114,000 acres this year, and the crop was a little larger than the 2010 crop, which averaged about 25 tons per acre. About 45 percent of the crop has been processed. The company expects to produce 8 million to 9 million hundred-

weights of sugar, depending on storing weather.

Roche said the company had a better year than it did in 2011, when it delivered a “disappointing” $155 million in payments to shareholders. “This payment is not profit to shareholders,” he emphasized, noting that farm costs continue to rise.

Laying down gavel

Doug Etten, Foxhome, Minn., chairman of the board for nearly five years, stepped down after his maximum of 15 years on the board. Etten said full deregulation of Roundup Ready beet seed in 2012 was historic for producers, who have been using the technology since 2008. He said the technology is “extremely important” for producers across the nation, because beets “don’t compete so well with weeds.”

The industry is coping with a 40 percent reduction in sugar prices from a year ago. He acknowledged that a large part of 2012 crop sugar production has been contracted for sale, and that the fall-off is at normal, historic levels. But he emphasized that with rising prices of corn and other competing crops, a normal sugar price “won’t work anymore.”

Etten said one of the big changes in his time is the formation of United Sugars, the marketing alliance between Minn-Dak, American Crystal Sugar Co., and Florida cane cooperative U.S. Sugar Corp. Since then, Minn-Dak has increased its acreage from 40,000 to 120,000. He noted that the company is in the process of investing a total of $70 million in a molasses desugarization expansion, for use on the 2014 crop, and increasing sugar load-out capacity.

He credited growers with a near-unanimous vote to invest in and finance the improvements. “We’re excited,” Etten said of the investments.

Farm bill ‘look out’

Jim Wiesemeyer, national syndicated columnist and senior vice president of policy and trade at Informa Economics in Washington, D.C., gave farmers a “look out,” rather than an outlook for the 2012 farm bill.

Wiesemeyer thinks a “mini-extension” farm bill framework will be passed and a multi-year bill won’t happen until early 2013, after a fiscal cliff compromise is reached and will bypass the House floor.

Rather than the Senate version of the farm bill, which cut $23 billion from farm bill costs during its 10-year life, the package that passes likely will cut $30 billion or more in low-hanging fruit. The sugar program, which runs at nearly a zero budget cost, is only vulnerable in a House fight in which some grandstanding and “aggressive conservative” Republican critics might go after it.

Wiesemeyer said the sugar price reduction from 59 cents a pound in November 2011 to 35 cents today, is a result of a record-high crop, slightly reduced consumption and an 8 percent increase in Mexican sugar production. “More carry-in, more carry-over, means a lower price,” he said.

Roche noted that in April, the U.S. Department of Agriculture increased the tariff rate quota, allowing some 450,000 tons of additional sugar into the country to create “a perfect storm” to come off the higher point. That, along with a misjudgment on consumption, Mexican imports and then the biggest crop, nationwide all contributed to the decline, he said.

The surplus in world sugar can change quickly if a major producing region in the world experiences a weather problem, Roche noted.

New Obama tactics?

Wiesemeyer said sugar producers and processors have invested heavily in beet storage facilities across the country, and in efficiencies. He says beets will have to compete against other crops for acres. Those crops are increasing in technology, he said, noting Monsanto, which has bought an agricultural equipment company. He says Monsanto by 2016 wants to have a precision agriculture planter to deliver on-the-go switching of corn hybrids and other crops within a single pass, to take advantage of agronomic differentiation within a field.

“It’s not pie in the sky,” Wiesemeyer said of the equipment wrinkle. “That will be your next significant kick-up in at least corn and soybean yields, which will make those commodities more attractive. That will serve as an umbrella support for sugar prices, because they’re going to have to bid those acres.”

Wiesemeyer said President Barack Obama’s second term may be more “common sense” than his first one in environmental regulation. He said the first signal on that will be whether Lisa P. Jackson, administrator of the U.S. Environmental Protection Agency, steps down, and who would replace her.

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