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Published September 03, 2013, 09:31 AM

Harvest Revving up

In the midst of a poor sugar price climate, and with a 22-month labor lockout ended, American Crystal Sugar Co. plans to start its pre-pile sugar beet harvest on Sept. 3.

By: Mikkel Pates, Agweek

MOORHEAD, Minn. — In the midst of a poor sugar price climate, and with a 22-month labor lockout ended, American Crystal Sugar Co. plans to start its pre-pile sugar beet harvest on Sept. 3.

Dan Gowan, American Crystal’s director of agriculture in Moorhead, Minn., says the pre-pile harvest is a bit later than last year because the crop is smaller, and keeping beets in the ground allows them to grow. The crop had a “late start, but it looks like we’re going to have a very nice finish, and not too far from an average crop,” he says.

This year’s crop is projected at about 22 tons per acre. The 2012 crop averaged 27.1 tons per acre, and the averages in the past few years have been a bit more than 24 tons per acre. Late planting and a cool spring slowed the crop some, and the recent lack of moisture also had an effect. Indications of sugar content are excellent for this time of year, according to the company.

Rains like those that came to portions of the Red River Valley in North Dakota and Minnesota on Aug. 29 would be favorable to the yield, says Cory Kritzberger, American Crystal’s former ag director, who recently became harvest and maintenance supervisor for the East Grand Forks, Minn., factory. Gowan says the full-scale harvest is tentatively set for Oct. 1, as is historically the case.

This year’s crop will be harvested in an environment of poorer economics for sugar than farmers have seen in the past several years.

The factor to the south

One of the significant issues in declining sugar prices has been larger-than-expected Mexican production, which can come to the U.S. freely because of the North American Free Trade Agreement. Other world sugar imports are restricted through a tariff rate quota.

David Berg, American Crystal’s president and CEO, says Mexican soft drink manufacturers are planning to buy 50 percent more Mexican sugar for their products this year. Some prominent soft drink bottlers in that country are owned by sugar companies. While the soft drink industry announced it will buy more Mexican sugar, the Mexican government clarified it had nothing to do with the announcement and would continue to take advantage of the Free Trade Agreement.

The 2013 to ’14 Mexican sugar crop isn’t likely to be as large as the 2012 to ’13 crop, but is likely to be “way more than we can use,” Berg says. The U.S. typically can handle about 700,000 tons of Mexican sugar imports, but under the North American Free Trade Agreement, must take all that Mexico decides to send. U.S. corn fructose use in Mexico has recently increased for soft drinks, so it might be logical to assume that the Mexican use of more of its sugar could offset corn fructose.

If the shift of Mexican sugar into soft drinks occurs, Berg says a quarter of the sugar that might have been coming to the U.S. might stay at home. “That doesn’t fix things, but it’s a step,” Berg says. “It’s (the market implications) 2,000 miles and 12 months away so we’ll see what the actual impact is.”

On labor and quality

Berg says he expects no major change in American Crystal’s sugar production from the return of the Bakery, Confectionery, Tobacco Workers and Grain Millers union members, who came back to work May 28 after a 22-month lockout.

Speculation has swirled that the replacement labor played a role in the out-of-specification sugar recently produced at the Hillsboro, N.D., plant.

Berg acknowledged that a “not insignificant” amount of sugar had been inadequately cooled in a process at the Hillsboro factory and will be blended with newly produced sugar for shipment. He says the problem was one of equipment — not the fault of workers.

Berg says the problem was caused by a record high tonnage crop with unusually high sugar content, combined with inadequate cooling capacity. Berg says the company’s daily through-put today is significantly greater than when it was installed in 1974.

“The only problem here is that someone — someone in management — should have put in a capital project — and I’ll take responsibility for that,” Berg says.”The sugar cooler should have been up-sized.”

He emphasized that workers did what they were asked — make a high amount of sugar at a rapid pace. He says they produced sugar that went to storage warmer than it should have been so it changed in color, and stayed in storage longer than expected. The color specifications are apparent with a spectrometer and wouldn’t be apparent to most consumers, Berg says.

Berg declined to say how much the issue may have cost the company in dollars. He also declined to describe whether or to what extent the issue affected shipments to customers. “It’s a situation we had to work our way through,” he says.

New broker

Meanwhile, farmers and other industry officials are watching to see if a change in beet prices will affect beet cooperative share prices. American Crystal’s beet payment was $63 per ton for the 2012 crop and the current projection for the 2013 crop is $40 to $45, according to a letter sent to shareholders.

Jayson Menke is president of FNC Ag Stock LLC of Grand Forks, N.D. — the main broker for trades of American Crystal Sugar stock. FNC Ag Stock was created on Aug. 26. It is part of the transition of the ag stock business from Alerus Financial to Farmers National Co. of Omaha, Neb., in September 2011.

Menke says Crystal shares traditionally are listed and traded from fall to spring. The co-op board of directors must approve the transactions, and usually considers those starting the day before the annual meeting, which is Dec. 5 this year.

This year’s first American Crystal share listings were listed on Aug. 26 — the earliest anyone had ever listed beets for sale in a marketing year. Prior to this, the earliest listing for a season was Sept. 7, in 2012. In some years, there are no listings until after the annual meeting. Last year, the share stock price started at $4,200 per share in September and peaked for the year at $4,450 later that month.

On Aug. 29 last year, the website listing American Crystal’s stock trades had five standing offers to purchase shares, with two separate offers to purchase 20 shares at $2,000 each.

A year ago, the dynamics for beet share sales was totally different, with strong production and strong world sugar prices. Menke says the first shares were posted within five minutes of the listing. The company listed recent sales of shares in April 2013 from $2,500 to $3,000 each.

Farther south in the Red River Valley, Minn-Dak Farmers Cooperative in Wahpeton, N.D., will start its pre-pile harvest on Sept. 11, which is nearly a month later than last year’s Aug. 14 start, says Tom Knudsen, vice president of agriculture. The co-op is projecting a 19.2-ton-per-acre crop.

Knudsen says beets are feeling the effects of hot and recently dry conditions, with some in isolated areas going “as flat as a pancake” in the mid-day sun, especially in sandier areas of the south.

“Some growers haven’t seen it like this since 1988 or 1989, and some haven’t ever seen it,” Knudsen says. Quality samples look good.

Sales of stock for Minn-Dak Farmers Cooperative and Southern Minnesota Beet Sugar Cooperative are done through private treaty deals, not through brokers.

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