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Mike Warner. 69, of Oxbow, N.D., remembers being president of the Red River Valley Sugarbeet Growers Association when it prevailed in a multi-million-dollar case against the Federal Crop Insurance Corp. in a dispute over indemnities after a disastrous freeze in 1981. (Mikkel Pates / Agweek)

Lessons from the big beet freeze of 1981

FARGO, N.D. — Mike Warner has a message for farmers with contractual problems: Stick to your principles, stick together.

And don't give up if your cause is just, keep going, even if you're fighting "city hall."

Warner, 69, was a Hillsboro, N.D., farmer in 1981, when a freeze hit sugar beet farmers, much like in 2019.

Farmers delivered sometimes frozen beets to their recently-formed cooperative — American Crystal Sugar Co. — but the beets wouldn't store well. They were denied crop insurance compensation when the beets deteriorated.

Warner, then 31, was president of the Red River Valley Sugarbeet Growers Association. In that role, he helped challenge the Federal Crop Insurance Corp., winning what was then the first successful legal challenge of its type.

FCIC said it believed that once the company took possession of the beets, the agency had no liability. "We said the company is 'us,' the company accepted the beets, and attempted to mitigate the loss," Warner said.

Local crop insurance agents had made improper guarantees that farmers would get paid, even if they delivered.

The RRVSGA organized farmers to sue the FCIC and after five years, they won an appeal worth about $6 million (about $15 million in today's dollars).

A newer co-op

A bit of history: An American Crystal Sugar Co. predecessor company opened the first plant in the Red River Valley in 1926 at East Grand Forks, Minn., with subsequent plants at Moorhead, Minn., (1948), Crookston, Minn., (1954), Drayton, N.D., (1965), and Hillsboro (1975).

On a parallel track, growers in 1935 had organized the RRVSGA, which negotiated annual contracts with the privately-held company. In 1973, the growers, RRVSGA spearheaded the purchase of the company as a farmer-owned "closed cooperative," and a model that has taken over the entire U.S. beet industry. Growers paid $86 million and put in $13.8 million in improvements the first year.

In 1974, the co-op established its headquarters in Moorhead.

Historically, the former corporately-owned American Crystal played it safe — wanting to be done processing by mid-January. The new farmer-owned co-op wanted to process more beets, so planned for longer processing seasons.

The 1981 crop was eerily similar to 2019. It was the highest-yielding crop Warner had ever produced. From Oct. 21 to Oct. 25, 1981, the daily maximum temperature was mostly below freezing. Nighttime lows were less than 30 degrees for five days, and dipped to the teens on Oct. 23, after four episodes of significant rain.

Co-op shareholders insisted on delivering freeze-damaged beets, but the co-op didn't know for sure how they would store.

Warner recalls that about 40% of growers had purchased federal crop insurance, which then was sold by individual crop insurance agents. Many of the agents had made improper, misinformed "guarantees." "Guys were delivering and had been told, 'Don't worry, you're covered" by insurance, he said.

But the frozen beets didn't store well. Melting sugar beet piles released thousands of gallons of sugar water into the ditches. Some sugar content went into American Crystal's wastewater ponds.

Warner was tasked to meet with top FCIC officials in Washington, who wouldn't budge on allowing indemnities. With millions at stake, Warner worked with Morris Dickel, a Crookston, Minn., country lawyer, counsel to the RRVSGA, as well as Faegre & Benson LLP in Minneapolis, took the case to federal court.

The FCIC argued that their liability ended when American Crystal took possession of them.

The shareholders took the position that 1) they'd been badly misinformed on the coverage, and in different degrees; and 2) the farmers didn't pass ownership to some third party private enterprise.

"The processing was merely another piece of machinery that the farmers themselves owned, to make sugar with," Warner recalls. They argued that they'd "mitigated" whatever losses the FCIC had.

The growers won on appeal. In his office at Oxbow, N.D., Warner keeps a copy of the $4.7 million check that the association initially received, with a note from Dickel: "Who says you can't beat City Hall?" The money was distributed to the farmers who had not gotten their payments. "I signed every check that went to every one of those several hundred growers," Warner recalls.

The RRVSGA went on to be helpful for beet producers, including in developing the federal beet sugar program that protects U.S. producers from excessive imports, especially from sugar subsidized by foreign governments. He said today's crop insurance programs are more developed than they were 38 years ago, and today are a more integral part of the revenue safety net for farmers.

"The little guy won this time, and he was on just, defensible ground and justice was served out," Warner recalls. "The tragedy of it was ... this was the beginning of the depths of the 1980s farm crisis. There were men who needed that money immediately, and — to be honest with you — had to give up farming for lack of the income they so badly needed from that."

Since the RRVSGA, Warner went on to be on the boards of American Crystal Sugar Co. (1989-1996), and Dakota Growers Pasta Co., a co-op that was sold to a corporation. He was the 2003 North Dakota Agriculturist of the Year. The same year, he closed down United Spring Wheat Processors ("Spring Wheat Bakers") a co-op he chaired that failed because of marketing and production/technology issues.

In 2004, Warner worked with his son, Alex, who to establish Pedigree Technologies LLC, a company that now employs 80, developing software to help companies track, monitor, and diagnose fleets and high-value assets, as well as collaborate with mobile workers.