Crystal says union's cost estimate of labor struggle too high

FARGO, N.D. -- American Crystal Sugar Co. officials deny new union claims that a labor lockout has more than doubled processing costs for 2011 beets. They acknowledge costs have increased, but say farmer-owners already know about the costs, and say the company is seeing its replacement hires as a possible permanent workforce.

The Minnesota-AFL CIO published a news release April 17, saying American Crystal's bottom line "suffers due to ongoing lockout," adding the company is "burying numbers to hide real costs." Some 1,300 workers in the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM) were locked out of their jobs on Aug. 1 when they voted down a contract proposal by the company. BCTGM is affiliated with the AFL-CIO.

American Crystal is a farmer-owned cooperative, with five factories in the Red River Valley.

"A review of the six months ended Feb. 29, 2012, compared to the same period last year, revealed relatively constant company revenues," the Minnesota AFL-CIO said. "However, other more important categories saw major changes. Production costs shot up 200 percent. Company proceeds before taxes dropped 23 percent and payments to shareholders fell 24 percent."

Brian Ingulsrud, vice president of administration for American Crystal, says he is "not going to try to analyze all of those numbers" in the union release, except to say that the cost increase is "significantly less than the 200 percent" cited in the union news release. "That's not in the ballpark," he says.

He acknowledges that company costs have gone up, but declined to name a figure. "Unfortunately, this lockout has cost our union employees a lot as well, in terms of lost wages and the benefits they could have had," he says. He added that costs are "coming down significantly" as the company is moving deeper into the processing campaign. "They are getting to be cheaper and cheaper as time goes on."

Comparing co-ops

In its release, the union compared the $59 per ton projected price for Crystal's 2011 beet crop to the $72.72 per ton that is projected for the same season by Minn-Dak Farmers Cooperative of Wahpeton, N.D. The two co-ops are separate, but common marketing companies sell their sugar and byproducts.

The projected figure is also compared to the record-high $73.02 per ton paid by Crystal in the 2010 crop, and $52.87 the previous year, Ingulsrud acknowledges.

Ingulsrud pointed out that company management had meetings in April with shareholders and there was "good discussion about what the cost of the lockout has been." He said that based on comments received during the meeting, the shareholders are backing the company's position. He declined to confirm that the extra costs from the lockout account for the majority of the difference between the Minn-Dak and Crystal payments. "I'll say the lockout has had a significant impact," he says.

Ingulsrud said the 2011 crop was quite a bit smaller than the previous year's crop and "that has a negative impact on the price we pay out as well" because the costs are spread over a smaller volume. Crystal is nearly finished processing some 9 million tons of beets, compared with 11 million tons the previous year. If the difference between the two payments is $14 per ton ($73 minus $59) then the total difference for the 2011 crop would be about $126 million, if that all could be attributed to the labor struggle.

The union compared Crystal's production costs to Minn-Dak, where they say production costs dropped by 5 percent, where proceeds before taxes rose 14 percent and payments to shareholders rose 9 percent. David Roche, president and CEO of Minn-Dak, declined to comment on the union release. According to separate reports, Minn-Dak had a short processing campaign that ended in mid-March, based on an extremely short crop averaging 16 tons per acre, so the higher per-ton payment is applied to a smaller crop.

Withheld figures

The Minnesota AFL-CIO union says Crystal has withheld in its official reports how much it has paid for its "inability to produce enough saleable sugar." David Rham a union spokesman from the Hillsboro, N.D., factory, says the figures make it "clear as day" that if Crystal's executives' goal is to make money for shareholders they would end the lockout and reach "a fair contract with the workers who helped make the company a success."

No talks between Crystal and the BCTGM locals are scheduled for the Red River Valley factories.

Ingulsrud says that the end of the beet slicing season is weeks away. He says there's no doubt there has been some challenges but that "overall, I think they've done a terrific job," he says. He says the company has a 50-50 split between local workers and those hired by Strom Engineering of Minnetonka, Minn.

"Sometime during the next processing season we expect it'll be 100 percent local," he says. Crystal has a target of hiring 1,000 employees. "We are hiring people with the intention that they could be our long-term workforce," Ingulsrud says. He says there were 7,000 applicants and that the company has hired 800 workers. The company reportedly is training those workers over the summer.

Meanwhile, Ingulsrud notes that Crystal had a new labor contract agreement ratified April 20 with a BCTGM local in Sidney, Mont. Crystal's Sidney Sugars Inc. subsidiary has one plant, with some 240 union workers. That contract specified annual pay increases of 4 percent, 3 percent, and 3 percent, over three years -- "the same as offered Crystal employees," he says.

"We were able to find an agreement in three days," Ingulsrud says. He says that agreement changed so that union workers had the same medical plan that management employees have. "That's exactly what we're asking of American Crystal as well," Ingulsrud says. Like the American Crystal workers, the Sidney Sugars workers historically have had a separate plan for union workers. Ingulsrud says it was "critical" in the Sidney Sugars agreement that the contract be competitive because of the strong demand for workers in that area.

He says the "language" is analogous between the two contracts, involving the company's ability to hire outside contractors or promote workers. "Pretty much all of the things we were looking to change in the American Crystal union contract are already in the Sidney contract. They were in it before," he says, adding that, "I felt like there was a very good, professional exchange between our negotiation team and the union's team out there."

Ingulsrud declined to speculate whether the American Crystal lockout had an influence on the Sidney union approval of the contract. Karlon Schmitt, a BCTGM negotiator in Sidney, was not immediately available for comment.

Minn-Dak Farmers Cooperative in 2011 completed a two-year contract with its BCTGM local, which runs through May 31, 2013.