FARGO, N.D. -- With the sugar beet payments headed south for the 2013 crop and potentially the next two crops, shareholders and joint venture partners are wondering how to handle the financial challenge.
American Crystal Sugar Co. is holding its joint annual meeting with the Red River Valley Sugarbeet Growers Association Thursday in Fargo. The Wahpeton, N.D.- based Minn-Dak Farmers Cooperative of Wahpeton follows with its annual meeting Tuesday also in Fargo.
While low beet prices are expected, farmers are wondering what happens now. Crystal is following up its annual meeting with two special shareholder meetings on Dec. 11 at 9 a.m. in Grand Forks at the Chester Fritz Auditorium and 2 p.m. at the Fargo Ramada Plaza to "discuss issues related to stock ownership."
Shareholders have the right and obligation to market beets through the cooperative, so not producing during unprofitable times is not an option. The beets are needed to feed the company's five sugar processing plants, regardless of whether farmers make money selling beets. The meeting is closed to members but open to "legal counsel who assist shareholders with joint ventures ... if there is an American Crystal shareholder who will vouch for them," according to the meeting notice.
Farmers are reticent to talk about the situation on the record.
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A shareholder-grower at the Northern Ag Expo on Tuesday in Fargo said farmers had made "plenty of money" on beets in the past three years, but now are faced with the situation of losing money. "It would be nice to have a happy medium" for prices, he said. He predicted this will be a special problem for shareholders -- sometimes retired growers -- who don't or can't raise beets anymore, but work with joint venture partners who can.
Farmers have seen a steep decline in projected beet payments for this crop, with Crystal projecting $38 per ton, a steep decline from last year's $68 per ton, and Minn-Dak is estimating $40 per ton -- plus or minus. Minn-Dak executives project payments in the $30-per-ton area through 2015, and are looking for ways farmers can break even on beets.
Co-op stock share prices are down considerably from last year, but for some reason have inched up in the past few weeks.
When Crystal was formed as a cooperative a share of beet stock equated to one acre of beets. With advancements in technology and yields, the company has reduced the amount of land grown per share. In the past year, the range allowed during planting was 80 percent to 85 percent of an acre per share, but that increased to 92 percent because of late spring planting.
The www.FNCAgStock.com website shows prices Dec. 3-4, were between $1,335 and $1,350 per share, they brokered 376 shares. Share sale prices hit a bottom of $1,200 on Nov. 19, according to the site.
From Sept. 18 to Oct. 15, the company sold 185 shares with the first sales at $2,000 per share and the last sales at $1,600. From Nov. 18 to Dec. 4 they sold 1,233 shares. The first sale was for $1,550 per share but most of the activity was in the $1,250 to $1,350 range. Now there are 19 parties looking for 1,650 shares in a price of range of $1,000 to $1,300. "At that level, there are a lot of buyers out there," said Jayson Menke, an AgStock specialist.
Historically, the last time the co-op's shares were at $1,200 was in November 2001. FNC AgStock.com and its predecessors have been handling stock deals for American Crystal since 1994. Since that time, the lowest stock price period was from December 2000 to January 2001 when 579 shares sold at $800 per share. The high was $4,450 per share sold on Oct. 2, 2012. A year ago on Dec. 4, 2012, 10 shares sold at $3,900 a share. On Dec. 4, the company sold 175 shares at $1,330 per share.
Farmers National Co., the parent company of FNC AgStock, also manages limited partnerships and joint ventures, said Menke, who works with both companies. Typically this time a year there's been a market established for limited partner and joint ventures -- offers from growers who want to grow beets but don't own the shares, or from shareholders who are seeking general partners to grow their beet shares.
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Currently there are no standing offers for limited partnership deals, Menke said.
"We have growers interested in continuing to work with us for shares that we manage for the limited partner, but we have not done any deals for this year yet. The majority of our growers are interested in continuing to grow the beets. However we haven't determined a fair market value." Farmers National is working on some type of sliding scale payment multiplier to make deals fair for both sides. There is one standing offer for a grower to be paid for growing beets, but Menke said the true value may take time to establish and will involve profit potential on competing crops.
A year ago, limited partnership deals were costing $400 to $425 per maximum plantable acre of sugar beets. "Now, it's likely to be after Jan. 1 that we expect deals to shake loose," Menke said. Most of the deals are year-to-year deals, he said. Farmers National said without land or stock it costs about $600 an acre to grow beets.
