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Celebrate beets

FARGO, N.D. - The big week of sugar beet meetings in the Red River Valley was as optimistic, despite challenges. American Crystal Sugar Co. and Minn-Dak Farmers Cooperative of Wahpeton, N.D., both held annual meetings to large attendance. Officia...

FARGO, N.D. - The big week of sugar beet meetings in the Red River Valley was as optimistic, despite challenges.

American Crystal Sugar Co. and Minn-Dak Farmers Cooperative of Wahpeton, N.D., both held annual meetings to large attendance.

Officials of both co-ops describe the prospects for strong farm profits for the 2006 crop, but also caution about the risks of keeping a crop through the later part of May. Longer term, they seem optimistic that midterm congressional elections have improved the prospects for sugar-favorable legislation and trade policy.

"If there's ever going to be a time for celebration, it's this year," says James Horvath, Crystal's president and chief executive officer.

Protecting the piles

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Both co-ops posted crops exceeding 25 tons per acre, meaning taller piles and a longer campaign.

Minn-Dak expects a "good long campaign" to the May 15 to 20 period, while Crystal expects to finish at the end of May, says David Roche, president and chief executive officer.

Even considering the processing challenges, both co-ops are predicting healthy sugar beet payments to growers.

Crystal came in at $43 per ton gross payment, which is down from $50.25 for a final payment on last year's crop. Initial payments often are much lower than the final figure, which is adjusted during the year and is affected by the sugar price and processing success.

Minn-Dak expresses its payment as "net" payment, and projected a payment of just more than $40. The difference between gross and net often is about $4 to $5 and represents the cost of processing beets.

Minn-Dak officials invested more than $250,000 in new investments for the 2006 crop, including insulating blankets in the storage sheds and plastic tarps.

"Our piles are in the neighborhood of 30 to 32 feet," Roche says. "In a perfect world, we'd like them at 22 feet or less - 25 to 28. But it was what we had to do to respond."

Historic plow-down

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Crystal officials are defending their decision to cut 40,000 acres. Eight percent of the beets were left unharvested because of a crop that came in at more than 25 tons.

May and June were very dry, but the crops hung on with subsoil moisture and thrived with later moisture.

Crystal has a nearly 12 million-ton crop to process - nearly 1 million more than its previous record, despite the destruction of beets.

The yield was about 3.5 tons per acre more than historical averages, largely because of the success of disease-resistant varieties.

"We're probably going to be challenged to duplicate this year's result because the topsoil moisture is going to be tapped out."

Minn-Dak officials apparently never seriously considered plowing under any beets.

Both companies have tweaked their processing speed.

"We increased it by about 300 ton a day" to 37,000 tons for the five valley factories, Horvath says.

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"You end up getting a little less sugar recovery per ton. It's a tradeoff whether you get it out now or lose it in June."

Storability is an issue.

Crystal has "a number" of beet piles at 26 to 28 feet high that normally would be piled at 20 feet.

This year, in addition to the routine "splitting" of the piles, Crystal is going on top of the piles with a "trail groomer" which pushes the extra 6 to 8 feet of beets to the middle.

In the long term, Bill Hejl of Amenia, N.D., president of the World Sugar Growers Association, spoke to the group about how ethanol is changing the world picture for sugar.

He says the European Union is stepping up its plans for beet production profitability. The world can't keep up with demand for either sugar or ethanol, and our "customers had better get off their program crop proposals for the farm bill, help us fix Mexico and get ready to compete with $3 corn or they'll be begging for sugar in a few years," says Hejl, who will step up to presidency of the Red River Valley Sugarbeet Growers Association, as Steve Williams of Fisher, N.D., stepped down so he could run for a position on the Crystal co-op board.

"The U.S. needs 11 million acres more corn in 2007 just to meet the demands of 3 billion gallons of ethanol production currently under construction," Hejl says. "While those acres will likely displace soybeans and wheat, some will come from sugar beets.

"Three dollar corn at 175 bushels per acre competes quite well with 23-cent white sugar and a 20-ton wheat crop, especially since you don't have to wake up at 1 a.m. to harvest corn or own an interest in a beet factory."

Political goals

Mike Hasbargen, Minn-Dak's chairman of the board, hails the "new bipartisanship" in Congress after the midterm elections.

"We're hoping that this bipartisanship will lead to a more balanced view," Hasbargen says, especially over trade policy, which he calls a "failure" during the last 10 years, including a

$25 billion loss on ag trade.

Roche says the "mantra of globalization is wearing a little thin on the American public."

He says if the administration "insists" on bringing foreign sugar into the United States, the domestic industry will promote making it into ethanol, while the "economies of making ethanol out of sugar beets is not there right now."

Rep. Collin Peterson's ascendance to the chairmanship of the House Agriculture Committee is seen by both co-ops as a key development in keeping a favorable sugar program. Peterson has said that as long as he's chairman, sugar will be taken care of, and he says he won't pass a new farm bill until it is.

The key to the program is making sure that it operates at "no cost" to taxpayers - instead bouying prices by limiting the amount of cheaper foreign sugar into the market.

Most of the region's political firepower stayed in Washington last week. Amy Klobuchar, Minnesota's Democratic U.S. senator-elect, made her first appearance at the Crystal/RRVSGA annual meeting - arriving late and leaving early, not answering questions.

Klobuchar says she'd be a strong voice for sugar on the Senate Agriculture Committee. "I'll be following the North Star and I won't be following the Lone Star," she says, referring to President Bush's home state of Texas.

Horvath notes that Klobuchar had campaigned in the Red River Valley, where Crystal and others had worked to defeat the Central American Free Trade Agreement and others, an issue that resonates with the pro-labor Klobuchar.

"It's clearly not a Democrat-Republican issue from our perspective," Horvath says of the trade policy.

Handling Mexico

Horvath agreed again to extend his contract by a year and will remain at the co-op's helm for at least another year. He is a key player in the world sugar trade issue, continuing on a task force to work out compromise on Mexican sugar - the greatest near-term threat to sugar profitability.

The North American Free Trade Agreement opens the Mexican market Jan 1, 2008, to low-priced, U.S. corn fructose, which would displace sugar in the Mexican soft drink market and free up Mexican sugar to compete in the U.S. market.

In July, the United States signed a temporary, short-term trade agreement with Mexico that allowed about 250,000 tons of Mexican sugar into the United States and opened the tariff rate quota involving a number of countries. The imports caused sugar prices to decline significantly.

There's been "zero progress," pending a change in national government, Horvath says. How the farm bill and the trade deal with Mexico pan out will affect how soon Crystal might go ahead with plans to expand its Drayton, N.D., plant.

"I believe we could quickly see prices in both markets declining to below U.S. (loan) forfeiture levels," Horvath says, ominously. "Depending on how the Bush administration plans to handle this, the alternative could be that to avoid forfeitures we'll instead reduce domestic acreage to balance the market."

A 500,000-ton increase in imports could reduce American Crystal's planting by 40,000 acres (the same amount destroyed this year) and increase the costs by $2 a ton.

The good news, Horvath says, is that Florida and the Red River Valley are the lowest-cost production areas in the U.S.-Mexican market.

On other matters:

-- Crystal is the majority owner of ProGold L.L.C., the corn fructose plant in Wahpeton, N.D., that has been leased to Cargill for 10 years. Officials are negotiating with Cargill over whether the lease, which expires at the end of 2007, will be changed. If no agreement is reached, the lease automatically extends for one year after that.

-- David Kragnes, Crystal's chairman of the board, says he'd like to be able to announce next year that Roundup Ready sugar beets are approved for production at Crystal. But Horvath says that's dependent on whether Monsanto gets approval of GM beets in Europe this fall.

"We're kind of waiting on that before we give a final commitment," Horvath says. "And we want to make sure we don't have any issues with our customers."

-- Crystal's Sidney Sugars subsidiary in Sidney, Mont., had an average crop with 24.5 tons per acre, with a slightly low sugar content at 17.6 percent.

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