FARGO, N.D. -- American Crystal Sugar Co. growers slogged through a tough harvest in 2008, but the result will be another huge year for yields and an excellent price outlook.
The 2008 payment per ton currently is projected at $44.50 per ton -- the third year in a row for $45 plus results.
David Berg, Crystal president and chief executive, has declined to speculate whether the $44.50-per-ton payment projection is conservative, noting that the tonnage includes "nearly an unprecedented amount of mud," which is not friendly to processing. He says the projections were made in November, before a decline in energy prices.
Tonnage is 25.2 tons per acre, the second highest in the company history, the company announced Dec. 4, as part of its annual meeting with the the Red River Valley Sugarbeet Growers Association. Nearly 300 people attended.
Crossroads
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This year's meeting theme was that of a "crossroads."
Officials' talks featured a bedrock of political stability, overlain by matters of markets and other issues that will have their effects on the future of the sugar industry co-op. Although growers seems generally pleased, some say they're concerned about what appears to be an increasingly permanent cut in acreage by 15 percent, going down to 421,000 acres this year, judging an increasing yield trend.
Berg says growers have been told that beet acres probably will range from 400,000 to 425,000 acres again in 2009, although final decisions haven't been made.
Beet yields have been running at high levels of 25 tons per acre, 23 tons per acre and 25 tons per acre, for the past three years. Also, fewer acres have been abandoned each year.
In the 2008 crop, Crystal sold a little more than 200,000 tons of beets at four of its southern piling stations to Minn-Dak Farmers Cooperative in Wahpeton, N.D., which suffered a loss of 30 percent of its beets frozen in the soil because of historic amounts of fall rain.
Berg acknowledges a long-term acreage cut from the co-op's peak of about 500,000 could affect the value of stock shares, but he says there is internal debate on whether the effect will be positive or negative.
Crystal stock values and prices -- roughly $2,000 to $2,200 an acre -- offer the right and obligation to market an acre of beets through the co-op. But stock price is about the potential profit growers can achieve, Berg says. Another factor has been the price of competing commodities.
"The market will tell us," he says of the impact on share prices.
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Marketing
The day included a mix of positives and negatives.
A year ago, Crystal was limited on how much sugar could be marketed, because of its allocations under the federal farm program.
"That limitation is not there today," Berg says. National sugar consumption is up 6 percent from last year, which raises the marketing allocation.
In August 2008, the U.S. Department of Agriculture increased the tariff rate quota for refined sugar by about 300,000 tons. There were restrictions on quality coming in, but much of what came in last summer didn't meet customer quality standards and has had to be further refined.
Berg says USDA is calculating that 800,000 tons more of sugar must be imported by the end of the year to meet demands.
"But there's no capacity to refine it right now," he says, because of an explosion in a refinery last year. "So at this point, refined sugar prices are relatively strong, over 30 cents, and raw sugar prices are under 20 cents. They're in a policy dilemma."
Despite having an open border on sugar trade with Mexico since January 2008, little was said about it at the meeting.
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Berg says not much sugar has yet come into the U.S. from Mexico because of the North American Free Trade Agreement. That's partly because high-fructose corn sweetener has been priced high enough so that it didn't move into Mexico as expected.
"That threat is as large as it was 12 months ago," Berg says, noting that a devalued peso also affected Mexican imports.
Berg says the company is studying how to cut its carbon footprint, including looking at using methane produced by waste streams for generating energy, and perhaps offsetting some coal and natural gas uses. He says energy costs for producing sugar are increasing, but he says the lime rock used in beet sugar refining is becoming increasingly unavailable because it uses coke -- a high-energy form of coal. It has tripled in price in four years and is becoming unavailable with competition from industrial applications in China.
Berg says the availability of "human capital" -- qualified people to run the harvest and factories -- is an increasing concern. He says each of the company's five factories added six to eight people to work on dust suppression in the wake of a dust explosion.
