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Crystal-union agreement big

In the first week of June, I have to say I'm thrilled that American Crystal Sugar Co. of Moorhead, Minn., and the Bakery, Confectionery, Tobacco Workers and Grain Millers Union came to an agreement without repeating the work stoppage that occurre...

2343008+American Crystal Hillsboro - Pates.jpg
Mikkel Pates / Agweeik

In the first week of June, I have to say I'm thrilled that American Crystal Sugar Co. of Moorhead, Minn., and the Bakery, Confectionery, Tobacco Workers and Grain Millers Union came to an agreement without repeating the work stoppage that occurred in 2011.

I sincerely hope everybody is happy, although posturing in labor negotiations makes this difficult to judge.

I'm kind of a communicator by nature so I'm always the one in my family or among friends to discuss confrontational issues early to come to mutually satisfactory conclusions. It seemed hopeful to me that Crystal, this time fronted by Lisa Borgen, vice president of administration, should be applauded for at least trying to get the talks started early so they could finish early. Things appeared more transparent.

The result?

From the outside looking in, I think multiple years of guaranteed pay increases look good compared to some other industries, including my own. It makes sense in today's rapid technological changes that workers are rewarded for doing the new, vital things. Drug testing for workers sounds sane.

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Any cost in the contract, of course, must be covered by the price of sugar beets if the business continues.

In my mind, the sugar industry is worth continuing - perhaps celebrating. It's governed as a farmer-owned cooperative, meaning that the financial fruits go to the Red River Valley, rather than Brazil or somewhere else. If there were no beet industry, farmers would be growing crops that are easier to grow by more people, and more subject to the vagaries of commodity markets.

Farmer-owned, value-added companies are hard to value unless they disappear and must be replaced.

The financial impacts of the early labor agreement will be difficult to judge and not immediate.

Last November, the company announced a $38 per ton beet payment for the 2016 crop. The payment is made in segments, updated with the April 1 segment, if warranted. It's based on the price of sugar and byproducts. The final payment for the 2016 crop will be issued in November 2017.

Depending on who you talk to, the settlement of the labor contract may have little to do with the price paid for 2016 beets. Some hope the figure improves - perhaps into the mid-$40s (or more) where producers say they need to make a profit growing beets.

Maybe the value of the labor deal will included in the 2017 beet payment prices, but only the growers will likely know how much that will mean.

Shareholders tell me the $38-per-ton projection included a cost associated with the labor contract, but that savings will likely be eaten up with the signing bonuses that the company probably is "gladly" paying, if it can avoid the 22-month stoppage as in 2011. The bonus is $2,250 per employee, at 1,200 to 1,300 employees, which is somewhere north of $2.7 million.

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Labor deals influence the value of owning companies. Crystal beet shares stabilized at $2,350 per share during the selling season, which ended just prior to the announcement of the labor deal. The average price was down 6 percent from the previous year. The new labor pact may not make share prices increase when transactions resume in the fall - share values also involve other things - but it can't hurt.

And what would have been the alternative?

If the "final" offer hadn't been accepted, the company managers would have been contract-bound to put a workforce in place in time for the 2017 harvest season, which would have come in mid-August.

Farmers would have lost.

Workers would have lost

Communities and community relations would have lost. Only about 30 percent of the current workforce came back after the last lockout, but they would have had to make other arrangements again. There's a lot of pain behind that statistic.

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