All sugarbeet farmers in Idaho, Washington and Oregon must belong to the Snake River Sugar Co., a grower cooperative formed in 1994 to acquire the operating assets of The Amalgamated Sugar Co., the nation's second-largest sugar beet processor.
Amalgamated's three sugar processing plants monopolize the region, producing about 1.5 billion pounds of sugar annually and employing about 1,250 people year-round plus 850 seasonally, according to Amalgamated's website.
Co-op members sign contracts obligating them either to raise sugarbeets on the acreage representing the shares of stock they own in the co-op or pay a penalty. The co-op can guarantee a price before the harvest and can dip into cash reserves to honor the agreement if the market price ends up lower.
The obligation to grow beets can seem burdensome to farmers who would rather grow other crops during years with poor sugar beet prices. But the rules and penalties are designed to protect the co-op. Members can sell or lease their shares if they want out of beets.
The co-op's shares aren't registered with the U.S. Securities and Exchange Commission, because they aren't subject to registration requirements of the Securities Act of 1933. They aren't registered with state securities commissions either, thanks to state exemptions for farm co-ops.
Amalgamated was formed in 1902 by the union of two Utah sugar companies. In 1997, the co-op signed agreements to take control of Amalgamated's operations and take minority ownership of Amalgamated from its owner, Valhi Inc., a unit of Valhi Holding Co., a Texas company controlled by Harold C. Simmons, a Dallas billionaire who controls several companies. (The U.S. Labor Department in 1983 accused Simmons of mishandling pension fund assets, and a judge ruled that he invested too much of the pension into his takeover of Amalgamated. Simmons, who donates to Republican candidates, told The Wall Street Journal in 2012 that the ruling led him to start backing candidates with free-market and antiregulatory agendas.)
The deal was structured so that Valhi retains 95 percent ownership of Amalgamated until the co-op completes payments on a 30-year debt to Valhi. But the deal allowed the co-op to assume full operating control. One set of board members oversees both Amalgamated and Snake River, and Valhi does not seat directors on it. The arrangement also allows Valhi to defer taxes on the sale of Amalgamated until the loan ends in 2027.
Source: sugarjournal.com