MOORHEAD, Minn.-American Crystal Sugar Co. is warning its growers that the checks they will get for the crop just harvested will be much smaller than the checks they received after last year's harvest.
Payments for this year's crop, which start going out this month, will be $38 per ton, compared to the $68.41 per ton growers received for the crop harvested in 2012, Dave Berg, the company's CEO, said in a phone interview Monday.
Growers throughout North Dakota and Minnesota-the nation's largest sugarbeet producing region-can expect a sharp decline in crop payments due to a flooded sugar market.
Berg said the drop is due to an oversupply of sugar that is depressing sugar prices and the expectation that the sugar content in this year's beet crop will be nearly 2 percent lower than last year and nearly 1 percent off the long-term average.
Berg said annual fall meetings being held this week with growers have focused on the lower payments.
"Obviously, there's a great deal of concern on the part of the growers and they're interested in what is being done to resolve the situation," Berg said.
"These are farmers, and everything they produce goes up in price and it goes down in price.
"You really hate to see this kind of dramatic fall in price, but they (farmers) understand that this is the way markets work," Berg said.
In a posting on American Crystal's employee blog, Berg said a drop of $30 per ton means most American Crystal growers will lose money raising beets this year, and in many cases they will lose a lot of money.
"Most of them understand that it's the sugar market that has caused this, but they also need to know that every one of us who works for the company is working hard to squeeze every crystal of sugar out of every beet that they have delivered to us," Berg said in the blog posting.
Meanwhile, the Minn-Dak Farmer's Cooperative has not set its crop payments yet, but President and CEO Kurt Wickstrom said payments for the 2013 crop will be "significantly lower" than last year's rate of $75 per ton.
Wickstrom said he's optimistic it will be close to $40 per ton, which they've projected for a few months. Minn-Dak will officially set its budget and crop payments in a week or so and announce it at a post-harvest meeting, he said.
Wickstrom said many growers have long relied on beets to produce good returns, but that just isn't the case this year due to an oversupply of sugar in the U.S. market.
"Profit margins are going to be way down depending on each grower's personal situation," he said.
He said it'll be a tough year for beet growers and 2014 doesn't look much better based on the amount of sugar Mexico is exporting and increased costs for producers.
Berg echoed Wickstrom, stating in the phone interview that the situation with depressed sugar prices is due largely to the effects of the North American Free Trade Agreement and the impact of "excessive Mexican imports."
He said the drop in beet payments had no connection to a lockout of union workers that began in August 2011 and was resolved earlier this year.
"This is purely a market situation," Berg said.
Wickstrom said the market changes could affect the number of acres planted in the U.S. and throughout the region
In 2010, Minnesota and North Dakota had 57 percent of the nation's sugar beet acreage and produced 55 percent of the nation's supply, according to a 2012 North Dakota State University report.
The health of the sugar industry here, which contributed an estimated $4.9 billion economic impact in the two states, could have an impact on the overall economy.
Sugar beet cooperatives in North Dakota and Minnesota employed an equivalent of 2,470 full-time workers and indirectly supported about 18,800 jobs in the area.
"The economic contribution sugar has to the Red River Valley is very significant so we want it to remain strong and healthy," Wickstrom said.