FARGO, N.D.-The specter of minimal profits or losses from the 2013 sugarbeet crop-on the tail of a phenomenally profitable crop in 2012-has shareholders and growers of Minn-Dak Farmers Cooperative of Wahpeton, N.D., bracing for low or no profits for at least three years.
Minn-Dak Farmers' celebrated 41 years as a company and cooperative at its annual meeting in Fargo, N.D., on Dec. 10. They also welcomed Kurt Wickstrom, who took over as president and CEO late this summer.
Farmers are expecting to be paid about $40 per ton for their 2013 crop, which also had a poorer yield than last year when the per-ton payment was $75.17. And that was slightly less than the nearly $79 payment for the 2011 crop. Historically, Minn-Dak has been less open about these figures and projections.
In Wickstrom's first official remarks at the annual meeting, he emphasized the co-op's values of "integrity, long-term commitment, community orientation, fairness, innovation and adaptability." Wickstrom said the grower base is "very committed"-both those that own shares and those who "rent shares from others. He told Agweek that annual grower agreements allow the co-op to impose a penalty if shareholders don't plant acres, based on covering the co-op's fixed costs. There is no penalty if the producer makes a good faith effort to plant and care for a crop.
Growers want to plant
"By and large, growers want to plant beets, raise beets and harvest beets," Wickstrom said. He said the question is what producers might do if they faced three years of breaking even or losing money on beets. Some farmers may make money while others won't. "We're trying to make sure they understand the financial impact of not having beets to put through the factory," he said. "The way for us to reduce our costs and maximize the payment to them is to run our plant at maximum capacity."
Wickstrom said he thinks "everybody's prepared to `invest,' or not make money" with the 2014 crop. "But if we don't see some promise for the 2015 crop and beyond, it's going to be difficult to ask growers to lose money three years in a row. It's an intensive crop to grow."
Brent Davison of Tintah, Minn., said Minn-Dak may have 20 percent of its acres grown by limited partnerships. Some sources say American Crystal Sugar Co. might have 50 to 60 percent of its acres in joint ventures of various kinds. Farmers who asked not to be named guessed that the majority of these might be parents whose shares are being grown by children who have not yet purchased them.
Davison said each farm's financial condition will dictate how long they can ride out tough times. One of the keys is that budgets for competing crops aren't good either. "I've heard some people say, `We'll hunker down a year, but if it gets to be two or three that may be a different story. That's a moving target, that's hard to say." Minn-Dak's agreement is year-to-year, and not like the five-year deal that American Crystal Sugar Co. of Moorhead, Minn., has with its growers. Davison said he was surprised to hear about Crystal's five-year contracts.
Crystal scheduled meetings Dec. 11 in Grand Forks, N.D., and Fargo to spell out specifics about responsibilities for limited partners (original shareholders) and general partners (farmer-growers) involved in joint ventures.
Only annual contracts
After difficult processing years in 2008 and 2009, Minn-Dak in 2012 decided to make various investments, including in a molasses "desugaring" plant. That's 30 percent completed and will come into play in early 2015. The co-op put another $5.5 million or so into a "super-sack" bagger to prepare 2,000-pound packages of granulated sugar. Minn-Dak will be the first company in the United Sugars Inc. marketing group to invest in the technology. Growers themselves invested in improved harvesters and beet carts that came into play in the 2013 crop, Davison said.
Luther Markwart, executive vice president of the American Sugarbeet Growers Association, told farmers at the meeting about the latest on the farm bill.
Congressional ag committee leaders in both houses are still working on a bill that started out being called the 2012 farm bill, then the 2013 farm bill. Now- ikely-it will be called the 2014 farm bill. Sugar provisions were passed handily in both versions and are nearly identical, so there should be little opportunity to change them in the conference committee.
A balance for all?
The big issue looming is the Mexican sugar that has overwhelmed the U.S. market under the North American Free Trade Agreement. Wickstrom said the goal should be a balance-"where sugar buyers feel they're getting fair value, and where our producers also get their returns continued."
Markwart said the Mexican government owns nine mills-about 20 percent of the Mexican industry-and there has been no downsizing in the past decade. He said the government can control where that sugar goes and "to give their market and our market some relief" they can move that to countries.
Meanwhile, the U.S. industry has shut down half of its processing facilities since 1985 and many have changed ownership-mostly to farmer-owned cooperatives on the beet side. "You had major ownership changes because third parties would no longer take the risk and invest the money," Markwart said. "You're really down to the last owners of the business. Our customers need to realize that at prices where they are today, you cannot sustain these businesses."
The Mexican industry has not gone through any consolidation, said Markwart, who is the beet farmers' chief lobbyist. "When the government owns the mills and says, `We're not going to shut them down because if we do there's going to be tens of thousands of peasant farmers with machetes going to come and shut down Mexico City.' That's a social decision. That's really what we're fighting."
Recent news reports indicate Brazil may not run 30 to 40 of its sugar cane mills because of high costs and low prices. If world prices come up a little, it might be easier to move excess Mexican sugar elsewhere.