POWELL, Wyo. — It was once a lucrative crop, but several disappointing years have left sugarbeet farmers in a tough spot.
“There’s a lot of concern out there. Many farmers are wondering if they can afford to grow the beets,” said Kurt Dobbs, an agronomist.
For the past couple years, the weather hasn’t cooperated and many growers produced beets at a loss.
However, unlike other crops, local sugarbeet growers are part of a cooperative and face financial penalties if they stop growing the crop. That’s left some beet growers feeling as though they’re caught between producing sugar beets at a loss or paying the penalty for not producing.
“We have seen our sugarbeet growers’ balance sheets shrink tremendously over the course of five years to the point of nonexistence in some cases,” said Greg Borcher, agricultural loan officer with First Bank of Wyoming. “With low sugar prices and Western Sugar [Cooperative] performance, or non-performance thrown in, it has caused a great amount of concerns to local beet growers.”
However, Ric Rodriguez, vice-chairman of the Western Sugar Cooperative board of directors, said growers will not be growing beets at a loss this year.
“We certainly ... don’t want growers to plant and then lose money,” he said. “Without the weather events the last two years, there would not be a discussion on planting. The cooperative has operated better the last two years, but because of the weather, it has reduced the amount of sugar we have to sell, which affects the payment.”
The Western Sugar directors say they understand the challenges growers are facing, as they are growers too, but the potential penalties are necessary to make the business model work.
“The quickest way to fail a sugar refinery is to not have a supply of sugarbeets,” said Tod Stutzman of Powell, Wyo., who also serves on the co-op board.
In the early 2000s, food and beverage giant Tate & Lyle operated six sugar factories in the region, including the one in Lovell. But as sugar prices — and the company’s stock — fell, Tate & Lyle looked to divest itself of the sugar business. There was the possibility that the company wouldn’t find a buyer, in which case the factories would close. Without factories to buy the beets, the entire industry was going to go belly-up.
To save this key regional industry, growers formed the Western Sugar Cooperative in 2002 and bought the business from Tate & Lyle for $78 million.
To be profitable, the factories need to guarantee a steady supply of sugar to their customers, who are “leading food companies and small businesses,” said Heather Luther, vice-president and general council for Western Sugar.
In order to maintain a commitment to production, Luther said the growers agreed to bylaws requiring each shareholder to produce an acre of beets for every share they own or pay a penalty — currently about $385 per acre.
“We all had an agreement with each other,” Stutzman said.
Beets cost a lot to produce, and farmers need about $40 per ton to break even. Several years ago, farmers were making $70 per ton or more on sugar beets. Over the last five years, the payout has declined considerably. Last year, farmers were paid $17 per ton, and they had 30 percent to 40 percent losses on their crops due to late-season snowstorms.
Stutzman said the average payment between 2010 and 2018 was $46 per ton.
David Northrup, who grows sugarbeets and other crops near Willwood, Wyo. is among the farmers growing more frustrated with the cooperative.
“I had not planned on planting after five years of poor management at the co-op,” he said.
Northrup said a lot of farmers were hoping that 2019 would be the year things turned around, but then the weather went bad, with a damaging freeze in early October.
Other cooperatives have paid more for their beets, which Northrup said indicates at least part of the problem lies with the way Western Sugar is being run. He said the size of the cooperative — which includes growers in Wyoming, Montana, Colorado and Nebraska — means all growers share losses in a wider area. He also said farmers in the southern part of the region produce a lot of beets that rot in the pile before they get processed, which also brings the price paid down.
“The north has been subsidizing the south,” Northrup said.
Other local growers expressed similar concerns but declined to speak on the record about the issues.
Stutzman disagreed that Western Sugar’s problems are unique to its operations. He pointed out that American Crystal Sugar Company, which operates in Minnesota and North Dakota, left some 100,000 acres of beets in the ground last year.
Dobbs, the agronomist, said sugar beet farmers may be losing faith in the system. Fred Hopkin, a farmer in Penrose, Wyo., agreed that may be the case.
“Some farmers are unwilling or unable to plant beets this year,” Hopkin said.
However, unless they’re able to unload their co-op shares and obligations to another farmer, the only way to escape the penalty without growing beets is to die or go bankrupt. Even in retirement, growers are obligated to produce or find someone who will.
Borcher, the ag lender, said some farmers are “frantically” trying to get rid of their co-op shares, but there aren’t “too many likely takers out there” for them. Some growers are trying to give the shares away for free.
“My feeling is, if the owners/growers did not have the $385-plus penalty hanging over their head, most would say goodbye to sugar beets for good and move on to other crops in their rotation,” Borcher said.
Rodriguez noted the goal of the cooperative was to keep the grower-owned factories running and creating a business model that worked for all growers involved.
“The growers are also the owners. Some have a hard time realizing that,” Rodriguez said. “There’s a lot of emotion out in the field and we, the board, understand that. We are growers and owners also.”
Borcher pointed out that, without sugarbeets, farmers might not have another crop that would be nearly as profitable as the beets traditionally have been.
“The cooperative definitely needs the beets to survive,” he said. “Does the grower need beets to survive? It’s a case-by-case basis on an answer to that one.”
Borcher believes some farmers could survive and do well without the beets, but others might not fare so well in a non-beet environment.
“Historically, sugarbeets have been a good crop for local farmers, one that has paid the bills in most years,” he said. “However, the past five years, sugarbeets have about broke a lot of farmers.”
In response to the devastating freezes, U.S. secretary of agriculture Sonny Perdue announced last month that he’s approved a request for assistance through the federal Wildfire and Hurricane Disaster Indemnity Program — an action that had been urged by Western Sugar leaders, Wyoming Gov. Mark Gordon, local lawmakers, U.S. senators Mike Enzi and John Barrasso, and others. The USDA is providing $285 million in disaster relief to sugarbeet growers for beet losses incurred in 2018 and 2019through cooperatives across the country .
Borcher said the funding will “go a long way to heal some of the growers,” depending on what the payments end up being to individual farmers.
“At the same time it may be too little too late for others,” he added.
Dwight Gilbert, a Powell area sugar beet farmer, said the USDA funding is going to have a very positive impact on pulling the beet farmers through this tough time.
“It’s probably saved this area,” he said.
Stutzman described the past two years as “outliers.” If the coming growing season is even an average one, he said the growers will be profitable.