When news broke a month ago that American Crystal Sugar payments to beet growers was going to be $38-per-ton this year, down from $68-per-ton a year ago, there was some talk farmers might want to opt-out of growing beets in 2014. With payments so low, and a continued depression in sugar prices, growing sugar beets will be a money-losing operation.
As growers know, not growing beets was never an option because they are contractually obligated to do so.
But Crystal Sugar held special shareholder meetings this week to reiterate that those holding shares must "plant, raise and deliver" acres of beets consistent with shares they own. So there will be no planting of corn or soybeans on sugar beet acreage.
Crystal Sugar CEO Dave Berg addressed the topic in his company blog yesterday:
You may have noticed in some RRV newspapers that American Crystal held special shareholder meetings yesterday (Wednesday). These meetings were set up to provide a forum to discuss questions related to what’s called “delivery obligations” that shareholders have as members of the cooperative.
In total, about 600 shareholders came to meetings in Grand Forks and in Fargo. Most of the meeting content was delivered by our corporate attorney, Dan Mott. Dan provided the audience with some basic knowledge about their rights and obligations as shareholders in a sugarbeet cooperative. In essence, buying stock in a co-op gives a farmer the right to deliver beets to the Company, and to share in the profits when sugar and by-products are sold. The stock ownership also creates an obligation for the grower to deliver beets to the Company.
As you have probably read in news reports, the low price of sugar in the U.S. market at this time means that most American Crystal shareholders will lose money raising beets this year. That fact has created a desire on the part of some shareholders to not raise beets in 2014 This would naturally be bad for the Company, as we need a large supply of beets to fill commitments to customers and also to provide revenue to cover the large amount of fixed costs which the Company must pay each year.
However, each shareholder has signed what’s called “Five Year Agreement” which requires that each grower “plant, raise and deliver” acres of beets consistent with the number of shares that they own. Wednesday’s meeting went into a lot detail about how this obligation works, and that the Company will enforce this agreement consistently on all shareholders.
The number and type of questions from shareholders was just great. They have spent a lot of time considering how the current lousy sugar market affects their farms, and they are very prepared to deal with this situation as they get ready for 2014. I have always felt that our farmers demonstrate that they take a long-term viewpoint when they buy stock in the Company, and that they will not let a crummy year divert them from their commitment to American Crystal.
(Mike McFeely is a talk-show host on KFGO-AM in Fargo, N.D. He can be reached at firstname.lastname@example.org. Follow him on Twitter @MikeMcFeelyKFGO.)