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FARGO -- The bidding process for the government's PIK program
begins this week, and American Crystal Sugar Co. officials are
predicting heavy participation.
On Friday, Crystal completed a series of eight meetings, which
attracted 1,100 growers across the valley. Crystal consists of 1,250
farm units, involving about 3,000 shareholders.
James Horvath, president and chief executive officer, told growers
how important the program is for getting supply into line with
demand.
PIK stands for payment-in-kind, a program in which farmers will
offer to destroy healthy beet acres. They'll receive "PIK
certificates," which represent government-owned sugar in
storage and will eventually translate into cash.
Individual decisions
"Based on the number of people who showed up, I think we should
have heavy involvement, but it comes down to individual people
making decisions," said David Berg, vice president for
administration. A typical enrollment will be 20 to 30 acres, with
cash to the grower of $500 to $800 an acre, Crystal officials
calculate.
"USDA has made a relatively firm commitment they'll have the
information back in the hands of our growers by Sept. 15, so they'll
have it before our 'full' harvest begins Oct. 1," Berg said.
The USDA's Farm Service Agency late Friday was notifying sugar
officials about payment limitation policies.
Eligibility
"USDA basically set up shop in a conference room at the U.S.
Beet Sugar Association, and opened it up to growers and processors
to go through the enrollment eligibility in detail," Berg said.
Brian Ingulsrud, Crystal's director of agricultural strategy
development, was at the meeting.
"The FSA is going to provide guidance to county FSA offices
about what types of entities will be allowed, how many payment
limitations," Berg said. "The individual shareholders will
verify the information with the county offices. Once they've got
that, they can enroll through Crystal."
Berg said that while the gross size of the enrollment will be
determined by the payment limitation, Crystal is "confident
there's still a very meaningful number of acres available even under
the strictest of the payment limitation rules."
He said the company expects that about 50,000 of Crystal's 500,000
acres will be destroyed.
"We would consider anything in the 25,000-acre range to be
meaningful, and we're confident it could be more than that,"
Berg said.
Payment rules
"I think the basic rule of thumb is that payment limitations
will parallel how AMTA (Agricultural Market Transition Act) payments
are made," Berg said. Another issue is how crop insurance
payments will be handled.
PIK can't be used on acres that have received crop insurance
compensation, but some farmers have received relatively minor
"wind, crust and freeze" payments for beets that have
suffered minor setbacks.
"A field may be worth $700 an acre through PIK, but maybe it
had a $17 an acre wind-crust-freeze payment," Berg said.
"That's a gray area."
Producers will provide historical tonnage, sugar content and
factory extractions. That information will generate a sugar-per-acre
number, which will be used as a basis for USDA's decision.
If, for example, a producer's historic production is 5,000 pounds
of sugar an acre and they ask for 4,000 pounds of sugar in PIK
certificates, that's an 80 percent bid level.
Crystal officials avoided suggesting what bid level farmers
should offer to the government.
Berg said the sugar PIK program will cost about $500 million. The
government's agricultural payments for all farm programs have
totaled about $70 billion since the 1996 farm law went into effect.
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