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"This per ton payment translates into about $680 per acre for our shareholders," said James Horvath, Crystal's president and chief executive officer. "They obviously have to deduct significant costs from that."

Horvath said the low payments are on "the ragged edge of causing significant damage to our shareholder base. Half our shareholders are losing money. It's not a sustainable situation."

Prices drop

Shares aren't changing hands very often, but prices have reportedly come down from about $1,800 per share a year ago to about $900 per share today. Lenders to farmer-shareholders are "supportive," Horvath said, believing that the co-op is in "choppy waters" now but will be in "calmer waters" later.

The projected payment is $10 per ton less than the 10-year average, Horvath said, about $100 million revenue that would have come if payment rates were at 10-year averages.

"That does not count the multiplier effect, which would have the equivalent approaching a quarter-billion," Horvath said. The Moorhead-based co-op produced a near-record 9.6 million tons of beets in 2000 -- despite the destruction or idling of about 55,000 acres in government programs and disease losses.

Crystal and the Red River Valley Sugarbeet Growers Association held its first-ever joint meeting at the Fargo Holiday Inn. Combining the meetings saved tens of thousands of dollars.

No. 2 crop

The 2000 crop averaged about 21.6 tons per acre, the company's second-highest yield. Sugar content averaged 17.8 percent, slightly above average. The company will produce 27.2 million hundredweight of sugar but will "buy back" about 1.6 million hundredweight from the government through the payment-in-kind program that destroyed healthy beet acres to reduce the pile of forfeited sugar.

Crystal has no plans to cut beet acres in 2001, and will plant nearly 500,000 as it did last year. Company officials are working with the U.S. Department of Agriculture to put together administrative rules that might apply if a "PIK II" program is announced, probably in May or June, after the crop is planted.

Horvath pointed to sugar prices at 20-year lows and sugar imports from so-called "stuffed molasses" from Canada and excess Mexican sugar as the primary reasons.

U.S. producers have challenged the stuffed molasses practice in court. They lost a case in a federal district court but have appealed it to the U.S. Court of Appeals for the Federal Circuit in Washington, D.C. The case will be heard in January or February.

Horvath was not optimistic about Congress passing a law before the end of the year.

"From what I'm hearing, the lame-duck session may not be very productive," Horvath said. "They may just punch everything into the 107th Congress."

Among the company's milestones in the past year was the completion of a $103 million molasses desugarization plant at the company's Hillsboro, N.D., factory.

Horvath noted the 1999 crop was the second largest in the company's history, at 9.6 million tons, with 17.4 percent sugar. It produced 26.6 million hundredweight, about 13 percent of all sugar consumed in the United States.

Among other highlights, Crystal:

• Said goodbye to Wayne Langen, Kennedy, Minn., who has served his full term as chairman of the board. A new chairman will be named at a reorganization meeting today in Fargo. Also today, Horvath said he will recommend a replacement for Jim Dudley, vice president of agriculture, who resigned at the end of October to take a job with C&H Sugar.
• Recently entered the e-trade era. United Sugars Corp., Crystal's marketing partnership, recently participated in one of its major customers' first Internet bidding sessions. The company sold "quite a sizable amount of sugar that way," Horvath said, and expects that business to expand.

  "The objective wouldn't be to reduce the price, but to take the administrative burden out, essentially over time being able to eliminate written purchase orders, the invoicing process and the administrative gobbledygook," Horvath said.