| "Anybody's who's higher-leveraged, has less owner
equity or doesn't have a large enough base to operate from, is going to
feel more impact. You're going to see more of those people exiting the
business." - Bob Bahl, president of Farm Credit Services of
Grand Forks
Horvath
MOORHEAD -- American Crystal Sugar Co., the flagship of farmer-owned
cooperative food processing in the region, is navigating stormy seas.
Over the past two years, Crystal's 2,800 shareholders have lost an
estimated $600 to $900 a share. Shares that 18 months ago were trading at
$1,500 to $1,800 now are in the $900 range.
Conservatively, $300 million to $450 million has been washed away from
the balance sheets of Crystal shareholders. Throw in similar numbers from
Minn-Dak Farmers Cooperative of Wahpeton, N.D., and Southern Minnesota
Beet Sugar Cooperative of Renville, Minn., and the losses nearly double.
Of course, not all shares were bought at the higher levels. Some
Crystal growers bought shares at the $125 in the early 1970s, and others
reportedly paid as high as $2,800 in the mid-1990s.
Assuming that everyone's shares have devalued, however, it's a
balance-sheet hit of huge proportions.
"Everybody is aware that these beet stock values have dropped from
$500 to $1,000 an acre," said one director of a local in the region
who asked not to be named. "Beet stock is dropping. I would suspect
the next thing to drop is land." Crystal, at its recent annual
meetings, has seemed eager to send a dual message.
No panic, please
The first message is not to panic, that beets will continue to be grown
in the Red River Valley.
Second is that the U.S. sugar program must be strengthened and trade
deals improved. They say the region is a low-cost producer in the United
States, but that unfettered Mexican sugar coming into the United States
because of the¨duce at full bore.
A few American Crystal growers have been asking for a reduction of
acreage -- from nearly 500,000 acres to the 450,000-acre level -- to get
production in line with markets. Crystal ended its year-2000 crop with
455,000 acres, cut by the government's payment-in-kind program and in part
by crop losses from disease.
Despite that, the co-op turned in what appears to be its second- or
third-largest beet harvest in history.
Crystal officials say they would consider some sort of industrywide
reduction, including cane producers.
Value-added options
Ironically, Crystal's woes are happening in a year in which
"value-added" agriculture continued to be the mantra, especially
for politicians. There have been similar difficulties in other such
industries, including pasta, edible beans and corn sweetener.
Farmers have been using their own capital to replace capital that would
come in from outside sources. Quite often other value-added stock grew
from favorable value from beets.
"I'm leaning on the old shares I have," said one frustrated
Minn-Dak grower from Minnesota. "Those shares are supporting the new
shares, plus ProGold, plus new ventures, like Spring Wheat Bakers."
Despite serious shareholder equity losses at American Crystal, it isn't
turning into a significant cry for new management.
Most members seem to accept that problems such as excess sugar from
Mexico and unfavorable court decisions on Canadian "stuffed
molasses" deals have been out of management control.
Horvath was first mate when Crystal put $48 million into ProGold. He
was ProGold's first and only chief operating officer and helped strike the
deal to lease the $260 million plant to Cargill when the company started
seeing years of red ink in their future.
Free from its ProGold losses, Crystal in August 1997 approved the sale
of 61,500 shares of preferred stock, raising $92 million for capital
projects that have come during a market glut and low prices.
"I think Horvath has taken over in a difficult situation,"
says Paul Borgen, a grower and former board member from Georgetown, Minn.
"Anything that could go wrong has gone wrong in the last three
years." |