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Sugar co-op loses 10.8 percent of beet crop to frost
By David Little, West Central Tribune
February 2, 2001
 

Tons of sugar beets belonging to the Southern Minnesota Beet Sugar Cooperative in Renville are rotting in the piles. 
Tribune photo by Bill Zimmer

Local lenders: don't overreact
By David Little, Staff Writer
Shareholders of Southern Minnesota Beet Sugar Cooperative will receive less revenue this year because an early frost last fall damaged a significant portion of their 2000 beet crop.
    As a result, farmers and lenders will be working very closely on plans to finance the 2001 beet crop.
    "The big thing is just not overreacting. That's what we're trying to tell everyone,'' said Marc Knisely, chief executive officer of Farm Credit Services of Minnesota Valley in Willmar.
    "As a farmer-owned cooperative ourselves, and I guess the largest agricultural lender in the area, we have concerns. Margins in agriculture have been fairly slim and pretty tight from a profitability standpoint,'' he said.
    "Anytime any business has its gross income cut by a third after they've put out all of the expenses to produce that product, it's going to hurt.''
    Knisely said Farm Credit deals with a fair number of producers and everyone is different.
    "We look at each situation on its own merits and make decisions based on that.''
    He said farmers deal with weather-related and production-related risks that most businesses don't have to deal with. While farmers do an excellent job of managing those risks with insurance and other tools, "this kind of thing can happen. We're poised to not overreact, recognize this as a one-time, weather-related event and deal with it on a case-by-case basis with individual growers.''
    Knisely said Farm Credit supports any efforts by Southern Minnesota to pursue assistance through crop insurance or disaster assistance if that is a possibility.
    Knisely has worked in the Farm Credit system for 20 years and has seen similar problems happen to other commodities.
    "Farmers historically kind of plan for a bad production cycle periodically and they've learned to deal with it,'' he said.
    "You have to recognize that these types of obstacles will pop up periodically if you're involved in production agriculture, and not overreact and deal with it as a one-time event and structure your business such that you can handle these bumps in the road and have some flexibility and leeway from a financial standpoint.''
RENVILLE 2/2/01 -- Southern Minnesota Beet Sugar Cooperative has lost 10.8 percent of its 2000 beet crop because beets awaiting harvest were unable to recover from a damaging frost last October. The loss means payments to sugar beet growers will be less than the break-even level projected last August.

Co-op officials discussed the situation with shareholders at six meetings last week and with about 50 area bankers Tuesday morning at the cooperative's headquarters near Renville.

Alan Ritacco, president and chief executive officer, said the co-op will dispose of a minimum of 250,000 tons of ruined beets. Growers harvested about 2.3 million tons last fall. Up to 450,000 tons may be lost, depending on what happens with the weather and further deterioration of beets in the pile, he said. The final number won't be known until the end of February or early March.

"But in any case, what we did was to meet with the growers, told them where they were at, told them what we've got going, let 'em know how we're handling, what we're handling, and move from there,'' said Ritacco.

The deterioration occurred after a hard frost struck in early October while 80 percent of the crop was still in the ground awaiting harvest. Ritacco described the crop as a drought beet that did not have enough moisture to recover from the frost.

Farther north, beets grown in the Red River Valley region by Minn-Dak Farmers Cooperative of Wahpeton, N.D., and American Crystal Sugar of Moorhead suffered from little or no frost.

"We thought the beets had healed themselves'' and could be processed but not at the same rate because of the poorer quality, said Ritacco. "But more importantly what's happened is a lot of them have been deteriorating pretty quickly.''

The co-op is still calculating the dollar loss and is working on a couple of options to help growers.

The purpose of the meeting with the bankers was to explain the situation and reassure lenders who might be uncertain about financing growers for this year's crop, according to Ritacco.

"What we're trying to do is make sure they understand that this is a one-year type of thing, the extent that it is, and what it looks like next year,'' he said. "We want to make sure they have all the information going into making decisions and not make decisions on rumors.''

Officials meet with bankers when the need arises, according to one co-op board member.

"We've met with bankers before whenever we thought there might be an opportunity to give them some information that's pertinent to the time,'' said Duane Hultgren of Raymond.

"The payment that we have forecast for the 2000 crop now is going to put more pressure on us as producers getting our finances organized for the 2001 crop year,'' he said.

Farmer impact

A surplus of sugar in the domestic market for the past several years, due mainly to imports of stuffed (high-sugar content) molasses, caused sugar prices nationally to fall to 20-year lows.

The surplus resulted in a projected payment to beet growers of about $30 per ton for the 2000 crop, or about $600 per acre, compared with the 10-year average of about $770 per acre, according to the co-op's annual report.

The cost of producing an acre of sugar beets ranges from $500 to $600 per acre, excluding land costs and share prices, according to U.S. Agriculture Department crop production estimates.

But this year's payment to local growers will be even less than the earlier projection, due to the loss of beets.

Hultgren said deteriorated beets are being applied on land.

"It's a significant loss, and until we are done with the slice and until we're done seeing how we do in other areas, that's all we can say,'' Hultgren said.

Hultgren has been growing beets since the co-op was formed more than 25 years ago, and this is probably the first time that he's seen such a loss from a combination of drought and frost.

"It's depressing to everybody, and it depends pretty much on what their situation is like. But most of the growers realize that this is an act of nature, and nature sometimes deals a hard blow to us and we've got to try to go on,'' he said.

Speaking as a board member, Hultgren said, "We hope to get back to something more normal. As a grower, I think that there are reasons to be optimistic, to believe that we can recover from this. And that's what the co-op is, is the growers. If the growers recover, the co-op will be fine.''