| FARGO, N.D. -- Per-ton beet payments are down slightly from last year's
actual payment, but American Crystal Sugar Co. shareholders were optimist
Dec. 6 at the annual meeting in Fargo, N.D.
James Horvath, the Moorhead, Minn.-based co-op's president and chief
executive officer, announced publicly that the gross beet payment for the
2001 crop will be $36 per ton for the coming year.
"This per ton payment, in combination with the low tons per acre
in this year's crop, translates into about $640 of on-farm revenue per
average acre," Horvath says.
Valleywide, the smaller payment estimate, calculated on a smaller crop
in 2001, comes to $100 million less money going to the co-op's growers
this year than they would have in "a typical year," Horvath
says.
Horvath says the co-op is not low-balling the projected payments even
though last year's November projection was a $31.50-per-gross-ton payment
and ended at $37.70 per ton. He explains sugar prices started moving up
toward the end of the year, adding $1.50 per ton to the payment. Another
$3.50 per ton came from better-than-expected sugar recovery in the risky
period between a March payment and mid-May.
"There's no overt goal to be conservative" in the estimate,
Horvath says. "It's clearly in the shareholders' best interests to
give them as much cash as we can. We borrow money cheaper than they borrow
money."
Farmers in the hallways seemed more upbeat than last year, when sugar
policy was uncertain and prices were in the tank.
Paul Mathiason, Grand Forks, a farmer and vice president of the
American Sugarbeet Growers Association, guessed that most Crystal members
expect the $36-per-ton payment projection to rise. "I would think
weather is the only obstacle -- if it got hot for too long and something
went wrong with the storage," Mathiason says.
Indeed, Horvath says sugar prices already have improved somewhat since
the November projection. "We've got about 75 percent of the crop
booked now at prices that are marginally above the November
forecast," he says.
Another opportunity is if the weather gets cold and stays cold through
the processing season.
"The possible downside is with Mexico," Horvath says.
Mexico's so-called Tier-2 sugar could be exported to the United States at
a profit, even over tariffs negotiated in the North American Free Trade
Agreement, Horvath says.
Under NAFTA, tariffs against Mexican sugar decline until there are no
tariff restrictions in 2008.
"It would be economically logical for them to start exporting
sugar to the U.S.," Horvath says. "They appear to be showing a
great deal of restraint in not doing that, I think trying to come to
common ground here to renegotiate that deal."
Still, there's the threat of market-depressing Mexican sugar. "The
risk could be that they could start dumping sugar and if they do the
prices could fall dramatically from where they are today on the remaining
25 percent," Horvath says.
Crystal's meeting was held in conjunction with the Red River Valley
Sugarbeet Growers meeting, which featured a satellite teleconference with
Sen. Paul Wellstone, D-Minn. Luther Markwart, executive vice president of
the American Sugarbeet Growers Association, also spoke to the group by
telephone, because of the pending farm bill. After the farm bill, the
Mexican issue and new World Trade Organization talks will become the
focus.
Horvath serves on the four-person Mexican Sugar Task force of the U.S.
sugar industry, to try to find a solution for NAFTA issue. The group is
designed to offer quick responses to policy changes to the U.S. trade
representative and his agricultural trade ambassador. -NT>Crystal board
Chairman Robert Vivatson of Cavalier, N.D., says Crystal faces
"powerful forces" of consolidation in its markets and among its
competitors. He says United Sugars is the second-largest seller of sugar,
with about 25 percent of the market, and faces both risks and
opportunities in trying to protect that market share.
According to the annual report, Crystal started cutting capital
expenditures two years ago because of extremely low sugar prices, imports
of sugar-containing products ("stuffed molasses") and the end of
the farm bill.
The stuffed molasses issue has been stopped in the courts and may be
more broadly fixed in a bill pending in Congress, Horvath says. The farm
bill is "very good for sugar" and likely to be passed. If those
problems are truly fixed, the sugar industry has agreed to adhere to
marketing "allocations," or reductions, under the farm bill.
Processors have met to agree on those levels, Horvath says, and are
writing those for inclusion into the Senate bill Dec. 11. Crystal's
acreage would have to be reduced "in the range of 5 (percent) to 7
percent," he says.
These allocations are based purely on historical sales volume and
capacities, Horvath says. "It does not have the ability to bring new
production on-stream and have it count toward the allocations, as last set
did."
Horvath says that's "better all around" because the old
method encouraged processors to continue to expand, which is
counterproductive. Since the early 1990s, Crystal's capital expenditures
averaged about $60 million and were cut to below $20 million, Horvath
says. At some point, the board may decide to increase that spending to a
more normal level, which will be at "a minimum of $25 million to $30
million range," he says. |