American Crystal Sugar shareholders met today for a more somber annual meeting than usual. Typically when the farmers who grow sugar beets for the cooperative, hold their annual gathering in Fargo, it’s a celebration of another profitable year. This year, most farmers are facing big losses as a result of the crash in sugar prices.
Losses will be tallied in the hundreds of dollars per acre and most farmers attending the meeting didn’t want to talk about it. Their losses will also depend on production costs, with farmers who rent land taking a bigger hit than those who own their land.
Farmers are bound by contract to plant a specific number of acres each year.
American Crystal Sugar President David Berg says sugar price woes aren’t over. Farmers could face more than one year of losses according to Berg.
“I don’t want to even try to guess about that. Is it three years, five years, ten years? I don’t know. ”
Berg told the farmer shareholders he believes their investment in this company, in company stock and in their own farm operations, supports a long term business partnership.
“If anyone produces sugar in North America it’s going to be produced right here in the Red River Valley. We have the right natural resources and we have the right human resources to continue to be a rock foundation of the North American sugar industry.”
Ag economists say losses this year could be as high as $500 per acre. Most years farmers earn a profit of hundreds of dollars per acre on sugar beets. But it’s what economists call a high risk- high reward crop.
The cost of planting and harvesting sugar beets is much higher than corn, soybeans or wheat. But the potential earnings are also historically much higher. In the past many farmers have said ‘sugar beets pay the bills.’
Minnesota is the leading sugar beet producing state in the nation. North Dakota is number two. A 2012 economic study determined the sugar industry has a $4.9 billion annual economic impact in Minnesota and North Dakota. That economic impact will be significantly less this year.
According to Berg the problem is a direct result of the North American Free Trade Agreement opening the border to Mexican sugar imports.
Berg has been lobbying the Mexican government and the Mexican sugar industry to cut exports. What does he tell the Mexicans? If they dump too much sugar on the North American market they will “kill the goose that laid the golden egg.”
“So what do we hear from the Mexicans? They understand, I think they comprehend it,” Berg said. “But they have never had the kind of supply control mechanisms in their country that we have here. So they are still trying to understand what it is they can do to bring things back into balance. They understand the problem but converting understanding into tangible action, that takes some time. ”
Berg told reporters the company has no plans to reduce sugar beet acres next year, and no plans to cut the American Crystal workforce.