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Crystal Sugar Expects ‘Price Crisis’ to Continue

Mon, 12/09/2013 - 10:09am
DAVE KOLPACK, Associated Press

FARGO, N.D. (AP) — The annual meeting of American Crystal Sugar Co. on Thursday highlighted the company's 40th year as a farmer-owned cooperative, but there was little cause for celebration among shareholders.

With total grower payments down more than $300 million in the last year, the multimedia show by company president and CEO David Berg ended with a slide that read, "Tough times don't last, but tough people do."

Berg said at a press conference before his speech that he doesn't see the end to a price problem he attributes to excessive supplies of Mexican sugar in the U.S. market. The amount of sugar exported to the U.S. from Mexico has ballooned from 700,000 tons five years ago to more than 2 million tons, he said.

"We just don't have room for that much sugar in the market," Berg said. "We would sure like to say the price crisis of sugar is behind us, but it really isn't. Obviously this is a pretty important time for the sugar industry and American Crystal."

Berg said many people in the U.S. sugar industry feared this scenario 20 years ago when the North American Free Trade Agreement was ratified. High prices in the last couple of years led Mexican farmers to increase acreage for sugar cane and flood the American market.

The end result has trumped the American sugar program that is designed to balance supply and demand, Berg said.

"They have never had the supply control mechanisms that we've had here. Mexico needs to be more responsible in the way it participates in this merged market under NAFTA," he said.

Despite losing money, growers in the cooperative are long-term investors who have weathered low prices before, Berg said. While some farmers are debating about planting something other than sugar beets, Berg noted that prices for most crops have been down in the last few months.

"It's not like other commodities are sucking acres away from sugar beets," he said. "Growers don't like losing money in sugar beets, naturally, but they're not opportunistic. They don't just jump and do something for one or two years so they can make some money and then bail on it."

North Dakota is the second largest producer of sugar beets in the country.

North Dakota Sens. John Hoeven and Heidi Heitkamp told the group that many countries, not just Mexico, unfairly subsidize and protect their own sugar interests to the detriment of U.S. producers. The senators said a new long-term farm bill, which has a sugar provision that has passed both the House and Senate, would provide growers with more certainty.

"Our industry can compete with anyone anywhere when the terms are fair," Hoeven said. "The sugar program levels the playing field with subsidized foreign producers and benefits not only our industry, but also consumers."

Heitkamp called sugar production the linchpin of many local economies in the Red River Valley. Berg said it's not just growers who are feeling the pain of the market woes.

"Money that doesn't wind up in farmer's pockets never gets spent in the towns around here," he said.

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