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Mikkel Pates, Forum Communications Co., Published December 03 2010

Banner year comes with uncertainty

American Crystal Sugar Co. shareholders at their annual meeting were happy but not giddy about a phenomenal crop and price year – their enthusiasm perhaps curbed by concerns about future use of Roundup Ready beets.

“Finally!” said Bill Hejl of Casselton, N.D., asked to come up with a single word to describe the year. He said the year will be notable for its high yields, high prices and – bonus – a trouble-free harvest.

Paul Mathiason of Grand Forks said farmers may find a way to “give away” those gains through higher land rent and through paying higher input costs for next year, but he acknowledged that the year could hardly have gone down any better. “If you’re complaining this year, you should probably find something else to do,” he said.

Since November, shareholders have been told they’d likely be paid $57 a ton on the 26.3-ton-per-acre crop in 2010, a gross payment of $1,500 an acre that is a modern record. That could still be revised between now and when the final payment is made in November 2011. In the past few years, projections have been revised upward.

If that holds, the 2010 crop payment will be 25 percent higher than the respectable results from the 2009 crop, when $52.87 per ton of average was paid on a 22.7-ton per acre average – a $1,200-per-acre average gross payment.

David Berg, Crystal’s president and chief executive officer, in his annual address, recounted how the co-op and its shareholders have become more efficient. The co-op harvested 11 million tons of sugar beets this fall and will have a campaign that ran from mid-August to late May.

“That was done on 415,000 acres this year. Thirty or 40 years ago, that would have taken 800,000 or 900,000 acres,” he said.

The company is always looking for new ways to squeeze more sugar from its current assets or “add some assets,” Berg said, but he wasn’t specific about what those investments might be. He said the industry currently is in good shape because of favorable demand.

Berg acknowledged that some growers are suggesting that now might be a time for greater capital investments. One path is increasing the “unit retain” levels to invest in more long-term capital projects. With unit retains, the company holds back a quantity of the payment for seven years, like an interest-free loan from the shareholders to the company. Unit retains have historically been $2 to $3 per ton.

“There’s always discussion” about shifts in unit retains, and Berg acknowledged that “in a year like this, there’s obviously more.”

Uncertainty over Roundup Ready beet technology is the most prominent question for growers in 2011 and beyond.

Federal court actions Aug. 13 made it illegal to plant the glyphosate-tolerant beets, pending further action by the U.S. Department of Agriculture. Planting Roundup Ready beets in 2011 is in question, as well as in subsequent years, pending the outcome of an Environmental Impact Statement.

There also is new court action in California. A federal judge said some beet seed crop planted last summer in Oregon would have to be removed from the ground. Those Roundup Ready seed plants were planted after the judge vacated the deregulation of Roundup Ready sugar beets, even though they were planted under permits by the USDA.

Plaintiffs in the lawsuit contended that the permits should not have been given. One possibility is they’d be removed from the fields but kept alive as in carrot-like sized “stecklings” if the courts allow.

Berg noted the stecklings in the current dispute would come to maturity in 2011 and would be harvested for seed and planted for commercial production at the earliest in 2012, if allowed. Berg said American Crystal has a seed company and some of the acres in question were planted by a competitor.

“I don’t know what our competitors are doing; it’s not legal for me to know that,” he said. “I don’t know what the volumes are and I can’t give you a real good idea about the impacts on seed.”

The issue of how to prepare for a non-Roundup beet year in 2011 continues to be negotiated between beet and chemical companies, as well as seed companies. The companies are negotiating volumes that may be needed, which could be affected by whether growers in other areas of the country decide to grow beets at all.

Scott Anderson, a Minnesota sales representative for Dow AgroSciences, with more beets in his territory than any other representative nationwide, said his company is one of three major companies that traditionally supplied components for “micro-rate” control herbicides in sugar beets, prior to Roundup Ready beets conversion.

Mikkel Pates is a writer for Agweek.