ISSUE #432

432 - The Model Farm: A $150 Million Revenue Opportunity

1-30-03

Profitability of sugarbeet production in 2003 will be determined in large part by avoiding the problems and mistakes encountered in the past. Life long learning is about changing and doing things differently today to be ready for the demands of tomorrow.

The American Crystal Sugar Model Farm - What's This?

The American Crystal Agriculture Department has had a Model Farm team in place for about 2 years. This team has been given the task of analyzing the grower practices database in minute detail. Finding out exactly what the data analysis indicates are those grower practices enabling shareholders to produce the very best crop possible. Agriculturists will share the first phase of the Model Farm analysis with shareholders at Close The Gap II meetings this winter.

Maximum Crop Potential:

The Model Farm Team used three methods to estimate the maximum potential sugarbeet crop using real world results from the grower practice system from 1997-2001. A summary of this maximum crop production analysis is given in Table 1.

Table 1

 Crop Yield & Quality
Analysis Method% SugarYield T/A
Top 10 Producers Per District Analysis 17.88 23.50
GPS Statistical Maximum Results 19.00 26.81
Optimum Planting Date & Stands 18.44 25.51

The three analysis methods clearly confirm that significant opportunity for improvement exists for sugarbeet production in the RRV. The Model Farm Team chose values near the midpoints of each analysis to establish a potential crop productivity goal.

RRV Wide Potential Achievable Crop
% Sugar% LTMYield T/ARSA lbs.Total Crop Tons
18.50 1.2 25.0 8,650 12,500,000

American Crystal has achieved only 69%, 83%, 73%, 83%, 69% and 63% of this potential crop from 1997-2002, respectively. This is the GAP in productivity.

Achieving this potential crop would:

  • Increase the beet payment by $94,000,000 due to yield
  • Increase the beet payment by $56,000,000 due to improved quality
  • Increase shareholder revenue by about $300/acre

Data Available:

Ask your agriculturist at contracting how your yield, sugar %, RSA, RST, LTM, plant population and planting date compare to agriculturists area, factory district and RRV averages and how to improve in 2003.

Close the Gap II Model Farm presentations will look at on-farm profit potential gained by optimum implementation of each agronomic practice.

Annual Meeting Resolutions:

The following resolutions were passed at the 2002 American Crystal / Red River Valley Sugarbeet Growers Association Annual Meeting. All resolutions have been reviewed by the Company's Board of Directors Agriculture Committee and the full Board of Directors. Following each resolution is a statement of how the Company will respond to the resolution.

Resolution #1: Genetically Enhanced Sugarbeets - Be it resolved that American Crystal Sugar Company and the Red River Valley Sugarbeet Growers Association are encouraged to help accelerate the implementation of genetically enhanced varieties.

Response: American Crystal and the Red River Valley Sugarbeet Growers Association are both strongly committed to making genetically enhanced varieties available to Red River Valley producers as rapidly as is practically possible. The Company and the Association will continue to work actively through trade associations and other bodies to bring about introduction of these varieties.

Resolution #2: Proportioning Piling Equipment - Be it resolved that the Red River Valley Sugarbeet Growers Association urges the Board of Directors of American Crystal Sugar Company to increase piler capacity in proportion to the acres that are being transferred.

Response: The Company measures station piling capacity using a formula based on current year contracted acres multiplied times five year average yield. The resulting tonnage number is divided into rated capacity of the pilers located at the station to provide a percentage daily piling capacity. All stations are listed from low to high and piler relocation or acquisition decisions are based on which stations have the smallest capacity relative to acres and tons contracted to the station. Other factors, including land availability and which factory will slice beets moving into the station, are taken into account when determining allocation of piling equipment.

Resolution #3: Study of Review Seed Policy - Be it resolved that American Crystal Sugar Company and the Red River Valley Sugarbeet Growers Association commission the Economics Departments of North Dakota State University or the University of Minnesota-Crookston to review this seed policy and evaluate how this policy affects the producers of American Crystal Sugar Company.

Response: American Crystal Sugar Company and the Red River Valley Sugarbeet Growers Association will jointly select faculty members from one or both institutions to do an evaluation of the current seed approval policy.

Resolution #4: Harvest of Hailed Beets During Prepile - Be it resolved that a system be looked into whereby a grower whose crop is severely damaged by hail be allowed to deliver as much of that crop as is possible during prepile harvest and that he be paid for these beets at the regular harvest price.

Response: American Crystal Sugar Company Agricultural staff will analyze the feasibility and economic impact of the proposed policy and will report these to the Agriculture Committee of the Board of Directors.

CEO Jim Horvath States:

"Based on the information I have seen, the greatest opportunity American Crystal, and each of its shareholders, has is to maintain and improve the profitability of the sugar business by learning and applying the "Gold Standard" agronomic practices that have been and continue to be developed starting today. No matter what threats come along from the trade and policy perspective, doing the best we can every day in growing a premium crop and maintaining the company's critical mass will result in the highest possible financial returns to the shareholders. I believe the use of "Gold Standard" agronomic practices is key to each shareholder's future financial success".