American Crystal Sugar Company

views updated May 14 2018

American Crystal Sugar Company

101 North Third Street
Moorhead, Minnesota 56560
U.S.A.
Telephone: (218) 236-4400
Fax: (218) 236-4422
Web site: http://www.crystalsugar.com

Cooperative
Incorporated:
1973
Employees: 1,263
Sales: $676.6 million (1998)
NAIC: 311313 Beet Sugar Manufacturing; 311221 Wet Corn Milling

American Crystal Sugar Company is a 2,800-member agricultural cooperative based in the Red River Valley region of northwestern Minnesota and northeastern North Dakota, a region sometimes referred to in the sugarbeet industry as the nations sugar bowl. American Crystal is the largest U.S. processor of beet sugar, with sugar plants located in East Grand Forks, Crookston, and Moorhead, Minnesota; and Drayton and Hillsboro, North Dakota. Its position as a top competitor in sugar production was strengthened in 1993 through the formation of Bloomington, Minnesota-based United Sugars Corporation. A marketing company formed in partnership with Southern Minnesota Beet Sugar Cooperative of Renville, Minnesota, and Minn-Dak Fanners Cooperative of Wahpeton, North Dakota (the upper Midwests two other major sugarbeet growing co-ops), United Sugars ranks as the nations top beet sugar supplier and holds about 25 percent of the entire domestic sugar market; it offers a full line of consumer sugar products under the Crystal and Pillsbury Best brands as well as private labels, in addition to supplying sugar to commercial clients, such as Kraft General Foods, Hershey Foods Corp., and Mars Inc. American Crystals history goes back to 1899, and the company has been a pioneering force in the industry, particularly since 1973, when a group of growers assumed both ownership and management of the originally family-controlled concern. American Crystal is also a partner with Minn-Dak and Southern Minnesota in Midwest Agri-Commodities Company, which markets sugarbeets, sugarbeet molasses, and other specialty commodities. Moreover, it holds a 46 percent interest in ProGold Limited Liability Company, which is active in the corn sweetener market through a wet corn milling plant.

Early History

During the late 19th century, sugarbeets were still little more than an experimental crop in the Red River Valley. By then beet sugar was, however, a major commodity in Europe, outpacing in tonnage that of imported cane sugar. A German chemist named Andreas Marggraf had experimented with sugar extraction from the Beta vulgaris as early as 1747, and, in 1802, the first German sugarbeet factory was built. Another stimulus to the industry came in 1811, when Napoleon sought to outflank a British blockade of Frances chief raw sugar source, the West Indies. Under Napoleon, some 40 sugarbeet processing factories were soon established in France. For countries and regions with colder climates, sugarbeets offered the possibility of a huge new source of income, a crop that could directly compete in quality with sugarcane, which is limited to tropical and subtropical growing areas.

According to Walter Ebeling in The Fruited Plain, the first successful beet-sugar factory in the United States was established in California in 1879. California, in fact, would prove a key growing region for sugarbeets for roughly the next hundred years; Ebeling noted that as late as 1975 the state led the country in production, followed by Idaho, Colorado, and Washington. The American Beet Sugar Company, owned by the Oxnard family and based in Denver, was one of the first sugarbeet producers, having been formed in 1899. Through the early decades of the 20th century, American Beet developed into a six-plant operation over three states: Colorado, California, and Nebraska.

At the same time, a beet-processing plant owned by the Minnesota Sugar Company had sprung up in Chaska, southwest of Minneapolis and St. Paul. By 1919, Red River Valley farmers were experiencing success with sugarbeet growing and had begun shipping their harvest to the Chaska plant. Minnesota Sugar, in turn, commenced large scale experiments in the Valley, according to 50 Years in the Valley, an American Crystal retrospective. Closely affiliated with Minnesota Sugar was the Northern Sugar Company of Mason City, Iowa, which also figured largely in the early development of the Red River Valley.

In 1922, a crisis was at hand for Colorados American Beet Sugar Company, which was fast becoming a neglected and vulnerable family business. Following a board meeting convened in April of that year, a special committee was formed to investigate and redirect the company. Then, in June, three successive eventsthe resignation of second American Beet president Robert Oxnard; the death of original company president Henry Oxnard; and the resignation of chairperson and appointed president H. Rieman Duvalthrew the already beleaguered company into a tailspin. Although Duvals resignation was at first rejected, he was eventually replaced by R. Walter Leigh.

By 1924, with Leigh at the helm, the Colorado company was facing the possibility of dissolution. Only three of its six plants were still operating, and only one of these three, the Oxnard, California, plant, was considered sufficient to handle present operations without costly renovation. Leigh recommended that American Beet, if it intended to survive, should seek out new territories and either acquire or form a coalition with other successful beet operations. Both American Beets chief chemist and vice-president ventured to Minnesota that year to explore the Red River territory and the possibility of an alignment, if not merger, with Northern Sugar and Minnesota Sugar.

During this time, the Commercial Clubs of Grand Forks, North Dakota, and East Grand Forks, Minnesota, had been negotiating with Minnesota Sugar over the construction of what would be the Valleys first sugarbeet processing plant. H.A. Douglas, president of both Minnesota and Northern Sugar, had announced the prior year that his Chaska-based company would commit $1 million toward the construction of the proposed plant, provided the areas farmers and business leaders raised an additional $500,000. The completion of the deal appeared a foregone conclusionconsidering the high interest of all parties involveduntil a conference with Douglas at the behest of American Beet was held in Chicago in September 1924. During that meeting, American Beet representatives indicated the companys interest in entering new locations while possibly relocating its idle factories or acquiring existing factories. Following another conference in October, during which a purchase price for both Northern and Minnesota Sugar was discussed, American Beet completed negotiations in November, acquiring Minnesota Sugar for $1.97 million and Northern for $2.45 million. The deal included the property involved in the East Grand Forks development but did not obligate American Beet to build a factory there.

Rumors and speculation abounded among Valley growers and civic leaders through the spring of 1925, when the acquisition was finalized. Shortly thereafter, American Beet officials cleared the air. The construction of a plant would be postponed and a local in-progress sale of stock in the East Grand Forks development, named the Red River Sugar Company, would need to be rescinded. Fortunately for the beet fanners, the wait for a new plant was not long. In 1926, American Beet erected a 2,000-tons-per-day capacity plant in East Grand Forks. Early that same year, the farmers established the Red River Valley Beet Growers Association, which would work in cooperation with American Beet on a number of matters, including acreage allotment. An early indication of the ventures success was the negotiated expansion from 10,500 acres planted in 1926 to 20,000 acres in 1927.

By 1934, American Beet had changed its name to American Crystal Sugar Company and had come to depend heavily on the Red River Valley for its prosperity. That year was a particularly devastating one for the sugarbeet industry, however, due not only to the nations crippled economy but also to an outbreak of curly top, an insect-transmitted virus that ruined over 85 percent of the sugarbeet crop across the country. The East Grand Forks operation was the only American Crystal unit to post a profit. All told, the company lost $1.3 million in 1934. Both it and the sugarbeet industry as a whole rebounded over the next several years, however, thanks to the work of plant breeders who developed superior beet hybrids that were more resistant to curly top and other viruses.

According to 50 Years in the Valley: East Grand Forks and the Valley beet industry flourished during World War II, just as it had during the Great Depression and other times of economic strife. It made consistent profits while many of the Companys other plants faltered. The consistent high quality of Valley sugarbeets contrasted with those produced in other parts of the country because of the Valleys fertile soils, productive farmers and comparatively better moisture conditions. Certainly there were bad years in the Valley, but its overall consistency made it a sugarbeet mecca.

194681: Expansion and Cooperative Formation

Following the war, American Crystal readied for expansion, purchasing land for two additional plants in 1946. Two years later, the company completed construction of what was essentially the first new factory in the industry in almost two decades. This plant was located in Moorhead, Minnesota, about 70 miles south of East Grand Forks. Completion of the other plant, in Crookston, Minnesota, followed in 1954. In 1965, a fourth American Crystal plant was brought into operation, this time in Drayton, North Dakota.

Company Perspectives:

American Crystal Sugar Company is a world-class agricultural cooperative that specializes in sugar and sugar-based products and by-products.

Our mission is to simultaneously maximize shareholder returns and customer satisfaction through innovative farming practices, low-cost production methods and sales and marketing leadership.

By then the American sugar industry was beginning to undergo changes, prompted by Fidel Castros coup in Cuba. Cuba, a historically large supplier of sugar to the United States, was penalized by an amendment to the Sugar Act that redistributed the countrys quota and ultimately benefited U.S. sugar producers. Although Congressional support for the U.S. sugar industry would become increasingly important in later years, the Cuban situation had only a limited effect on domestic sugar production. With the early 1970s came cutbacks in planted acres for American Crystal. In 1973, amidst depressed conditions in the industry, Red River Valley acreage was at 150,000 and trending downward. The company was then operating only six of its 11 plants (four of which had become mainstays of the Red River Valley economy) and had curtailed any plans for future development. As Steve Brandt wrote in Corporate Report Minnesota: American Crystal Sugar was a moribund Denver-based company, held by a trust that was content to reap company profits for philanthropic activities that had been laid down by the firms founding family. Management seemed bent on restricting operations.

Members of the Beet Growers Association had for some time recognized the gravity of the situation, andhoping to capitalize on possibilities for the future, if plant improvements and other actions were undertakenhad already made plans in late 1971 to acquire a nine percent interest in American Crystal that was up for sale. The association was headed by Executive Secretary Aldrich Bloomquist, who in a letter to Crystal executives proposed at the same time an ambitious alternative plan: the sale of the entire company to the growers. By February 1973, the $66 million deal was sealed, with approximately one-third of the money to come from area farmers (through $100 per acre equity stakes) and the remaining two-thirds through long-term financing from the Bank for Cooperatives in St. Paul.

In 1974, its first full year as a farmer-owned cooperative, American Crystal announced plans for a new $40 million plant, to be built adjacent to the original East Grand Forks factory, which would be renovated at the same time. Together, the improvements would allow the company to expand acreage by up to 14 percent, a growth-oriented move the Growers Association had fought for repeatedly, and increasingly unsuccessfully, during the latter years of outside ownership. The company also grew in 1975 by absorbing the Red River Valley Cooperative, which was proceeding with the construction of a factory in Hillsboro, North Dakota. Meanwhile, two additional Midwestern sugarbeet co-ops were chartered, both in 1972. One was a North Dakota group called Minn-Dak Farmers Cooperative (Minn-Dak), which formed in the Wahpeton area and proceeded to dedicate a plant there before the 1974 harvest. The other was Southern Minnesota Beet Sugar Cooperative (SMBSC), which was established after that areas Growers Association received word in 1971 that the Chaska plant was due to close forever at the end of the season. SMBSC began construction of their $60 million plant, located east of Renville in southern Minnesota, in early 1973. In an early sign of partnership, American Crystal managed the plant until 1978, when SMBSC took control.

The timing of all of this heady growth in the sugar bowl could hardly have been more fortunate, for sugar prices were just about to skyrocket. Although U.S. farmers were typically prevented from suffering, or benefiting, from volatility in sugar prices, a new farm bill completed in 1973 contained no such stipulation. Egerstrom summarized the unusual situation: American farmers produce about half the sugar consumed annually in the United States. The rest is surplus from other sugar countries that sell most of their exports under contracts at fixed prices. There werent surpluses of anything during the early 1970s. Sugar crops around the world that were spared drought were raked by hurricanes and other natural problems. American Crystal and the Red River Valley beet growers were in for a windfall. World sugar prices shot up from about 15 cents a pound to as high as 70 cents. As Bloomquist remarked: We had farmers who recovered their entire investment in the co-op that first year. Of course, sooner or later the opposite scenario would occur, as in 1977 when a worldwide sugar surplus developed. American Crystal and its fellow co-ops have since successfully lobbied for a strong national sugar support program, despite occasional opposition from consumer groups and food processors.

Key Dates:

1899:
The American Beet Sugar Company is formed as one of the first sugarbeet producers.
1925:
American Beet acquires Minnesota Sugar and Northern Sugar.
1926:
Company constructs sugarbeet processing plant in East Grand Forks, North Dakota.
1934:
American Beet changes its name to American Crystal Sugar Company.
1948:
Moorhead, Minnesota, processing plant is completed.
1954:
Third processing plant is built in Crookston, Minnesota.
1965:
Fourth American Crystal plant begins operations in Drayton, North Dakota.
1972:
Two Midwestern sugarbeet cooperatives are formed: Minn-Dak Farmers Cooperative and Southern Minnesota Beet Sugar Cooperative (SMBSC).
1973:
American Crystal is transformed into a grower-owned cooperative.
1975:
The Red River Valley Cooperative and its processing plant in Hillsboro, North Dakota, is absorbed by American Crystal.
1982:
American Crystal, Minn-Dak, and SMBSC form a joint venture, Midwest Agri-Commodities Company, to market beet byproducts.
1993:
American Crystal, Minn-Dak, and SMBSC form second joint venture, United Sugars Corporation, the largest beet sugar marketing company in the United States.
1995:
American Crystal, Minn-Dak, and Golden Growers Cooperative form ProGold Limited Liability Company to build and operate a wet corn milling plant.
1997:
United States Sugar Corporation joins the United Sugars alliance, creating a nationwide sugar marketer; United Sugars begins a national rollout of Pillsbury Best Sugar.
1999:
American Crystal increases its sugarbeet acreage to 500,000.

1982 and Beyond: Cooperating Cooperatives

In 1982 American Crystal joined Minn-Dak and SMBSC as a partner in Midwest Agri-Commodities Company. Headquartered in Corte Madera, California, near San Francisco, Midwest was established to market beet byproducts, namely molasses and pellet-sized pulp, which was used principally as feed for dairy cattle. In 1993 Japanese buyers represented Midwests largest customer base, purchasing some 63 percent of the pulp produced by Midwest, a figure that in turn represented more than 60 percent of all beet pulp imported by Japan. European markets were also a key destination for the three co-ops byproducts.

In June 1991 American Crystal announced plans to construct a $31 million molasses desugarization plant at its East Grand Forks site in order to increase the co-ops production capacity. Desugarization involves extracting approximately 86 percent of the sugar contained in the molasses produced as a byproduct during sugar production. The facility was expected to produce some 130 million more pounds of sugar from the same tonnage of beets then being processed. Due to delays involving the Minnesota Pollution Control Agency, the plant was not completed until just prior to the 199394 processing campaign. Meantime, in March 1992 Joseph P. Famalette was hired as president and CEO of American Crystal to replace the retiring Al Bloomquist. Famalette was a former executive with Minnesota-based processor International Multifoods Corporation.

In 1993 American Crystals position as a top competitor in sugar production was strengthened through the formation of Bloomington, Minnesota-based United Sugars Corporation, another jointly owned venture with SMBSC and Minn-Dak. United Sugars immediately ranked as the nations top beet sugar marketer. By this time, American Crystal had invested, as a cooperative, over $200 million in plants, equipment, improvements, and research designed to enhance efficiency and increase profitability for its members. By almost all accounts the money had been well spent. Not only did the cooperative generate an estimated $1 billion annually to the economy of the Red River Valley, but it also continued to set high industry standards for quality while simultaneously setting new records for sugar production (1.9 billion pounds of sugar in 1993), total net beet payment ($284 million), and sugar sales (1.8 billion pounds). In addition, while more than 80 percent of the co-ops sugar was purchased by food processors, including General Mills, Sara Lee, Nestlé, Hershey, and Kraft, the companys namesake brand of packaged sugar ranked number one among retailers in the upper Midwest.

In the fall of 1994 American Crystal raised more than $28 million and increased its sugarbeet production through a public stock offering. For each share of stock purchased, buyers were required to grow one acre of sugarbeets for the co-op. The following spring American Crystal finalized a deal that expanded its operations into wet corn milling and the corn sweetener field, as part of a planned diversification. The co-op invested $48 million to take a 49 percent stake (later reduced to 46 percent) in a new joint venture, ProGold Limited Liability Company, whose other owners were Minn-Dak and Golden Growers Cooperative. ProGold planned to build a $261 million wet corn milling plant in Wahpeton, North Dakota, to produce high fructose corn syrup, corn starch, corn oil, ethanol, and various byproducts.

In April 1995 Famalette resigned to take a position with a California co-op. Mark Richardson was named interim president before Dan McCarty took over as president and CEO. In the fall of 1996 American Crystal completed another public offering of about 20,500 preferred shares, which translated into a like number of additional sugarbeet acreage, and increased the co-ops total acreage to more than 435,000.

Just a few months after the ProGold facility began production of corn sweeteners in October 1996, the bottom dropped out of that market due to excess supply. As a result, American Crystal delayed a planned expansion of its East Grand Forks molasses desugarization operation. It also turned over operation of the ProGold facility in Wahpeton to corn sweetener rival Cargill Inc., with Cargill sharing the profits with the co-op owners. During 1997 American Crystal also completed a study of future growth opportunities, which concluded that diversification should be abandoned in favor of a recommitment to the sugar industry. That year the co-op made two significant sugar-related moves: it entered into an alliance with U.S. Sugar Corporation, the largest grower of sugar cane in Florida, which made United Sugars the first nationwide producer and distributor of refined sugar, with a 25 percent market share; and it began rolling out the industrys first premium national brandPillsbury Best Sugar. The use of the Pillsbury name had been gained through a licensing agreement with Minneapolis-based Pillsbury Company, a unit of U.K.-based Grand Metropolitan PLC (which soon merged with Guinness PLC to form Diageo plc). Meantime, 1997 also saw American Crystal produce a record amount of sugar despite the heavy blizzards and a 500-year flood that visited the Red River Valley that year.

In 1998 American Crystal completed the largest beet-slicing expansion in its history through expansion of its East Grand Forks and Hillsboro facilities, which work cost $57 million. The co-op was also constructing a molasses desugarization facility at its Hillsboro location which would be capable of processing about 200,000 tons of molasses. Slated to be operational in 2000, this project was being completed by Crystech L.L.C., a 50-50 joint venture of American Crystal and Toronto-based Newcourt Credit Group Inc. At a total cost of $96 million, it represented the largest capital expenditure in American Crystal history. By 1999 the co-op had increased its sugarbeet acres to 500,000 thanks to the sale of stock in the fall of 1997 representing 61,500 acres of additional land. Under the leadership of new president and CEO James J. Horvath, the co-op was also investigating the addition of organically grown sugar to its product line. With all of these expansionary moves, American Crystal moved toward the 21st century on the upswing, with 100 years in the sugar business and 25 years as a cooperative behind it.

Principal Subsidiaries

Crystech L.L.C. (50%); Midwest Agri-Commodities Company (33.3%); ProGold Limited Liability Company (46%); United Sugars Corporation (33.3%).

Principal Competitors

Alberto-Culver Company; Christian Hansen; Cumberland Packing Corp.; Imperial Sugar Company; Monsanto Company; Sugar Foods; Tate & Lyle PLC.

Further Reading

Alster, Norm, Getting the Middlemans Share, Forbes, July 4,1994, pp. 1089.

American Crystal Delays Plant Project Expansion, Minneapolis Star Tribune, March 12, 1997, p. 3D.

Brandt, Steve, Poor Prices Put Crystal on Spot with Beet fanners, Minneapolis Tribune, March 29, 1982, pp. B3, B4.

, Sweet Deal, Corporate Report Minnesota, January 1986, pp. 9196.

Bueno, Jacqueline, U.S. Sugar Joins Midwest Co-op, Paving Way for a National Brand, Wall Street Journal, July 30, 1997, p. B4.

Campbell, Erin, Crystal to Stick to Sugar, Grand Forks (N.D.) Herald, December 5, 1997, p. 1A.

Cereal Investigation Doesnt Concern Beet Fiber Producer, Minneapolis Star Tribune, July 9, 1989, p. 4B.

Company News, Minneapolis Star Tribune, June 26, 1991, p. 2D.

Cooperatives Pool Beet Production, Minneapolis Star Tribune, December 27, 1984.

Ebeling, Walter, The Fruited Plain: The Story of American Agriculture, Berkeley: University of California Press, 1979, 433 p.

Egerstrom, Lee, Sweet Profits: Red River Valleys Sugar Beet Goes on with Savory Sales for American Crystal, St. Paul Pioneer Press, December 10, 1984, pp. 1, 910.

50 Years in the Valley, Moorhead, Minn.: American Crystal Sugar Company, 1976.

Henderson, Julie, American Crystal Sugar Considers Growing Sugar Organically, Grand Forks (N.D.) Herald, July 8, 1998.

Johnson, Rona K., Red River Valley Beet Harvest Set to Start, Agweek, August 29, 1994, p. 29.

Jones, Jim, Growers Soured by Sugar Bill Loss, Minneapolis Star, October 25, 1978.

Kennedy, Tony, American Crystal Sugar Exec Leaving, Minneapolis Star Tribune, April 27, 1995, p. 3D.

, Crystal Sugars New CEO Happy to Run Own Show, Minneapolis Star Tribune, February 10, 1992, p. 2D.

Phelps, David, Organized, Well-Financed Lobby Effort Helps Make Life Sweet for Sugar Growers, Minneapolis Star Tribune, March 19, 1987, p. 10A.

President of Crystal Sugar Co. Beats Ouster Bid, Then Resigns, Minneapolis Star Tribune, January 21, 1986, p. 11B.

Rustebakke, Brian, American Crystal Celebrates 25 Years As Coop, Grand Forks (N.D.) Herald, December 4, 1998, p. 1B.

, Crystal Opts to Harvest It All, Grand Forks (N.D.) Herald, October 9, 1999, p. 1A.

Schmickle, Sharon, Red Rivers Beet Boom Means a Bust for Belize, Minneapolis Star Tribune, April 16, 1989, p. 25A.

Shoptaugh, Terry L., Roots of Success: History of the Red River Valley Sugarbeet Growers, Fargo, N.D.: Institute for Regional Studies, 1997, 270 p.

Struck, Myron, American Crystal Is Top State PAC, Minneapolis Star Tribune, July 11, 1988, p. 4D.

Sugar Firms to Combine Marketing Operations, Minneapolis Star Tribune, July 30, 1997, p. 3D.

Sugar Glut May Lead to Sales Quotas, Minneapolis Star Tribune, April 7, 1993, p. 3D.

3 Sugar Beet Co-Ops Sign Merger Deal, Minneapolis Star Tribune, November 3, 1993, p. 3D.

Three Sugar Co-Ops Are Planning to Join Forces, Minneapolis Star Tribune, March 15, 1993, p. 1B.

Jay P. Pederson

updated by David E. Salamie

American Crystal Sugar Company

views updated May 29 2018

American Crystal Sugar Company

101 N. 3rd Street
Moorhead, Minnesota 56560
U.S.A.
(218) 236-4400
Fax: (218) 236-4422

Farm Cooperative
Incorporated:
1973
Employees: 3,427
Sales: $542.87 million
SICs: 2063 Beet Sugar

American Crystal Sugar Company is a 2,145-member agricultural cooperative based in the Red River Valley region of northwestern Minnesota and northeastern North Dakota, a region sometimes referred to in the sugarbeet industry as the nations sugar bowl. American Crystal is the largest U.S. processor of beet sugar, and its position as a top competitor in sugar production was strengthened in 1993 through the formation of United Sugars Corporation. A marketing company formed in partnership with Southern Minnesota Beet Sugar Cooperative of Renville, Minnesota, and Minn-Dak Farmers Cooperative of Wahpeton, North Dakota (the upper Midwests two other major sugarbeet growing co-ops), United Sugars ranks among the nations top three sugar suppliers, contributing some 15 to 17 percent of the entire domestic sugar supply. American Crystals history goes back to 1899, and the company has been a pioneering force in the industry, particularly since 1973, when a group of growers assumed both ownership and management of the originally family-controlled concern. American Crystal is also a partner with Minn-Dak and Southern Minnesota in Midwest Agri-Commodities, which markets some 35 percent of all sugarbeet molasses and 38 percent of all sugarbeet pulp produced in the United States.

During the late nineteenth century, sugarbeets were still little more than an experimental crop in the Red River Valley. However, by then beet sugar was a major commodity in Europe, outpacing in tonnage that of imported cane sugar. A German chemist named Andreas Marggraf had experimented with sugar extraction from the Beta vulgaris as early as 1747, and, in 1802, the first German sugarbeet factory was built. Another stimulus to the industry came in 1811, when Napoleon sought to outflank a British blockade of Frances chief raw sugar source, the West Indies. Under Napoleon, some 40 sugarbeet processing factories were soon established in France. For countries and regions with colder climates, sugarbeets offered the possibility of a huge new source of income, a crop that could directly compete in quality with sugarcane, which is limited to tropical and subtropical growing areas.

According to Walter Ebeling in The Fruited Plain, the first successful beet-sugar factory in the United States was established in California in 1879. California, in fact, would prove a key growing region for sugarbeets for roughly the next hundred years; Ebeling noted that as late as 1975 the state led the country in production, followed by Idaho, Colorado, and Washington. The American Beet Sugar Company, was owned by the Oxnard family and based in Denver, was one of the first sugarbeet producers. Through the early decades of the twentieth century, American Beet developed into a six-plant operation over three states: Colorado, California, and Nebraska.

At the same time, a beet-processing plant owned by the Minnesota Sugar Company had sprung up in Chaska, southwest of Minneapolis and St. Paul. By 1919, Red River Valley farmers were experiencing success with sugarbeet growing and had begun shipping their harvest to the Chaska plant. Minnesota Sugar, in turn, commenced large scale experiments in the Valley, according to 50 Years in the Valley, an American Crystal retrospective. Closely affiliated with Minnesota Sugar was the Northern Sugar Company of Mason City, Iowa, which also figured largely in the early development of the Red River Valley.

In 1922, a crisis was at hand for Colorados American Beet Sugar Company, which was fast becoming a neglected and vulnerable family business. Following a board meeting convened in April of that year, a special committee was formed to investigate and redirect the company. Then, in June, three successive eventsthe resignation of second American Beet president Robert Oxnard; the death of original company president Henry Oxnard; and the resignation of chairperson and appointed president H. Rieman Duvalthrew the already beleaguered company into a tailspin. Although Duvals resignation was at first rejected, he was eventually replaced by R. Walter Leigh.

By 1924, with Leigh at the helm, the Colorado company was facing the possibility of dissolution. Only three of its six plants were still operating, and only one of these three, the Oxnard, California, plant, was considered sufficient to handle present operations without costly renovation. Leigh recommended that American Beet, if it intended to survive, should seek out new territories and either acquire or form a coalition with other successful beet operations. Both American Beets chief chemist and vice-president ventured to Minnesota that year to explore the Red River territory and the possibility of an alignment, if not merger, with Northern Sugar and Minnesota Sugar.

During this time, the Commercial Clubs of Grand Forks, North Dakota, and East Grand Forks, Minnesota, had been negotiating with Minnesota Sugar over the construction of what would be the Valleys first sugarbeet processing plant. H. A. Douglas, president of both Minnesota and Northern Sugar, had announced the prior year that his Chaska-based company would commit $1 million toward the construction of the proposed plant, provided the areas farmers and business leaders raised an additional $500,000. The completion of the deal appeared a foregone conclusionconsidering the high interest of all parties involveduntil a conference with Douglas at the behest of American Beet was held in Chicago in September 1924. During that meeting, American Beet representatives indicated the companys interest in entering new locations while possibly relocating its idle factories or acquiring existing factories. Following another conference in October, during which a purchase price for both Northern and Minnesota Sugar was discussed, American Beet completed negotiations in November, acquiring Minnesota Sugar for $1.97 million and Northern for $2.45 million. The deal included the property involved in the East Grand Forks development but did not obligate American Beet to build a factory there.

Rumors and speculation abounded among Valley growers and civic leaders through the spring of 1925, when the acquisition was finalized. Shortly thereafter, American Beet officials cleared the air. The construction of a plant would be postponed and a local in-progress sale of stock in the East Grand Forks development, named the Red River Sugar Company, would need to be rescinded. Fortunately for the beet farmers, the wait for a new plant was not long. In 1926, American Beet erected a 2,000-tons-per-day capacity plant. Early that same year, the farmers established the Red River Valley Beet Growers Association, which would work in cooperation with American Beet on a number of matters, including acreage allotment. An early indication of the ventures success was the negotiated expansion from 10,500 acres planted in 1926 to 20,000 acres in 1927.

By 1934, American Beet had changed its name to American Crystal Sugar Company and had come to depend heavily on the Red River Valley for its prosperity. That year was a particularly devastating one for the sugarbeet industry, however, due not only to the nations crippled economy but also to an outbreak of curly top, an insect-transmitted virus that ruined over 85 percent of the sugarbeet crop across the country. The East Grand Forks operation was the only American Crystal unit to post a profit. All told, the company lost $1.3 million in 1934. However, both it and the sugarbeet industry as a whole rebounded over the next several years, thanks to the work of plant breeders who developed superior beet hybrids that were more resistant to curly top and other viruses.

According to 50 Years in the Valley: East Grand Forks and the Valley beet industry flourished during World War II, just as it had during the Great Depression and other times of economic strife. It made consistent profits while many of the Companys other plants faltered. The consistent high quality of Valley sugarbeets contrasted with those produced in other parts of the country because of the Valleys fertile soils, productive farmers and comparatively better moisture conditions. Certainly there were bad years in the Valley, but its overall consistency made it a sugarbeet mecca.

Following the war, American Crystal readied for expansion, purchasing land for two additional plants in 1946. Two years later, the company completed construction of what was essentially the first new factory in the industry in almost two decades. This plant was located in Moorhead, Minnesota, about 70 miles south of East Grand Forks. Completion of the other plant, in Crookston, Minnesota, followed in 1954. In 1965, a fourth American Crystal plant was brought into operation, this time in Drayton, North Dakota.

By then the American sugar industry was beginning to undergo changes, prompted by Fidel Castros coup in Cuba. Cuba, a historically large supplier of sugar to the United States, was penalized by an amendment to the Sugar Act that redistributed the countrys quota and ultimately benefited U.S. sugar producers. Although Congressional support for the U.S. sugar industry would become increasingly important in later years, the Cuban situation had only a limited effect on domestic sugar production. With the early 1970s came cutbacks in planted acres for American Crystal. In 1973, amidst depressed conditions in the industry, Red River Valley acreage was at 150,000 and trending downward. The company was then operating only six of its 11 plants (four of which had become mainstays of the Red River Valley economy) and had curtailed any plans for future development. As Steve Brandt wrote in Corporate Report Minnesota: American Crystal Sugar was a moribund Denver-based company, held by a trust that was content to reap company profits for philanthropic activities that had been laid down by the firms founding family. Management seemed bent on restricting operations.

Members of the Beet Growers Association had for some time recognized the gravity of the situation, andhoping to capitalize on possibilities for the future, if plant improvements and other actions were undertakenhad already made plans in late 1971 to acquire a nine percent interest in American Crystal that was up for sale. The Association was headed by executive secretary Aldrich Bloomquist, who in a letter to Crystal executives proposed at the same time an ambitious alternative plan: the sale of the entire company to the growers. By February 1973, the $66 million deal was sealed, with approximately one-third of the money to come from area farmers (through $100 per acre equity stakes) and the remaining two-thirds through long-term financing from the Bank for Cooperatives in St. Paul.

In 1974, its first full year as a farmer-owned cooperative, American Crystal announced plans for a new $40 million plant, to be built adjacent to the original East Grand Forks factory, which would be renovated at the same time. Together, the improvements would allow the company to expand acreage by up to 14 percent, a growth-oriented move the Growers Association had fought for repeatedly, and increasingly unsuccessfully, during the latter years of outside ownership. The company also grew during the 1970s by absorbing the Red River Valley Cooperative, which was proceeding with the construction of a factory in Hillsboro, North Dakota, at about the same time as the East Grand Forks expansion. Meanwhile, two additional Midwestern sugarbeet co-ops were chartered, both in 1972. One was a North Dakota group called Minn-Dak Farmers Cooperative (Minn-Dak), which formed in the Wahpeton area and proceeded to dedicate a plant there before the 1974 harvest. The other was Southern Minnesota Beet Growers Cooperative (SMBGC), which was established after that areas Growers Association received word in 1971 that the Chaska plant was due to close forever at the end of the season. SMBGC began construction of their $60 million plant, located east of Renville in southern Minnesota, in early 1973. In an early sign of partnership, American Crystal managed the plant until 1978, when SMBGC took control.

The timing of all of this heady growth in the sugar bowl could hardly have been more fortunate, for sugar prices were just about to skyrocket. Although U.S. farmers were typically prevented from suffering, or benefiting, from volatility in sugar prices, a new farm bill completed in 1973 contained no such stipulation. Egerstrom summarized the unusual situation: American fanners produce about half the sugar consumed annually in the United States. The rest is surplus from other sugar countries that sell most of their exports under contracts at fixed prices. There werent surpluses of anything during the early 1970s. Sugar crops around the world that were spared drought were raked by hurricanes and other natural problems. American Crystal and the Red River Valley beet growers were in for a windfall. World sugar prices shot up from about 15 cents a pound to as high as 70 cents. As Bloomquist remarked, We had fanners who recovered their entire investment in the co-op that first year. Of course, sooner or later the opposite scenario would occur, as in 1977 when a worldwide sugar surplus developed. American Crystal and its fellow co-ops have since successfully lobbied for a strong national sugar support program, despite occasional opposition from consumer groups and food processors.

In 1984, American Crystal joined Minn-Dak and SMBGC as a partner in Midwest Agri-Commodities. Headquartered in Corte Madera, California, near San Francisco, Midwest was established to market beet byproducts, namely molasses and pelletized pulp, which was used principally as feed for dairy cattle. In 1993, Japanese buyers represented Midwests largest customer base, purchasing some 63 percent of the pulp produced by Midwest, a figure that in turn represented more than 60 percent of all beet pulp imported by Japan. European markets were also a key destination for the three co-ops byproducts.

In June 1991, American Crystal announced plans to construct a $31 million molasses desugarization plant at its East Grand Forks site in order to increase the co-ops production capacity. Desugarization involves extracting approximately 86 percent of the sugar contained in the molasses produced as a byproduct during sugar production. The facility was expected to produce some 130 million more pounds of sugar from the same tonnage of beets then being processed. Due to delays involving the Minnesota Pollution Control Agency, the plant was not completed until just prior to the 1993-94 processing campaign.

By 1993, as a cooperative American Crystal had invested over $200 million in plants, equipment, improvements, and research designed to enhance efficiency and increase profitability for its members. By almost all accounts the money has been well spent. Not only does the cooperative generate an estimated $1 billion annually to the economy of the Red River Valley, but it also continues to set high industry standards for quality while simultaneously setting new records for sugar production (1.9 billion pounds of sugar in 1993), total net beet payment ($284 million), and sugar sales (1.8 billion pounds). In addition, while more than 80 percent of the co-ops sugar was purchased by food processors, including General Mills, Sara Lee, Nestle, Hersheys, and Kraft, the companys namesake brand of packaged sugar ranked number one among retailers in the upper Midwest.

Regarding the co-ops future, CEO Joseph P. Famalette was optimistic. A former executive with Minnesota-based processor International Multifoods, Famalette was hired in 1991 to replace retiring CEO Al Bloomquist. He told Forbes in July 1994 that within two years American Crystaldue to its ongoing push for higher efficiencycould sustain its profitability even if the current import quota system favoring U.S. sugar producers were eliminated. He also added that co-ops, through prudent cross-investment, could steadily advance toward the goal of evolving into major food companies themselves. Forbes writer Norm Alster commented that American Crystal and another sugar beet co-op will invest $51 million in Northern Com Processors. This will give the two beet producers 51% of NCPs equity, with farmers individually owning the other 49%, Famalette observed. If I have flour, sugar and high-fructose corn syrup, there arent a lot of food products I cant make.... This is a revolution, and youre just beginning to see the pieces of it coming together.

Affiliated Companies: Midwest Agri-Commodities; ProGold; United Sugars Corporation.

Further Reading

Alster, Norm, Getting the Middlemans Share, Forbes, July 4, 1994, pp. 108-09.

Brandt, Steve, Poor Prices Put Crystal on Spot with Beet Farmers, Minneapolis Tribune, March 29, 1982, pp. B3-B4.

Brandt, Steve, Sweet Deal, Corporate Report Minnesota, January 1986, pp. 91-6.

Cereal Investigation Doesnt Concern Beet Fiber Producer, Star Tribune (Minneapolis), July 9, 1989, p. 4B.

Company News, Star Tribune (Minneapolis), June 26, 1991, p. 2D.

Cooperatives Pool Beet Production, Star Tribune (Minneapolis), December 27, 1984.

Ebeling, Walter, The Fruited Plain: The Story of American Agriculture, Berkeley: University of California Press, 1979.

Egerstrom, Lee, Sweet Profits: Red River Valleys Sugar Beet Goes on with Savory Sales for American Crystal, Pioneer Press (St. Paul), December 10, 1984, pp. 1, 9-10.

50 Years in the Valley, Moorhead, Minnesota: American Crystal Sugar Company, 1976.

Johnson, Rona K., Red River Valley Beet Harvest Set to Start, Agweek, August 29, 1994, p. 29.

Jones, Jim, Growers Soured by Sugar Bill Loss, Minneapolis Star, October 25, 1978.

Kennedy, Tony, Crystal Sugars New CEO Happy to Run Own Show, Star Tribune (Minneapolis), February 10, 1992, p. 2D; 3 Sugar Beet Co-ops Sign Merger Deal, Star Tribune (Minneapolis), November 3, 1993, p. 3D; Three Sugar Co-ops Are Planning to Join Forces, Star Tribune (Minneapolis), March 15, 1993, p. IB.

Phelps, David, Organized, Well-Financed Lobby Effort Helps Make Life Sweet for Sugar Growers, Star Tribune (Minneapolis), March 19, 1987, p. 10A.

President of Crystal Sugar Co. Beats Ouster Bid, Then Resigns, Star Tribune (Minneapolis), January 21, 1986, p. 11B.

Schmickle, Sharon, Red Rivers Beet Boom Means a Bust for Belize, Star Tribune (Minneapolis), April 16, 1989, p. 25A.

Struck, Myron, American Crystal is Top State PAC, Star Tribune (Minneapolis), July 11, 1988, p. 4D.

Sugar Glut May Lead to Sales Quotas, Star Tribune (Minneapolis), April 7, 1993, p. 3D.

Jay P. Pederson

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