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Sugar beet rot causes $33 million loss; grower payments end
Losses suffered by Michigan Sugar Co. could reach $33 million because of rotting sugar beets, according to Dick Leach, director of government and community relations with the farmer-owned cooperative.
Originally estimated at a four percent loss due to persistent warm weather, the rotting sugar beet estimate "snowballed" to 15 percent of the 5.5 million tons growers delivered, causing the company to tell its grower-owners that payments have ended, Leach said.
"We sent out a letter in late February that stated there would be no more grower payments for the 2004 crop," Leach said. "Growers have gotten about $24 per ton, and there will be no more. At this point we project that farmers will take a $7 to $9 per-ton loss."
In a normal year, Leach said, growers get 65 percent to 70 percent of their crop payments in December, followed by payments in April if the crop was a good one, September (not always) and in October, after the books have been closed and audits completed.
Because of the loss, growers have taken the rotted beets and spread them back onto their fields, where they provide some fertilizer value.
Also as a result of the rot problem, the company reduced its acreage allocation - what farmers will plant - for the 2005 crop by 6 percent. An extremely optimistic farmer might say that's not all bad, Leach said.
"There's certainly no good side to the losses we've been taking, but if we had processed as we would have in a normal year, the cut in acreage would have been even greater," Leach said. "We would have had a great deal of sugar to carry over, so now that's shrinking to the point where it's manageable." The 2003 carryover is estimated at 700 thousand hundredweight.
Even with that positive spin, it's difficult to say that losing 15 percent of the crop can be beneficial, Leach said, especially since this is the first year that Michigan's sugar beet growers are consolidated as owners of one company. Michigan Sugar and Monitor Sugar merged last fall.
"I think the growers understand the problem because they own the company," he said. "But this is still a huge loss for them. Beets have been a good, stable crop for the most part. In all my years as a grower and working with the company, I've never seen a year like this."
The problems began during harvest last fall, Leach said.
"We had a warm, good harvest, and it was hard to get the beets down to 50 degrees or below before we started to pile them," he said. "Then into November, we still had warm days, but we took the beets anyway because the farmers had to get to their corn and soybean harvests. Then it stayed warm through December and in the first part of January, we had warm rains that soaked in. Beets never had the chance to get cooled down."
As a result of this year's losses, Leach said the company is reexamining how things are done.
"Everybody is looking at everything," he said. "We'll look at sugar beet varieties, possibly starting the processing earlier to get them processed before they deteriorate; and maybe moving the piles around. None of this is set in concrete, because you can't really point to anything we did wrong. It's just that conditions were tremendously bad, and we hope it never happens again. This is a bitter pill to swallow, but farmers live on hope, and we'll go forward. We're still a strong company, and it's time to get ready for the next crop."
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