American Crystal Sugar, A Grower-Owned Cooperative

Cartoon by Trygve Olson, in The Forum of Fargo-Moorhead, 01/18/2012

Nobody needs a crystal ball to see the increasingly grim situation ahead for communities in the Red River Valley, the longer American Crystal continues the lockout.
But that’s the future. How about the past? How did we get here?

The Fargo Forum recently published a brief history of the American Crystal Sugar Company, courtesy of the company itself.

Since I always strive to provide proper attribution, but find it very difficult to read articles at Forum-owned newspapers, with Forum’s practice of putting all articles behind a paywall a mere 7 days after publication, no matter how long OR short the article may be, here it is:


A brief history of American Crystal Sugar Co.

By: Dave Olson, INFORUM

1890 – Henry Oxnard and others open a beet sugar factory in Grand Island, Neb. The next year, Oxnard builds factories in Norfolk, Neb., and Chino, Calif.

1899 – Oxnard opens a factory in Ventura County, Calif. Later that same year the four plants are combined into American Beet Sugar Co.

1923 – Minnesota Sugar Co. announces plans for a beet sugar factory in East Grand Forks, N.D.

1924 – American Beet buys Minnesota Sugar Co. and its plants in Chaska, Minn., and Mason City, Iowa.

1929 – American Beet takes over Amalgamated Sugar, which has factories in Utah, Idaho and Montana.

1934 – American Beet changes its name to American Crystal Sugar Co. That same year, growers begin to organize what will become the Red River Valley Sugarbeet Growers Association.

1948 – American Crystal opens Moorhead plant.

1954 – Company opens plant in Crookston, Minn., its third in the Red River Valley.

1965 – American Crystal’s Drayton, N.D., plant opens.

1972 – In April, 1,500 sugarbeet growers vote to decide whether the association should attempt to buy American Crystal. Seventy percent say yes.

1973 – Crystal Grower’s Corp. formed as an entity to merge with American Crystal, OKs $86 million purchase.

1973 – American Crystal growers purchase American Crystal Sugar Co. and form a cooperative, uniting the company and the Red River Valley Sugarbeet Growers Association.

1974 – New headquarters opens in Moorhead.

1975 – After a merger with the Red River Valley Cooperative, American Crystal opens its Hillsboro, N.D., factory.

1981* – Union workers go on strike. Strike lasts 28 days.

1982 – American Crystal sells Clarksburg, Calif., plant. Remaining factories are all in the Red River Valley.

1993 – American Crystal, Minn-Dak Farmers Cooperative and Southern Minnesota Beet Sugar Cooperative form United Sugars Corp. to cooperatively market their sugar.

2002 – American Crystal purchases plants in Montana, Wyoming and Texas.

Source: American Crystal Sugar Co. website

There. Wasn’t that informative?

So we have learned that American Crystal Sugar is a cooperative. A grower-owned cooperative. But does American Crystal Sugar ACT like a cooperative? If it has historically acted like a coop, does it still act that way now? You might want to read the following article for a little background before you weigh in.

Some question if Crystal is still acting like a co-op.

By Dave Olson, The Forum
Crookston Daily Times
Posted Jan 23, 2012 @ 12:15 AM

Fargo, N.D. — As the lockout of 1,300 union workers at American Crystal Sugar Co. stretches into a sixth month, a question is getting asked: Is the cooperative formed by area farmers in 1973 more concerned with the financial bottom line than it is with the community-based ideals co-ops traditionally aspire to?

“The question is a tough one, and many, many people are asking it,” said Bill Patrie, executive director of Common Enterprise Development Corp., a nonprofit organization in Mandan that helps co-ops and other mutually owned businesses form.

Patrie said it is not unusual for a successful co-op to evolve into a business far different from its origins.

“In the case of American Crystal — and many other co-ops of its age or financial size — there is a morphing into a more corporate model, where cash returns are the measure of the company’s success rather than the service provided to its members,” Patrie said.

At its simplest, a cooperative is a business enterprise that provides services to its members, said Patrie, who added that the founding purpose of American Crystal was to process the sugar beets of its members and to sell the sugar.

He called the purchase of the company by growers in 1973 a proactive move.

“If no one would have bought it, they would not have been able to sell sugar beets,” Patrie said.

At least, that was the fear.

In the late 1960s and early 1970s, tensions were high between growers and American Crystal, a corporation that operated out of Denver, Colo., and whose roots reached back to the 1890s, when a man named Henry Oxnard opened a beet sugar factory in Grand Island, Neb. Over the course of nearly a century, the company evolved into a large, privately held business with facilities in several parts of the country.

In the early 1970s, area sugar beet growers were becoming increasingly concerned about the company’s lack of responsiveness to grower requests, including calls that beet piling stations be expanded and improved.

Farmers were also aware of the company’s tendency to close unproductive plants. And with four of American Crystal’s seven facilities located in the Red River Valley, growers were concerned local facilities could be targeted.

When growers voted to buy American Crystal Sugar in a deal worth $86 million, they did so out of a desire to control their own future, said Minnesota State University Moorhead archivist Terry Shoptaugh, who wrote a book on American Crystal’s history.

“When they (growers) bought this company and turned it into a cooperative, that made them masters of their own destiny,” Shoptaugh said. “They could bring in the people they wanted to manage the company, and they would grow the beets that became the sugar.”

As the co-op grew stronger over the years, management has displayed what might be seen as corporate muscle-flexing, with the current lockout being just one of the recent examples.

The co-op also embarked on a legal battle in a number of area counties in the last decade challenging the amount of property taxes the company pays. As a result, its tax burden was eased somewhat.

In Minnesota’s Clay County, where American Crystal is one of the county’s largest taxpayers, a settlement brought about by the litigation is expected to lower the co-op’s annual tax bill by more than $180,000 starting in 2013.

American Crystal has also established itself as a major political donor.

According to the website, the co-op’s political action committee routinely spent between $300,000 and $600,000 each election cycle through the early 2000s.

That spending leapt to $2.1 million during the 2008 election cycle, according to
One benefactor of that spending has been Rep. Collin Peterson, D-Minn. In the current election cycle, American Crystal’s $10,000 PAC contribution to Peterson’s campaign committee puts the co-op at the top of Peterson’s donor list.

Asked about whether the cooperative has evolved, the new chairman of American Crystal’s board, Robert Green, said in a written statement that its goals have remained the same — growers banded together because they saw potential to improve the business.

“Growers knew that the Red River Valley’s fertile soil, ample rainfall, and frigid winters offered an ideal mix for expanding sugar beet acres, extending sugar beet storage, and ramping up factory throughputs,” Green wrote.

“The original goals are still in place today — to find every way possible to become more efficient at improving our productive capacities from the farm through the factory to the customer,” Green said.

He added that decisions made by the co-op board are intended to fulfill long-term strategic goals, including producing low-cost sugar.

“We have to make changes that make us competitive,” Green said.

The birth of a co-op requires a team effort, according to Patrie, and he said concern for community — one of the seven principles of co-op formation — is a big part of that.

The other six principles that co-ops live by, as delineated by the International Cooperative Alliance, are: voluntary and open membership; democratic member controls; member economic participation; autonomy and independence; education training and information; and cooperation among cooperatives.

“It’s not just a talking point,” Patrie said of the community/co-op connection, adding that all cooperatives grow out of a local setting and their formation requires such a struggle that the roles of workers, managers and owners become blurred.

“They’re all one thing,” he said.

But while a sense of common mission is essential when a co-op starts, it can fade when a business begins hitting its stride.

“Now you have three separate positions, and everybody’s squaring off,” Patrie said. “You get this division where people start playing roles, copying those roles from the rest of the corporate world.”

In the current labor dispute, it’s difficult to know who is being unreasonable and who isn’t, said George Sinne, a former North Dakota governor who once worked as a lobbyist for American Crystal and whose family was once heavily involved in sugar beet farming.

Sinner said these days he is too far removed from the situation to be privy to behind-the-scenes information. But he doesn’t believe the issues surrounding the lockout are major.

“It may be there are some stubborn people on both sides,” Sinner said, adding that if that is the case, “people’s lives are at stake, and they better not play the tough-guy game too long.”

Over the course of the lockout, union representatives have said they are looking for a fair contract, one that preserves benefits and job security.

American Crystal CEO Dave Berg has said the company’s bargaining position, including a proposal that workers begin to pay something toward health insurance premiums, is aimed at keeping the co-op competitive in a global market.

Sinner said he was told by a source he trusts that the company’s board — not management — is calling the shots.

“Most of those board members are people like me who know these workers, love ‘em, work with ‘em and are not inclined to be selfish. And yet here we sit,” he said.

Green said in his written statement that the co-op board and company management “are in complete alignment on the issues under discussion and the company’s positions throughout the negotiations.

“While we all remain committed to reaching a fair agreement that gets our employees back to work as soon as possible,” Green added, “our board members and shareholders remain completely supportive of and in agreement with the company representatives handling the negotiations.”

Asked by a union member some months ago about what he thought of the issue of job security, Sinner said his answer focused on the potential for technology to change the workplace.

“I said, ‘You’ve got to remember, technology is moving at an incredible rate, and many of the tasks are probably being monitored by computer. That takes a highly sophisticated employee who is in touch with management. You can’t ignore that and think things must go on as they were,’ ” said Sinner.

Yet, Sinner said, it is clear today that the industry is a profitable one. He listed several factors he believes account for that:

— Sugar program legislation changes that eliminated costs to taxpayers. The program’s main way of protecting domestic growers is by limiting how much foreign sugar can come into the United States.
— A better market for sugar since South America began using much of its sugar for ethanol production
— A relatively weak dollar that makes U.S. products more competitive

“I think it’s a mistake to credit either the (company) management or any particular person with the progress the company has made,” said Sinner, who expressed sadness over the current labor situation.

“I don’t know what can be done. I pray that they get it settled,” he said.

Patrie, too, is hopeful differences can be resolved.

“My hope,” he said, “is that American Crystal is not like a typical cooperative evolving and that it will find within it this unusual ability — which almost no co-op I know has — to reform itself.”

What if, Patrie asked, American Crystal offered workers an ownership stake in the company?

“That would be an exciting way to look at it,” he said, adding he would be willing to take a delegation of workers and company officials to a region of Spain where he said employee-owned co-ops have a long record of success.

“The data is in. The studies have been done,” Patrie said.

American Crystal officials declined to discuss the suggestion of employee ownership. But Patrie sees it as way out of the current dispute.

“When employees own the enterprise, they tend to get higher wages; they stay longer; companies are more profitable and adopt technologies quicker,” he said. “When it’s your enterprise, you take care of it.”

Copyright 2012 Crookston Times. Some rights reserved.

So there you have it. Is the American Crystal Sugar Company — a grower-owned cooperative — still acting in the spirit of the principles of the cooperative movement? What are those principles again?

The ICA’s seven guiding principles of co-operatives are more exactly known as the Rochedale Principles, laid out in 1844 by the Rochdale Society of Equitable Pioneers in Rochdale, England.

Here are the 7 principles of cooperatives, as included in the ICA’s 1995 Statement on the Co-operative Identity:

1st Principle: Voluntary and Open Membership
Co-operatives are voluntary organisations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.
2nd Principle: Democratic Member Control
Co-operatives are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary co-operatives members have equal voting rights (one member, one vote) and co-operatives at other levels are also organised in a democratic manner.
3rd Principle: Member Economic Participation
Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.
4th Principle: Autonomy and Independence
Co-operatives are autonomous, self-help organisations controlled by their members. If they enter to agreements with other organisations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy.
5th Principle: Education, Training and Information
Co-operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives. They inform the general public – particularly young people and opinion leaders – about the nature and benefits of co-operation.
6th Principle: Co-operation among Co-operatives
Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures.
7th Principle: Concern for Community
Co-operatives work for the sustainable development of their communities through policies approved by their members.
(emphasis mine)

In 2012, is the American Crystal Sugar Company, a grower-owned cooperative, still acting like a cooperative? Discuss. ~

01-24-2012: New Google News feed link!

Nearly SIX FULL MONTHS have gone by since August 1, 2011, when American Crystal Sugar locked out its 1300 employees who are union members.

As the lockout continues, I’ve reconfigured the ACS- and lockout- related news feeds appearing here.

For links to the latest articles appearing anywhere on the web that mention “American Crystal Sugar”, click here:

If for some reason the Google News format doesn’t work for you, you might want to try the Grand Forks Herald American Crystal Sugar RSS Feed located in the sidebar. ===>

If you are looking for my Google +1 shared items (which more often than not concern topics other than ACS and the lockout), please click here:


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