Beets return to prominence: American Crystal Sugar share values show strength
GRAND FORKS, N.D.—American Crystal Sugar Co. stock share prices and trading ran steady to stronger in the trading season, which seems to be coming to a conclusion, says Jayson Menke, ag stock specialist at FNC Ag Stock LLC, in Grand Forks, N.D.
American Crystal of Moorhead, Minn., is a farmer-owned cooperative in which members purchase shares, which offer the right and obligation to deliver beets. Shares typically are bought and sold from harvest until spring.
FNC Ag Stock is a subsidiary of Farmers National Company. It helps facilitate sales of agricultural stocks that are non-exchange listed, including ethanol and sugar beet shares, including American Crystal.
In the fall of 2017, the FNC Ag Stock's initial sale was in mid-September. Sales started at $2,725 per share. The last sale so far was in mid-March at $3,100 per share. FNC Ag Stock was involved in transfers of 2,000 shares with an average price of $2,943 per share, which is about average for recent years.
The earliest FNC Ag Stock has seen sales shut off has been the middle of March. Last year some shares were sold until May 9 or 10. The latest has been May 12.
"All transfers require board approval from American Crystal," Menke says. Current sugar prices are allowing producers to make money.
One factor strengthening prices was that the American Crystal board in March increased their gross beet payment projection from $46 per ton to $48 per ton for 2018 beets. Sugar price projections don't always happen this time of year. Favorable marketing and a cold spring that helps with beet storage were factors in the increase.
One wild card in this year's sales is that, starting in 2018, American Crystal is requiring that all parties in a limited partnership must sign a notarized personal guarantee to American Crystal.
Five years ago Crystal went from a strong beet payment to a weak payment, due to market shifts. In one-year limited partnerships, some growers told their shareholder limited partners they wanted to not plant beets. Beet co-ops need to cover about $500 to $600 in fixed costs.
"Things needed to be tightened so everyone knew their responsibility," Menke says of the rationale. "Limited partners—with how the co-op laws are written—need to be at risk. The personal guarantee was created to make sure that everybody has skin in the game."
The new requirement seemed to have only "limited" impact, he says.
Another factor buoying beet shares demand is that as beet yields have increased, co-op members have been allowed to plant a smaller percentage of share acres.
Originally, a share of beet stock equalled one acre of production. In 2012, farmers could plant up to 88 percent of their share numbers. In 2018, farmers will be allowed to plant 73 to 78 percent of their share numbers.
Consequently, some farmers seem to be buying shares to help increase their farm's acreage closer to their original producing capacity, but aren't necessarily looking to expand significantly. Also, other commodity prices have become weaker.
"It's not to say that farmers can't make money on other crops this year, but beets have kind of returned to their prominence in the Red River Valley," Menke says. "Beets have made a lot of farms (financially successful) over the last 30, 40 or 50 years."