Perseverance keeps Crystal business sweet
By Gerry Gilmour
The Forum - 10/16/1999

October in the Red River Valley brings shorter days, cooler temperatures and sugar beet trucks rumbling 'round the clock along rural roads.

The close of another harvest nears for American Crystal Sugar Co. The 100-year-old Moorhead company, though firmly rooted in this valley, can trace its roots to another.

American Crystal today is the No. 1 producer in a colorful and competitive industry. Agricultural economists estimate the business annually has a $1 billion impact on the valley.

It's a business that has persevered through droughts, warm winters, rainy springs, disease, floods, low prices, inflation and mechanical breakdown.

"It has taken generations of dedicated shareholders and employees, who truly cared about committing themselves to mapping the future of this company and then delivering on those promises, to bring us to today," company president and chief executive officer Jim Horvath said.

According to "A Heritage of Growth," a glossy history recently published by American Crystal Sugar Co., the beet wasn't considered as a commercial source of sugar until the late 1700s, when a German chemist produced beet sugar crystals with the same chemical properties as cane sugar.

King Frederick William III of Prussia built the first beet sugar factory in 1802. France, facing a cane blockade, became a major sugar beet producer in 1811, when Napoleon's scientists duplicated the Prussian factory's results.

Early American attempts to establish beet plants were failures, according to the history. The first successful factory wasn't built until 1870, in Alvarado, Calif.

Among the early beet sugar pioneers was Henry Oxnard.

The son of a wealthy Brooklyn cane refiner and his brothers had managed the family business in Brooklyn until it was sold to a consortium. The brothers went to work for the consortium. Henry Oxnard, who had lived in France, following a tour of European factories decided he could establish a network of beet sugar factories in the United States.

He opened his first in 1890 in Grand Island, Neb. Plants followed in Norfolk, Neb., and Chino and Ventura County, Calif.

The four plants operated independently as four companies until March 24, 1899, when Oxnard and his investors met in New York City, and formed the American Beet Sugar Co., which today, we know as American Crystal Sugar Co.

Oxnard's new company built its first plant near Rocky Ford, Colo., in the Arkansas River Valley. Two additional American Beet Sugar plants soon followed.

About the same time Oxnard was opening his Grand Island plant, E.J. Babcock, the first dean of engineering at the University of North Dakota in Grand Forks, was carrying out field experiments showing that sugar beets grown in the Red River Valley contained high sugar contents.

Randolph Probstfield, Clay County's first settler, years earlier had demonstrated that beets could be grown in the valley. He produced his first crop in 1859.

Nine farmers working with Babcock in 1890 produced beets with sugar contents higher than those being grown in California and Nebraska. One East Grand Forks, Minn., farmer produced a crop with a whopping 20 percent sugar content.

Babcock urged farmers to consider beets as a way to diversify and generate higher economic returns. In 1910, the Grand Forks and East Grand Forks commercial clubs formed committees to explore the possibility of attracting a sugar processing plant to the valley.

That same year, American Beet Sugar Co. stock began trading on the New York Stock Exchange.

The first Red River Valley beets, grown in the 1920s in Polk County, went to Chaska, Minn., for processing in a Minnesota Sugar Co. plant.

About the same time, American Beet officials were looking at the Red River Valley. According to "A Heritage of Growth," a company chemist reported to the board of directors that the valley had everything they were looking for: excellent soil, a convenient transportation system, ready supply of water and enthusiastic growers.

American Beet acquired Minnesota Sugar Co.'s plants in 1924 and in 1925 began construction of a $1.2 million processing plant at East Grand Forks. In anticipation of its completion, 500 farmers in 1926 began growing sugar beets.

In 1934, American Beet became American Crystal Sugar Co., reflecting the Crystal Sugar brand name of its sugar.

The East Grand Forks plant by then was the company's top producer, and plants elsewhere were closed. The Red River Valley became the company's prime production area, though Denver was the company's corporate base.

Plants were added at Moorhead in 1946 - the same year the U.S. government eliminated World War II sugar rationing - and Crookston, Minn., in 1954.

A fourth valley plant, at Drayton, N.D., came along in 1964. The early 1960s also saw a move by the Red River Valley Sugarbeet Growers Association to expand its power in the industry.

Al Bloomquist, a former newspaper editor for the Mankato (Minn.) Free Press, was hired away from Western Beet Sugar Producers, a marketing organization for American Crystal Sugar and other sugar producers, as the growers association's first exectuive secretary.

"I wouldn't have known a sugar beet from a load of turnips when I saw my first sugar beet," said Bloomquist, a Willmar, Minn., native who today resides in Moorhead.

Once on the job for the growers, he began acquiring small amounts of stock from other sugar beet companies. Armed with their financial information, he could compare how the growers were faring in their relationship with American Crystal Sugar.

The growers ultimately decided they could do better. They also began worrying about the company's future.

A majority of its stock was owned by interests of the Boettcher family of Denver, including the Boettcher Foundation.

Bloomquist said the growers initially set out to acquire enough stock to give them a seat on the company's board of directors.

Bloomquist said he found out that Archer Daniels Midland, a food giant, had recently tried the same tactic, only to back out when it became apparent that the Boettcher interests were not about to cede power in the company.

Bloomquist made a bold move. In a letter dated Jan. 28, 1972, he wrote a two-page letter to American Crystal Sugar president C.W. Briggs. In it, he said Red River Valley growers and non-growers wanted the opportunity to grow more beets.

"Would not your stockholders' interest of a return on their investment and the growers' interests be best served by selling out the growers at book value?" he wrote.

Bloomquist was surprised at the response. Briggs, during a meeting with Bloomquist at the American Society of Beet Technology conference in Phoenix, said the directors were interested. And why not: Book value was 66 percent higher than the company's stock was bringing on the market.

Growers, bankers, consultants and attorneys were quickly mobilized. At Moorhead attorney William Dosland's advice, the St. Paul legal firm of Oppenheimer, Brown, Wolf, Leach and Foster was hired.

"To this day I don't think the powers that be in Denver thought we could come up with the money to buy the company," Bloomquist said. "When we finally sat down in Denver, and we saw who we had on our team, I think they took an entirely different look at this thing."

Getting the banks on board early was critical, he said.

"All the banks in the valley then were what you could call ag banks. Their big portfolio was farming. They knew what an operating loan was, but I don't think many banks had ever loaned money to farmers to buy stocks," Bloomquist said. "Once you had all the banks on your side, you knew you had it."

Backed by the banks, 1,300 growers in 1973 raised $20 million in equity and borrowed $66 million.

The cooperative expanded rapidly, merging with an operating plant in Hillsboro, N.D., in 1974.

Fate was kind to the growers in the fall of 1974. The company and growers shared in a windfall from a great crop and high payments.

"If (the Denver-based company) had a year like that, they probably never would have sold," said Bob Levos, who retired last fall as American Crystal's vice president of agriculture, after 36 years with the company.

Levos got his first taste of the beet business early. His grandfather grew beets near Wheatland, N.D.

Had the growers not bought the company, he said, there would be fewer beets being grown in the valley.

"Beets are generally a very stable crop," Levos said. "Potato farmers have feast and famine years. Wheat and barley are sold when the farmer wants to sell. I think beets are a very stabilizing thing for the valley economy."

"If the beet industry would ever leave, the value of land in the valley would drop by at least half," Bloomquist said.

Bloomquist said American Crystal Sugar Co. in many ways served as a model for later grower-owned and initiated enterprises.

"The biggest thing it contributed to the economic well-being of the economy is that the grower found out that he could invest in his own business," Bloomquist said. "The fact that these guys were willing to do it made it possible."

Terry Shoptaugh of the Moorhead State University library has extensively studied American Crystal Sugar Co. and the beet industry. He said the buyout went against the farmer's ingrained distrust of big companies and banks.

"^They're part of the corporate structure," he said. "One of the interesting things is that, as a body, the growers own the company, but that doesn't mean they can walk in there and tell the company what to do."

By all accounts this has been an excellent harvest. Cool October temperatures - the ideal range is from 32 to 55 degrees - and, until Friday, little rain, allowed a majority of growers to lift and haul their beets.

The American Crystal Sugar campaign in most years is fought in that narrow fall window which can be abruptly closed by an Arctic snowstorm. It is the most intense harvest in the world, involving more than 2,000 growers aided by 3,000 seasonal workers. Some 45,000 truckloads a day are on the road at peak harvest.

The often-used $1 billion economic impact figure is based on payroll, property taxes, capital investments, construction, and manufacturing material purchases.

"The impact is huge," said Pat Benedict, one of the company's original board members. "One way to look at it is, what would happen if they shut the doors to the plants tomorrow? There would be a lot of unemployment and a lot of farmers looking around, wondering what to do."

Benedict's family grew 300 acres of beets when the farmers bought the company. Today, his family grows more than 2,300 near Sabin, Minn.

"It's one of the bright spots in agriculture right now," he said. "There are a lot of hopes and dreams riding on American Crystal right now."