Beet harvest will test American Crystal Sugar's lockout strategy

  • Article by: MIKE HUGHLETT , Star Tribune
  • Updated: August 23, 2011 - 9:21 PM

In the coming weeks, American Crystal Sugar will start beet processing with replacement workers. Can they do the job without sacrificing productivity?

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Steve Jacobson in his beet field this month at his farm near Moorhead. Jacobson takes his beets to American Crystal Sugar’s nearby processing plant, and he’s concerned that the lockout will hurt the company’s image.

Photo: Leah Millis, Star Tribune

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It's been three weeks since American Crystal Sugar locked out 1,300 workers in a contract dispute, but the company's biggest economic test of the lockout is still to come.

Weather-related crop setbacks have delayed the harvest, so American Crystal's five Red River Valley plants -- while teeming with replacement workers -- aren't yet processing beets.

And when the Moorhead, Minn.-based company starts up those factories, it will be relying on a relatively inexperienced workforce, upping the risk of production shortcomings, labor economists say.

Ultimately, that risk is borne by the 2,800 growers who own American Crystal Sugar, a cooperative. Their income is partly determined by how efficiently the lumpy beige roots from their fields are transformed into fine white sugar.

One director, North Dakotan William Hejl, wrote a letter to the editor of two Red River Valley newspapers explaining the growers' position, though the letter notes only his status as a farmer, not a director.

Farmer-owners "thought long and hard about the very difficult lockout decision," Hejl wrote. In the long term, the company's labor contracts must be changed "to make sure our farmer-owned cooperative can compete."

Farmers, most of whom have been reluctant to talk publicly, effectively approved the lockout in the first place. American Crystal's 15 directors are beet farmers, elected by fellow beet farmers.

Neil Widner, board chairman and a Stephen, Minn., beet farmer, declined to comment. Other directors did the same or didn't return calls.

One farmer who would speak, Steve Jacobson, said "most growers feel American Crystal made a pretty fair offer and that [locked-out workers] should reconsider it. ... People would like to see this thing settled.

Worries about firm's image

"Many growers are concerned about the image of American Crystal, and that locking out workers may put it in a bad light," said Jacobsen, who farms near Hendrum, Minn.

American Crystal is a well-known brand, and the company is a major economic force in northwestern Minnesota. Until the lockout, labor relations had long been good, and "that's no accident," said Paul Borgen, a Dilworth-area beet farmer and former member of American Crystal's board.

Crystal's farmers and its workers have for years worked together on sugar policy issues in Washington, D.C., "lobbying side by side to secure our mutual futures," he said. And of course, they're all from the same community, unlike owners and workers in typical corporations.

When the company threatened a lockout in mid-July, Borgen found out about it from a worker who's a friend and fellow motorcycle enthusiast. Jacobson, who's also a Norman County commissioner, heard about it from union workers -- "typical hard working guys," as he put it -- in a local restaurant.

American Crystal, the largest U.S. beet sugar producer, locked out its workers on Aug. 1 after its labor contract expired. A day earlier, members of the Bakery, Confectionery, Tobacco Workers and Grain Millers union had resoundingly voted down the firm's contract offer.

It featured a $2,000 signing bonus and a 13 percent wage increase over five years, the majority on the front end. But it also would have brought union workers into the company's health care plan, upping their costs. And it included contract language that union members claim would erode their job security.

Replacements at the ready

Since the lockout started, no contract talks have been held and none are scheduled. Meanwhile, about 950 replacement workers are in the plants, and over 300 more are set to join them once the harvest begins.

Replacement workers are "very expensive," said Aaron Sojourner, a labor economist at the University of Minnesota's Carlson School of Management. They usually get paid as least as much as the workers they replace, he said. And they're often not locals, so they must be put up in hotels and motels and -- for security's sake -- driven to and from the company's plants in van pools.

Productivity suffers because the replacements lack the experience of seasoned union workers, even those doing low-skill jobs, Sojourner said. Management is betting that the long-term gains of a favorable contract will offset any short-term losses.

Jeff Schweitzer, a spokesman for American Crystal, said the company "recognizes there is a learning curve" for replacement workers. But they are "eager to learn" and the company has given them plenty of training, he said. "Will we get the exact same efficiency? That remains to be seen. But our goal is to maximize throughput."

American Crystal's -- and thus beet farmers' -- bottom line depends on several factors, including how efficiently the company's five plants extract sugar from beets. Jacobson said he's comfortable that "management will put workers in place to efficiently process the crop."

Growers like Jacobson are already under pressure because of a relatively weak crop. American Crystal won't even begin processing until Sept. 8. It prefers to get its factories, which run nine months a year, humming this month. They go full-tilt on Oct. 1 when the harvest kicks into high gear.

The company is estimating a yield of 20 tons per acre this year, down from a five-year average of 24.6 tons. "We're struggling to raise a decent sugar beet crop this year," Jacobson said. "It will be less than average at best in this location."

Mike Hughlett • 612-673-7003

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  • Employees walked down the road with picket signs outside the American Crystal Sugar plant in Moorhead during the first day of a lockout Aug. 1. Beets still aren’t being processed in the Red River Valley because weather has delayed the harvest.

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