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American Crystal Sugar Co.'s farmers are looking at a bumper crop as the Moorhead-based cooperative ramps up to process sugar beets with replacement workers for the second consecutive harvest.
With full-scale harvest slated to begin this week, Crystal says it can handle the big crop. The company argues that with a year of lockout experience under its belt, operating challenges will be fewer and bottom line prospects better.
"We're really happy with the way our factories are running," said Brian Ingulsrud, a Crystal Sugar vice president. "We expect improvement in our financial results."
The lockout of 1,300 workers, one of the longest and largest work stoppages in recent Minnesota history, crimped Crystal's financial results in its most recent fiscal year. Lockouts tend to raise a company's operating costs and can lead to a decrease in production efficiency.
The sugar beet workers union believes this year's big crop will tax replacement workers more than last year. Union leaders say the company is still relying on expensive replacement workers for top-paid skilled jobs.
"It's much more of a challenge because they have more beets to process," said John Riskey, head of Local 167G of the Bakery, Confectionery, Tobacco Workers and Grain Millers union.
Crystal Sugar, the nation's largest beet sugar producer, on Aug. 1, 2011, locked out union workers at its five processing plants -- three in northwestern Minnesota and two in North Dakota -- over a contract dispute.
While the farmer-owned cooperative has offered a raise of 13 percent over five years, it has also proposed health care cuts and contract language that would erode some union rights, notably seniority.
Workers, voting in both August and November 2011, rejected the contract by at least 90 percent. Some workers this spring called for a third vote, and the contract was shot down again on June 23, this time by 63 percent.
An exodus of union workers from Crystal has accelerated since the last vote. About 400 have told the company they've quit or retired, up from 240 in late June. Many have simply moved on to other jobs.
Ingulsrud says the pace of workers crossing the picket line has also picked up since the June vote, but he declined to give numbers. Union leaders say picket line crossings remain minimal.
John Budd, a labor relations expert at the University of Minnesota's Carlson School of Management, said that when a labor conflict lasts this long, workers' economic duress often pushes them to work elsewhere or reconsider their old jobs, despite standing ground on principle for months.
"Either you're drifting away, or you're drifting back," he said.
By law, replacements in lockouts are temporary, not permanent. And lockouts tend to be short-term corporate strategies, given the cost involved and the potential for production snafus. "What happens in most cases is that [a lockout] is not a long-term sustainable practice," Budd said.
Lockout-related operating costs nicked Crystal Sugar's profits, with its farmer-growers getting $59 per ton of beets in its fiscal year ending in August. That's well below the $73 per ton received by farmers at rival Red River Valley beet co-op Minn-Dak Growers.
In August 2011, Crystal began bringing in replacement workers recruited by labor contractor Strom Engineering. It was an expensive move by nature. Those workers need to be housed while working in Red River Valley plants, a cost Crystal ultimately bears.
Crystal started hiring local replacement workers late last year. By June, 70 percent of replacements were local and 30 percent from Strom, Crystal has said. Ingulsrud said the percentage of locals has since increased, but he declined to give numbers. Strom workers are in high-skilled Crystal jobs.
Union leaders are skeptical of the company's claim, saying Crystal is still using more Strom workers than they were hoping for. "They have not been able to find the skilled people to replace their union workforce," Riskey said.
Ingulsrud said many Strom employees at Crystal worked during last year's production season, making them more seasoned. Plus, local replacements underwent extensive training this summer during the sugar mills' down time. "Our productivity is significantly better than last year," Ingulsrud said.
Beet plants are idled in June and July and usually start up again in mid- to late August with "pre-pile" processing. Pre-pile began Aug. 4 this year -- the earliest ever -- courtesy of early planting.
During pre-pile, which runs until about Oct. 1, only 10 percent of the crop is harvested, though 15 percent has been this year. On Oct. 1, full-scale harvesting normally starts as beets are stocked in huge outdoor piles for winter and spring processing.
Record sugar beet yields are expected in Minnesota this year, according to the U.S. Department of Agriculture. Crystal is forecasting 25 tons to 26 tons of beets per acre, compared with 20.5 tons last year. And sugar content -- as a percent of a beet's weight -- is higher than normal this year.
Despite Crystal's experience with the lockout, the big crop could still pose an operational challenge. "This year, I think it will probably be a more robust test for them," Budd said.
Mike Hughlett • 612-673-7003