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Can’t beet it: Sugar executive says future of sugar beet industry looks bright with new grower-owned co-op
Inder Mathur knows the world of sugar. He has seen it from several points on the
globe.
It is with self-assurance born of experience that he posits that the future of the sugar
beet industry in the United States lies in co-ops.
BY JIM GRANSBERY
Of The Gazette Staff
"Grower-owned companies will be the successful ones in the future," Mathur said. "The long-term
commitment and the cost structures that come with a co-op make it a lot more competitive."
He sees the day when there might be one big co-op in the region.
"The more that join us, the stronger we’ll
become," he said.
Mathur, 48, is the new president and CEO of The
Western Sugar Cooperative, a grower-owned
company that completed the purchase of The Western
Sugar Co. this spring from the British firm Tate & Lyle,
the worldwide sweetener company founded in 1875.
The new co-op operates six sugar refineries –
including in Billings and Lovell, Wyo. – in four Western
states.
A long-time accounting executive with Tate & Lyle,
Mathur brings a financial expertise that the fledgling
farmer-owned business needs at this point. He faces
several challenges in his first season at the top.
In a co-op, one is more closely associated with
the shareholders, he notes.
Compared to working for a publicly traded stock
company, "Here you feel it," Mathur said. "They have
entrusted me with the responsibility to protect and
grow their investment."
That
investment
is
primarily
centered
on
the
number
of
acres
under
cultivation
and
the
vagaries
of
the
weather.
Mathur
said
the
co-op
has
sufficient
acreage
to
run
the
six
factories.
"But
not enough to run optimally,’ he said.
Sugar beet producers in the four states – Colorado, Nebraska, Wyoming and Montana – contracted 143,500
acres to the co-op for the first season. Rick Dorn, of Hardin, the chairman of the board of directors, earlier this
year said the company would like to hit 170,000 acres within the next year or two.
Those beets that got in the ground have been buffeted by the weather. A late freeze and drought conditions
in all four states threaten higher yields.
"We had to replant (frozen beets) in all regions," Mathur said. "About 30 percent. We are concerned about
how they will yield. We believe it will be enough to benefit both the co-op and the farmer.
"The other 70 percent are in fairly good shape. If the water situation holds, we’ll have a decent crop. And we
do want more acres, more beets."
"We want to run the co-op so farmers feel proud to own it and grow more acres with us," he said.
Beet farmers this year can also look to the new farm bill to help underpin their new venture.
"The farm bill is there to protect us from a drop in price," Mathur said.
Three items in the law will help reduce U.S. sugar production and eliminate some costs to farmers if prices
go soft again.
Sugar processors will again have marketing allotments or quotas, which were removed in the 1996 law.
The new allotment cap is determined by the past three years’ average of total refined sugar sold.
The forfeiture fee of 1-cent per pound for sugar was eliminated as was a 1-cent a pound marketing fee the
government charged. The marketing fee removal means about $2 a ton more to the farmer.
The loan price for beet sugar is 22.9 cents, while the current market price is 27-28 cents a pound.
Mathur said there are two threats to U.S. sugar producers: if domestic users continue to move operations
overseas; and how large of an import quota Mexico gets in ongoing negotiations.
As of last Oct. 1, Mexico, under a side agreement to the North American Free Trade Agreement, has been
eligible for a sharp increase in quota into the United States. U.S. producers fearing a flood of sugar North have
fought to keep some restraints on the amount allowed in.
Mathur said he is keeping a close watch on the task force working on an agreement with Mexico, which
should be reached in the next few months.
It has been said that sugar is the second most political commodity in the world, following oil.
"I would think so," Mathur said laughing.
Free trade in sugar will be difficult to achieve, he said, because other countries subsidize sugar production.
"They generally don’t want to talk about it, but we don’t have a level field."
He also faulted the U.S. industry for not doing a very good job of explaining to consumers and farmers that
a very small percentage of sugar is bought and sold at the world price, currently about 7 cents a pound, with
October futures at 4.83 cents a pound. The futures were pushed to that level last week because of the
weakening Brazilian currency and expected heavy exports as a result.
He said the European Union, too, has a sugar quota for imports.
"That is a very sensitive topic there as well as here," he said.
Mathur is familiar with Europe. A native of India and now a U.S. citizen he took his degree at Middlesex &
Hendon College in London. He joined Tate & Lyle as a senior internal auditor in 1984 and joined Western
Sugar in Denver in 1986.
Turmoil in the U.S. financial markets should not affect Western’s operating loan with CIT Group, Mathur
said. CIT Group is owned by Tyco International, which has suffered from allegations of corruption.
Tyco is trying to divest CIT Group, which is considered a viable financial unit, to cover its upcoming debt
payments.
Mathur said, "CIT is very solid. They understand the beet business and have been involved in financing
other beet companies."
J.B Groh, a financial analyst with D.A. Davidson & Co., echoed Mathur’s evaluation. Groh said Tyco’s
difficulties should have no affect on the operating loan from CIT.
Mathur expects a bright future for Western. "There is incredible potential overall for increasing returns to
growers by expanding," he said.
Because Tate & Lyle had a continuing capital improvement program over the 17 years it owned Western
Sugar, Mathur said it had invested millions on expansions and upgrades.
"As I told the farmers, we have acquired some very valuable assets."
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