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MATTERS AT HAND: Crystal's strategy means danger for sugar program

American Crystal Sugar executives must be figuring that the U.S. sugar program is going to end. That's the only way to explain their current labor strategy. The strategy is to reduce costs by cutting jobs. The company has chosen tough tactics, in...

American Crystal Sugar executives must be figuring that the U.S. sugar program is going to end.

That's the only way to explain their current labor strategy.

The strategy is to reduce costs by cutting jobs. The company has chosen tough tactics, including a lockout of its 1,300 union workers.

All of this adds another element of danger to the sugar program, which is already at risk in Congress.

Crystal's calculation is both financial and political.

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If the sugar program ends, imports of sugar will rise. The price of sugar will go down. American sugar refiners will survive only by becoming more competitive. That means driving down costs. Labor is a very big cost, and Crystal saw the expiration of its labor contract as a way to reduce the work force.

This strategy makes sense for Crystal executives, who work for the growers who own the cooperative. If Crystal didn't survive, these farmers would have to find new crops. They'd lose their investment in the machinery that's unique to raising sugar, and they'd add expenses to grow different crops.

To continue to grow sugar, they need factories to refine their product.

So, growers have an interest in driving down costs, too -- especially if Congress were to end the sugar program.

As it happens, Congress is about to take up the farm bill, which contains a provision that protects U.S. sugar production. It's not a subsidy. There's no direct cost to taxpayers. Instead, it amounts to a tariff on imported sugar. This has the effect of raising sugar prices in the United States. It's a classic case of protectionism.

This is deeply unpopular among economic conservatives and free-traders, who have lately gained unprecedented power in the U.S. House of Representatives.

Sugar is grown widely in the United States, even though the country is not self-sufficient in sugar production. An old truism often used to explain sugar's success said that sugar was grown in a majority of states, so a majority of senators had an interest in sugar.

The end of the sugar program is not a foregone conclusion, but the political equation has changed.

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That's because there's a second truism about sugar production. It may be grown in a majority of states, but it isn't grown in a majority of congressional districts. As a result, supporters of the sugar program need votes from members of Congress who have no direct interest in sugar.

In the past, they've depended on organized labor. The common denominator here is an interest in protecting American jobs, on farms and in factories. This created a natural alliance between labor and sugar.

Crystal's decision to lock out its union workers and to bring in replacement workers shatters that trust.

American Crystal is the giant among American sugar refiners, accounting for at least 15 percent of U.S. production, according to the company's website. Crystal prides itself on efficiency. The website boasts about the company's low-cost production of sugar.

The company's contract offer shows that leadership believes that costs must be lower still. The offer includes language that makes it much easier for the company to cut jobs.

This is the crux of the issue for both the company and the union. Union workers want job stability. Company executives want fewer employees.

The end to the lockout probably lies in some agreement about how many jobs to cut and how quickly to do it.

However this ends, the Red River Valley will take a hit.

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It's hard to see how the local economy will absorb the workers that Crystal probably will cut, whether it's a third, a fourth, or even a tenth of the total.

So, these are the stakes in Crystal's gamble:

The end of the sugar program.

The loss of jobs.

A big impact on the Red River Valley economy.

A scramble to find employers to take up the slack.

In the end, however, American Crystal will survive, along with its refineries and its growers and at least some of its jobs.

That's the bet Crystal appears to be making.

Related Topics: MIKE JACOBS
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