Interview with Aldrich C

Aldrich C. Bloomquist Narrator

James E. Fogerty Interviewer

May 24, 1990 & May 15, 1992 James J. Hill House & Minnesota History Center Saint Paul, Minnesota

Aldrich C. Bloomquist -AB James E. Fogerty -JF

JF: I'd like to begin by asking where you were born and grew up.Bloomquist

AB: I was born in Willmar, Minnesota in 1921. My dad hadC. a shoe store in Willmar, and my mother was one of a large family from Nebraska. They had met in the northwest corner of Nebraska, where Dad had gone before World War I and Mother was teaching school there. Mother was a graduate of Peru State Teachers CollegeSociety in Peru, Nebraska. John Sterling Morton Tree Arbor Day was foundedAldrich in Peru, Nebraska.

Mother taught school, and Dad had the shoeof store. My dad's education was country school, and they had a commercial school in Willmar. My dad had excellent penmanship, and I remember that even up in the days afterHistorical he retired, he would still be making nameplates and little cards for the county fair--his lettering was so good.

I went through grade schoolinterview and high school in Willmar and participated in athletics. I played everything, I guess, that anybody could play. I went to Gustavus Adolphus College in Saint Peter, Minnesota, and I should have finished in 1943. I graduated from high school in 1939 and should have gotten my degree in the spring of 1943, but in December of '42, I went into the service.Minnesota So ultimately, I had my final semester to finish when I came out of thehistory service.

JF: OralAnd that was in...

AB: I think it was 1946 was when I got my degree. It was one of those war-era classes where you're almost given a choice--they said, "What class would you like to be a member of?” I still attend class reunions with the class of '43, because those are the people I knew.

I came back and finished school, and I didn't know ninety percent of the people who were at Gustavus at that time. You know, schools have all changed, but by the time the first semester was over at a school like Gustavus, you knew everyone, at least who they were.

By the end of the first year, you probably knew everyone by name and mostly where they were from.

After I went into the navy in December of 1942, I was sent to Farragut, Idaho. One of the early camps was Camp Ward, and I remember arriving there on Christmas Eve and going through the typical reception for new recruits--the haircut and the whole bit. And I remember the first big meal I had in the service was Christmas dinner, and everyone who's ever been served remembers that you got the ice cream on top of the mashed potatoes and gravy--I'll never forget that.

I finished boot camp at Farragut and was sent to physical instructors school, and I often thought that I was probably the least qualified to go to physical instructors school of anybody in that group. But the thing was I had had some experience in college in editing a newspaper, and the fellow who was in charge--the officer in charge of the camp newspaper at Farragut--grabbed hold of me and said, "You know, if you'll stick around and do this, why, I'll send you to a better school." Bloomquist

I was designated to go to signalmen school at the UniversityC. of Illinois in Champaign, but he decided that I should stay and put out the camp paper for a month or two or three. Then I was sent to Bainbridge, Maryland, and that was the longest trip across the country I'd ever taken. We went from Idaho to Bainbridge, Maryland,Society by way of California and so you can imagine the length. [Laughter] But ultimatelyAldrich we got there, and I wound up in a physical instructors school. of We had Olympic divers, the Riley brothers, Adolph Keifer; baseball players like Wally Berger, the home run king, boxers, an unbelievableHistorical motley collection. As I say, I certainly should not have been in with a group like that, and there was another fellow who had been commandeered to help out on the newspaper, a fellow by the name of Jim Wood from Iowa. The two of us interviewwere absolutely --well, when you'd run the hundred-yard dash, if there were a hundred in the class, Jim and I would wind up ninety-nine and one hundred.

One thing that I'll never forget is that in this physical training course, they'd do everything by the alphabet, and so whenMinnesota they were teaching boxing, it made no difference what my size was. I thinkhistory I was 140 pounds and the guy next to me was--well, in fact, he was a boxer. He had boxed on the Olympic team--Costino, or something like that. A nice Italian boy fromOral New York City, and he tried to treat me kindly when we had our boxing, but... [Laughter]

That was the way it went. I finished the training station at Bainbridge, Maryland, went to the Great Lakes training center, and trained a couple of companies of recruits as a Specialist First Class. That was when my ulcers--which I guess I never knew I had--acted up, and ultimately I got a medical discharge.

So I came back to Minnesota and started newspaper work. I worked on a newspaper for almost six months in Saint James, Minnesota, the Plain Dealer, and at Christmas of that

11 year--December 24, in fact--I got married. The individual who was president of Gustavus at the time asked if I would come back and do some public relations work for the college and get my degree, which I then did.

Back at Gustavus, we lived in one room. It was not an apartment. We shared a bath and a kitchen facility with a half dozen others in a big, old house that the college had bought. And, of course, the college was full because they had the veterans programs at that time.

Ultimately, I finished school. It took one summer session and I took two courses--very concentrated. I had one in the morning and one if the afternoon. I did very well. That took care of my grade point average and got it up where it should have been.

I think my diploma says "1946," if I remember correctly, and I went to work then and taught journalism at Gustavus for one year. I had two classes in journalism. I finished my degree work, ran the news bureau at Gustavus, did a few other public relations jobs, and then took a job in Mankato on the Mankato Free Press. With a small-townBloomquist daily like that, you get a pretty good cross section of everything, and so I did everything from being wire editor--which meant that you got there first thing in the morningC. and more or less opened up--to winding up as a sports editor a couple of years later.

I then went into sales work. I started doing it part time when SocietyI was working for the Free Press. Then Josten's of Owatonna had opened upAldrich a yearbook division, and I worked for them for a couple of years. I went to Minneapolis, again working for a fellow by the name of Larry Brings, who owned the Brings Press.of We did a number of yearbooks.

At Josten's, I was assigned the southwesternHistorical part of Minnesota and traveled that area. With Brings there were no borders. I did the General Motors Institute yearbook from Flint, Michigan, and did the University of Chicago Maroon one year. At that time, Chicago was getting the "whizinterview kids," and most of the staff were fifteen- and sixteen-year- olds--brilliant kids. I did their yearbook.

JF: Were you headquartered in the Twin Cities at the time? Minnesota AB: Right. Wehistory had moved to Minneapolis in about 1952. We moved up in 1952, because it was in 1955 then that my ulcer acted up again. I wound up having surgery to repairOral the ulcer, and the doctor thought it would be a good idea for me to get out of selling.

So that's when I left selling and applied for the job as public relations director for a regional office. The ad was in the Minneapolis paper. I was interviewed by a fellow by the name of Harold Belknap, who was the manager. It was a public relations organization, funded and supported by the beet sugar industry.

I was hired in September of 1955 and ran the Minneapolis regional office. I had the Minnesota, North and South Dakota, Iowa, and Wisconsin region. Later on, the fellow

12 who had the Chicago office with that organization became ill, and in addition to doing the region that I had been assigned to, a couple of days a week I'd go to Chicago and run that office.

JF: Now, what organization was this?

AB: It was Western Beet Sugar Producers. There was a regional office in Chicago, one in Minneapolis, one in Denver, one in Salt Lake City, and the head office was in San Francisco. For a time, there was also an office in Los Angeles.

I was called a regional manager, and each office had someone doing the same type of work. Most of our backgrounds were either in newspapering or radio or television-- mostly some news background. In addition, each of the offices had a trained home economist, who was called "Nancy Havens," no matter what her real name was. This was a corporate name. Bloomquist JF: Sort of a "Betty Crocker" type? C. AB: Right. That type of thing. Each of these five offices had a Nancy Haven. I wouldn't have known a sugar beet if I saw a truckload of them when I was hired and took the job. Chaska, Minnesota, was the closest factory to Minneapolis atSociety that time, so I did avail myself of the opportunity to go there and talk toAldrich the ag people and find out what a sugar beet looked like. of Then I started doing news work--feature stories--on the industry. That took me to the Red River Valley, and that's where I met the peopleHistorical that I subsequently went to work for.

JF: Was Western Beet Sugar Producers a new organization? interview AB: Yes. It was started in early 1955, and I was not the first one hired, but one of the early ones.

JF: Was it anhistory industry association?Minnesota Was Crystal Sugar a part of it?

AB: Right. Crystal was a part of it. Let's see. At that time you had Utah-Idaho, Amalgamated,Oral Franklin County--which was a small Idaho company, National Sugar in Kansas, Great Western, Holly, Spreckles, Union, American Crystal, and Michigan. So we covered the whole industry and they all belonged at one time or another.

JF: So Michigan Sugar would have been covered then out of the Chicago office-- Michigan and Northern Ohio Sugar?

AB: Right. The Chicago office was really busy, because of the concentration of a lot of industry users. The National Confectioners Association was headquartered there. We did

13 a lot of work with them and for them, and a lot of the salesmen for the sugar customers of the industry were in that Chicago area because of its location.

We worked very closely with the Sugar Association in Washington--or at that time it was in New York--and with the U.S. Beet Sugar Association in Washington. I made my first trip to Washington, D.C. when I was interviewed for the job in 1955. The U.S. Beet Sugar Association was having a meeting in Washington at that time, so all of the principals of all of those companies were there, and I had a chance to be interviewed by most of them. A fellow who had come up to Minneapolis to interview me said that I had passed muster, and I started work that fall.

JF: And that was for Western?

AB: Western Beet Sugar Producers.

JF: Were they practically synonymous then with the U.S. Beet SugarBloomquist Association or not?

AB: The U.S. Beet Sugar Association did all of the WashingtonC. work, and we worked with them. But we worked in the regions where the beets were produced. The Washington, D.C., operation pretty much limited itself to the legislative activity. Society At that time there was a sugar program which wasAldrich not part of the farm bill but a separate piece of legislation, and whenever that sugar bill would come up for renewal, all the regional managers would go back and helpof out in the lobbying efforts. So back then was when I really got started in the lobbying. Historical JF: So the U.S. Beet Sugar Association was really legislative, and Western Sugar was promotional in trying to get people to use sugar. interview AB: Well, over the years there have been a lot of people saying sugar is bad for you-- this, that, and the other thing, and it was a matter of putting out brush fires more than anything, really. That was when we started using the economic impact that the beet industry has in the areas Minnesotain which it operates as a hook to hang news stories on. history You know, you'd make a payment at that time. There was about 100,000 acres of sugar beetsOral in the Red River Valley and I suppose about fifteen million-and-a-half tons of beets, and at that time, you could get eight to ten dollars a ton. But that was big money then, and over the years that has just increased.

We used the economics of the industry as the handle for getting stories on the industry. The Sugar Association, which again at that time was based in New York, did the research to dispel the stories that sugar was bad for you and worked with the dental associations and various medical associations.

JF: Did that include cane sugar?

AB: That includes cane, right. The Sugar Association is supported by the whole sugar industry: beet, cane growers, processors, the whole bit. U.S. Beet, of course, as the name implies, was supported by the beet industry. This Western Beet Sugar Producers that I was working for also was the beet industry.

There were a number of real individuals. You had Frank Kemp at Great Western, Merrill Shoop at Holly, Doug Love at Utah-Idaho, Art Benning at Amalgamated. Those were the big supporters of the program. At that time Great Western was the biggest, and if Great Western said it wasn't going to support Western Beet Sugar Producers, chances are that we lost sleep. You'd try to mend your fences with Frank Kemp, and the others who felt strongly about the program would go to him and try to tell him he was making a mistake. That went on for a couple of years, and then he decided he was going to get out. Then he came back, having been prevailed upon to stay around for another year.

JF: Did he actually withdraw Great Western's support? Bloomquist

AB: I think most trade associations work that way. If you'reC. going to resign, it isn't like, "I quit and I quit sending you money today.” You have to notify the other trustees that by- -say, June first--that you want out a year from June first. That's the way it would work. Society He would have that letter; he would turn it intoAldrich the trustees saying Great Western--or whoever turned it in would say--they were pulling out of the support of the association effective a year from that date. That wouldof give the others a chance to either join with them or not, and we then would have a year to phase out the operation, and that subsequently is what happened. Historical

We folded in 1962, but we knew in 1961 that the Western Beet Sugar Producers was going out of business in 1962,interview and so it gave all of us a chance to look for another job.

JF: Was that really because the support of Great Western was withdrawn, or was it a combination of other things? Minnesota AB: Well, I historythink it was very definitely Great Western, and Amalgamated went right along with them. So I think we finally got down to having Utah-Idaho and Holly as the onlyOral big ones that felt it was a mistake to destroy this organization. But they prevailed-- the two biggies--and the program phased out in December of 1962. I had started work with Red River Valley Sugar Beet Growers in November of '62.

JF: When were they formed?

AB: They go back in the early '20s, about the time that beets were first grown up there. It was a very loose organization for a number of years. Until I went to work for them, they had never had a paid employee, never had a full-time employee working for them.

In the early days, the whole idea was that they were to do the negotiating with the company for the contract with the growers that grow beets. In the beginning, the company could do no wrong. The growers felt there was nothing American Crystal did that wasn't perfect.

I remember some of the early meetings that we had with company people. When it was time to renew the contract--we called them negotiating sessions--the company would come in and the contract was all printed. It was just a matter of letting the company buy lunch and initialing the contract, and that was it.

The company held a strong hold on growers' contracts, and this has never changed. A farmer with a beet contract has an edge on his agricultural outlook. And in those days, if you had a beet contract, you weren't going to do anything because the company could pluck it just as quickly as they signed it.

JF: By not renewing it? Bloomquist

AB: By not renewing it. When the board told me that we wouldC. negotiate a contract, they said that knowing full well they didn't really want to negotiate a contract. They wanted to do whatever the company wanted to do. It became very apparent in those early years that the job could boil down to making sure we had a nice annual Societymeeting and that type thing. A lot of meetings. We got into research, startedAldrich this International Sugar Beet Institute, which is now twenty-five years old. of JF: And that's located at... Historical AB: ...At Crookston, Minnesota. When it was started, it was at Crookston. Then we enlarged it to include a machinery show. The first few years of the machinery show and the institute, the meetingsinterview were held at two places. We'd hold them in West Fargo, North Dakota--in the Cass County fairgrounds on a Tuesday. Wednesday was a moving day, and then on Thursday we'd open out in the winter shows building at Crookston. And the educational part of that, particularly at Crookston, was held in the National Guard Armory, right next to theMinnesota winter shows building. history But that's now twenty-five years old, and today it's the largest machinery show and instituteOral anyplace in the country. If you want to see sugar beet equipment, that's where you go. And while originally it was just the growers in the Red River Valley, both the other co-ops--Mindak at Wahpeton, North Dakota, and Southern Minnesota at Renville, Minnesota--have people on the campaign today, as does the Manitoba Beet Growers Association from Winnipeg, Canada. It's held in mid-March, and it draws growers from all over the country, because if people are interested in beet equipment, they'll see more of it there than at any one single place.

JF: Just to pursue that for a second. I know when I look at the Sugar Journal, which seems to advertise a lot of equipment, although I presume some of it is for beets and some of it is for cane, a lot seem to be German made. Is that still true?

AB: That's still true.

JF: Or European, I would say.

AB: European, particularly in the equipment that goes into mills. The beet industry really had its origin in Germany, and subsequently it moved into France when Napoleon decided he needed sugar and the British were blockading his shores and he wasn't able to get sugar. This was not beet sugar, it was the sugar that had been grown in some of the Highlands and the Caribbean. He started beet factories almost on a one-a-month basis for a number of years, and at one time there were hundreds of beet factories in France and Germany. Bloomquist There's still a lot more beet sugar produced in Europe than there is in the United States. The first beet plants that were built in the United States startedC. with European equipment. A lot of that equipment never wears out. Even though a beet plant goes out of business, that equipment is packaged up, picked up, and moved to another place. Society In so many industries, if you go back to the turnAldrich of the century, you would see a tremendous change in how something is done. Beet sugar factories today are basically the same as they were back in 1898 when Americanof Crystal's first one was built. They're modernized, but the equipment and how sugar is extracted from the beet is basically the same as it was way back then. There has neverHistorical been a radical change in how sugar is extracted from beets. And even today, though some of this equipment is made in the United States, it's made by companies that were founded by offshoots of European companies. Silver Engineeringinterview in the Denver area, for example, and Ogden Iron Works, had their origin in Germany, and the equipment they make is very similar to what would be from Germany.

You know, there have beenMinnesota a lot of questions asked about why a German firm was hired to build the planthistory at Wahpeton and Hillsboro, North Dakota. One of the reasons was that in order to get financing, the lenders wanted a turnkey operation, and there was no U.S. companyOral at that time willing to sign a turnkey operation. There are today, but again it would be a company with European connections.

JF: Looking at beet sugar producers and the Beet Sugar Association, was there cooperation with similar associations with cane growers? Did they have a U.S. cane producers association?

AB: Cane producers have the U.S. Cane Sugar Association that still exists today. Just like U.S. Beet Sugar Association, there's a U.S. Cane Sugar Association. Now, that is made up of the cane refiners. Each of the areas where cane is produced--Florida,

Louisiana, Hawaii, and Texas--have their own organizations, and they have no collective group. The Floridians still have Washington representation, but that's for the Florida sugar cane. And this is not the refiners group; it's the raw cane. The raw cane mills have banded together in Florida. The same thing in Louisiana. Texas has just the one, and then there's the Hawaiian Sugar Planters Association, which also maintains a Washington office.

In addition to the U.S. Beet Sugar Association, about six years ago all of the growers in the country finally got together after all these years, and they now have a Washington- based organization called the American Sugar Beet Growers Association. All of the growers in the country today belong to that organization.

When you get involved in trying to rewrite a sugar program, as we are currently engaged in, you have all of these various factors and groups that participate. The members of the Congress who are in a position to say so, insist that "As long as you guys are all talking together and have the same program, are looking for the same result,Bloomquist chances are you can maintain a program. But if you split and somebody goes this way and somebody goes that way, why, you're not going to make it." C.

JF: Well, that is interesting. So you have a number of parallel associations. Later when we talk about legislation, I've got quite a lot of things we needSociety to find out about that. What I would like you to talk more about is thatAldrich relationship with the cane producers and, in some cases the cane refiners, which I understand would like to bring in offshore sugar. of AB: Just to keep their refineries busy, right. Well, you go back again to when the growers hired me in 1962. We established anHistorical office, and that would be the first full-time office for the Growers Association in Grand Forks, North Dakota. Subsequently, it was moved to Fargo, and it's interesting to note the reason for the move. Grand Forks would have been more the centralinterview part of the Valley, but at that time, it took us two days to go from there to Washington and back because of airline schedules. You couldn't do it in one day.

That's not quite right. YouMinnesota could do it, but you couldn't spend any time. If you left Washington, historyafter having spent a day there, you could get as far as Minneapolis or Fargo and you'd have to wait until the next day to go on up to Grand Forks. Well, that didn't makeOral any sense. I hadn't moved up to the Valley yet.

JF: You didn't. You were still living in Minneapolis.

AB: I was still living in Minneapolis, commuting weekends. I went to the board after these problems with transportation showed up and asked if anybody had any strong feelings one way or the other about where the office would be located. It surprised me at that time, and it still surprises me, that even though the preponderance of growers are in the north end, they prefer having the office in Fargo and having annual meetings there. It gives them an opportunity to come down to Fargo. We've never had any problem with

18 anybody saying, "Gee, we ought to have the meeting in Grand Forks.” We do meet there on occasion, but I think everyone is very happy to have both the headquarters of American Crystal and the Growers Association still in Fargo.

In those early years, as I indicated, we did meet with the company, trying to get some things straightened out that we--"we" meaning the growers' board--thought we were entitled to. But that feeling existed that, "Boy, we don't want to rub the company the wrong way or they're going to pull their beet contract.” Individuals were particularly scared.

You get growers sitting around a table and they would indicate that we should be getting more for our beets, the same as growers in the group at Great Western or Amalgamated. Collectively, they'd be willing to say that, but to sit down with the company face to face, they didn't want to; because they were afraid the company would use its power to take their beet contracts away. Bloomquist There were many indications and there was evidence all the way along that people, growers who were particularly friendly with the company, wouldC. wind up with a few more acres. And the name of the game in those days, as it is today, is how many acres of beets have you have. Society JF: How did the company treat the formation Aldrichof this organization?

AB: Well, I think reluctantly. of

JF: Were there similar organizations in theHistorical Arkansas Valley and California?

AB: The group in California belonged to the California Beet Growers Association. That was a strong organization,interview and still is today.

JF: Did they represent Spreckles Spreckle Sugar Co. growers?

AB: Spreckles, Holly, Union,Minnesota and Crystal in California. They have a blanket contract that covers all of historythem, and the Growers Association in California would go to the biggie, which at that time was Spreckles. Today it's Holly, but they'd go to Spreckles. Once they'dOral get that agreed to, then the rest of them would just fall in line. If they got a good contract with Spreckles, the rest of them would fall in line.

JF: You mean all paid the same thing?

AB: Yes, right. In those early years there would be two or three members of the growers board that might go to some of the meetings of other grower groups, so they knew what was going on. For example, there was no publication that covered the beet growers at that time. In 1963, 1964, I started the Sugar Beet Grower magazine, and the company wasn't too happy with it, because we were able to report what was going on in other areas. So

19 growers were better informed on what went on in other areas, probably more than they had ever been. We did newsletters and things like that, and at our annual meetings we started bringing in growers from other areas who would come in and talk about their work.

JF: Was there an organization in Colorado?

AB: There was one, but there were two groups headquartered out of Greeley, Colorado. Well, there were several groups, and they all belonged to Dick Blake's group, National Sugar Beet Growers. That included, for example, the Montana group, the Nebraska group, the Wyoming group, and the Colorado group. The Colorado group included the farmers who grew for Crystal down in the Arkansas Valley and also in Kansas.

Then there was a Texas-New Mexico group. Now, that was not a part of the National Beet Growers group that was headed by Dick Blake. The two really strong organizations, when I got into the business, were the California group and the National,Bloomquist which was Dick Blake's group. C. JF: Did they include Utah-Idaho?

AB: Right. Then as time went on, there was a group up in theSociety Pacific Northwest. A fellow by the name of Ford Smith, who was a banker,Aldrich took on the job of representing the beet growers in Toppenish and Moses Lake, Washington, who grew for Utah-Idaho. And I think that ultimately that led to the downfall,of or one of the reasons why Utah-Idaho decided to get out of the business. Historical Those growers negotiated too tough. I think that in negotiating contracts with the company, you had to understand where both sides were coming from and try to write a contract that was fair to yourinterview people but also fair to the company.

In the case of that contract in the Pacific Northwest, I think everybody in the industry felt that it eventually got too strong for the growers and gave the company just too little of the sugar dollar. We felt in RedMinnesota River Valley that our contract was the other way, that the company washistory getting too much.

But thatOral wasn't really what was irritating our people. The thing that our growers were concerned with was the growth of the industry as far as the Valley was concerned. In 1963, 1964, just after I got up there--there was a group trying to get a plant in the Drayton area and they did a good job.

They had a Dr. Fry, a medical doctor, who worked night and day with that group of farmers up there trying to put that package together. American Crystal didn't enter that situation until in the middle of the night in Washington, D.C., at the Carlton Hotel, where they agreed to sponsor that group. Otherwise, that group was going to Congress the next

20 day, and they had Charlie Brannan--who had been head of the Farmer's Union for many years and the former Secretary of Agriculture. The farmers had hired him.

They went along with Dr. Fry to make that presentation, because the Congress was about to allocate some beet acres for new plants. At two o'clock in the morning, American Crystal's president and ag vice president finally agreed with those growers that they would make a joint presentation the next day, and they got one of the allocations.

JF: Otherwise it could have been a separate company.

AB: It would have been a separate company and a separate bill.

JF: Had they already approached Crystal at this point to see if they were going to expand?

AB: They had been all along, but Crystal had indicated no interestBloomquist at all. Not going to expand, not going to expand, and that was the position of the company, and that prevailed right up to the end. That mill at Drayton was built in 1965, butC. that same philosophy prevailed up to the time the growers bought the company out.

There was just no way they were going to expand. And it wasSociety one of those things where you have a company that--and I don't know if thisAldrich is putting it right--but there were no living members of the Boettcher family, and it was the Boettcher interests that controlled American Crystal through the Boettcher Foundation.of

When the last of the Boettcher family died, Historicalthey owned control of American Crystal. The Brown Palace Hotel in Denver, Ideal Cement Co, they were all Boettcher interests. And there was a railroad in that general area that was also controlled by them The Denver, Rio Grande, and Western Railroad.interview

The boards of directors for Ideal, Crystal, Brown Palace, were all the same people. When they would have a meeting, it was only to support the philanthropies that had been designated by the Boettchers,Minnesota never anything outside of Denver, nothing outside. All of that is where historythe money was being made.

AlongOral the way, and this is before the growers made their push for the company, the Boettcher interests tried to put Ideal Cement Company and American Crystal and American Potash--which was also owned by the Boettcher--those three companies into one corporate organization. There was a block of 100,000 shares that had been owned by Cuban American Sugar Company.

JF: In Crystal itself?

AB: In Crystal, of Crystal stock that was picked up by Borden's when Borden's bought Cuban American Sugar Company. That block of stock, along with a few other shares,

21 were voted against this, and it was within a small percentage of the total shares outstanding that the Ideal Cement Company shareholders, the American Potash shareholders, all voted for this merger of the three of them. The American Crystal holders did not vote, and, like I say, it was a small, small number.

So out of that whole group, you wound up with the Ideal Basic Corporation--which exists today--which is Ideal Cement Company and American Potash. You had the Brown Palace Hotel, which was never a part of this, although it was owned by the same board really and is still owned by the Boettcher interests, and American Crystal was separate.

We didn't know this at the time, but when we finally negotiated a buyout, we found out that a number of the directors, who had been directors of American Crystal for years, had never seen a sugar beet. They had never been to the Red River Valley, and that's where the business was located. That's the reason the growers finally made that push; it was to get the expansion that they would not get under the old management in Denver. Bloomquist JF: That was really the reason for the buyout of American Crystal by the growers? C. AB: By the co-op, right.

JF: What was the structure of the Grower's Association whenSociety that was formed? They hired you and you were on the board of directors?Aldrich

AB: I was executive secretary of the Red ofRiver Valley Sugar Beet Growers. We had offices, as I said, in Grand Forks at the beginning. Subsequently, we moved to Fargo. At that time, when it was in Grand Forks, we hadHistorical a law firm in Crookston that was the counsel for the Growers Association. When we moved the offices to Fargo, the board felt that it would be better if we had a local attorney, and that's when Bill Dosland and his firm got involved. They becameinterview counsel for the Growers Association.

We started banking at Polk County State Bank in Crookston. It was a Bremer Bank--it now is First of Crookston--and the Growers Association still banks there. Because of the makeup of the original boardMinnesota that I worked for, Crookston is probably where the headquarters historywould have been if there had been any airline transportation.

JF: OralSo you were executive secretary, and you worked with a board. What was the nature of work that they wanted to undertake at that time? Was it just negotiating with the company?

AB: Yes. We started negotiating the contract and getting it to the point where the company did not come in with the contract all printed.

JF: That must have taken some struggle. I mean, that must have been very unpleasant for them.

AB: It was for them. It was for them. I think--and again I'm getting a little ahead--but I think ultimately when we asked the question of Charlie Briggs, who was the president of Crystal at the time that we undertook the purchase, I think he felt that we would never succeed. No way a bunch of farmers are going to put together the kind of money that's necessary to buy this New York Stock Exchange-listed company. No way.

He felt, "Let those guys spin their wheels and spend their money and they're going to fail, and that'll be the end of the Growers Association.” I still believe to this day that that was in the minds of the American Crystal people when they said, "Yes, we will entertain an offer to sell."

Briggs knew that the growers were a lot stronger than some of the other members of his staff felt we were. He really became president when the previous president, a fellow by the name of von Bergen, lost his job because of his inability to deal with us. Von Bergen was a finance guy out of purchasing, and at first he ignored us. No way was he going to meet with us and negotiate a contract. Bloomquist

The board I worked for finally said, "Well, if you want a contract,C. you're going to have to deal with us.” The fellow who usually negotiated the contract was the vice president of agriculture, who at that time was a fellow by the name of Harvey Johnson. And Harvey would say, "I can't negotiate on this point;" von Bergen neverSociety got involved in negotiating with the growers. Aldrich

Well, finally he did it. We had a meeting inof the Tree Top Room in Moorhead and subsequently had a meeting in Minneapolis, and that was the last meeting von Bergen attended. The board of American Crystal metHistorical and changed presidents. Briggs came in, negotiated with us, and we got the contract that we wanted for that year. Our relations with Briggs continued on an annual basis. Every time it was time to negotiate a new contract, Briggs came. interview

JF: Personally?

AB: Personally. Paul Erramouspe,Minnesota who was their vice president of finance, and Harvey Johnson also historycame, so I always had the three of them. Then there's no passing the buck, you know, because when we brought our board in, they had the power to negotiate a contract.Oral They were given that power by our growers. We felt that the company should be represented by the same type of peer group, somebody who could say, "Okay, if we're going to do this, they agree to it, that's it.” And if they didn't agree to it, that's the group that you've got to try to convince.

There were several things that we could never get the company to go along with. One was that the growers liked the idea of piling stations. They said, "Okay, we've got a plant at Drayton, but we live up at Nichie. That's a long way from Nichie to Drayton to haul beets. You know, you might get three loads a day or whatever. We think there should be outside piling stations."

The company's position was, "That's not economically viable and we don't have the money to do it.” They did put in a couple, so we knew they worked and the company knew they worked. But it was always a big deal. When the budgets were submitted, if the ag staffer said, "We need a piler here," that was one of the first things that was crossed off by the boys in Denver.

The Growers Association found out that we could go to any of our local banks and use a check off system to borrow the $150,000 to buy the scale, the paving, the piler, the whole bit for these outside stations. So then our thrust was to go to the company and say, "We think there should be a piler at XYZ," and the company would say, "We can't afford it. We can't afford it."

Then we'd say, "We'll put it in on a check off, because the growers will save enough money in delivering beets there instead of that long haul into the factory. They're willing to do it.” On that basis, the company agreed. Bloomquist

JF: By a check off, you mean that the growers would agreeC. to contribute to the purchase.

AB: Well, really a check off is like if you deliver a ton of beets, the first dime would go to the bank to repay the note. The banks in the Valley had theSociety experience and history behind them, so they knew a check off was almostAldrich better than a co-sign by grandpa. And unbelievably, we had banks that were looking for the business. I had bankers who would call and say, "Are you going to put in any moreof pilers this year? We'd like to put up the money.” It was a good loan. Historical By the time we got that worked out, it was very evident the company was not going to expand. A lot of our guys had watched the condition of the plants go down year by year. The company just was notinterview putting money back into the plant. At the same time they weren't reinvesting, other companies in the beet industry were making money, so we knew the company was--well, we had their annual report. We knew they were making money, but we found out subsequently that the president of the company in those days was given one directive, Minnesotaand that was, "You make sure that you've made enough money to make thesehistory contributions [to the Boehcher Foundation] at the end of the fiscal year," and that was it. As long as the president would come up with sufficient profit to do that, that'sOral all that was necessary for his well-being.

As I've said, we subsequently found out that most of the board didn't know what was going on, had no real feel for the beet business, and they had a good deal. They'd go into Denver, attend the board meeting for Brown Palace Hotel, pick up one director's fee for that, another for Ideal Cement Company--which was Ideal Basic by the time we bought it- -one for American Crystal, and then there was the railroad. So they could pick up four director's fees in one day. That was a good deal. Unbelievable.

There were a couple of them who knew what the beet business was all about, but most of them had never been to the Valley. When Briggs went to the board and said "We've got the growers in the Valley asking the question, `Would we be interested in selling the company at book value?'," I'm sure the board asked what the book value would be. At that time, the stock was selling for about twenty-three or twenty-four dollars on the New York Stock Exchange and the offer was for about thirty-nine to forty dollars. No one in their wildest dreams thought we'd ever come up with the money to do it. So they said, "Sure."

We had our first meeting--maybe we're getting ahead--but we had our first meeting in Denver, and I think we convinced them at that first meeting that we were serious. The chairman of the American Crystal board was a fellow by the name of Cris Dobbins, who was also the president and CEO [chief executive officer] of Ideal Basic and chairman of the board of that Brown Palace Hotel operation.

He saw whom we brought. We had the Oppenheimer law firm from Saint Paul, we had people from the Arthur Andersen office in Minneapolis, we had WilliamBloomquist Davidson from Lowell Brodes in New York, we had the Saint Paul Bank, co-op, we had the First National Bank of Saint Paul, interim lenders--we had all theseC. people in Denver when we had our first meeting with the board of American Crystal. And I have to believe that the chairman at that time realized that we were serious and took us seriously from that point on. No matter what Briggs and Erramouspe said, I think he feltSociety we were serious about our purchase. Aldrich

JF: And they saw you were going to be ableof to raise the money, too.

AB: He felt, "They didn't get all these peopleHistorical in here if they don't feel that the deal has a chance of going through.” You know, we had to raise a down payment, the twenty million dollars that was predicated on 200,000 acres at one hundred dollars an acre, and the company had contracted 150,000interview acres. That was our next big hurdle--getting the company to agree to go along with that additional 50,000 acres for that first year.

Then you had people saying that the factory couldn't handle that size crop. The company said they would not contract,Minnesota because there was no deal as yet, and we had to have a second contracthistory covering those additional 50,000 acres. That was a separate contract with the grower. The company in essence said that if in the processing of the crop, there were beetsOral that couldn't be processed because they got too many, the loss would relate to those beets that were from the 50,000 additional acres and the grower would not be paid. He would take that loss.

So the company didn't stick its neck out at all. It was the grower who did, who in addition to putting that money up front, borrowed from banks who had never loaned farmers money to buy stock. That was in itself an education--to get the banks to go along with that. We also had to get to the people who go round and make sure that banks are running their businesses the way they should be--bank examiners.

We had to convince them that this was different than buying stock in something that the grower is not concerned with or connected to. Subsequently, there were about fifty-four banks and PCAs [Productive Credit Association] that loaned us money. In order to also satisfy the lenders and the federal government, we had to guarantee that anyone who wanted to buy stock could buy stock and would be financed.

I think we had under a dozen in the whole Valley whose credit was such that the banks were reluctant to lend to them. We got the Crookston bank and the bank in Moorhead and one in Grafton willing to pool loans to finance those few people who were marginal risks.

JF: I'd like to talk a little bit with you about the Red River Valley Sugar Beet Growers Association and how it was organized. At the beginning of 1962, you were executive secretary. You had a board.

AB: We had an executive committee that was made up of three directors from each of the four factory districts that existed at that time--Drayton, East GrandBloomquist Forks, Crookston, and Moorhead. And as you know, when Hillsboro was merged into the operation, they added three more directors from there. But the executive committee,C. when I went up there, was made up of twelve people, three from each of the factory districts.

The total board ranged variously from forty-five to sixty people.Society The point at which the beets were delivered determined how many directorsAldrich. If they had, say, three pilers in the Crookston yard, there would be a director for each of those three. The same would be true for all of the outside pilers. Directors wereof elected from that area.

The original idea was to organize around counties,Historical rather than the pilers. Originally, they were set up on a county basis. Each county had its own organization. They elected directors to the Red River Valley organization. Then the various counties would caucus to elect the directors for the interviewfactory district, and they would be the executive committee. And so the organization originally was on a county basis.

It has changed over the years. Today, for example, if a farmer delivers to the Argyle piler, the Argyle group would Minnesotabe organized and they would elect a director to the Red River Valley Sugarhistory Beet Growers Association board. But in the early days when I went up there, it was by counties. We'd have the twelve counties that grew beets, and each would haveOral its own annual meeting every fall. That meant I had twelve meetings in the fall of every year, and that culminated in the annual meeting of the Red River Valley Sugar Beet Growers, which has never varied by more than a few days. It is always held during the first week in December.

Actually, the board of the co-op today is still the three from each factory district. It's interesting that when the company was purchased and the initial board was set up, the executive committee became the first board of American Crystal. The idea was that down the road they would cut back to two representatives from each factory district, so that there would have been eight on the board.

That never happened, and, of course, nobody's going to vote themselves out of office. I guess that will hold forever, and that's the only way you would do it. The first board that was elected was on a staggered three-, two-, one-year basis, and the election was kind of a mockery because it was the executive committee that put themselves up for election. In those days, you didn't have contests.

When I went up there, there were four individuals who had been very active in running the organization. There was Hugh Trowbridge from Comstock down in the Moorhead district; Ralph Deale from the Hillsboro area. Ralph was also a legislator, a Nonpartisan League legislator, a member of the House of Representatives. There was a fellow by the name of George Green up in the Drayton area, and R.T. Adams in the Fisher-Crookston area. And there was a gentleman by the name of Roy Ronan who served as secretary in those early days.

That was the five who really were the group who hired me, and theyBloomquist were the group that, for all intents and purposes, had run the organization for many years. In 1962, shortly after I arrived, there was a move to change the bylaws to makeC. it imperative that there be a contest for president. Nobody wanted to kick R.T. Adams out, but they figured he had served long enough. Society They knew the only way they could defeat himAldrich was to get somebody from his own area to run against him, and that wasn't easy to do, because R.T. was a big landowner and a good many fellows rented land from him. But theyof engineered a deal whereby they nominated a fellow by the name of Lyle Kiel, who then became really the first president of the association whom I worked for. He was fromHistorical Crookston, south of Crookston.

Lyle ran against Adams and won the election. That was the beginning, I suppose, of the modern-day Red River Valleyinterview Sugar Beet Growers. With the new bylaws, they put a limit on how many terms you could serve, so it wasn't a self-perpetuating thing.

They tell the story that R.T. Adams and Hugh Trowbridge, would kind of alternate every third year or so who wasMinnesota going to be president so they couldn't accuse them of running the organization.history That was really the beginning of the growers actually taking a hold and looking out for their own interest--much more than they had in the past. Oral JF: How soon after you were hired did you actually move to Moorhead?

AB: Well, the first year we had the offices in Grand Forks and I commuted for a year. It had nothing to do with when I was supposed to start up there, because I started that first November of 1962. It had to do with when I could sell my house in Minneapolis. There was not a vibrant real estate market at that time, and it turned out to be sort of a godsend because I wound up being able to move the office the next year to Fargo. When my wife and I moved north in the spring of 1963, the office was moved into what used to be an old

27 bakery biscuit company in Fargo. So our tenure in Grand Forks was quite short, and we've been in Fargo ever since.

Then in 1972, when I left the Growers Association and went to work for the company, doing basically the same thing but under a different hat, the Growers Association moved into a new office in South Fargo, and while today they're not in that same place, they're still in South Fargo.

The organization has changed substantially over the years. Whenever you have a trade association organization, how they operate depends a lot on the individual who has the job. I think, for example, that I ran the association--and I say I ran it. I probably was dictatorial in how we ran the association in the early days as compared to the way Dick Fitzsimmons has run it, for example. It may be that the way I did it was necessary in the early days.

I guess only time will tell, but once the growers reorganized afterBloomquist the company was purchased and George Sinner, who is now governor [of North Dakota], became president of the Growers Association, they changed the way they functionC. completely.

JF: From one that was... Society AB: ...Kind of in an adversary position with theAldrich company. Once we bought the company, of course, we are it, and it would be pretty hard to get mad at yourself, and that's really what we would have to do. of

The board I worked for in 1972, when the acquisitionHistorical was made, had certain demands that nobody was going to change. For one, they were going to move the office from Denver to the Red River Valley, period. There was no arguing on that. Charlie Briggs, who was the president, was offered theinterview chance to continue in the job by the growers, but they would not go along with his suggestion that the offices be kept in Denver. His second choice was that they move the offices to Minneapolis, and the growers would have nothing to do with that, either. The only choice was to move it to the Red River Valley. Minnesota But, back whenhistory I moved up to the Valley the Growers took over space in the Manchester Building, which used to be a bakery, and the company then took over the Growers AssociationOral offices. I had some really nice offices in the Manchester Building, because I just moved there. The Internal Revenue Service had half of this building, and I moved into the best offices in the building. When the company was acquired, we just took over that whole space that the IRS had had in Fargo, and the move from Denver was made directly to that building in Fargo.

Then they started looking at building a new place, or for an office building, and we looked at a number of properties in the Fargo-Moorhead area. This building that we presently occupy had not been built but it had been designed on speculation by an architect and builder.

We made some changes in it. For example, we added the two-story entrance lobby. At the time it was built, we thought we'd been able to rent out a whole wing. Well, that idea was short-lived. You know, ever since then we've been looking for space. Somehow, we make it. The thing that sold the farmer board, or our grower board, on that spot was the fact that you were talking four and seven-tenths acres, rather than 155 front feet like you do in a normal city construction situation.

There were a couple of buildings available, and much effort was made to convince the board that we should take them. But they were too small, or lacked parking, lacked space, and that's why we didn't take them. Now the new building is called the "Crystal Palace," you know. The farmers call it that, particularly in those years when their payments aren't too high. But that building was built and equipped for a million dollars.

JF: Which is unbelievable. Bloomquist AB: Today you wouldn't even touch a wing of it for a million dollars. That worked out really well. We talked earlier about how growers view everythingC. as being in "their end of the Valley" or in "the other end of the Valley.” The next big decision was this research facility, which had been at Rocky Ford, Colorado. There was nothing more than a couple of tar paper shacks. Not quite that, and they were hardly representativeSociety of a multi-million dollar company's research facility. Aldrich

In the fall of that first year we were in business,of there was nothing that we touched that didn't turn into money. The growers were feeling plush. They authorized the architects to proceed with drawings for this new researchHistorical station. When it was built, no money was spared.

When it came time to buildinterview that big warehouse out back of the research facility, the architect or the builder said that we could save a couple hundred thousand dollars by using tin on the outside--corrugated metal. Most farmers, of course, have had experience with corrugated metal and it's all nicked and banged up. They said, "No. We're going to build it; it's going to be firstMinnesota class.” So that's got the same white-face brick that the rest of the building has.history

I thinkOral basically the growers are very, very proud of that research facility, probably more so than the Crystal Palace where the headquarters are. We really had more reason to put the research facility in the Fargo-Moorhead area than we did the head office. Proximity to North Dakota State University is important; it is very closely aligned with agriculture, and we had a lot of projects that we were working on in cooperation with NDSU.

Getting back to how the Growers Association operated. In that period before we launched out to buy the company, we started getting involved in research. We had a number of growers, particularly a fellow by the name of Gerhart Ross from the Fisher area, who

29 really believed in research and did not think that the company was fulfilling its obligation to the growers with the type of research they were carrying on.

So we organized, in fact, the first check off system for research. Gerhart more or less instigated that and the growers agreed to it, and so we started funding a research project where the growers would sit down and decide what needed research. The company sat in, but it was the growers who had the say about what was going to be done. One of the projects that they indicated interest in was the storage of beets, which ultimately led to what we now have.

We have the best storage facilities for beets to extend our campaign, and a lot of that original work was done under the auspices of the Growers Association. We did it with the Beet Sugar Development Foundation, where we helped fund it, and also we got involved in extensive research at North Dakota State University. In fact, we built a building over there and gave it to the university with the understanding that we would pay for the expenses of maintaining it. We gave it to them, and you know, $100,000Bloomquist back in the early 1960s or mid-1960s was quite a bit of money. The research dealt with how to keep beets longer without losing the quality of the product. C.

Research became a big thing. That's also when we started this research project at Crookston at the Northwest School [of the University of Minnesota]Society and that led to the machinery show, along with the educational aspectsAldrich of it, and that carries on today. We now have the cooperation of Min-Dak and Southern Minnesota. The Minn-Dak Farmers Cooperative and Southern Minnesota Beetof Sugar Cooperative. But between the three of them, they're probably putting $150,000 to $450,000 a year into sugar beet research. Historical We've also worked with the state legislatures and had a couple of joint positions created at North Dakota State and the University of Minnesota for sugar beet specialists. They'd never had that. In the old days,interview the old company had the philosophy, "Don't mess with our product. Don't mess with our agriculture.” The growers didn't feel that way because beets had been in the Valley since 1923, and here you had an agricultural college--well, two, Minnesota and North Dakota--doing no work at all on sugar beet research. Minnesota The Growershistory Association went to work. We got state funds for a position--half and half at North Dakota State University and the University of Minnesota. We got federal funds to workOral with the Beet Sugar Development Foundation, and over the years have had members of the House and Senate who have been very supportive of the program. You know, back in Hubert Humphrey's day, he was on the right committees. Milt Young, a Republican on the other side, was on the right committees, and now Quentin Burdick is. So we have done--"we" meaning the whole Valley--very well in getting federal and state funds for sugar beet research.

JF: Can you tell me just a couple things about the Beet Sugar Development Foundation? Who runs it?

AB: That's another organization owned by all of the beet companies. The Beet Sugar Development Foundation by itself does no research, but whenever they develop a project they'll say, "Okay, this is what we want done," whether it has to do with weed control or whatever the project might be. They will draw up the agenda and they'll allocate so much money for it and they'll go to Colorado State or the University of Minnesota or North Dakota State or wherever and say, "This is what we want done. This is the amount of money we've got. If you've got somebody that can do it, then the Beet Sugar Development Foundation will fund that project."

The Beet Sugar Development Foundation was very instrumental in doing a lot of the preliminary research on this beet sugar storage project. But, again, American Crystal was the only one that took advantage of it. All the work had been done on a cooperative basis so, you know, the findings are available to anyone of this group that supported it, and it's been supported by the whole industry.

JF: But nobody else picked up on that particular point? Bloomquist

AB: No. One of the things, as far as that storage project goes,C. is the weather. We sit in a unique area. We don't get the Chinooks in the winter. Our average temperature in December, January, and February is more conducive to keeping beets than, say, Idaho, that gets great variations. Of course, California would be out Societyof it. The factories in Montana, Nebraska, and Wyoming are not big Aldrichenough to do more than they're doing already. If they were to go into a storage project, they would have to add immeasurably to the size of their plants in order to handle theof additional beets. They just don't have it. I think weather is the key there. Historical JF: So the Beet Sugar Development Foundation is really an arm of the sugar beet companies? interview AB: Right. Another example, there's a West Coast Seed Company that is owned by all of the companies that produce seed, and it's a cooperative venture. They hire a manager and the staff out there, and each company pays its share of the operating expenses. Minnesota Acreage is allocated.history Say that American Crystal seed needs 480 acres or 4,000 acres. The staff in Oregon will make the arrangements, but the contracts in essence are with AmericanOral Crystal to produce a certain amount of seed. Great Western has its operation and some of the other seed companies are not in the sugar business but are in the seed business. Beta Seed, for example, is a German company. The domestic arm of that is Northrup King, and Northrup King is a part of this West Coast Seed Company. They don't have a beet plant, but they do produce seed.

JF: Well, while we're talking about seed for a minute, can I just clarify one thing with you? Was it not true back in the 1920s, '30s, '40s, and '50s that many of the companies produced their own seed and demanded or expected them to be used?

AB: Well, they did, Jim, and I'm glad you mentioned it. That's one of the areas that we started getting active in as a grower association, and the first breakthrough that we got was that the company allowed us to plant a few hundred acres using other seed, and finally we got to ten percent. So if a farmer was going to plant one hundred acres, he could plant ten acres with something other than Crystal's seed.

Now, there was good reason for taking the position that we did at the time. The company, regardless of whether the seed was good or bad, had a guaranteed market for that seed. They might have had a bad year seed-wise, and what would they do? They'd pull in some of their inventory--which was probably ten years old or eight years old or six years old.

At the time we bought the company, we destroyed over 300,000 pounds of seed that was stored down at Rocky Ford. It was useless, but it was carried on the books. We knew it; it was no surprise to us. That was the reason we wanted to get to the point where a grower had a choice. Bloomquist We're in the seed business today, and even though the grower knows that if he buys seed from us it may cost a few cents a ton more because the profit'sC. going to accrue to his co- op, he can plant any seed he thinks will do best on his land. We don't have more than fifty percent of the market today--of the American Crystal. In the old days, the company had one hundred percent. Society Aldrich JF: Does Crystal seed, for instance, that you produce today get sold to other companies in the area? of

AB: Yes. It's a wholly-owned subsidiary ofHistorical American Crystal.

JF: Well, there used to be the old American Beet Seed Company. interview AB: Yes. And we sell seed in Idaho. In fact, just a year ago we bought a facility in Idaho where we do experimental work. We try our varieties out there the same as we do in the Valley, in order to find out what will do well there. Each area of the country has some peculiarities, whether it'sMinnesota a disease problem or some other thing like temperatures and growing conditions.history

As youOral know, most of the areas, other than the Red River Valley and Michigan, are irrigated areas, so you have need for different varieties. We are getting into the seed business more and more every year. Michigan is a big market for us.

JF: Does Holly Holly Sugar Corporation, now part of Imperial Holly produce its own seed?

AB: Holly has its own seed. Western has its own seed. California is almost all USDA [United States Department of Agriculture] seed sold through the companies. When I say "USDA seed," it's their varieties grown by the companies and sold to their growers. But

32 they've opened up their market a little bit now, and this Beta seed that I mentioned, I know is now selling in California.

It's a wide-open market, and it's a big market. You know, over a million acres of sugar beets, a million-and-a-quarter acres I think; that's probably a market for two and a-half million pounds of seed. If seed is fifteen to twenty dollars a pound, you know, you're looking at thirty to forty million dollars in seed sales. So it's a significant business.

JF: When you were executive secretary of the Red River Valley Sugar Beet Growers Association, did the various growers associations in various parts of the country work together at all? Did you meet with your contemporaries?

AB: Yes.

JF: Did they work in concert on anything much? Bloomquist AB: On legislation, basically. Half a dozen of our people would probably attend the national sugar beet growers meeting and would listen to all ofC. the discussions to learn what they were doing that might interest our people. We were very interested in what the growers were getting per ton and the basis of their contracts. Society We had a lot of meetings where we would sit downAldrich with people --like Dick Blake, Malcolm Young, and others--to examine their contracts. You've got to remember, and we had to remember, that when you take the Californiaof contract and look at the Red River Valley, they're like apples and oranges. A lot of differences. And so you had to bear in mind that there were differences and not justHistorical look at the bottom line and say, "Well, look. They've got a better contract, or we've got a better contract.” A lot of things went on.

JF: So, for instance, wheninterview you came in 1962, at that time Crystal was growing beets in Colorado, as well as California?

AB: Right. Well, they were growing in southern Minnesota. They had a plant at Chaska. The plant at Mason City,Minnesota Iowa, was still operating. Rocky Ford was operating, and Delta. history JF: Clarksburg [California]. Oral AB: Clarksburg. Missoula [Montana] had closed and Grand Island [Nebraska] had closed. They had not closed when I started with the growers, but by the time we gave any thought to buying the company, the non-Valley plants had boiled down to Mason City, Rocky Ford, and Clarksburg. The others were all out of it. Then, as you know, only Rocky Ford held on.

Well, Clarksburg did, and we ran it for a few years. We tried to work out an arrangement where they would join the co-op. They opted not to, and subsequently the board sold it to growers in that area.

At Rocky Ford, the growers established their own co-op. We had a management contract for a while with those growers and that facility.

JF: I always look at farmers as being sort of individualists. You know, people who like working for themselves. And here they are banding together as the Red River Valley Sugar Beet Growers Association. How did they work together? Obviously there must have been some common objectives, but how did they work together on a personal, professional level, carrying these kind of informal relationships?

AB: I'm sure there was a lot of reluctance and a lot of concern on the part of the growers when we started really moving toward purchase [of American Crystal]. Number one, you know, nobody in our group had the ability to run a sugar company. That was American Crystal's job. There were growers who felt that perhaps it was going to fail from day one.

But I think the growers who were the real entrepreneurs-- the growersBloomquist who were aggressive, who had shown aggressiveness in their beet operations and their own farming operations--who saw the need to really move ahead. They hadC. a crop that they were, under the right circumstances, making good money on, and if they were to expand and grow, it appeared to them that beets were the way to go. Society I think if at the same time we did this with sugarAldrich beets, we'd tried to put together a sunflower operation or anything else that required further processing, it would have failed. I don't think that the growers wouldof have been as dedicated to that.

History has proved that. There have been attemptsHistorical to form co-ops for sunflowers, for example. They never got off the ground. There have been several attempts recently at ethanol projects, which ultimately could have a lot to do. In fact, some of our growers, big beet growers who are alsointerview big grain producers, have felt that ethanol is the next step. But they have tried, certainly without any leadership from American Crystal, to stimulate some interest, but have never been able to get beyond somebody bringing it up at one of our factory district meetings. Minnesota Sugar beets forhistory some reason have created more consensus. There's a rare farmer who has had a sugar beet contract who's gone belly up, and for everyone who has, somebody else couldOral say, "Well, he wouldn't have made it no matter what. He was just not a good operator."

Farming is no different that a lot of other things. If you're a good farmer, you can make it. I've yet to see a good farmer, a really good farmer, go down in the almost thirty years I've been in the Valley. The really good ones are substantial. Just take our averages. You've got 400,000 acres of sugar beets and 1,800 growers. That's a little better than 200 acres per grower.

You take a good operator and he's going to net. I always say there's two different kinds of net. One that most of us look at, and then there's the farmer's net. The farmer's net is what's in the bank after everything is paid for, and I think good farmers today--and in those days--were netting 200 dollars an acre.

They'll argue that they don't, but when it comes right down to it, they are. Even if you use average costs, they're doing very well.

JF: Is it partly the economics then? What you're outlining is really interesting. That there are people who, even though there might be some economic incentive to banding together as sunflower growers, for whatever reason they don't see the incentive being the same. But for sugar beet growers, there is a sort of fraternity, if you will.

AB: There is. It's probably a closer-knit agricultural group than any other commodity that I know of. Now, we don't have too many crops in the Valley, as you know. I don't know that we're any closer knit than say the almond growers. Bloomquist

JF: Or peanut growers? C.

AB: Peanut growers. Peanuts, again, there may be small pockets, but peanuts are spread over more states than I ever realized. Same thing with tobacco.Society Those people that have peanut contracts, allotments, and tobacco allotments,Aldrich boy they hold together just like the sugar people do. of Cane growers have done pretty much the same thing. As you probably know, Louisiana has gone through an almost complete changeHistorical in the last eight years. There are fewer growers today, but their organization is a lot more tightly knit now than it's ever been in my past dealings with them. interview In Florida, you've got a couple of huge co-op where individual growers are big. We say our growers are big, but ours are nothing compared to those people. One co-op has less than fifty members, and each one is probably--again, talking averages--doing over two million dollars a year in Minnesotacane each. history JF: Each grower? Oral AB: Each grower.

JF: Do you think it's because of the way that crop is grown?

AB: Well, it is. The people with that big acreage down there got in early; they're good operators with a good financial setup. They organize their own raw mill, and they've just hired the best talent they could find to run it. It's very successful. That's a key to any of these operations.

JF: Well, it is interesting. Part of it must be the economics. In fact, sugar has made money year in and year out.

AB: It has, right. You know, at the time we were talking about putting the co-op together, we said we needed a one- hundred dollar an acre investment. There were farmers in the Red River Valley, and they were good farmers, who said, "One hundred dollars? No way. I'll wait until it's free and I'll get back in it."

They'd grown beets for Crystal. I'll run into them every once in a while, and they will admit they made a mistake not going along. That one-hundred dollars is now almost one- thousand dollars per acre.

JF: Which is a lot.

AB: Unreal, really. Bloomquist JF: Let's talk a little bit if we could right now about the company itself. When you came in 1962, the company, of course, was headquartered in Denver.C. It had operations, as you just pointed out, that were more far flung than they were later--in the sense that they were growing sugar in more places. What was the structure of the company? Society AB: Well, we talked a little bit about the boardAldrich earlier.

JF: And the Boettcher interests. of

AB: The Boettcher interests, and, of course,Historical that was the key. The company operated on what the board told the guy who they hired as president. As long as the president and chief executive officer, was returning profits to the corporation so they could handle their philanthropic activities ininterview the Denver area, then he was on solid ground.

JF: Can I make one analogy and you tell me if it's true? Because that surprised me when you talked about that earlier--I hadn't realized that. Was it being run sort of like the Bremer Bankshistory are run, ownedMinnesota by a foundation, in effect?

AB: Yes. I've been in this business since 1955--that's thirty-five years--and I never knew a Boettcher.Oral There weren't any when I first got into this business, and I understand it was many years before that. Well, one of the Boettchers was kidnapped. Do you remember that?

JF: Well, when you say it, it rings a bell.

AB: Just like one of the heirs of the Coors.

JF: Or the Hamm kidnapping.

AB: Right. For some reason, you know, there were individuals who came from moneyed families who were kidnapped for ransom. Some have been found, some were killed, but anyway, that was one of the Boettchers.

JF: So the company at the time you joined was controlled literally by a foundation board.

AB: Yes. I have never looked at the minutes during that period when von Bergen was fired, but I'm sure that's not what the minutes would show. It would be that he asked to be relieved for health reasons or something.

During that period, he obviously was not providing them with the profit to pay the dividends to the small group of shareholders so that they could carry on those philanthropic enterprises, because the Boettcher Foundation would be like the McKnight Foundation. In other words, the Boettcher Foundation owned stock in American Crystal. So when the dividends accrued to that stock, the Boettcher Foundation had that much more money to give to various charities in the Colorado area. Bloomquist

We talked about the factories they had when I first got to knowC. the company. It was the four plants in the Valley: Moorhead, Crookston, East Grand Forks, and Drayton-- Drayton being the newest one in 1965. Then there was Chaska, Mason City, and Rocky Ford. It was evident to the growers that nothing was being reinvested.Society Aldrich The Chaska plant had nothing but problems with the growers in that area. The growers said they were trying to keep that thing alive;of the company maintained that every time they met, the growers were trying to take something that the company didn't have to give them. Historical

Each one of those areas had a factory manager and an ag superintendent. The ag superintendents were probablyinterview the most powerful of those two, and obviously got all their marching orders from Denver. They had very little to say about--you know, if you're going to buy a new lawn mower, why, it had go Denver. That is probably being a little chintzy, but in reality it had to go to Denver. So the physical appearance of the plants in the Valley was deterioratingMinnesota year by year because they were not putting anything back. history The story is that when the budgets would first go in, the first thing that the president wouldOral do would be to cross out anything that had to do with physical appearance and then it would boil down to just what had to be done. The growers were not operators. They didn't know exactly how a factory operated, but they said it had gotten to the point where a lot of the plants were just being held together with Scotch tape and baling wire.

It was sad, and it certainly did not lend itself to meeting the growers' aspirations, which was more beet acres. The only way to achieve that, obviously, was to upgrade the plants.

JF: And as you pointed out earlier, the company was literally blackmailed into accepting the Drayton plant.

AB: In those days I'm not sure how often their board met, probably only two or three times a year, but certainly not monthly as the co-op board does. The most important meeting would be the one at their fiscal year end--I think on March 1 or February 28. That was when they made their allocations of profit to the Boettcher Foundation.

There were a number of attempts made during the period that we had the Growers Association. I understand ADM Archer Daniels Midland Company made a move for the company during that period and found out that they might get a pile of stock, but the control was still in the hands of the Boettchers and there was no way they were going to get it. Then, as I understand it, much of that stock that ADM had accumulated then went to the Boettcher interests. Cris Dobbins and his cronies found a home for it and bought that stock, which only solidified their control of the company, because that block of 100,000 shares that wound up in the hands of Borden would have done nothing. You know, they might have said, "Well, you can have somebody on the board of directors but you're not going to have any say in how the company is run, becauseBloomquist we've got the ultimate control," which they did have. C. JF: You've mentioned Mr. Briggs. Who was he?

AB: Charlie Briggs was president. Harvey P. H. Johnson wasSociety vice president of agriculture. He was the one that we all dealt withAldrich the most.

JF: Did Briggs have any background in sugar?of

AB: He'd been their vice president of marketing,Historical and even when he took over as president, he still held onto his major accounts. When I say "major," I mean he had a couple of them who--we found out when we got access to the books--were substantial customers and who, say ifinterview Briggs needed a million-bag sale, had the credit so that they could write the order, and it would show up on Crystal's books. It would be a receivable. It would show and would enable them to show a profit. That kind of game went on. Once we got access to the books, we could see what was going on. Minnesota There was a fellowhistory by the name of Fred Zitkowski, who was the son of one of the revered old-timers, Herman Zitkowski, who dates probably to the turn of the century in Crystal's history.Oral I don't think anybody really knew what Fred did in Denver, but he was there and he drew a pretty good salary for those days.

Really, the second guy probably in influence was Paul Erramouspe, who was young--I would guess probably in his thirties at the time--and he was vice president of finance. I think he later was assigned the role of hatchet man by Briggs in our negotiations to buy the company. As a result of being tabbed as the hatchet man, a lot of our growers said, "There's one guy who doesn't come when we buy the company."

Another one was a fellow by the name of Milt Carlson. He was in charge of marketing by-products. For reasons that I don't know, he also irritated the growers to the point where I've heard them say, "Three guys that are not coming: Fred Zitkowski, Milt Carlson, Paul Erramouspe.

JF: Zitkowski, because they just didn't think he was doing anything?

AB: Well, nobody knew, you know, and that's enough reason. But I don't know what he did. He was never replaced, let's put it that way, and I don't think we're missing something. [Laughter]

JF: Now, Mr. Dobbins at this time was chief executive officer?

AB: He was chairman of the board. Cris Dobbins at the time was president and chief executive officer of Ideal Basic Corporation and also was the chairman of the board of American Crystal. As I said earlier, the American Crystal board, Bloomquistthe Ideal Basic board, the Brown Palace board, and this railroad board were all the same people. There were interlocking directorships. C.

Really unreal. When the deal was finally agreed to and we invited all of our board to go to Denver for the celebration, our farmers talked to some of thoseSociety directors and were astounded to learn that some of them had neverAldrich been to the Red River Valley and had never seen a sugar beet. You know, we couldn't understand how you'd run a company and not know any more about it than they did. of

JF: At that time, what was Crystal's positionHistorical in the U.S. beet sugar industry? Was it third or fourth?

AB: Fifth or sixth. interview

JF: It was much smaller.

AB: Oh, much,history much smallMinnesota er. Let's see, the biggie was Great Western; second, and almost even to this day, Holly and Amalgamated. Now, we're in that category. There are three of us. Like last year, they would have been very close. Oral Two years ago we were the biggest. I think we still are, but not by much because of the poor crop last year. Western is way down now. I think in those days it was Great Western, Holly and Amalgamated about in the same level, Union Sugar was bigger than Crystal, Spreckles was bigger than Crystal, and then Crystal, and just a shade bigger than Michigan at that time.

And then, of course, there were three or four others which are still in business. There's Franklin County, which later became a part of Amalgamated, and really all they did was close the plant. National Sugar is Reg Carey's outfit in Sugar City, Colorado.

JF: And Union Sugar with...

AB: ...Of course Union. That was owned by...

JF: ...Wasn't that company owned by Consolidated Foods at one time?

AB: Right. And then they sold it in the last three years to Holly. It's now part of Holly's California operation.

JF: Holly's gotten big then?

AB: Yes. And then, you know, with being bought by Imperial, Holly is second to Amstar. Hell, Billy Sprague is in there with Savannah Foods & Industries. It's probably bigger than, well, probably bigger than Amstar today, because they've got the cane business and the beets in Michigan and northern Iowa. I would guessBloomquist that in volume, if not the biggest, they certainly are second only to Amstar. C. JF: Is Amstar still operating Spreckles like they did before? Society AB: No. They're completely devoid of that. A number of the executives of Spreckles bought the company in a highly leveraged buy-out,Aldrich and their problem is paying the interest. But the guy that was president, the last president of Spreckles under Amstar, George ------, and three or four of his top ofassistants, mortgaged their souls to get enough leverage. Today it's Spreckles Industries and the Spreckles Sugar Company is separate, although owned by the same group. But theyHistorical do have some other businesses, and I guess they do quite well in the East. So that's going to help.

Also, Spreckles has been interviewrefining sugar from offshore raws that come up the river where they're operated near Mantika. You can run raws through a beet plant with certain modifications and every once in a while, they'll refine a raw 30,000-ton cargo. So they're going to be a viable operation, I think. historyMinnesota JF: Well, in California I presume that Crockett is still under Hawaiian?

AB: Oral Yes. C&H California & Hawaiian Sugar Co., right. Now, that's interesting, because I think we talked about what happened to Frannie Morgan and his company.

JF: Hamakua Sugar.

AB: When was that? Three or four years ago. Anyway, he wound up owing about ninety-eight million bucks, and the interest was killing him. He got ten million from the state of Hawaii as an interim loan. He says that the quality of the cane that he's growing on the lands that he owns--and that's almost seventy-some thousand acres--has dropped off because of the residue or whatever comes out of that volcano.

JF: Oh. From Kilauea.

AB: Well anyway, I saw in the Wall Street Journal, just within the last week that he has put up 23,000 acres of his cane lands for auction. Whoever is handling that says that they should bring $68 million, which would cut his bet to thirty million. And at thirty million, he'd still be the second largest Hawaiian cane grower, even by selling off 23,000 acres. He apparently figures then he could handle that and the interest and all the rest of it, because he's got a big cattle operation. I think with the interest the Japanese have shown in some of that land that he may...

JF: ...I know. Just exactly what I was thinking.

AB: They say that somebody had eyeballed it with an idea that on those 23,000 acres you could build a couple of beautiful golf courses, among other things. Anyway, it looks like that's what Fran Morgan is going to do to bail him out. Bloomquist

Prior to that announcement, everybody was speculating on whatC. Frannie was going to do. The rumor was--and it wasn't a rumor--that he was in deep trouble financially and had to do something. C&H then was supposedly on the market because, you know, it's a co-op, and Frannie Morgan's share of the sale of C&H would save him.Society Aldrich AB: Of course, if either of the two biggies Amfac, Inc. and Alexander & Baldwin, Inc. had voted against the sale, it would not haveof happened.

AB: None of us have talked to Frannie sinceHistorical that story was in the Wall Street Journal, but we think that, at least for the moment, it's taking the heat off, and these two sales are supposed to be completed by August. But with the Japanese looking for land in places to play golf and things like that,interview everybody figures that's probably who'll buy it.

I bought a couple of suits from Brooks Brothers over in Minneapolis, and I dealt with a young guy there, Rick Hahn, who's in love with Hawaii, working in Minneapolis. [Laughter] He has startedMinnesota--the kid's got his head screwed on right--taking Japanese at night school historyover at the University, and he figures by the time he is fluent enough in Japanese, Brooks Brothers will be ready to open up a store in Honolulu and he'll be able to goOral over there and talk with the natives in Japanese.

JF: Well, maybe he was right, you know.

AB: I think I told you that my wife just got back from Japan and she says, "Boy, we're going to have to go some to keep up with them.” Unbelievable transportation system. You know, how the hell did the United States let our infrastructure and rail system get to the point that it is?

JF: Good question. And the highway system. Of course, on the other hand, it is so much bigger than Japan.

AB: That's true. But Europe is pretty good-sized. You know, you can go anyplace by train. I said to this good friend who was a member of the Dutch Senate, "Hendrich, how in hell can you afford it? I saw a train going across the flats up there and not two people in the whole damn thing."

He said, "That's the one thing that everyone in Holland is guaranteed, and that is a ride home."

JF: When they want it.

AB: When they want it. And I said, "Well, how often?"

"Oh," he said, "on those isolated runs, they may only have a trainBloomquist every three hours. But in the major cities, hell, the trains run every fifteen minutes." C. JF: Although it amuses us to talk about the Japanese, when they shake down the actual dollars reported, the Dutch are still the biggest investors in the U.S., although nobody seems to realize that. Society Aldrich AB: In fact, a week from today I'm throwing a fund-raiser down at the Saint Paul Hotel for Howell Heflin--I got conned into that--ofwho is a senator from Alabama. So I'm going to be back next week. That's Thursday the thirty-first. Then on Friday the first, I've got to be back in the Valley. We've got the Dutch comingHistorical over. The Dutch grower board, like most of our growers, doesn‟t realize that I got the idea of co-oping from them. I had known Hendrich and visited over there with their co-op. interview They have bought Interstate Seed, which is just across the river from where we're located in Fargo. The Dutch sugar union has bought and owns Interstate Seed. I said, "How in hell did you guys get involved in Interstate Seed in Fargo, North Dakota?" Minnesota "Well," he said,history "we had an arrangement.” They've got subsidiaries like you can't believe. One of the Dutch co-op subsidiaries is in the seed business in Holland, and they had handledOral the marketing of sunflower seeds for Interstate from Fargo. Perfect, good fit.

JF: How many will be coming from the Dutch group?

AB: There are two different groups. One group is going to stay for a couple of days, including the hired president, a fellow by the name of Lichens, whom I know. I have looked at the names of the growers, and the grower board members that I knew are all off. They have a twelve-year limit just like our board does. You can stay on the board twelve years.

Hendrick Lawless, this guy that was a good friend, and von Kempen, who used to be chairman, have all retired. But it's very interesting, because the size of the operation is basically the same as ours--the sugar operation--and they're in so many other things. The seed business is big, and they're in the alcohol business. They make Genava, which is Dutch gin, and they bought--have you heard the name Henkes?

JF: That sounds familiar. I've been in Holland several times in the last couple of years.

AB: They make cordials and crème de menthe and that type of thing. Anyway, the Dutch made this gin, and in order to spread the word, or spread their business, they bought the business, and Henkes had something like eighty outlets--small liquor stores. They bought it, and they hired a young Swiss to come in and run their wine business. They don't grow any grapes in Holland, but they figured that that's a real market. And through these eighty or ninety small liquor stores, they figured that they could do really well.

So this Swiss boy went to Italy and bought bulk wine, put it in cargoBloomquist ships, shipped it around through Gibraltar and up to Rotterdam. They homogenize it to get rid of all the residue that's in this cheap wine and it's bottled like you bottleC. a quart of milk here, in that type of a container. This was several years ago when they told me this story. And they market it. It was the equivalent of one dollar for one of those quarts of this cheap wine. Society Well, let's see. Then if you bought like a four-pack,Aldrich then they'd give you a carafe, so you'd have a carafe to serve it in. Then they would run a big ad campaign saying that for that "special occasion," you would want to buyof a good bottle of French wine, which they also handled. The other deal was with a French bottler. Starting from ground zero where the Dutch never drank wine, they have built quiteHistorical a business, beginning with that cheap wine, so at least people knew what it was. Then, you know, if you're going to have a birthday party or an anniversary, you should buy a good bottle of wine. [Laughter] You know, very interesting. interview

JF: You mentioned something just a few minutes ago that I think is intriguing. You're generally credited as the one who thought up the idea of buying Crystal Sugar from the Boettcher Foundation andMinnesota the others. You got the idea, though, from talking with this friend from Holland,history more or less.

AB: Oral The idea of co-oping.

JF: The idea of making it into a co-op.

AB: Right.

JF: Interesting. Had they bought a private Dutch company, or had they formed their own co-op?

AB: The Dutch sugar industry is fifty percent co-op and fifty percent publicly owned. There are two sugar companies in Holland. The interesting thing is that several years ago the co-op owned controlling interest in the private one. You can imagine what the equivalent of the Justice Department in Holland did to that, so they had to divest themselves of part of the stock. But they're still the biggest single stockholder in this other thing.

As I understand it, a corporation in Holland runs a little differently than it does here. You've got to have fifty-one percent over there to control. Here you don't. If your stock is spread widely enough, you can control with ten percent, or whatever the number is.

At one time they had complete control of the sugar market in Holland. The Dutch sugar union produces about the same volume of sugar that we do. They have cut down on the number of plants they had, but have increased the size of those they kept because land is so dear over there and Groningen, where Hendrick is from, has a huge factory. They're all bigger than ours, all of their factories. When I first looked at it, thereBloomquist were 28,000 growers that grew beets for this Dutch sugar co-op. C. JF: Just in Holland?

AB: Just in Holland. For half of it, just for the co-op half, 28,000.Society That's now down to 21,000, so the individual farms are getting bigger.Aldrich It also changes the way in which you can run a co-op. Ours is such that our growers, our board members, have much more say about running the co-op than they do over ofthere. In Holland, with 28,000, or even with 21,000 now, who the hell really knows what's going on? Historical I get the feeling from what Hendrick told me that most of their board activities are ceremonial--like coming over here. They bought Interstate, and now they're coming over to see what they bought, thatinterview type of thing. Hendrick says that the fringe benefits of being a director of the Dutch sugar co-op are really why members serve twelve years.

JF: Farms must be proportionately much smaller. Minnesota AB: Oh, muchhistory smaller.

AB: Oral You know, if you've got a reasonable-size farm in Holland, you make good money, because all your crops are pretty well guaranteed. You look at six or seven dollar wheat as compared to our four dollar or so. And five dollar corn as opposed to our three dollar. Their yields are as good, if not better than ours. The land--well, you've been in Holland-- it's flat, just like the Red River Valley. That's why the Dutch feel so much at home when they're up there. It looks just like home.

JF: Just more of it.

AB: Yes, just more. Oh gosh, it sure is.

JF: Interestingly--and this gets a bit into something else that we want to talk about--is what does the European Common Market, of which Holland is a part, do with its excess sugar? Because surely all that sugar cannot be sold just in Holland.

AB: No.

JF: Yet, you've got the Germans, the French, the Danes and others producing sugar, as well.

AB: In 1974, Europe, the EEC [European Economic Community], was a net importer of sugar. They had to import sugar to make sure that everybody in the Common Market got enough sugar. Today, they are the biggest exporter in the world. My theory, and I stick to it, is that in 1974 when the United States kicked its sugar program out, that the Europeans figured, "Boy, there is the market that we want.” So their beet acreage just went way up. We're the biggest sugar market in the world, because even thoughBloomquist we don't have the population that the Chinese have or India, our per capita consumption is such that we're a big, big market. C.

Many people don't realize that. They say, "Well, we don't really need this highly subsidized domestic industry.” If the U.S. beet industry were Societyto disappear tomorrow, there would be a shortage of sugar in the UnitedAldrich States for this year and in the foreseeable future. There is not the refining capacity in the world, not just in the United States, to provide enough granulated sugar, white sugar.of The beet industry is supplying a necessary portion of the sugar that's needed in the United States. Historical Some say, "Well, give them time.” Sure. The Europeans could provide us with a couple million tons of refined sugar, but not enough to fill the void that would be left. Then all of a sudden you get in a biddinginterview war. You know, are we going to bid more for our sugar than the Arabs with all their money, or whomever? I don't know.

JF: That's also more money we're spending overseas that is not staying here. Minnesota AB: That's right.history You know, it is interesting that you mention that. It never comes up in these discussions on legislation. We'll get a million tons of sugar. It's not in the billions of dollarsOral--but it's, oh, $250 million, you know, which is small change maybe.

JF: But still.

AB: It's still money.

JF: It sure is. Look at the European Common Market and the price subsidies that are paid to ensure that farmers there are not affected by the price swings in the international market, given their overproduction. Where do you think, as you look at it, that is going to go? Do you see a gradual decline in sugar production there, as with some other

45 agricultural products in Europe, because they are over-subsidized and costs are rising too high?

AB: I think we're entering a whole new phase in agriculture in Europe, not only the EEC but with the Iron Curtain countries now becoming more democratic. I think that's a huge market that these countries are not serving themselves. It's going to take time, but as their standard of living increases, they will be buying more sugar, for one thing, and certainly other commodities.

I don't know if anyone has ever done a study on how much land in the Common Market that is now devoted to sugar would move into producing something other than sugar beets as the need for other types of foodstuffs increases over there. I don't know how much and whether there would be any.

See, the big surplus in sugar in the EEC is in France. Basically the French are the big winners in this overall thing. And, you know, they say, "Well, youBloomquist don't get as much in the world market for that sugar as you do for what you're producing domestically," which is true. But you're blending it. When you take a price that's betterC. than you get in the U.S. for growing beets--and we have talked about how profitable beets have been--and when you get a price that's better than that for two-thirds of your crop, and for one-third you get something less, when you blend the two you probably come upSociety with what we get for all of our crops. It's been an extremely lucrative thingAldrich for the French sugar beet grower. How long that's going to go on, I don't know. of JF: Do the Germans and some of the others essentially supply most of their own domestic markets? Historical

AB: Yes and a little bit on the surplus. Under the EEC they have A, B, and C sugar. The A is the basic quota sugar,interview and the B is a little residue, a little over that, and C is strictly gambling sugar. If you produce, say, 10,000 tons, and that's what your A quota is and somehow you produced 12,000 tons, you got 2,000 tons outside of your quota that you're not going to get full price for. You may get two different prices for it, and whether or not it's worthwhile will dependMinnesota on the world market. With the world market at present levels, you come outhistory all right.

AnotherOral thing that's happening is that the world market for sugar today is basically a refined market. It's not a raw market. It used to be a raw market when sugar that was grown in underdeveloped countries had to go someplace to be refined. It still does, but the amount of refining capacity around the world has not increased as rapidly as the demand for refined sugar.

When you look at the sugar market today, it's the white market where most of the trades take place. They don't want raws. So people with refining capacity buy the raws, refine it, and then make it available to the market. Then there are a lot of the areas of the world where there is no refining capacity. Africa is a good example. There are a few refineries

46 in Africa but not very many, so that sugar all has to be refined. As for the Arabian states, with the money they have they only buy refined sugar now, white sugar. The CBI [Caribbean Basin Initiative] nations--I'm trying to think of a refinery down there. I can't think of one. That's all raw, so it has to go to a refinery.

That's part of what the negotiations on the current farm bill are about. If the proposed farm bill is enacted into law, the CBI nations would be allowed to ship into the United States about 500,000 tons a year to be refined and re-exported. There's a mechanism in there to subsidize the price that would be paid for that sugar and also to pay the refining costs. But that's what the world market is. Its white sugar today, it's not raw. Because if it was raw, those CBI nations would be able just to ship it to those who need it.

JF: Directly.

AB: Yes. But it's got to go through a refinery to really have value. Bloomquist JF: Well, you indicated earlier that you think with the rising standard of living and greater openness in Eastern Europe, some of the European EECC. sugar is going to find its way there instead of to us.

AB: Right, whether it goes into consumer goods or it goes intoSociety manufactured goods. But I think the market is there if their standard of livingAldrich comes back to what it was, not on dollar value but if they live as well in, say, Czechoslovakia, as they did prior to the time they got under the Iron Curtain. If you go backof to that period, they lived pretty well, and I think their standards have gone down as they've been under the Iron Curtain. Romania, Yugoslavia, and all those countries are the same.Historical

JF: In fact Czechoslovakia, as I understand it, was a major sugar beet producer. interview AB: Oh, it was and still is. There are beet plants in there, but I haven't heard anyone say that they think the production of sugar in those Iron Curtain countries will take care of the needs if all the other restrictions are relaxed and people are able to get what they want. historyMinnesota JF: I was amused by a little story about a market crisis in Bulgaria, in which apparently there was a shipload of Cuban sugar actually on the high seas heading there, and they didn'tOral have any money to pay for it. And, you know, there is always this bickering back and forth between communist Eastern Europe and communist Cuba. There literally was no sugar in Sofia or some of the other Bulgarian cities, and suddenly there's this crisis about what the Cubans, in fact, were going to do. They could have turned the ship around and gone someplace else where they could get paid for it, leaving the Bulgarians high and dry with no sugar.

AB: They know a lot of that and, you know, most of the trade that Russia has had with Cuba for sugar has been bartered. Somebody said, "What's the price?” Well, it depends on what a steam engine is worth. You know, what's the steam engine that they shipped

47 worth? I think everything is inflated when they talk about what the price is. We keep hearing in the last couple of years that Russia is paying about thirty-two cents a pound for Cuban sugar. Like somebody said, "Yes, they paid thirty-two cents a pound for sugar, but that old car they traded also has a price tag of $25,000, and it's probably worth five dollars.”

JF: Like the value of the ruble, it's all relative.

AB: Figments of the imagination, yes. What are things worth?

JF: Could you talk just a bit about the sugar industry in the last twenty years? When you came into the business as executive secretary of the Red River Valley Sugar Beet Growers Association--to just trace its evolution, its consolidation, its changes.

AB: When I came into the business in 1955, Great Western was the major company, and Holly, Amalgamated, and Spreckels vied for second, third and fourth.Bloomquist Utah-Idaho, which was a major factor in the industry at that time, had three or four factories--two of them in the state of Washington--which were considered as fine an exampleC. of American beet factories as existed. Then there was American Crystal, in Michigan, and Monitor, which is a Robert Gage Cole Company with one factory. There was Franklin County, a small factory and company in Idaho, later acquired by AmalgamatedSociety and closed. And National Sugar Refining--that was always talked of as RegAldrich Carey's company. That was a one- factory operation in Sugar City, Colorado. of There were some really powerful individuals connected with these companies. I recall Frank Kemp, who not only is considered spokesmanHistorical for the beet industry, but on a number of occasions he was the one selected to represent the sugar industry in hearings in Washington. interview JF: The whole sugar industry?

AB: The whole sugar industry. historyMinnesota JF: Including the cane?

AB: Oral Right. Carroll Cooley of North Carolina was chairman of the ag committee. In speaking to the whole sugar industry, including the user group, he would say when he got us together, "You people go downtown and decide what it is you want, and when you reach an agreement, come back and tell me what it is, and we'll write a sugar program.” In those days Frank Kemp was the individual who usually wound up carrying the ball not only for the beet people, but for the whole industry before the Congress.

Other individuals were involved at that time, as I recall. A fellow by the name of Charles DeBrettville was president of Spreckels--which at that time was owned by Amstar. DeBrettville later went into the banking business in San Francisco.

The president of Utah-Idaho Sugar Company was Doug Love. The controlling interest was the Mormon Church, and they were very definitely a factor in the beet industry.

Ernie Flegenheimer was president of Michigan Sugar Company. Rather Ernie's dad, Albert Flagenheimer, was president and Ernie was vice president. Ernie is president today.

Amalgamated was headed by A.E. Benning, who was Art Benning's dad. A.E. was considered one of the best operators in the business. Never an industry leader per se, like Frank Kemp, but he ran a good operation. Everybody in the industry marveled at the way his factories operated. When his son, Art, took over, Art became a leader in the industry, although never the outspoken leader that Frank Kemp was.

The president of Holly was Merrill Shoop. Merrill was a lawyer and represented the family that had control of Holly at the time. Although even at thatBloomquist time, the control was like six or seven percent. No one ever had a really big block of Holly stock for some reason. C.

JF: Also, as I recall, there weren't that many shares outstanding. Society AB: I believe that 100,000 shares were all thatAldrich was outstanding. The Tuck family from Colorado Springs, and Russ Tuck owned the shares. My recollection is that's the same family that has the Broadmore [Hotel], andof Russ Tuck was chairman of the board of Holly for a number of years. Of course, Holly has changed hands now, and he no longer has anything to do with it. Historical

At the time I got into the business, the head of American Crystal Sugar Company was a fellow by the name of Summerfield,interview and he died that first year, so I never knew him. His place was taken by H. von Bergen, and he subsequently was replaced by Charlie Briggs. Charlie was the president up until the time the growers bought it in 1972.

So as you can see, of thatMinnesota whole group that I mentioned, the only person who's still in the sugar businesshistory is Ernie Flegenheimer. Most of the companies have been bought and sold a couple of times. For example, Spreckels, which at that time was a wholly owned subsidiaryOral of Amstar, is now independent. It's a highly leveraged company, but it is independent.

Holly was acquired just last year by Imperial from Sugarland, Texas. Imperial is a cane refiner and for years had been one of the real thorns in the side of the beet industry. Now they are no longer a thorn, and they're one of the strange bedfellows in the industry.

Michigan Sugar Company had been pretty much owned by the Flegenheimer family. It was a publicly traded stock, but the Flegenheimer family had absolute control, and Ernie sold the Flegenheimer stock to Billy Sprague and Savannah Foods and Industries. So

Savannah Foods and Industries is now in the beet business, as well as the cane business. Billy's own family, which dates way back in sugar lore, owned cane lands in Louisiana. So Billy is a grower, a refiner, and a beet processor.

Then you've got Western, which is made up of the remnants of the old Great Western Sugar Company. Frank Kemp ran that with an iron hand, but Frank never understood that all that money he had in the bank was going to be used to wrest control from him. A young man by the name of Billy White, whose father was on the board of Great Western Sugar Company, decided he was going to buy Great Western Sugar Company. And I can remember Frank Kemp saying, "Where in the hell is the kid going to get the money?"

Well, to make a long story short, Billy White used the money that was in the till at Great Western, because Great Western was public. They traded stock, Billy White got control of it, and once he got control, why, the cash came out of the cash register of Great Western. Billy didn't run the operation too well, and it wound up in the hands of the Hunt brothers of Texas. That was one of the pieces of the Hunt empireBloomquist that went down the tube at the time of the silver debacle. C. There were a couple of others involved in Great Western, but when Frank Kemp had it, nobody would argue that it was not the best run, best sugar company in the business. From the day Billy White took it over, it went downhill. The Societylast thing was when the Hunts filed bankruptcy. The properties sat idle Aldrichfor a while. Western was bought by and now is a wholly owned domestic U.S. subsidiary of Tate and Lyle of England, the world's largest operator in the sugar business. Andof they are now back in business and with every indication that they're going to put some of those plants back in good shape. They are a vital part of that inter-mountain area once again.Historical

JF: Does Tate and Lyle have any cane interests in the United States? interview AB: They own Amstar now.

JF: I didn't realize that. Oh, they bought it from KKR Kohlberg Kravis Roberts, wasn't it? Minnesota history AB: Yes, they bought Amstar. So today Tate and Lyle today is the biggest cane refiner, a majorOral beet processor, and they bought A.E. Staley, so they are one of the biggest corn syrup makers, too.

If I were to sit around the table with the people who are running the industry, and had been absent for ten years, I'd know Ernie Flegenheimer and not another soul. We've got two new ones now in the business. That's Mindak, the farmer co-op, and Southern Minnesota. So you've got Irv Zitercough at Southern Minnesota and Jerry Shannon at Mindak.

Today, American Crystal's president is Ron Hayes, and he is the fourth president American Crystal has had since we bought the company in 1972. Briggs resigned shortly after we moved the offices to Fargo, and he was replaced by Jack Tanner, who had been ag manager and vice president for agriculture. Tanner had a conflict of interest with one of the people whom American Crystal did business with, and he resigned.

He was replaced by Charlie Shamel, who had come from Spreckels. Charlie was an engineer by training and had been with Amstar in a refinery at Chalmette in Louisiana. When he was hired by American Crystal he had been in marketing in San Francisco. He stayed with the company until five years ago when Ron Hayes was named. Ron Hayes had no sugar background. He came to American Crystal as vice president of operations. His background had been with General Foods in a number of executive capacities, and currently, he is running the company.

As I indicated, Ernie Flegenheimer is running the Michigan operation. Monitor, which used to be the Robert Gage Cole company, or owned by them, wasBloomquist bought by South African interests, oh, six, or seven years ago. A lawyer by the name of Bob Hessler, who had been a lawyer for the Corelle family who owned and controlledC. Monitor, took over as president when it was bought by the South Africans.

We mentioned Billy Sprague at Savannah Foods. Roger Hill Societyis the new president of Holly, and he works very closely with Denny Kempner,Aldrich who is board chairman of Imperial and pretty well runs that cane and beet operation. of JF: What about the Hawaiian companies? Historical AB: C&H and I don't even know who the president of C&H is. It had been John Bunker, who had been in the sugar business not quite as long as I have. John's father, of course, was Ellsworth Bunker, whointerview started with National Sugar and later became an ambassador to a number of countries, as ambassador without portfolio, and served many different places.

John started out with GreatMinnesota Western, went from Great Western to Holly, from Holly to C&H, and hehistory retired from C&H about a year ago. In addition to being president of each of those companies I mentioned, he was also very instrumental in keeping the Sugar AssociationOral alive and well for a number of years when it fell on hard times.

JF: And Amstar has gone private in that particular time, but it's still involved in the sugar business.

AB: It's still in the sugar business.

If you think about the way the Japanese look at Hawaii, I don't know how many more golf courses they can fill. But with the apparently unlimited amount of funds they have available, I don't think anyone believes that Hawaii's future in the sugar business is too

51 good. They are--without reservation--the best producers of sugar on a per-acre basis any place in the world. Brilliant agricultural research in cane production, and the only thing that will put them out of business is costs.

Even as efficient as they are all of their laborers--and I mean right down to the field laborer--are unionized, highly paid, and their costs of production continue to rise. If the returns per ton don't keep pace with inflation, they could be in deep trouble.

JF: I have a hard time when people talk about other uses for that land though, and I've had conversations with a number of people in Hawaii. You do wonder. I remember sitting out on a boat in the Au-Ar Channel and looking at the Pioneer Mill fields rising up there and you think without the cane, it would be red dust blowing around. Even the resort industry's got to have an economic interest in it.

AB: Right. And how many people can you put on the island? Bloomquist JF: Yes, how many condominiums can you build? C. AB: Right. How many golf courses, really? And they've tried other crops.

JF: How many macadamia nuts can you grow? Society Aldrich AB: That's right. How many can you eat and how fast is the market going to expand? They have tried other crops on that land andof they have not done nearly as well as they do with sugar. When they started using this drip irrigation a number of years ago, that kind of guaranteed good cane production. Historical

You know, they always talk about all the rain in Hawaii, and the surprising thing to me and to a lot of people is thatinterview some of that cane land never gets those rains. If it wasn't for this drip irrigation that's been developed in the last half dozen or dozen years, some of that land would probably be arid today.

I think everyone would agreeMinnesota that the production of sugar in Hawaii is gradually going to decrease, buthistory that's not to say that it will cease being a factor. You know, they produced about l.l million tons for years, then down to a million, and now it's around 900,000 I think,Oral even with the sale of this land that's been reported by Francis Morgan. You're still looking at anything from 750 to 800,000 tons pretty consistently from now on. And I think, Jim, as you pointed out, that land is good cane land.

It's just like in Florida. You look at that area around Lake Okeechobee and somebody says, "Well, you can grow radishes.” But how many radishes can we use? So it is used for cane and that muck soil in Lake Okeechobee does a beautiful job with cane, as does that land in Hawaii with cane. So whomever you interview on tape in fifty years, you'll probably still be talking about Hawaiian cane sugar industry.

JF: A&B will still be there.

AB: Alexander and Baldwin, yes. Hawaii is a funny group. I'm trying to think of some of the names of the people. Well, like Francis Morgan in the last four or five years. Francis has been very much up front. By the time somebody gets to be a spokesman for the Hawaiian sugar industry, if they own the business like Francis does, they stick around after sixty-five. But I suspect in the years that I've been in this business there have been more spokesmen for the Hawaiian industry than any other industry, because they're all hired hands. When they reach sixty-five, they retire and somebody new takes their place.

As I said someplace along the way, the Hawaiian Sugar Planters Association, which again is supported totally by the industry over there, is one of the finest research facilities in the world not only on cane, but on the possibility of alternate crops. They just have never come up with anything that does nearly as well as the cane.

JF: Is C. Brewer still a factor over there? Bloomquist

AB: C. Brewer is still a factor, right. C.

JF: I can never remember whom that was sold to. What is the coordination nationally between the beet and cane industries? Do they operate prettySociety autonomously and get together only in Washington, or is there more cooperationAldrich than meets the eye?

AB: They cooperate through the Sugar Association,of to defend sugar, the product.

JF: The commodity, okay. Historical

AB: Commodity. They cooperate and work very closely together through the Sugar Association. There's anotherinterview organization --the World Sugar Research Organization-- where you've got both feet in cane. Basically it is the same membership as in the sugar association, except there are representatives from countries all around the world, in addition to the whole U.S. industry. historyMinnesota Recently, within the last four or five years, the membership of U.S. companies in the World Sugar Research Organization has been pretty well focused through the Sugar Association,Oral because all the companies now belong to that organization. So rather than have American Crystal belong and Holly belong--which we have for umpteen years--it's now the Sugar Association that represents U.S. interests. Most of the sugar producing-- well, developed industries--in the world belong: South Africa has always been a member, Canada, Australia, the French, the Dutch. And, of course, the British. The British have always been very strong in it.

The headquarters for World Sugar Research are in London. They don't have a research staff per se. They collect funds, develop projects, and then fund them. A lot of

53 universities around the world are doing projects and different things that deal with sugar, the commodity.

In 1980, the cane sugar refining industry, members of the U.S. Cane Sugar Refiners Association, decided they were going to go their separate ways on sugar legislation, and so they pulled away from the beet processors, the beet growers, and the cane growers. They went with the user group in opposing the program that has been advocated by the beet and the cane growers, and they lost, both in 1980 and again in 1985.

Now they have decided they can't beat us with votes, so they have joined. Right now as we speak, and it may change tomorrow, everybody is supporting one position, including the Western Corn Milling Industry. The two major players in that are ADM and Staley. Others like Cargill and CPC were neither for the program nor did they oppose it on the floor or with their representatives in 1980 and 1985.

I have a feeling this time they are going to oppose the program, becauseBloomquist it contains some provisions that they don't feel are in their best interests, but we won't know until it finally comes up for a vote. By the time you transcribe this, why, theC. vote will probably have taken and we'll know.

JF: So the industry is actually a pretty small industry in one Societyway. You're saying the members changed rather frequently in the last fewAldrich years. But for a major industry, it's a pretty small group of companies, although it seems to me it's gotten smaller and smaller. of AB: It keeps getting smaller. We have American Crystal. Since it became a co-op it's become a major factor because of the size. YouHistorical know, the size is usually determined by how many hundred weights of sugar you produce. And then, of course, you've got the other two co-ops--Minkad and Southern Minnesota--both very vital to the industry. If you take the three of us you'veinterview got forty to forty-five percent of the industry right here in our back yard.

JF: Of the beet industry? Minnesota AB: Of the beethistory industry, right.

JF: OralDo Mindak and Southern Minnesota cooperate closely with Crystal Sugar?

AB: Yes. We market our pulp by-product cooperatively. Mindak and Southern Minnesota have a joint marketing effort for their sugar.

JF: What brand is this?

AB: There is no brand. They're just selling generic sugar, and it's sold industrially. Crystal is the only brand that is marketed right here, and, of course, we have others that

54 come in. Holly is here, and C&H. I don't think Great Western is back here now. Amstar used to be here, you know, with Domino.

But it's regional as far as we're concerned, and from a marketing standpoint, Chicago is still the big market in sugar. It's kind of a dumping ground for everybody from the West. If you produce more sugar in California than you need in California, you ship it to Chicago. Same thing with Amalgamated. If they produce more than they need in the Pacific Northwest, it winds up in Chicago.

JF: Is that because Chicago is a big market in itself, or because in addition to that, it also fans it out to the surrounding states?

AB: Right. It's the biggest single market for industrial goods, again because of distribution centers. In candy, it's a central distribution point.

JF: Some of the sugar is also repackaged then? It could be sold Bloomquistas a consumer item, I suppose? C. AB: There are a couple of repackagers that buy sugar and sell in that market. There's a lot of generic sugar today that there wasn't before. Super Valu Stores is a big generic user. Red Owl is generic. That sugar may be packaged by AmericanSociety Crystal or Holly or Great Western. They have a number of people they dealAldrich with. You know, the bags are probably made by the same printer--but all of us package a little of it. It's a very competitive business, even under the aegis of a program.of

JF: I was thinking of just the little sugar packagesHistorical we saw at lunch, which really give no evidence of what company packages them. They must be packaged by some food service company. interview AB: They are. Have-a-Portion, here in St. Paul. They package for us and not only the little individual packets, though they do a lot of that. If you run a big restaurant and you want to have your own label on a packet, you can call Have-a-Portion. They may buy the sugar from us and they mayMinnesota not, but they'll package it and put your label on the little individual packages.history

TheyOral do a lot of government business at Have-a-Portion and that, of course, is packaged generically. You don't know where it came from. That's quite an operation.

JF: They're also bulk buyers.

AB: Right. That's right, and they're going to buy sugar wherever they can get what they think is the best deal. A number of companies have their own facility for those individual packets. There was also on the table [at lunch] low-calorie sugar. Surprisingly, there are few people in the industry with facilities or the equipment for making that.

We had ours packaged by a Canadian firm. Then he ran out of quota, so he couldn't ship it to us. There he sat with all this low-calorie sugar with our label and he didn't have a quota to ship it to us, and so he had to wait until the next year and make sure he got it over here in the first twenty-four hours or the quota would disappear. That's kind of a funny thing. Here we fight to keep the damn borders free, and we wind up being a culprit ourselves buying sugar packaged in Canada.

JF: You've got those quotas coming in from Canada.

AB: Yes. For several tons you can make millions of those little cubes. I said to our marketing people, "How much sugar is involved?” Hell, it wasn't even a truckload, but it's sugar and it had to have a quota.

JF: What would you say are the differences in outlook between people representing the beet and cane industries? There certainly seem to be differences in the way the industries are structured. You go to Hawaii and you look at big companies thatBloomquist are actually raising their own sugar as opposed to the farmers that are raising your sugar. C. AB: For example, you take the people who grow cane in Florida. They know that in Florida, even with that tremendous influx of people, there is no way they are ever going to have a sugar market for what they grow. It has to leave Florida.Society There is a small refinery there, enough to produce the refined productAldrich that's needed in Florida. But they grow several hundred thousand tons of sugar that has to be exported from Florida. But not exported to another country, and that, of course,of is why Savannah is located where they are [in Savannah, Georgia]. They handle much of that Florida excess or crop sugar and refine it there. Historical

Of all the beet companies, each one first tries to produce enough to take care of its own market. The only place thatinterview hasn't happened is California, which C&H also claims as its market. So most of the time there's excess sugar between what C&H refines and what the beet processors process in California. And that has to go to another market.

Now, if you read populationMinnesota projections it could be that despite the sugar they're producing in historyCalifornia today --which is surplus has to come to Chicago--someday California may be a net importing market because of the number of people. It is staggeringOral the way that state is growing. It's not only the people that use those packets and teaspoons of sugar; it's the canning and candy industries. It could be that from having excess sugar that has to be shipped elsewhere, they'll be self-contained.

Then in the Pacific Northwest you've got Amalgamated. I would say they can grow somewhat if the [federal sugar] program is such. They have the area to grow. I'm talking about getting additional beets. If someone went into that area that Utah-Idaho used to operate, there's good land. Growers at least ten years ago knew what to do with beets. Then again it would depend on what kind of a national sugar program there was, because right now C&H is the only cane refiner on the West Coast, the only one.

Amalgamated is in Idaho and Oregon. And if you don't have a sugar program, then, of course, you've got that big refinery in Vancouver, British Columbia British Columbia Sugar Co. But as long as you have a sugar program and the Canadian sugar is under quota that does not enter the distribution pattern in the U.S.

All of the existing companies here--American Crystal, and of course Mindak and Southern Minnesota--sit in a good area. We've got good freight rates between here, our prime market, and Chicago and Milwaukee and Des Moines. We've got good market, good freight rates from the producing areas to those markets, and I think that market will always exist. The only time it becomes cutthroat is when you have excess production in other beet-producing areas and they have to ship it into the Chicago market.

But the marketing of sugar has changed tremendously over the last ten years. It's no longer a hand-to-mouth operation. It's long-term contracts and long-term agreements. Much of the crop we're growing today has already been priced. YouBloomquist don't know precisely what you're going to have in the way of production, but you know pretty well what you're going to have, and so you forward sell most of your productionC. for the year at a set price. Obviously you are conservative in determining what you think you're going to have. The sugar that is above and beyond has not been priced. Society When you see a run up in the price of sugar, it'sAldrich a rarity that the people who are growing beets are going to benefit, because the sugar they're going to produce has already been sold and contracted at whatever the marketof is today. You know if you go back to the small amount of sugar that we were able to take in 1972 when we bought the company, and that run up in prices, the growers probablyHistorical benefitted by half of that run up rather than the whole thing. They still did very well, but much of it had already been contracted going in. interview JF: Do the representatives of the cane-growing companies have a different view on things? Do they have a different constituency?

AB: They are more assuredMinnesota of a supply than a beet company is. If you take a company like Holly, whichhistory is now tied in with Imperial, that would be an ideal situation. They can almost say, "Okay, we're going to set our market goal at twenty million hundred weight, and XOral number are going to come from the beet operation and X number from the cane operation."

When we try to set something like that, everything depends on the weather. If we have a good year, we may be able to get it. In the case of Imperial--say it's a short year for the beets--then they'll just arrange to buy a little more cane, which they can. Or vice versa. If it looks like the beets are going to be way up, then they'll just back off on what they're buying in the way of raw cane.

They have a better chance at achieving a level market than we do, and that would be true of Western, because of their tie-in with Tate and Lyle, and certainly Savannah with the Michigan Sugar operation. So that just leaves Amalgamated, Spreckels in California, and American Crystal and the two co-ops here that have that problem of monitoring.

Michigan is a big user of sugar, you know, and it's a rarity when they don't sell all of the sugar they produce in Michigan--both Monitor and Michigan Sugar. The big cereal makers buy a lot of sugar.

JF: The company you represent has 1,800 growers that own it, and it depends on those people to provide it with products. People from Hawaii own the companies, and the companies own the land and they farm it themselves. Does that create any divergences in interests? They're holding land which they could use for other things.

AB: Yes, and you have a comparable situation in Florida, where you have U.S. Sugar, the old Mott family deal, and individually they're bigger than anyBloomquist of those people in Hawaii. They have all that land, and so they control the price of the cane, the whole doggone thing, right up through the refining process. Yet theyC. do sell a lot of raw cane. Savannah buys from them, along with others. That's quite an operation.

It would be as if we owned a lot of the land and sold ourselvesSociety the beets. I don't think that is true anyplace in beets, that any company ownsAldrich land--oh, you know, they all own a few hundred acres. of JF: Well, you owned 6,000 acres at Rocky Ford. Historical AB: We did, yes. The problem was if we could have had beets on those 6,000 acres, we'd probably still be in business down there. But on rotation, you're at only about 1,500 acres. One in four, down there, isinterview what we tried to stay on. We rented all that land out and owning it, of course, we had something to say about what was put on it--if we wanted to be hard-nosed. But as much as we would have liked to have had more acreage there, we had a hard time just keeping that 1,500 in sugar, which was one out of four because of rotation processes. Minnesota history JF: I wonder if you would comment on your perspective on the changing economics in the sugarOral industry, particularly the beet sugar industry. How farmers' yield per acre has changed, if it has, and particularly how sugar prices have changed. In other words, has the net changed? Are they more profitable than they were in 1962? Are they less profitable than they were in 1962? If there have been any changes, why? If there haven't been any changes, why?

AB: Certainly, the dollars are bigger today than they've ever been, but by the same token costs have also risen, so the net between the cost of producing sugar beets and what the grower gets in today's economic situation is probably very similar. If you have an average

58 crop and your costs are average, you have make reasonable money. It's been a profitable crop.

At the time we put the co-op together, we were basing everything on yields of about twelve and a-half tons an acre sugar beet, twelve and a-half to thirteen, sugar content at fifteen percent. The average yield in the Valley now is more like sixteen and a-half to seventeen tons an acre, so the volume of beets, the number of tons, has risen dramatically for an agricultural crop.

As to sugar content, maybe it has risen a half point from fifteen to fifteen and a-half on an average. We've had years where the sugars have been extremely good, in the seventeen and seventeen and a-half range. But we still don't produce the high sugar beet content that some of the European countries do, for example. You can have an entire campaign in Spain, which is a much smaller producer, of nineteen and a-half, to twenty percent sugar. It's just unreal. Bloomquist JF: Is it because of the beets? C. AB: I think a lot of it has to do with the extreme heat. Whether those beets are different varieties that I don't know. But I've been in Spain and watched beets coming in from farmers' fields where the old sugar content on their sampling Societysystem all exceeded the twenty to twenty-one percent range. And if youAldrich apply sugars of that magnitude to the scale that our growers are paid on, that boosts the payment per ton substantially. But that isn't going to help our economics. of

I think one of the unknowns in the sugar business;Historical at least since I've been in it, is whether or not the beet sugar people could exist without a sugar program.

JF: A federal program? interview

AB: A federal sugar program. I think everyone in the business has reached the point where they don't want to run that risk. I think a lot of them, if you sat down in a corner and talked about it, wouldMinnesota say, "Yes, I think we could. I think we could exist without a federal sugarhistory program.” And others would say, "Well, I don't really know."

The Oralday may come, as we near the twenty-first century, when we get to the end of the program. I've heard people say--and not only on sugar but all federal farm programs--that we probably will have one more go-round of federal farm programs before getting into the free trade, with no program at all.

I have a strong belief that sugar particularly, and probably all agriculture, will succeed without a farm program. We are efficient. I've seen sugar production in other parts of the world. As the standard of living in the underdeveloped nations increases--and it is--their costs are going up, too.

A British economic group did a study on sugar production, and their conclusion was that the cost of production in the world is nearing the sixteen, sixteen and a-half cent level. Now, obviously there are people selling sugar for substantially under that, but whether or not the cost of production is less is debatable. Sugar is a social program in many countries where it's produced. It's not an economic crop. If you don't mechanize a cane operation, for example, you have thousands and thousands of jobs. And in some of those countries that produce sugar, that's what they want. They want a social program and they like sugar because of its social aspects. They can have 10,000 people working rather than 10,000 people on relief, or whatever the case might be.

This is probably true of a lot of agricultural crops. As for the beet business, when I first went to the Valley in 1962 we had about 100,000 acres devoted to sugar beets, and we had over 5,000 Texas-Mexicans working on the sugar beet crop. Today we have 400,000 acres of sugar beets, and I'm sure that if you look at the number of field workers, it's more like 2,000, 2,500. And a lot of that is the attitude of, "We've always used them, so we might as well continue to use them." Bloomquist

In fact, a lot of the people we call our better growers have anC. anathema about having weeds in their fields, no matter whether it's sugar beets or other crops. As long as labor is available they'll use it, just because they can't stand to see weeds in a field crop. But if they were forced to grow a crop without labor, they could do Societyit. Of course right now you've got that fine line of whether or not to useAldrich chemicals, and that issue has not yet been completely resolved. You know, if you quit using certain chemicals are the weeds going to take over? Those things have yetof to be settled.

But on the matter of economics. Even thoughHistorical the dollars and numbers are bigger, I think the profitability of a beet crop today is not much different than it was thirty years ago when I first came to the Valley. It was profitable then and it's profitable today. interview JF: Now I've understood, and you alluded to it earlier, that in many ways it's a more difficult crop to grow than wheat, for instance.

AB: It is, and it takes moreMinnesota equipment. The thing about the beet industry in the areas that we're talking historyabout--Southern Minnesota, Mindak, and the Red River Valley--is that every individual grower is equipped. For example, he'll have special planters for sugar beets,Oral cultivating equipment, automatic mechanical thinners, and all the harvesting equipment. He'll have more and better trucks, better and more powerful tractors than he'd have to, say, if he were just farming grain. So the initial input into the equipment necessary to produce sugar beets is much greater.

In California, all the beet grower out there really needs is that specialized planting equipment, because when it comes time to harvest, he contracts his harvest. There are crews, and again you can do that in areas where you're not faced with the climatic conditions we have here in the Valley.

If we don't have the beets out, say, by the twentieth, twenty-fifth of October, the odds are they're going to freeze and then they're worthless. As someone once said, the harvesting of sugar beets in the Valley is the biggest movement of a perishable crop to market in the world. It starts full blast about the first of October and goes for about three weeks, and that allows for a few days of rain, which is what we usually get during harvest.

But when I say "labor intensive," it's labor intensive machinery and labor when you get to the harvest. I suppose with 1,800 growers, we've probably got 5,000 trucks that are used in the hauling of the beets from field to factory or to the piling station. So you've 5,000 truck drivers, for example, and a lot of the Texas-Mexicans come up and work early. They may leave the Valley to go to either Wisconsin for cucumbers or Michigan for cherries, and then they'll come back to drive trucks during harvest.

Then we have, oh, not a large number, but there are year-round [Texas-Mexican] families who have settled into the community, secured jobs year-round working on farms or other places. A number of them go to trade schools, like in Moorhead orBloomquist Bemidji or Detroit Lakes, and become mechanics or work in other areas where they need a little specialized training. C.

JF: People who would normally have gone back to Texas? Society AB: Right. Because the group that comes up areAldrich seeing more and more the advantages of education, for one thing. And even though some of these families, the parents, have never had the advantage of schooling, they want oftheir kids to have schooling. I think they see that the schools in Minnesota are better than the ones that they are exposed to down in Texas. Historical

If they find a decent house in one of these small towns, and some have, there are a lot of farmers who will hire yearinterview round because there's so much equipment to take care of in the off-season. Then there's some scholarship programs. I know the Red River Valley Sugar Beet Growers have a scholarship program at Moorhead State, and it's always filled. There are always applicants for those scholarships. Minnesota JF: From thehistory Hispanics?

AB: Oral Yes, right.

JF: I noticed in listening to some of the tapes that Terry Shoptaugh and Stew Bass are doing that a number of the farmers commented that--as you're saying--that there are families they've hired sometimes for years and years and whom they know very well.

AB: You know, every once in a while you'll have somebody--like Herb Anderson--who's doing a tape this week. Herb had a family and they started going to McAllen, Texas in the wintertime to visit. Even though this family had been in that area and had worked for the

Andersons for years, Herb was one of the first to use high school kids in thinning operations.

Every year there are more and more growers that are space planting, eliminating the need for thinning. As I say, in the thirty years that I've been here, the number of Texas- Mexicans has decreased and the acreage is three and a-half to four times greater than it was.

JF: As I understand it, there was a change in the law a number of years ago that made it impractical for most farmers to provide actual housing to migrant laborers because of OSHA [Occupation, Safety, and Health Administration] requirements. Is that true?

AB: Yes, and the housing code for migrant labor almost made it necessary that you provide housing on your farm that would exceed the standards of resort communities. You could run a camp over on one of the lakes and rent out cottages that would not meet the standards that were required in the Valley. Bloomquist

A lot of growers decided to get out of that, and they tightenedC. their belts for a couple of years and learned how to space plant, learned how to get by without labor. What has been happening in the last few years is that a lot of the labor is living in the towns and that, of course, is posing some problems. Society Aldrich JF: Apartments and places like that? of AB: Apartments. Housing that holds students during the school year becomes vacant, and fills up with migrants in the summer. That'sHistorical posing problems not only in the Fargo- Moorhead area, but throughout the Valley. Welfare costs, as far as the counties are concerned, go up. The growers are moving, probably not as fast they could, but they are moving toward complete interviewisolation--where they can grow their crop without any need for migrant labor.

JF: I wonder how many Hispanic people who normally would have gone back [to Texas] have actually settled in Fargo,Minnesota Moorhead, Grand Forks, up and down the Valley. Would you say severalhistory hundred?

AB: Oral No, not that many. But it would be rare to find one of those small towns without two or three families. If you drive through that area, these small towns have a lot of empty houses, and they can probably be rented for a song. There are usually jobs available on farms for people who are willing to do that type of work, and a lot of them, like somebody told you, get tied in with a certain family and some will continue working there into the second and third generation.

JF: In talking about the profitability, certainly when you look at the beet industry totally, there must be differences. Is it true that there's more competition for land in California?

For instance, I remember reading about Oxnard that it became so expensive to grow beets, as it began to be developed, that they just couldn't grow them anymore.

AB: That's right. Around the Clarksburg area--which is the only one that I have any first- hand information about because we had a plant there--if they can't double crop the land they feel they can't afford it. For years that Clarksburg area needed 18,000 to 19,000 acres in order to produce enough beets to run that mill, and for years we never had any problem. Now all of a sudden they are having real problems.

You get the number of acres that farmers and landowners are willing to devote to sugar beets continually shrinking and then you get disease problems. One of the ways you take care of nematodes, for example, is you don't plant beets every year, so you have a beet- free period. By having beet-free periods in those limited areas that beets have been grown, all of a sudden your acreage drops tremendously.

Then there are other crops. Tomatoes are a good example. As theyBloomquist have developed tomatoes that can be harvested mechanically, the return per acre is substantially greater than the return on sugar beets. Farming is an economic endeavorC. the same as anything else. If you make more money growing tomatoes, you will grow them as opposed to sugar beets. Society California is having a problem. One of the peopleAldrich whom we dealt with early on in putting the co-op together was a fellow by the name of Eric Thor. Eric came out of the University of California at Berkeley, a brilliant economist.of He was back running the Farmer Cooperative Service in Washington when I first met him. Historical Later, after he retired from heading the Farmer Cooperative Service, he went back to California and he did a study, I believe for the Bank of America or one of the financial institutions out there. It indicatedinterview that--and he did it on the entire beet industry in the United States--the last place to go to the poor house in the beet sugar industry was the Red River Valley, and that for the rest of the industry the handwriting was on the wall. It was going to happen. Minnesota Indications arehistory that it is happening in California. A lot of people in the industry say, "No, it really isn't.” Others are saying, "Well, look at the numbers and you'll know it's going down,"Oral and it may be that it is going down. The only way that it would be saved is continuation of a price for sugar that is going to cover your costs, and I think the California sugar delegation has been lobbying very hard for an increase in the support level. They are saying they have to have it to stay in business.

Now, you have to wonder whether or not that is really true. In certain areas, I'm sure it is. I've known farmers out there that have been in the business as long as I have, and they've just said, "When I'm done, my sons are not going to grow sugar beets.” The economics just aren't there. They're doing it more because of habit. They've been in the beet business, they've enjoyed the camaraderie of the people they've known over the years in the

63 industry, and they make no bones about it. When they're done, the beets are done on their land.

As I indicated just a couple of minutes ago, the Californians' investment in the beet business is not that great individually. As I've said, a lot of work is done by contract with people who have forty harvesters and it's a business for them, the same as the group that follows the grain harvest starting down in Oklahoma or Texas and works its way up to the Valley. Yes, they're going to take a beating when the day comes when the beets are gone, but the individual grower is not, because his equipment--what he has invested in--is basically the land. He has some equipment, but certainly not the specialized equipment they need in the Valley.

The same thing is true, you know, for tomatoes or some of the other specialty crops in California. You have contract operators providing that equipment.

JF: In the long run, if that were to come true, that would certainlyBloomquist appear to threaten companies like Spreckels and Holly that depend on them. C. AB: Oh, definitely.

JF: You were talking about how highly leveraged SpreckelsSociety is. Aldrich AB: Right. Spreckels is highly leveraged, and they indicated they had converted one of their beet processing facilities to handle cane.of Whether or not that would continue to be economical down the road, I don't know. It is right now, and it does give them an opportunity to do a little better job of marketing.Historical All they have to do is run a cargo of raws up the river and refine it and they've got a certain volume of sugar, and they know it.

Even if the beets go out, thatinterview part of the industry could survive. You know, we mentioned Crockett. Crockett could stay in business even though the Hawaiian crop production is going down, because there is Taiwan, Australia, and Fiji, all of those big producers of sugar which would love to send sugar into our market through the refineries on the West Coast. Minnesota history You can't economically ship East Coast refined sugar to California and make a profit in today'sOral competitive situation. They'd have to go by us, for example, and we feel that we sit probably in the best position.

That's what Eric Thor said many years ago. He said, "You sit in a strategic position, because if you eliminate the domestic sugar program, you're going to have less production on the West Coast to the point that they won't be coming East with anything. The East Coast refiner is not going to be able to beat you price-wise in that Chicago market. So, you probably will stay in business.” And every indication is that we will.

If you give the leadership and a lot of the growers a choice of tightening their belts and trying to go without a program or maybe cutting back a little bit and going with the program, they are so entrenched in growing for a program that I think they wouldn't sleep nights if they didn't have a sugar program.

JF: Would the ability of Crockett--and maybe even Spreckels--to process foreign raw sugar impact, in a free market, beet growers in Idaho and Minnesota and places like that?

AB: I don't think the volume they can run through there is sufficient. And the California market is just growing, continuously growing.

JF: As a market?

AB: As a market. Lots of bodies, and when you start adding millions of people you add tremendous quantities of unique food processing to take care of them. Most of them, like the canning industry, are big buyers of sugar. Bloomquist

JF: What about the competition in the Valley, specifically, C.and beyond that? Competition with other crops for dollars? One thing which you mentioned and I would like to ask you about is double cropping in California. Do you mean you grow a crop of sugar beets and then you use that land to grow avocados, tomatoes?Society Aldrich AB: Or something. of JF: Something that's complementary. Historical AB: Right. In the Valley, you have your season. You grow sugar beets, that's it. Plow it up in the fall of the year and let it sit idle over winter. In California you don't necessarily have to let the field sit idleinterview over winter. You harvest a crop, you work the land, and you plant a new one where you don't have the freezing and where the price of land is such that you feel you have to.

And then, of historycourse, there'sMinnesota always a little greed written into any economic activity. If somebody figures, "My God, I'm paying whatever an acre to rent that land, if I can grow two crops a year, I'm that much better off.” Of course, from the economic standpoint, it looksOral like a good deal.

On the other hand, looking at it from the agronomics side it may be a poor decision. How long can land sustain that continual crop? Now and then they'll use the argument--which isn't valid--"Well, look at Europe. In Europe they've farmed for thousands of years that we know of."

Yes, but they don't do it twice a year. They don't crop anything twice a year. It's more like Red River Valley agriculture. They have freezes and their land does lie idle in the wintertime, and that is probably why they can keep farming it.

JF: Well, doesn't it amaze you when you're in Holland or Belgium? They get so intense if they plant it, and you think they must be using a lot of fertilizers.

AB: And then, you know, people from Europe come over here and they see our highway system and wide ditches, and they can't understand how we can let all that land just grow weeds or whatever. Because over there your highway ends and the crop is right next door.

The same thing is true when you go through wooded areas. They pick every little twig. Somebody's out harvesting them for fuel. I'm sure you've driven some of those country byways in Germany and seen people coming back with a packet of sticks on their back.

JF: Picked clean. You mentioned that the acreage in the Valley devoted to sugar beets has risen over the years. Has it plateaued do you think? I mean, you've got about as much as all the plants can handle right now. Bloomquist AB: We've got as much as the plants can handle. There was some concern. In fact, some of our officers don't know the Valley, really, so we had our agC. people do a detailed study. I knew NDSU had done one several years ago which detailed how many acres in the Valley with good soil within that twelve-county area can grow beets today. Society JF: Do you see it increasing in the next decade,Aldrich or is the economics too uncertain with the farming industry? of AB: No. I do not think that you're going to see any new beet plants built. If current technology and current facilities can some wayHistorical handle more acres, we might increase modestly. This storage that we started about five or six years ago has turned out to be very, very successful. interview Those beets that are put in under proper conditions where the sun, the rain, and the snow is kept off of them during that storage period, and then are frozen absolutely rock solid when the weather permits in December, early January, we think that if we had enough of them that we could be processingMinnesota up to May. Then every day that we run the plants, we can slice abouthistory twenty-five to thirty thousand tons of beets a day. All you have to do is measure whatever your yield is at the time, and you can figure out in short order how manyOral additional acres you can handle, how many additional beets.

I think one of the scary facts is that our yields vary so much. It's not like it is in Idaho where they irrigate. They can say, "Okay, we're going to have a nineteen- to twenty-one- ton crop," and they do. They'll have, oh, two or three growers that may have twenty-five and so on. But for a company like Amalgamated, they can project with more accuracy how many beets they're going to have than we can.

Now let's assume we have 400,000 acres this year, and we hope we get about six million tons of beets--that would be about fifteen tons per acre--based on what we've had the last

66 few years. We figure that we could handle up to six and a-half million tons without any problem with the current situation. But say we had an eighteen-ton crop. Then all of a sudden we're up to 7.2 million tons. Can we handle it? We either do or we have to figure out where to haul out the rotten beets. But that's the risk we run.

On one hand, you don't want five million tons, which isn't enough to run your mills economically. Six and a-half is great. That would be just about what we'd like. That would give us a campaign right up into about the first of March with all our mills running until maybe the fifteenth of March, something like that. But if you get up to 7.2, you divide it by, say, 26,000 tons, and you've got an awfully long campaign and you may lose beets from spoilage.

We've never had to hold those beets long enough to know when they start going bad in our storage buildings. I think the plan of the company right now, again depending on whether we get a [federal] program and whether they want to risk it, is ultimately to have two of those storage buildings at each of our factories. That wouldBloomquist be 100,000 tons, so we should be able to hold half a million tons of beets in those cold storage buildings. C. That's all with natural cooling. We've not looked at what the costs would be to put artificial cooling in and refrigerate. You know, really cool those outlets. But due to the fact that the sun doesn't hit them, and no rain or snow gets in,Society and we've been able to freeze them solid, it's worked very well so far. Aldrich

JF: And yet what you're saying is that thereof are probably limits.

AB: There are limits. And we didn't talk aboutHistorical what the marketing limits are. We had seventeen and a-half million hundred weight three years ago and everybody wondered, "Boy, where are we going to market that?" interview As it turned out, it posed fewer problems having seventeen and a-half million hundred weight than the next year when we had fourteen and a-half and we had to scramble to try to buy some sugar to fulfill our commitments to some of the customers we had established with that seventeenMinnesota and a-half million bag crop. It's interesting. history JF: Does the largest part of the crop go to industrial customers? Oral AB: Oh, yes. In our case, almost eighty-five percent goes to industrial customers. Never packaged; it's bulk.

JF: So the little red, white, and blue packages I buy are really a minor part of it--an important but minor part of it?

AB: A minor part of it. You know, again, with 17,500 hundred weight, that is 875,000 tons of sugar, which is almost the amount of sugar we imported the next year in the whole United States. That is one hell of a lot of sugar.

If we would have the tonnage that we talked about, you could probably go to twenty million, which would be a million tons of sugar, which is what the Hawaiians produce. We've got about 1.2 million acres and we're about one-third of U.S. production now, and if our production increased, why, we could be almost half.

JF: That's an interesting statistic, isn't it, that with such a huge crop, you actually had less trouble marketing?

AB: Right. It posed a lot of headaches at the beginning, because we didn't know what to do with it. But all of a sudden, why, the markets open. Of course that's one thing when you have a controlled program like we had. You don't have vast supplies of foreign sugar coming in and being warehoused. They can open the market or they can open up the quotas if they need it, and they keep close tabs on what's going on.

We would know, for example, by the first of December what ourBloomquist crop was and how it was running through the mill. We would know how much sugar we'd have, and the same is true of all of the beet producers. So the government, in determiningC. what the quota should be, has a better feel for how much domestic production there is, and how much would be needed from offshore sources. They've done a good job, really. Society JF: Now, all of Crystal's 400,000 acres is allottedAldrich out to specific farmers? So, in other words, someone can't just buy land in the Valley and decide to grow beets? of AB: No, you have to have a contract, and right now at this time of year--well, this time of the year you won't see it. But in the fall ofHistorical the year after a harvest, farmers--who have decided that they're going to retire or get out of the beet business for one reason or another--will run ads. You know, "200-acre American Crystal beet contract for sale.” That's the old supply and interviewdemand thing, and the demand has far exceeded the supply so the privilege of growing beets has been getting more costly. We think that the price is too high, but we're not buying right now.

The growers have the right,Minnesota when they quit growing beets, to turn the allotment into the company for historywhat they paid for it. But they know the open market is where they want to go, because the open market is eight to ten times what they paid for it. Well, it may not be whatOral they paid for it, but what the initial issue was. That was $100 per acre, and some of the stock has changed hands in the last couple of years at $850 to $1,000.

Now it depends on the size of the contract and who's buying. Some people may have bought a quarter or section of land. So in order to keep their rotation, they may want to buy forty acres, say, on a one-in-four rotation. They may have a 160-acre contract and have bought this additional quarter and they want to keep this same rotation, so they can afford to pay.

That's one of the reasons the price has gone up, because you rarely see anyone buy a big lot, say a 240-acre contract, which is roughly $240,000, plus the price of land. You don't see people doing that, but you do see the prices hold because people are picking up smaller parcels to round off their acreage for whatever reason.

JF: Part of the price then could be just because there's somebody around your land who wants a piece of it.

AB: Oh, sure. Right. But, you know, there's this group--we call them the "cornflakes"-- down in that Milan-Montevideo area which has been complaining about sugar beet growers forcing the price of land up.

There was a very interesting letter to the editor last week--from somebody down at Lake Lillian I think--showing that sugar beets amounted to something like two to three percent of the farmland usage in Minnesota, and he said, "How can it be that a crop that takes less than two to three percent of the land is setting the price?” You know,Bloomquist it's not very realistic. C. The same thing happened up in the Valley. That's one of the reasons we did that survey-- just to find out how they could point their finger and say it's because of sugar beets that the price of land has gone up, or the price of rents. Society Aldrich JF: That brings up an interesting question about the controversy down in southwest Minnesota over land values. Most farmersof get price supports for their crops, and yet here was a group of farmers complaining about sugar beet prices. I thought, "Gosh, guys, isn't this kind of shooting yourself in the foot?" Historical

I mean, the public who lives in New York City is going to say, "Well, but you're getting support for corn and wheat,interview too.” So, my goodness, isn't this nice? Here farmers are agreeing with the consumers, and I wondered if they realized what they were doing.

AB: I don't think so. The irony of that whole thing is that--and I guess we couldn't prove it--the word is that all theMinnesota costs connected with their trips to Washington and all that have been paid by historythe sugar users group. You know, that big group that's opposing the sugar program--because they found somebody that they thought, "Well, they're going to get publicityOral and we'll get backup."

One of the spokesmen is a very intelligent individual. Not that they all aren't, but there's one in particular who's very articulate and intelligent and did grow beets. The people who know him said, "Al, there's sour grapes. He just sold out too soon.” Like I say, you can't prove it, but that's what they're saying.

JF: Yet when you go down there around Renville--we're doing some video oral history interviews out there with a woman and her husband who have had a lot of trouble on their land and sold their farm to their daughter and son-in-law. They still talk about the land

69 value, and yet that big beet plant has saved a lot of those people. I mean, her husband got a job working in the beet plant and is making good money now, and they're in some ways better off than they were when they were farming. They're quick to give the credit to the beet industry down there that really bailed them out and bailed out a couple of little towns, like Danube, that would have been flushed down the tubes.

AB: Yes. Danube, Renville, Olivia--they are three that have benefitted immeasurably. And Willmar. Which is surprising, but a number of people live in Willmar and all the meetings are held there because it is the only town with big enough facilities to hold all of them at one time. So they get a couple of meetings a year, and it's big business.

JF: You've mentioned certain components of the acquisition of American Crystal Sugar, the New Jersey company, by the growers group. Could you run through the process, because you're generally credited with being the mastermind of this?

AB: That was one of the things that bothered me last night whenBloomquist I was thinking about what we had covered. I sure didn't want this whole thing to go by without giving credit to those people and to the growers who were just as damned stubbornC. as I was and weren't willing to quit.

The executive committee of the Red River Valley Sugar BeetSociety Growers is the group I basically worked with. That was a group of twelveAldrich men, and those twelve men had selected the president, who was Wil Brekken; the vice president, who was Paul Kimstead; and the secretary, Herb Anderson. of

Those three particularly, along with our lawyerHistorical Bill Dosland, said early on, "What are we going to have to do in order to put this thing together to achieve what we're setting out to do?” From day one, we said, "We're going to have to get outside help and it's going to cost money." interview

JF: Now, around what year was this?

AB: This was 1971. AndMinnesota so, as a preface to making this offer, the growers were concerned thathistory the company was not moving ahead the way they thought it should to provide for expansion of the beet industry. Everyone was aware of what had happened in 1965;Oral it was a shotgun wedding to get them involved in that Drayton operation. They would never have done it if they hadn't been put over a barrel and faced with having competition in their back yard. They didn't want that.

So they went along with the Drayton operation. And it turned out to be a good move for American Crystal, but it was not anything instigated by the company. In fact, the company had fought it until the final hours when that decision was made to join with the group. That is the background of the thinking of the growers in the Valley: if the company is not going to offer any expansion, we want more beets.

We looked around and we figured, "Okay, we've got to somehow get somebody on the American Crystal board [of directors] to get the board to listen to our plea for expansion by the company, whatever it takes.” How do a bunch of farmers try to get their word heard? Well, in the business world, you buy stock and you hope you can get a seat on the board.

We found out about a block of 100,000 shares of stock was owned by the Borden Company, which they had acquired when they bought Cuban American Sugar Company some years prior. We contacted the Borden people, and Borden indicated they would sell us that block of stock at what they had paid in their transaction with Cuban American. It was approximately the same price as the market was at the time, around twenty-two to twenty-three dollars a share, as I recall.

JF: Was this stock that Cuban American Sugar had owned in American Crystal?

AB: Yes, that's right. How they acquired it, I just don't know. Bloomquist

We did find out when we made that move that, prior to our makingC. the inquiry about that Borden stock, Archer Daniels Midland had made a move toward being involved in either buying the company or buying enough stock to get on the board of American Crystal. They were unsuccessful and, as we heard it, they found out theySociety couldn't achieve what they had set out to accomplish. They finally soldAldrich their stock back to American Crystal and the chairman of American Crystal parceled that stock out and made it available to people who were friendly to the present managementof of American Crystal, and so they were even more deeply entrenched. Historical In order for us to buy that 100,000 shares, it meant something like two and a-half million dollars that we had to come up with by the time we paid the various costs. In order to do that, we had lawyers drawinterview up some type of program that growers could invest in. But it looked like it was something that was going to take a lot of wheels spinning and would accomplish nothing, so we kind of discarded that. Although at the annual meeting in December of 1971, the growers did offer a resolution to seek ways by which we could have more of a say in howMinnesota the sugar industry operated in the Red River Valley. history In January, I wrote a letter to Briggs asking if the company would entertain an offer to sell at bookOral value. Well, book value was almost double what the market was at the time. I went to the American Society of Sugar Beet Technologists meeting in--I believe it was the end of February 1972. That was a meeting in Phoenix.

As was the custom, our whole executive committee was down there. In lieu of being paid anything for their services on the grower board, they were given a trip a year. As I recall it, they would pay for one first-class ticket, and if the individual director wanted to bring his wife and buy two coach tickets, why, it amounted almost to getting his wife out there for free. Of course, once you rent a room--that was the way that the board executive

71 committee of the Growers Association was really compensated. Everybody knew what was going on.

But anyway, there they were, we had them out in Phoenix. I had a note from Charlie Briggs, the president of American Crystal, saying he'd like to have lunch during that week. Harvey Johnson was attending the Technologists meeting, and Charlie had come to Phoenix. We met in a motel, I remember that, and he said, "In response to your letter, I've talked to the board and the board has indicated that they would be willing to entertain an offer. You know, sell the company at book value."

So after lunch, I went back and the whole executive committee was around the swimming pool at Dell Webb's townhouse in Phoenix. Our lawyer was there, along with all the members of the executive committee. I'll never forget Dosland cautioning everybody not to breathe a word because we had inside information and it could affect the price of the stock. Bloomquist That night we went out to dinner--I think it was a place called Pistol Pete's--with the whole board, and one of the directors told me he called homeC. and had bought some stock. To this day, I think he made a few bucks. Anyway, that was the beginning of the year of a lot of meetings. Society While we were in Phoenix, I said, "If we are goingAldrich to proceed with this, we're going to have to have a lot of help from professionals.” We asked Bill Dosland about a group of attorneys and he recommended the Oppenheimerof firm of Saint Paul, and a fellow by the name of Ed Dan was the one that was assigned to us. We made arrangements with Arthur Andersen, the accounting firm, and they assignedHistorical a fellow by the name of Leroy Kanoose.

We talked to Loeb Rhods in New York. I knew John Loeb, Jr., who had been president of Holly for a short period wheninterview they owned an awful lot of stock in it, and we arranged to meet with them in New York. It was a series of meetings, almost on a weekly basis.

Well, Loeb Rhods sent a fellow by the name of William Davidson, Waddy Davidson. We met with the Saint Paul BankMinnesota of Co-ops--well, first of all, we met with the commercial banks and wehistory found out in short order that they would be helpful in raising the twenty million dollars we needed. In other words, providing funds to little banks to help the growersOral borrow money to buy the stock. But the commercial banks had no interest in long-term financing of this project.

JF: So you went to First National Bank and some of those places?

AB: Dale Hanson of the First National Bank of Saint Paul was the one that was the most helpful. He put together a consortium of banks to provide the interim financing, but they had no interest in long term. Of course, as I indicated, I had talked to the people in Holland about their co-op, and so I figured, "Well, let's talk to the Saint Paul Co-op bank," and we did.

We made a date with them and came to the Cities and talked. Subsequently I've learned that the bank made the terms so tough that, although they didn't want to discourage us, they set the terms at such a level that they felt we would never succeed and they wouldn't have to follow through buying a sugar company with a bunch of farmers in the Red River Valley.

Anyway, they went along. Oren Shelley was the president of the Saint Paul bank at that time, and he immediately assigned people to work with us. Although they really didn't want to finance it, they set the term, $20 million for a down payment, at a level they thought the growers could never come up with.

Then we were told by the local banks that we had to convince the banking authorities. We had two local bankers that worked with us almost on a daily basis. One of them from the First National Bank in Moorhead, Curt Johnson, and one from the Polk County State Bank in Crookston, First National Bank in Crookston. Those twoBloomquist were Bremer banks. First National was part of Norwest bank system. C. We met with the Norwest bank people in Minneapolis, and they weren't interested at all initially. That's when we went to the First National Bank of Saint Paul, because we had to make sure we had a backup in case these local banks pulled outSociety of financing the growers. Aldrich We met with the bank examiners in both Minnesota and North Dakota, went over the whole deal with them, explained what we ofwere about to do. The lifeblood of the little banks in the Red River Valley, of course, was the operating loans to farmers. But they had never loaned farmers' money to buy stock, andHistorical we had to convince them that this, in reality, was an operating loan, even though it was to buy this stock.

Then the federal people gotinterview involved, and they said, "You've got to make sure that anybody that wants to join, can.” And when you're dealing with about 1,300 farmers, as we were at that time, you're going to have a few who have shaky financial statements. So we had to make provisions that they could be covered, too. Those banks that I mentioned agreed to take anybody, Minnesotaand they'd split the so-called bad loans between those three banks. As it turnedhistory out, they were all paid off the first year--no problem.

Well,Oral we had our team in line then. We went to Denver to the first meeting with American Crystal's board of directors. I think the company people--Briggs, Erramouspe, Zitkowski--whom we dealt with and some members of the board, thought from day one that this was going to be the way to get rid of us.

AB: The array of talent that we brought in for that first meeting with them included all those people I mentioned. We had the Oppenheimer firm, Arthur Andersen people, Loeb Rhods people from New York, Saint Paul Bank Co-ops, First National Bank of Saint Paul, and the local bankers and our grower board. We had quite a contingent that went to Denver to the meeting.

JF: And their whole board was there?

AB: Their whole board was there, and that was really the first time most of us had met them and they had met any of us. I felt from that day forward that Cris Dobbins felt that we were for real, that we really intended to do what we said we wanted to do, and I still think that Briggs and Erramouspe figured that there was no way on earth that we were going to raise $20 million from our farmers.

My recollection is that this was in March of 1972 that we had that first meeting, and from that day forward, of course, it was one meeting after another. Obviously our board had been told that this thing might cost us a quarter of a million dollars to hire outside talent. Little did they know at that time that it was going to be probably closer to a million dollars, but once we started going down that road, we just kept going.

Of course, then you go through a planting season. The team that weBloomquist put together was doing most of the work at that time because the farmer directors were busy farming. When the fall of 1972 came about, we had moved to the pointC. where we had to start selling stock.

We had grower meetings, most of them very successful. ThereSociety were a couple pockets of resistance, one up around Gilby. John Scott, whoAldrich was one of the premier beet growers and premier farmers in the Valley, was opposed to the plan. He is a John Bircher and inalterably opposed to co-ops, so he indicatedof almost from day one that there was no way that he was going to support this type of thing. He liked sugar beets, had done very well, and, as I say, he was one of the best growersHistorical that we had. The unfortunate thing is that John Scott took a number of other good growers with him in opposing it.

Then there was a pocket atinterview Drayton. There were some up there that said, "Why should we ban together with the rest of the growers in the Valley? We've got the good plant, we've got the new plant, and why should we help build the rest of the Red River Valley?” That group, was headed by Don Halgrove, who at one time was a candidate for governor of North Dakota and a veryMinnesota respected businessman in the Drayton area. Don was a beet grower, but hehistory felt that the Drayton grower was going to come out short on this deal of trying to buy the company. Oral There was another pocket over on the Minnesota side north of Warren in the Hallock area. That opposition group was headed by Buddy Jensen. He had a small following, and they had lawyers and tried to put hurdles in front of us, but we overcame each hurdle one by one and kept proceeding.

He said that there was no way that Crystal stock was worth what we were asking. The price we were going to pay was double what he thought it was worth at least, and there was no way that he was going to invest $100, and the other growers shouldn't invest $100

74 either. He made the statement that, "I'll buy all the beet acres I want as soon as you guys qualify your faith."

Well, I saw Buddy about ten days ago, and he's still looking for that beet stock. [Chuckles] I kidded him and he said, "Well, I think I'm going to retire before I ever get that beet stock," which I think is true.

Some of the people [who opposed the purchase] were vicious. Some of them said the usual things. I remember John Scott saying that I'd gotten a million dollars to do this, but I'm still waiting for the first dollar of that. You had to respect him for his beliefs and he was sincere, but the unfortunate thing, as I said earlier, is that some of his neighbors, who were also damned good beet farmers, were led away from joining the co-op because of what he said.

We had one other big obstacle that we had to take care of in 1972 and that was the fact that the company was going to contract for 150,000 acres for the Bloomquistfour plants. That was Moorhead, Crookston, East Grand Forks, and Drayton. We needed another 50,000 acres, because we needed 200,000 acres at $100 an acre to come upC. with our $20 million.

Well, the company said no way would they agree to contract another 50,000 acres unless the growers signed a codicil to their contract saying that in theSociety event the plants couldn't handle the beets, that the growers would take theAldrich loss and not the company. So that meant that we had to contact every grower in the Valley--which we did and we got them all to sign for the extra acres. of

Even the people who opposed it signed that.Historical They wanted to grow beets, and that only proved our point that you could sell 50,000 acres when the shotgun went off at noon. If you could make the rounds, you could have them sold in one day. They really wanted beets. interview

So we had that supplemental contract, all the beet contracts, and, of course, every time we did something at this point, the lawyers had to print things. That was one thing. You don't just send out a newsletterMinnesota when you're dealing with something like this. You have to have it in legal termshistory and it's an offer, and we had to print and mail out to all the stockholders. Everybody had to see it. Oral Well, we did all those things. Then as the year wore on while the farmers were busy doing their thing with their beet crop and the whole bit, we were busy trying to get all of the problems and all the legalities taken care of in trying to buy out American Crystal Sugar Company.

As I indicated, their lawyer, Don Graham, who was on the board of American Crystal, was probably one of the few members of their board beside Dobbins who really understood the beet business. Don had been on the Crystal board for years and was familiar with the Red River Valley and a brilliant lawyer, really. So you could be sure of

75 one thing, and that is that all the steps that were taken were going to be taken care of properly.

Someplace along the way we had a problem getting something taken care of in Washington. I can't remember at the moment just what it was, but I remember that Hubert Humphrey, who was alive at the time, indicated that it was something that he couldn't take care of and he suggested that we go to Clark Clifford in Washington. As I say, I can't remember just exactly what the problem was, but it was something that dealt with one of the federal agencies.

With Ed Dan and Bill Dosland, we went to Washington and met with Clark Clifford on a Friday morning. Clark listened to our case and said, "I'll be in touch.” On Monday afternoon of the next week, we got word that whatever it was had been taken care of and that problem no longer existed. What was done or how he did it, we never knew, but it was done. Bloomquist Then we got a bill for $30,000 from the Clifford-Warnke firm. You can imagine our executive committee, who had to approve such things, gettingC. a bill for $30,000 for that twenty-minute visit to Washington. But they were convinced that the job got done, politics couldn't do it, and if we're going to move ahead, this had to be taken care of. Society Later on in the negotiations another problem arose,Aldrich and this time American Crystal's lawyers suggested we--or Cris Dobbins really suggested it--follow the same route. He knew Clark Clifford. So again we went andof this time, because of the type of a problem, we were referred to Paul Warnke, who later became the arms negotiator. Again, boy I tell you, those guys were sharp cookies. Historical

My recollection is it took him about as long to take care of that problem as it had taken Clark Clifford to do the firstinterview one. I think we got a bill for $40,000 for that one, but we split it with American Crystal.

I'll never forget, when we went to Washington. We were meeting with the negotiators from Crystal when this problemMinnesota came up and that was when Dobbins suggested that we go to Washington.history So we left directly from Denver--Ed Dan, Bill Dosland, John Graham, and myself. We got a United flight nonstop from Denver to Washington. We'd called aheadOral and made an appointment with Warnke for the next morning, and Don Graham said to us over breakfast the next morning before we met, "I'll talk to Warnke about what the fee will be and all that kind of thing.” So the whole thing was kind of funny. Here you've got a brilliant lawyer trying to ask another brilliant lawyer how much he's going to charge.

I think our appointment was in the afternoon, and that night Ed Dan and Bill Dosland and I had dinner down at another meeting. We sat around the table asking each other, "What did Don find out about what the fee was going to be?” It was a joke because Warnke had so many ways of saying that it was "one of those things that there was no way of

76 knowing" and saying it in forty different ways every time Don would approach the subject. Anyway, as I say, my recollection is that it was a $40,000 fee split between American Crystal and the growers and that the job got done.

Once the beet crop had been harvested in 1972, it was getting down to the business of selling the shares at $100 an acre and getting the approval of the entire grower group. We had a couple of meetings and more growers attended those meetings than have either before or since. There was an unbelievable turnout at the Fargo Holiday Inn, really.

JF: So now we're into November or December of 1972?

AB: Yes, which is about a year from the time we first approached this subject. You know, there's no way of remembering all of the little things that went on. It was a full- time job for Bill Dosland and his law firm, and certainly Ed Dan. I don't think Ed did anything else. And whenever we needed additional help from the Oppenheimer firm--of course, that was a big firm--we had it. Bloomquist

During all this time, anything that had to do with finance wasC. referred to Waddy Davidson, and the Loeb Rhods people. They worked with Dale Hanson in Saint Paul on the interim financing and with the Bank of Co-ops and their lawyer, Mike Welsh, and with Oren Shelley and Glade Nelson. Those names come to mindSociety immediately, and it was almost a full-time job for all of those people I mentionedAldrich for that year.

There was some negotiating going on, too.of You know, you can take a set of books and say, "Okay, the book value is X dollars," but the Arthur Andersen people wanted to know why. And Haskins and Sells were the auditorsHistorical for American Crystal at the time, and of course Crystal had opened up their books to the Arthur Andersen people, so there was a lot of negotiating needed in the financial area to determine just exactly what the purchase price was. interview

I can think of a couple of things. For example, there was something like $300,000 worth of beet seed down at Rocky Ford which wasn't worth the powder to blow it away. There was a small problem dealingMinnesota with the growers at Rocky Ford which went back to the harvest year before.history Who's going to pay the growers? They were involved in a lawsuit and a few things like that. So we had to determine if that was going to be a part of the purchaseOral price or was Crystal going to pay that with the proceeds of the sale of the company and so on.

All of those things had to be resolved and again involved more lawyers. Like I say, it kept Dosland and his firm and several lawyers from the Oppenheimer firm quite busy. It was about this time that the government was involved in price controls. Wage or price control was going through the whole era, and so we engaged another lawyer out of the Oppenheimer firm who was familiar with that activity, and he worked with Crystal on that.

All of these things had to be settled, resolved. In most cases, it was just a matter of saying who was going to do it and when and who was going to pay for it--whether it's something that Crystal was going to have to pay before or something that the growers would pay for. Innumerable little obstacles like that.

JF: And you had to have this all ready for these meetings with your growers?

AB: Right. And then growers would be coming up with, "Who's going to run the company?” And, of course, at no time had we thought that the Growers Association was going to run the company. You're buying the company, but you're not changing management. All you're doing is saying, "Okay, growers become the shareholders and the shareholders are paid off.” In reality, that was the deal.

JF: Were they thinking at that time though about moving the company out of Denver?

AB: Oh, I don't think anybody ever had anything but that in mind.Bloomquist One thing that I've learned over the years about our farmers in Red River Valley, they want to be able to kick the tires when they buy something. History has proven that right,C. because, you know, they didn't want the Rocky Ford plant. Okay, it's fine to enter into a management agreement with the growers down there, but we want out. Society Clarksburg, the same thing. You know, that plantAldrich was practically given to the growers out there because the growers in the Valley didn't want anything to do with it. They couldn't watch it day by day. of

There was never any question that the researchHistorical plant was going to move up to the Valley. Along the way since that acquisition, we had a couple of votes with Renville Southern Minnesota Beet Sugar Cooperative regarding Renville joining us. On one of them it was sixty-five percent of the votersinterview who said yes, but we needed sixty-six and two-thirds percent. The Renville growers approved it, our growers approved it, but not by that statutory two-thirds. All these things took time. During this period, Renville was being built. Minnesota JF: Separatelyhistory built.

AB: Oral Separately, right. We negotiated with them to provide people to supervise the construction of that factory. Porterfield, who at one time was the operations manager for American Crystal, had retired and Charlie Briggs made the contact with him, and Port moved to Renville and lived there until he died. But he supervised the construction of that plant for the Renville growers on behalf of American Crystal.

We never were involved in the financing of that Renville operation but down the road after the thing was built, we did have two votes whether or not they were going to join with us and be a part of American Crystal or whether they were going to operate

78 independently. As I say, the vote was in favor of merger but not sufficient to get that two- thirds. I believe sixty-five percent voted yes.

Then the surprising thing is the people who voted against the merger in the Valley were the growers at Hillsboro, where they had been voted in the year before. But they felt that once they were in, they didn't want anybody else in there.

JF: The plant, though, at Renville, was being built at the same time you were negotiating the sale of the company to the growers?

AB: Yes.

JF: Were these meetings at all acrimonious? You mentioned some of the opposition people. Did they come and speak against this at the meetings?

AB: Oh, they did. Like I say, John Scott, very wealthy in additionBloomquist to being a good farmer, had his own lawyers and had them at the meeting and did some speaking. Most of it had to do with, you know, "you guys"--meaning the growersC.-- "you don't know anything about running a sugar company and you're going to put us behind the eight ball. We've got all these pollution problems, all these plants have to be redone." Society The Saint Paul Bank of Co-ops had insisted thatAldrich we hire an outside technical firm, and we did. We hired BMA of West Germany to come in and do an appraisal of all of the plants and tell us what had to be done and that becameof a part of the package. As a result of that, when questions like what we were just talking about were raised, we could answer them with some degree of knowledge. You know,Historical "Yes, we've got problems here, but there are not as bad as you have indicated and this is what BMA says," and nobody was faulting them. interview That's one thing about the sugar industry. When you get to looking for experts in that particular field, there are just not too many. When you get a German firm, you know, it's the old story. When you're more than ten miles from home, you're an expert, and they were a long way from home.Minnesota But they did a good job. We thought they did, and many of the suggestionshistory and recommendations that they made were implemented after the company was acquired. Oral JF: So as things began to turn into 1973, when the early part of '73 comes along, how close were you to...

AB: ...Well, by the time we got into early '73--I'm trying to think of the dates and I can't, but it was very early in the year. We had the final vote of the growers, the money was raised, and we'd made arrangements with Northwestern National Bank in Minneapolis to provide a check for the $20 million, which covered the money from all of the growers, to finalize the deal and for the interim bankers to cover the rest of it.

At the time Waddy Davidson, who was our expert on finance, had made arrangements with Prudential to pay that loan off. The American Crystal that we were buying had borrowed money from Prudential when they built Drayton. That had to be paid off out of the proceeds of this whole thing. So that was all done. I believe it was in May, early May of l973.

Crystal Growers Corporation was set up as a vehicle to purchase the company, because of tax consequences. If you want to look at the financing specifically or exactly the technique that was used because of tax purposes, you've got to look at that Crystal Growers Corporation. It was just a vehicle for all intents and purposes.

The average grower didn't know about it--had been told about it, but it was not vital. Because once Crystal Growers Corporation bought American Crystal, then the Growers Association took it over. When the Bank of Co-ops wrote the check for the difference, it was the biggest check that Oren Shelley had ever signed as president of the Saint Paul Bank. That took place right down here in Saint Paul. Everybody gotBloomquist paid, and then the price of sugar went up the next year. C. JF: Right on cue. [Chuckles]

AB: And the rest is history. Society Aldrich JF: In other words, it was a pretty perfect time, as it turned out, to buy the company. of AB: You know, it was not that smooth sailing all the way through. I must have been an S.O.B. that whole year because I just kept moving.Historical Everything had to keep going, and I think there were times when the growers figured, "God, I wish that guy would just get lost." interview There were a couple of times at executive committee meetings and board meetings when they said, "Why don't we cool it for a year? Why don't we just back off?” They figured that what we've done is fine, but let's step back and take a long look. Because of what happened in the sugar market,Minnesota had we ever stepped back we wouldn't be doing this tape today, becausehistory the whole thing would have been different and I would have retired from the Red River Valley Sugar Beet Growers four years ago. [Laughter] Oral But, you know, Wil Brekken I think was just as involved as I was, and he had a pretty good handle on the grower board. Arnet Weinlaeder, Pat Benedict, Herb Anderson--those are the guys that others listened to, and they were willing to go along with the deal. Their attitude was, "Let's keep this thing going. Let's not back off.”

Most of the group that wanted to slow down and back off were not members of the executive committee. They were members of the board but not the executive committee, and they were not as close to the day-to-day goings-on as was the executive committee. They probably sat home and figured, "Gee, what really is going on? We should probably

80 know more.” And perhaps it's true that they were not kept as close to the situation as those twelve members of the executive committee.

JF: Well, as you pointed out, it was moving so fast.

AB: Oh, it was. It was unreal.

JF: But it worked.

AB: It worked, right. We talked a little earlier about Charlie Briggs not being willing to move, making an offer to move to Minneapolis and the board not accepting that. He then announced that he would resign, and take early retirement. Everyone that was with the company, with the exception of Erramouspe, Zitkowski, and Milt Carlson was offered a job in the Valley.

JF: Now, you mentioned something about the fact that the plansBloomquist for the Crystal headquarters building had already been drawn up. C. AB: They'd been drawn up, but not for Crystal. It was going to be built on speculation. The land had been bought by a couple of local speculators fromSociety the area redevelopment. It was land from which all the buildings had been bulldozed and the land was cleared. An architectural firm had bid on and bought it, andAldrich it was going to build this building which had already been designed, to which we ultimately made some variations. But it had been designed and we knew what it was going toof look like. It was to be built in Moorhead on that site and the firm was going to then find tenants for it and rent it out or lease it or sell it. Historical

Well, we looked at both Fargo and Moorhead, and that was the only piece that had any appeal to our so-called buildinginterview committee. As I indicated before, one reason was it was 7.4 acres, or 4.7, but it was land rather than so many front feet on a downtown street.

We had to deal, number one, with the area redevelopment to make sure that the price we had been given was accurate.Minnesota Farmers do not pay people too much for a blue sky. Really what it amountedhistory to is that, by agreeing to buy it from this architectural firm and engineering firm who had an option on it, they got the business. In other words, we didn't go outOral looking for an architect. We got them when we bought the land.

That was the Lighthower Johnson firm from Fargo. The growers said, "Okay, you've got a rough design of a building. What's a building like that going to cost?"

They said, "About a million dollars.” And so the board then made a resolution--and that was a mistake--that they would spend a million dollars to build this building.

Unbeknown to us, meaning myself and the members of the executive committee, that in order to fit that plan to the million dollars, we had some modifications. I mentioned the

81 two-story entrance and so on. Once those changes had been incorporated in the plan and the architect-engineers had taken that to a couple of builders, they found out it was going to cost more than a million dollars.

Without telling us they figured they could get that million dollars by down-scaling. It's a unit building, and instead of the units, for example, being twelve by twelve or eighteen by eighteen, they cut it back by three feet, every unit. They took all of the guts, like the air- conditioning system, that were originally to be on the roof of the building, they brought those in and took space from inside the second floor. This is the air-conditioning, this is the heating system, so on.

Okay, they did all of that. Didn't say a damn word to us, and bids came in at the million bucks. Until the building was built and we started asking some questions, we didn't know. But when the time came to build that research station, which would have been the real plum for an architect-engineer--that was about an $8 million building--they weren't even offered a chance. Bloomquist

JF: Not surprisingly. C.

AB: No. As it has worked out, the building has worked, but it would have worked that much better if each of the modules had been that much bigger.Society Aldrich JF: Well, you indicate that you have space problems. of AB: Yes, that's right. Historical JF: Does the company lease other space in Moorhead?

AB: We did. We've got everybodyinterview in the headquarters building now. But, you know, the group that ran the company in Denver I think numbered sixty-four, and we're now doing the same thing with about 120. I think the research staff at Rocky Ford was sixteen and I think there are forty or fifty at Moorhead, so we do have more staff. historyMinnesota JF: But you have a bigger company.

AB: Oral Oh, sure. Much bigger.

JF: One thing I'd like to have you do is to talk about sugar as a political issue. Particularly, can you summarize the farm program now, the sugar program now, and where has it been in recent years and where do you think it's going, to ask you three questions in one?

AB: Okay. For a period of forty years, from 1933 until 1974, the sugar industry in the United States operated under the old Sugar Act, which is legislation that was started back in the Roosevelt era. In the preamble to the bill, President Roosevelt said that this

82 program is designed to keep the domestic industry viable and to provide a market for foreign sugar. So it was in reality a domestic program and a foreign-aid program.

The bill was found unconstitutional right off the bat, but Congress quickly changed what had to be changed to make it perfectly legal. Basically what it did was to divide the sugar market in the United States among domestic segments. At that time you had Hawaii, domestic beet, domestic cane, and Puerto Rico.

When the bill was initially passed, the big foreign recipient was Cuba, and Cuba remained the principal beneficiary of the foreign side of the program until, I think, 1963, when Castro took over. Since that time the Cuban portion has been divided up among the Caribbean nations and other nations around the world.

Second only to Cuba--at that time when the Sugar Act was passed--was the Philippines, and the Philippines had a substantial quota in the U.S. sugar market. Puerto Rico I mentioned, but that was part of the domestic side of the program,Bloomquist and at one time their quota was a million tons, which was equal to the production of Hawaii, or the quota of Hawaii. C.

My first recollection is that the beet quota was 1.8 million tons, and how they fought over that. As time went on, from 1933 on, I mentioned the demiseSociety of the Cuban quota. Then from 1974 until 1977, there was nothing, no program.Aldrich World prices in 1974 were such that a number of industry leaders said, "Well, they've always said they wanted industry to operate under a free market. Here's a goodof chance to do it.” From 1974 until about 1977, there was no sugar program at all. Historical By 1977 the industry was getting in trouble, and during that period the industry got together and decided they should try to get the Congress to do something. The so-called de la Garza Amendments interviewwere passed that year--in 1977--which provided for some payments to sugar beet and sugar cane producers and led to the industry banding together, and which ultimately resulted in the farm bill of 1980 with sugar being a part of the farm bill for the first time. Minnesota In 1980, sugarhistory was to be supported at sixteen cents, with incremental increases until it reached eighteen cents between 1980 and 1985. Then when it got to 1985, it was supposedOral to level off, although there was a provision made that the Secretary of Agriculture was to look at the cost of producing sugar and if an increase was warranted he should so report to the Congress. Or even if an increase in the support level was not warranted, he was still to report to the Congress.

Well, he has and he has not, but the support level has remained at eighteen cents. Now, the method by which the Secretary can achieve an eighteen-cent price is by limiting imports of sugar. The Secretary determines how much sugar will be necessary to serve the U.S. market, and after he has determined what the cane area and the beet area will produce, then he says, "Okay, we're going to need a million tons, or whatever the number

83 is, from foreign sources.” Then that amount is divided among the thirty-five nations that provide sugar to our market.

The foreign nations, particularly the CBI area, do a pretty thorough job of lobbying the Congress, as do the Philippines, to try to increase their quotas. With the introduction of high fructose corn syrup in the '70s, the sugar market started to shrink. Where the per capita consumption of sucrose, sugar from beet or cane, was about 102 pounds per individual in the early '70s, today it has shrunk to fifty-two pounds, and the difference is made up with high fructose corn syrup.

The biggest user of sugar in the United States in the 1970s was the soft drink industry. First they went to a fifty-percent blend, then to two-thirds, then to one-hundred percent fructose. Basically that was Coca Cola and Pepsi Cola, the two biggest users of sugar. Today, it's a rarity for any bottler to use sucrose. They do it during Passover. High fructose corn syrup cannot be kosher, so at a certain time of the year, the big areas where there's a big Jewish population, convert their mixes to sucrose. SoBloomquist we do sell that much sucrose, but the big bottlers are using corn syrup almost one-hundred percent. C. This has changed the need for sucrose in the United States. The industry today feels that the division among beet, cane, and corn is pretty well set, that corn has taken all of the market that it possibly can. The reason I say that is that high fructoseSociety corn syrup will not stand the heat, for example, that you must applyAldrich to use it for baking, candy making, and things like that. So there's a little corn syrup, as you know, in candy, but the major ingredient is still sugar. of

So this fifty-two pounds per capita has held Historicalreasonably constant the last three or four years. The industry pretty well figures that the division between high fructose and sucrose is pretty well established. interview Everyone in the industry is aware that the white corn milling industry has come up with a dry product, dry fructose crystalline. The problem it has is that it's very hygroscopic. It looks just like sugar and if you were to put a teaspoon on the table and a teaspoon of sugar next to it, they wouldMinnesota look identical. But if you let them sit for a while, the crystalline fructosehistory will absorb enough water that there will be a little puddle there, whereas the sucrose will not pick up the moisture out of the air. Oral JF: So that means that it is in fact still unlikely to be used for a lot of different purposes?

AB: Right. If they can somehow make the product so it loses its hygroscopic characteristics, it may make further inroads. People always ask whether or not Nutra- Sweet has cut the sucrose market. There's no indication that it has.

Most of the uses are dietetic foods, and there's still some uses--well, candy is another good one. They have not used the chemical sweeteners. Artificial sweeteners have not displaced too much sugar in any of the confectionery industry. Again it took a lot of the

84 sweetener market, but we do not think it took sucrose market. The one that everyone in the industry is concerned with and is really watching is this crystalline fructose.

The current legislation would provide that the foreigners be guaranteed a minimum quota of 1,250,000 tons. The industry feels that to agree to this would keep the CBI backers--the members of Congress who feel that the U.S. has to do something for the CBI nations-- neutral, or at least keep them off the back of the domestic industry. That would mean that out of a consumption of 9.2 million tons, there would still be a little over eight million tons to be divided between the beet and cane industries.

It's about 52-48, and it depends on what year the division is made of that residue from the total quota less the amount that is reserved for the CBI nations. If there's a shortfall in the cane area, it will be filled by cane producers. If they can't fill it, then it will be filled by foreign imports. If in the beet area there's a shortfall, it will be filled by other beet sugar. And again if that's not available, it would be filled with offshore sugar. So the refiners and the CBI, the refiners and the foreigners, are coming out muchBloomquist better than they did in, say, 1985 or 1980. C. JF: What does it do for companies like American Crystal?

AB: You know, you're going to continue to operate as you alwaysSociety have, but then if you get to a situation where production exceeds theAldrich amount that's available for domestic marketing, then there is mechanism in the proposed legislation which would call for marketing allotments. If you put marketingof allotments on, then the chances are that either the company is going to have to pay the storage cost of the inventory buildup or they're going to have to cut back on production. Historical

In the case of a company like American Crystal, that's difficult, because even though you may say 400,000 acres is notinterview a lot of acres, it is if you get maximum production. But you never know, and if you have 400,000 acres planted and you get something like eighteen tons an acre, you get 7.2 million tons of sugar beets.

If you're able to process Minnesotathem all, you'd probably come up with something over twenty million hundredhistory weights of sugar, which is probably more than we should expect to be able to market. Then if they catch you back, it's either up to the company to say, "Okay, we'veOral got, say, two million hundred weight excess. Either the growers pay the cost as they would in a co-op, the cost of storing that sugar, or we cut back our acreage for next year."

If you cut back your acreage you run the risk of having a poor year agriculturally. You might have fifteen million hundred weights, so then what do you do to come up with whatever your marketing allotment is? It's a precarious position for the beet producer, particularly those of us that are in dry land where we do not have irrigation water available that gives you a better chance of keeping your crops running about the same year after year.

JF: You mentioned this morning a little bit about some of the opponents of the price supports for sugar. The consumer lobby seems to be the most obvious.

AB: Yes. The big lobby is the sugar user. It's really something that's hard to explain. We sell sugar to sugar users, obviously, and the big sugar users are the people like Nestle, Consolidated Baking, M&M, Mars, Hershey, and General Foods, and on and on. They have a trade association called the Sugar Users Group, and they pay dues into that Sugar Users Group.

Their charge is not to kill the program. Several years ago, that was what they set out to do, to destroy the U.S. sugar program. Now their effort is toward reducing the support level. Of course the minute you reduce the price of sugar to a big user like those candy companies I mentioned, whatever they save their moves right down to the bottom line. So they're willing to--and they do--put up a lot of money.

The soft-drink industry is another one. You've got to understand thatBloomquist Coca Cola and Pepsi are the two biggest contributors to the Sugar Users Group, and yet they probably don't use a pound. But if you reduce the support level of sugar, you reduceC. the price of high fructose corn syrup.

They have allies in the consumer groups, the ones that are foreverSociety looking after the consumer. One of the interesting things is that Aldrichif you go all the way back to 1974, that was when there was a big run-up in the price of sugar and all the candy companies, users of sugar, raised their prices. Since that time,of world sugar has been down to two, two and- a-half cents. Domestic prices have been a lot lower than the cost of production, and yet there isn't a single instance where the pricesHistorical charged by the big users of sugar--the candy manufacturers--have been reduced to the consumer.

Just recently, Senator Conradinterview from North Dakota ran a so-called market basket. I think there was about eighteen dollars worth of groceries in a bag that he distributed to all the members of Congress, House and Senate, and on each item it was listed what the farmer got out of it. Minnesota When you takehistory a candy bar, for example, that retails for forty-five to fifty cents, depending on what the machine will charge. I think he used the forty-five cents. There's one and-a-halfOral cents worth of sugar in that forty-five-cent candy bar. And he did the same thing with the share the farmer got out of the price of a loaf of bread for the wheat and so on and so forth.

I remember some years ago when Bob F______was chairman of the ag committee. He stood up on the floor of the House and said, "The price of sugar is X cents a pound, and no matter what we do here today, the price of this soft drink"--he had a big bottle, one of those larger-than-life bottles of either Pepsi or Coke--he said, "You can be sure that the price of this product is not going to drop.” Which it hasn't, over the years.

They say you can't say it hasn't dropped because of loss leaders, which most industries use from time to time. You may see Coke, 7-Up, Pepsi using those loss leaders in grocery stores and their price might be less than it was in 1974. But for the day-to-day, year in and year out prices, users of sugar have not reduced the prices they charge consumers.

Eleanor Haus, who heads, I think it's the Consumers Federation of America, came up with a $3 billion cost item some years ago. Nobody's ever called her to justify it, but she says the sugar program cost the domestic consumers $3 billion a year to artificially keep the price of sugar up. Like I say, no one's ever called her to justify that. We don't think she can.

JF: Does she get listened to, though?

AB: Oh, sure, and that's the one figure that everybody's using. You know, if you use whatever the figures are, if you use them enough, pretty soon that almost sounds like gospel. Some members of Congress, like Downey from New YorkBloomquist and Gradison from Ohio, have--for the last half dozen years--introduced legislation to reduce the support level of the sugar. They use that $3 billion figure now, as didC. Senator Bradley from New Jersey who introduced a similar piece of legislation in the Senate.

Congress doesn't take either of those attempts very seriously.Society Senator Bradley was all set to introduce a bill in the Senate, and his peopleAldrich ran a quick survey. Our people, meaning the people like Boschwitz and Conrad and particularly Conrad, who would talk to Bradley said, "Why bring something up youof know you're going to get beat on?” And so Bradley had his people ran a quick check and found out that what Conrad said was true, that he had no chance at all to get his bill through.Historical

And it is true. A senator or a member of the House would not put something on the floor if he knew he was going tointerview get clobbered, and that's the way it was. Downey and Gradison introduce their bill every year, and the bill is referred to the House ag committee and that ends it, because Mr. de la Garza has not seen fit to bring the Gradison and Downey bill up for hearings or anything else. Minnesota So they sit inhistory the trenches or the back room waiting for what they think is an opportune time to attach it to some other legislation, and so far they haven't been successful in attachingOral to anything that has become law. But they'll be there, and one of these days they may have the right people on their side of the aisle and they'll win.

It's never been a partisan issue. For example, both in 1980 and again in 1985, it came out of the House ag committee unanimously. Nobody opposed it on the committee, where you've got more Democrats than Republicans. But in the House there are forty-five committee members, so you probably have whatever the division is, but both sides of the aisle have been supportive of the sugar program.

When you analyze the votes, most of the opposition does come out of the Northeast where there are a lot of big consumer groups and a lot of consumers, although we've had a lot of support. Congressman Manton, for example, out of New York has been supportive.

We prevailed on him to support the bill in 1985, and he said he got many letters saying, "What did you vote for sugar for?” And then in the next election later that same year, he won by the biggest margin he'd ever won by. So he said, "I'm not afraid to support sugar.” He thinks that agriculture needs that. People have to eat, which is true.

JF: They do indeed. That brings up an interesting question, though. Nationally, farmers who raise sugar, who are assumedly among the major supporters of the price support plan, are actually not that many in number. I mean, farmers alone aren't that many in number.

AB: No. I think there are, Jim, something like between 12,000 and 14,000 sugar beet and cane producers. And say that of the 14,000, 13,000 of them wouldBloomquist be beet growers. Well, you know the situation in Hawaii and Florida isn't much different. You've got that Belle Glade co-op, which probably produces as much sugar as weC. do, and there are fifty or fifty-five growers that grow for them.

So numerically, there are not too many cane growers. You wouldSociety have a few more in Louisiana, and I think Texas has got forty-five Aldrichor fifty, but it's a small operation.

JF: So how do they add up in terms of votingof numbers, even if you take--and we've already talked about the fact that there aren't even that many companies that produce sugar. I mean, they are rather a small number,Historical too. Where does the power come from?

AB: In order to understand it, I think you have to go back to the time we had the old sugar pact, when we had sugarinterview beets or cane in 26 of the 50 states. We always felt that we had enough votes if we only got the votes of the senators who had either beets or cane in their state, and almost without exception, we did get one hundred percent support from those people. So in the Senate we always figured we were pretty safe. Minnesota In the House--historywell, like in 1980 we lost the sugar program in the House, but we had the solid support of the committee. We passed it in the Senate and when the conferees got together,Oral they substituted the Senate version of the farm bill for the House bill.

AB: We've had a PAC [political action committee] since 1979. We started it that year, and I've been running it, so I know how much money we've had and where it has gone. In 1979, I think we raised something like $8,000 from our roughly 1,500 growers at that time Today we're raising from the same number of growers basically $250,000, and the same support has prevailed throughout the industry.

So when you read in the New York Times or the Washington Post about the powerful sugar lobby, I think they're referring to how much money we've got in our PAC, because

88 there's no more bodies going around down there than ever. We're able to support not only our own--when I say "our own people," I mean the people who would normally support us--to make them do a little better job of selling it to some of their colleagues, but we're also able to support new people elected to Congress. You know, until the time somebody votes against you, you consider they'll vote for you and you try to sell them the program, you support their candidacy, and that type of thing.

I suppose most of the calls that I get from newspapers are asking, "Why are you supporting Joe Smith in North Carolina?” There's a simple answer. He has been supportive of the sugar industry. If it's someone in New York who has never voted, "Why are you supporting so and so?” We have a farm bill coming up this year, and sugar will be a part of it. We have found that by supporting candidates, we normally get access to talk to them, and all we ask is a chance to talk to them about the sugar program. It has paid off, because we won in 1985 by about seventy votes, whereas we lost it in the House in 1980. Bloomquist In the Senate we usually win by about 65-35, and we think it will continue to be that margin. It would be indicative of what we were talking aboutC.--Bradley not bringing the bill up because he knew he didn't have the votes.

JF: So this time around you see pretty much the same outcome?Society Aldrich AB: I do. And again, it's all predicated on everybody being together. If any one of the segments--say the Hawaiians or the beet growersof or the beet processors--were to decide that they didn't like what Congress was proposing, didn't like what came out of the House committee and decided to go their own way,Historical about the only thing you can say is that they- -whoever it was--would be successful in killing it. You cannot carry it alone, but collectively you can. interview We talked at lunch about the unions, and you get the union people so there's no divisiveness there. The year 1985 particularly would be appropriate to look at, because in '85 we carried it in the House by about seventy votes. We didn't get any votes out of Maryland because of theMinnesota Amstar refinery. We didn't get any votes around any of that district--Newhistory York, Boston, Chalmette in Louisiana. All of the places where there were refiners voted against us, and yet we carried it by seventy votes. Oral JF: Even without that?

AB: Even without that. This time around, at least as of when I left the other day, the refiners were still on our side, so we should pick up those votes. I think somebody counted it up. There will be fourteen additional votes.

JF: And this bill would last for four years?

AB: Five years. It will be a five-year bill. It will be until 1995, yes.

JF: With price support still at eighteen cents a pound?

AB: Yes. I noticed in the paper this morning--it didn't mention sugar--it said that they froze the support levels on other commodities, which would mean that sugar would not be treated separately or differently, and it added soybeans in there. At the support level of soybeans, the story said that this would not have a budget impact because the support level was at a price lower than the market has been, or is projected to be, during the life of the bill. So when you see that you wonder, "Well, why the hell do they want to be a part of it?” [Laughter]

JF: You mentioned, though, that by the end of the decade, by the beginning of the twenty-first century, there might be some major changes.

AB: You know, people who generally have supported sugar farm bills--whether it's through a lack of knowledge of agriculture or of the sugar programBloomquist--think that this may be the last time, or there may be one more time a subsidy will be passed. When we enter the twenty-first century, chances are we're going to be a free marketC. society.

I think a number of members feel this, even though they would say that we're not doing too well in the GATT [General Agreements on Trade and Tariffs]Society negotiations. We're probably not going to get there with this UruguayAldrich round, but down the road what's going to happen is that we'll have free trade in the world. of Of course, I think that once you get where everybody's playing the same game, the domestic sugar industry, particularly in the RedHistorical River Valley, will do extremely well and will probably expand beyond anything we've talked about. The land is still available, and unless something happens to other commodities, I think the interest will be there, so I think the future for the sugarinterview industry in Minnesota and North Dakota is extremely good.

JF: Let me ask you one question that refers to something we talked about this morning. In talking about the cooperatives that existed: Southern Minnesota Sugar Beet Growers in Renville and also at Minn-Dak....Minnesota history AB: ...Jim, that's one place we've got to correct it. That took place before we did the co- op. Oral

JF: Okay. The formation of the Renville organization?

AB: Yes.

JF: If you look at American Crystal Sugar, which is so much bigger, and you look at these two independent cooperatives, first of all, do they cooperate in marketing?

AB: Jim, they don't. We cooperatively market our pulp by-product. There have been some preliminary discussions between growers on further marketing. In other words, I think the farmer today recognizes why American Crystal Sugar should not compete with Minn-Dak or vice versa, because the only guy who gets hurt is the farmer who gets paid on the net. I think that probably is the next step. Then I think the next step after that is a merger of all three co-ops.

JF: That was my question for you. It would seem that economics of scale, with consolidation throughout the industry, that for them to exist as separate corporations is unlikely.

AB: It really doesn't make any sense, because it's like why would you want two police departments in Saint Paul or two fire departments?

JF: Particularly if one was ten times the size of the other. Bloomquist AB: Right. And the other thing is that you wind up doubling the amount of management in so many areas. And sure, if you're the small guy, you benefitC. from not having a research center to support. We're the only one of the three that's got a big research facility.

The growers in both Minn-Dak and Southern Minnesota belongSociety to the grower group research and advisory board, and they kick intoAldrich that so much a ton. It doesn't go through the Minn-Dak co-op per se or the Southern Minnesota or American Crystal. It's a separate fund that supports research at NDSU, but theof growers have total control over it.

All right, if they were all part of the same thing,Historical why, you'd eliminate that and it makes the collection a lot easier. You obviously have got more money available, and then everything that we do at our facility--which is the only one--in Moorhead is for everybody's benefit. interview

The same thing in marketing. You know in the Minneapolis market, you can't say it's Crystal's market, but it's one of the three of us. If it boils down to price, the farmers are cutting their own throatsMinnesota competing, so I think that's going to happen. history As I mentioned this morning, we were awfully close in the vote on that amendment to merge.Oral You've got some egos that have to be taken care of, and over a period of time they will be. Then, you know, if you're going to put three together, you're only going to have one president, so you can look at it just from that standpoint. You've got three today--that means two have got to go.

JF: And nobody will.

AB: And nobody wants to go. But I think the growers, as they become more and more involved in really knowing what's going on, are going to say, "Okay, two years from next Tuesday we're going to have one co-op, or something like that, and let these guys butt

91 heads for a while and decide who's going to come out. Maybe a flipping of the coin; maybe somebody retires.” I think there will be a time between now and the year 2000 when that will happen, and it could be sooner than later.

I think the same thing is true of the free market. Like I say, everybody likes to have that little protection. Well, it's the same with teachers. They want to get tenure. I used to follow athletics very closely in the MIAC--Minnesota Intercollegiate Athletic Conference--and without even knowing the individuals I could tell you which schools had tenure programs and who had it. Because the minute you get a coach who's got tenure, he quits recruiting. Hell, who wants to go out and work all summer to get football players if you can go fishing? Well, that's being a little factitious.

JF: But still.

AB: But there's a certain amount of truth in it. You get that cozy feeling. You know, what the hell, they can't fire me, so I'll still win three and maybe ifBloomquist I recruit I'd win four, or something like that. C. It probably goes into other areas besides athletics. I just happen to watch that--and I could be wrong, but it seems very evident. I think the same thing is true in a business. You get some of our marketing people, they get easy. Competition is Societygood. Aldrich JF: Who makes the decision to hire the top executives at Crystal now? Is it the board? of AB: Yes, the board does that. Historical JF: So they, in fact, interview people like your successive presidents. You mentioned you've had four since the merger. interview AB: Right. And most of the times, Jim, they've been using headhunters. In fact, right now there's a headhunter in Washington looking for my successor, and I'm to have lunch with two of them in a couple of weeks when I go back. historyMinnesota JF: That will be an interesting experience for you. [Laughter]

AB: Oral It sure will.

JF: I'm sure they tell you you're pretty irreplaceable, but they'll have to.

AB: Well, I've made it pretty clear I'm going to retire this time around.

JF: The problem, I would think though, with a job like yours, is that you can hire somebody who's good, but you can't duplicate the contacts that you've got.

AB: That's the thing that's going to be difficult. As I mentioned at lunch about Bill Dosland and I, there are times things come up and Hayes Ronald Hayes, President of American Crystal Sugar Co. has to say either to me or to Bill, "God, I don't know anything about this.” And then he'll ask me and I'll say, "Yes, Bill and I, we know."

But we'll both be gone--Bill has already stepped down. A member of his firm is now the secretary and counsel, and Bill is still available, just like I will be. But I would guess in the next ten years they're going to have to lean on us from time to time just to answer some questions. The same thing with Stew Bass, you know.

JF: I would think it would be crucial.

AB: You know, it's not in how you grow sugar beets but, "Who the hell is this running the seed operation? He wasn't around the last couple of years. Where did he come from?” You know, that type thing. Bloomquist JF: Now, I think that would be crucial, particularly with the political contacts that you've got and the fragility of the alliance that holds the sugar programC. together.

AB: The thing that I said to Hayes at the outset is, "You know, Ron, you're not going to hire anyone who's going to operate the same way I do. You talkSociety to ten people and you get ten different ideas about how they would do it.Aldrich You've got to make the decision whether or not you're going to continue this type of thing. Whether they're going to live in Moorhead or Fargo or whether they're goingof to live in Washington, how far you want them to get involved, other than just the legislation dealing with the farm bill. Because you know that more and more Uncle Sam getsHistorical involved in everything --labeling, environment--both on a federal and state level.

"Ron, I'm not up to speed interviewon a lot of these environmental and other issues, and it would be a mistake for me to do it.” We belong to a lot of trade associations, you know, which follow those issues.

I said, "What the companyMinnesota has got to do is start getting some more interaction between American Crystal,history which pays the dues, and the heads of the associations that we have. They have to understand some of these EPA problems, labeling problems, whatever they are. ThenOral the communication between the people in our Moorhead office and the guys doing the thing down there has to be a lot better than it is today."

JF: The farmers whom you deal with that have been the owners of American Crystal since 1973--they're all businessmen--but they're not people who have traditionally hired and fired company presidents.

AB: No, that's right.

JF: How have some of them adjusted to this? Do you think some of them feel ill at ease with it?

AB: Jim, it's difficult, and you particularly see it each year when salaries come up. A farmer looks at income differently than you and I do. He doesn't understand all these fringe benefits that we see are necessary to keep the people you want to keep. You know we go to the growers and say, "We've got to have this type of program--health service, all the rest of it--to keep our employees."

"Jesus Christ, they should be happy to have a job," is the response and that's true. It's changing because the directors today are probably more sophisticated than the directors were ten years ago. Many of them have had advanced education, for one thing--college degrees in business. They're pretty darn sophisticated.

They read a lot more than they ever did, and certainly they go to more meetings outside of the Valley. Our guys will go to probably a minimum of three a year,Bloomquist where they interact with their peers and others, but people basically in the sugar business. They attend seminars. We bring people in to talk to them--how to be a directorC. and that type thing. But there's still a gap--you see it every year when that salary thing comes up. Fortunately, there's only one such meeting a year. We elect a guy for three years, but it's on staggered terms. So every year we could have somebody new, and it maySociety be that's the only person, or the only two, who doesn't understand the salaryAldrich thing, but it can take a whole day.

JF: I can imagine. of

AB: Just to understand. Because to them, salariesHistorical seem, "Jeez, that's a lot of money.” And it is, you know. There's no question. But you've got to look at the fact that you're running a big company. I remember a couple of years ago I said, "Look, you know what a million dollars is?" interview

"Oh, God, yes."

I said, "Do you realize thatMinnesota American Crystal does a million dollars worth of business every day, sevenhistory days a week, and 365 days a year?” That was the year we did almost 400 million. Oral "God.” And they couldn't understand or really see that.

And I said, "You know you get paid for your beets the equivalent of what anybody that grows beets does, not a percentage. The company takes in ten dollars, you get sixty-two percent of it and thirty-eight percent goes to expense the whole damn thing, including all our salaries, and you think that's fair. You used to think it was fair when we negotiated a contract, and the numbers are basically the same.

"The decision you have to make about what Hayes gets and what Bloomquist gets and what everybody else gets--it's just how that thirty-eight percent is divided. We update union wages for those people who work out there. Health insurance costs so much. You get all those things, and then you get down to your job, which is to set certain salary levels. Hayes has to say who gets them, and that's it.” But, like I say, it comes up every year.

JF: I'm sure it would be difficult. Well, just in the fact that they're the board of directors. I mean, it may be a co-op, but in fact the company has an image that's much more like a corporation.

AB: Oh, yes. It's a cooperative corporation, other than the fact that we don't make any money. Because what we do, we pay all our bills and then by a pre-arranged accepted formula, we divide the remainder to the farmer, to our owners, which is the same as paying for something and then paying dividends and all the rest. There are no dividends, there are nothing like that. But if you take in $100 million, $62 millionBloomquist goes to the grower and $38 million gets to pay for everything else, and that's been the formula, basically. C. JF: Well, it must be for some of them a leap of faith to realize that they are in the same position for all that it's a cooperative as the board of directors of any other $400 million- a-year corporation. Because in the eyes of the public, AmericanSociety Crystal Sugar is no different than Peavey Company or Pillsbury orAldrich General Mills. It is another food processing commodity company. Its board of directors, whatever they make think of themselves, are viewed by the public, includingof the public in the Valley, I'm sure, pretty much as anybody else's board of directors. Historical AB: They have to be.

JF: Interesting. Interesting.interview What a leap of faith it must have been for some of them, too.

End of 1990 Interview Beginning of May 15, 1992Minnesota Interview history

JF: ItOral was exactly two years ago this month that I did the second interview with you. The extended interview--which was unexpected--turns out nicely because, in the interim, you became president of American Crystal. I wanted to have you comment, if you would, on changes at the company itself since 1990. Is the company pretty much the same? Is its market share the same? Is the revenue pretty much the same?

AB: You know, market share in a company like American Crystal is pretty well dictated by crops, so we rely on Mother Nature to determine the size of the crop. The company, in the last half-dozen years, has proven that it can market just about anything that we can produce. If we produce thirteen and a half million, we market it very easily; seventeen

95 and a half million, we marketed it. These are hundredweights. And we‟ve been able to do that. Of course, the whole sugar program, the federal program, really says that if there‟s a bag of sugar, there has to be a market. The government controls the amount of sugar that can come in from offshore sources, and, in so doing, it more or less guarantees a market for any sugar that‟s produced domestically, whether it‟s ours or somebody else‟s. Of course, the volume, the number of bags of sugar that is sold, pretty well dictates the gross revenues.

American Crystal today is in that half-billion-dollar level in annual sales, which is up a long way from what it was when it was purchased. The feeling is that it will either stay there or grow. In years gone by, the company‟s philosophy was, “We will sell what we grow.” In the last few years, and I think looking into the future, the philosophy is we‟re going to establish a minimum market share, and we‟re going to sell that amount of sugar whether we produce it or have to buy it for resale. Once we establish a customer and he buys X number of hundredweights, we‟re going to more or less guarantee that we can supply that sugar. You know, sugar, whether it comes from AmericanBloomquist Crystal or it comes from anybody else, it‟s the same commodity. So we feel that in order to serve our customers best, we should make sure that if we set our marketingC. goals at eighteen million hundredweight, for example, that the combination of what we produce in our five factories, what our growers grow, and what we buy would be eighteen million hundredweight. Society Aldrich Some years we may be a little short and have to buy a little more on the outside. Some years we may be a little long. There‟s alwaysof a market. We have found that storing sugar has not been one of our problems. Historical

JF: What about when you go, let‟s say in a year, where you‟ve established eighteen million hundredweights asinterview your goal that you‟d like to keep that level, and you have a year where the crop brings in sixteen, where do you go to buy?

AB: We would then do what some of our customers do. We would make an arrangement with a cane refiner, and weMinnesota would toll sugar. We would buy foreign raws and make an arrangement historywith a refiner to toll that sugar for us. So, in essence, he is a middle man between the foreign supplier where we buy the raws and our customer. We‟re the conduit that Oralthis sugar goes through, and our marketing people then can be assured that if we tell somebody that we can provide them with two or three million hundredweight, we can by using this formula.

JF: You get a slightly lower slice of the profit, I suppose.

AB: You do. Yes, that‟s right. But we feel that in satisfying our customers‟ needs, it‟s worth it, even though it‟s just exchanging dollars.

JF: And then when you‟ve got a big production year, then you‟ve got the market.

AB: Right.

JF: How is production holding up in the valley? Are the acres pretty much the same?

AB: The acres are basically the same. In the last couple of years we‟ve had 400,000 acres, and we‟re at 400,000 acres again this year. Looking into the future, we think our production facilities, as we make improvements, will enable us to at least keep at that level and perhaps increase.

JF: You‟ve got five plants in the valley. Sugar technology, I understand, hasn‟t changed a whole lot. I mean, it‟s not something where robotics, for instance, has made things different like it has in some assembly plants. How difficult is it to keep a plant current and up to date? Bloomquist AB: Two things about the sugar industry. One, its capital intensive. You either keep things up equipment-wise, or all of a sudden you find yourselfC. behind an eight ball. And so your maintenance costs are extremely high. At one time the sugar industry was labor intensive. We‟re getting away from that. Say that a piece of equipmentSociety required three people to handle it. You buy a new piece of equipment today; it‟s probably one person doing the job of three. So over a period of time,Aldrich through attrition, without laying people off, we‟re going to be able to reduce our manpower needs. And, of course, that‟s the big item in ongoing costs. of

The technology, as you‟ve indicated, has notHistorical changed. We are today, however, moving into a new era of removing sugar from molasses, which is one of our byproducts. Over the next probably five years, we will add two ion-exclusion processes to the five factories. One will be at East Grandinterview Forks. Where the second one will be, I don‟t think we‟ve decided yet. This will add two or three million hundredweight to our production, reducing the amount of molasses that we have to sell. But the returns are better than 4:1. The price of sugar is that much greater than the price of molasses, and so we‟ll get out of the molasses market pretty muchMinnesota and we‟ll have that much more sugar. history JF: By increasing the sugar that you can extract from the process. Oral AB: Right.

JF: You still sell the beet pulp, though.

AB: Still sell the beet pulp and there doesn‟t seem to be any let-up in market. We have a big overseas market, primarily Japan.

JF: For the pulp?

AB: For the pulp.

JF: For cattle feed?

AB: Cattle feed. Japan‟s land area is such that they don‟t produce enough feed to take care of their dairy cattle, and sugar beet pulp is an exceptionally fine feed for dairy cattle. So we have a big market in Japan.

JF: It‟s nice to hear of somebody selling something to the Japanese.

AB: (Laughter) That‟s right. When everybody talks about Japan bashing, we look on them as a good customer, a good market. We also sell pulp to Europe. You would think with the European Community being the largest producer of sugar beets in the world, that there would not be a market for beet pulp. But there is, surprisingly. We sell a lot of pulp over there. We grow a lot of feed grains in the States here, whereas in Europe they don‟t have the feed grains. Whenever they grow grain over there, it‟s forBloomquist human consumption, not for animal consumption. So they use a lot of pulp, both their own and the pulp that we send over. Much of it goes into Rotterdam, and then it‟s spreadC. throughout Europe. We have a big market there. It, too, is growing, surprisingly. Society JF: When we were talking of subsidiary products, you think of molasses as being one, beet pulp as being another. I noticed recently thatAldrich Minn-Dak (Minn-Dak Farmers Cooperative) is in the yeast business now. of AB: They‟re in the yeast business, and they, like American Crystal, have made a swing at getting into dietary fiber from our pulp. In ourHistorical case, we poured an awful lot of money into it and decided that it was not for us. Minn-Dak is still in it, and they‟re in the yeast business. I don‟t think they‟ve been in either one of those subsidiary businesses long enough to know what the interviewlong-range profitability will be. At this stage, I have not heard exactly what the numbers are, but I don‟t think they‟re beating the drums and saying that it‟s the wave of the future, although they‟re still in it.

JF: Well, thenhistory there mustMinnesota be a limit to how much of it you can sell, too.

AB: That‟s right. And it‟s like so many things, when you get into it, you better have done yourOral market analysis pretty thoroughly. Yeast is an example. When you get into the yeast business, you‟ve got to recognize who the big boys are and realize they‟ve got deep pockets. If they welcome you, that‟s one thing. But if they decide that you‟re going to louse up their market, they can make it mighty tough for a few years.

JF: I saw the yeast thing and I thought, “Well, that‟s really interesting. That‟s innovative.” And then I don‟t know why, in the back of my mind I remembered Amfac entering the mushroom business a number of years ago, which was a disaster. And I thought, “Hmm, I wonder if there are any parallels here?” (Laughter)

AB: If you go back in the beet business, you had Great Western, when Great Western at one time was king of the hill. They were the most profitable, biggest, beet company. Today they hardly exist. It‟s now Western Sugar. It‟s owned by Tate & Lyle. But back in their heyday they were in the Christmas tree business, they were in the pizza business; you name it, they were in it. Then they got into the silver business because of their owners, and pretty soon they had nothing. So, you know, it‟s the same thing. If you look at farmers that I‟ve known over the thirty years that I‟ve been up there, there have been a few that have gone broke. But if you really look at the individual, he didn‟t go broke because of his farming operation; he went broke because he got into something that he knew nothing about, no matter what it was. Even with prices where they have been--now, beet prices have been good, but other commodities have not been all that great--good farmers are keeping their heads above water.

JF: Well, you and Crystal‟s management have certainly kept it pure. If Crystal‟s stock were publicly traded, they would call you a good, pure play, because you have not gone into other businesses. Bloomquist

AB: Well, we‟ve tried to stay in the business that we know, C.and our farmers have. There have been a few growers that I‟ve known quite well who had been in beets and all of a sudden you get the old, “They‟re in Chapter 11,” or Chapter 7, and you figure, “My gosh, how could that happen? He‟s a good operator.” And then youSociety check into it, and you find out that somebody sold him a bill of goods andAldrich he got into pork bellies or something, the futures market, that he knew nothing about. You can lose your shirt in a hurry. of JF: Coming back from Slayton a couple of weeks ago, I saw a guy out in the field with a piece of equipment that blew my mind. It wasHistorical a tractor that was so big and so wide and so silver that I nearly drove of f the road looking at it, and I wondered how much it cost. All I could think of was back in the late seventies when a bunch of people went broke probably not because theyinterview weren‟t good farmers but because they bought, as one farmer told me, too many blue tombstones--those big Harvest Store things that cost so much money.

AB: You talk to the bankersMinnesota like up in the valley, and they take some of the blame for these guys gettinghistory into trouble, because they said their lifeblood is lending money to people. A farmer comes in, he‟s driving a two-year-old pickup, “Geez, you ought to buy a new Oralone.” You know, the money was easily available. Well, you had a lot of guys who bought everything new every other year, and pretty soon, why, they couldn‟t keep up with it.

JF: At $50,000 a throw.

AB: That‟s one of those things. You know, we have that Sugar Beet Institute in March of every year. It‟s been interesting over the years to just go and see, because in addition to sugar beet equipment, all the big boys bring their big ones, the ones you‟re talking about. You look at one, and, you know, you have to look up--they are so huge. When you finally

99 find somebody that works for the outfit, you say,

“What does a piece of equipment like this cost?” Last year I looked at a tractor-- $155,000.

And I said, “Well, how‟s business?”

“Well, we‟ve sold eight,” he said.

JF: You‟d have to have quite an operation to sustain that.

AB: You do. I was brought up around Willmar, and if you had a quarter, 160 acres, that was probably the average. Maybe somebody had inherited one, he‟d got 320. But it was standard equipment to do that. Then I got up to the valley and these guys talk in terms of sections; we‟ve got some guys that have several sections of land. You‟ve got to work a hundred and a quarter (acres) a day in order to get your crops in andBloomquist the same thing when it comes time to harvest. But it‟s an entirely different type of agriculture up there than you‟ve got, say, in southern Minnesota. C.

JF: How is the profitability of beets for both the farmers and the company holding up? Society AB: Good. Again, a lot of it is due to the fact thatAldrich we‟ve kept the market through the sugar program, which is another story in itself. Ever since I‟ve gotten into this business and have gotten to understand it and the people,of I have believed, and I still believe, that eight out of every ten years a beet farmer would be better off without a sugar program. I‟m convinced that our growers can produceHistorical sugar as low cost as any place in the world. And saying that, if you take governments out of sugar around the world, all over, and let us compete on a free market, eight out of ten years we‟d do better than we do now. Two years, you‟ve got to learn interviewhow to tighten your belt, because you‟re going to have surplus crops in some places, and the market will drop, like it will with any commodity. I think we‟ll see that. I have a feeling that this is probably the last sugar program as we know it, the one that will expire in „95. If there‟s another sugar program, I think it will differ substantially from what we‟reMinnesota looking at right now. history JF: I want to talk more about that later, your prognostications for the future. Is there a waitingOral list of farmers who would like a sugar contract?

AB: Yes, ever since we sold the stock back in 1972 and 1973, and that was sold at $100 an acre. I heard just last week of some stock trading for $1,400 an acre as a company, we have not had to buy back any stock. We have not been involved in any of these transactions. When I say $1,400 that is what we were told that this certain batch of stock went for. So if you want to grow beets and you‟ve got the money or the credit, you can buy a contract. We at the company think it‟s too high at $1,400. Even for a very, very low cost producer, it‟s going to take you several years to pay that back. If you‟ve got the money, you know, looking at other commodities, it‟s probably the one thing that will

100 keep your head above water, because a good beet operator has been able to net upwards of $200 an acre on his beets. How long that will continue, you just don‟t know.

Then you get a guy who hits a great year where you get twenty. We always say twenty- twenty crop. You get twenty tons and twenty percent sugar in it, you‟re looking at $55 to $60 a ton for the beets. You start looking at a gross like that and you‟ve got costs of $400 to $500 an acre, you can make an awful lot of money in a short period of time.

JF: And most of your farmers grow other crops, too.

AB: Oh, yes. See, the rule of thumb is you‟ve got a one in four. Say that you have a section of land. In order to work out a perfect rotation, you‟d have 160 acres of beets, probably 320 of wheat, and 160 sitting idle, and you‟d work your rotation around that. In the valley, since I moved up there thirty years ago, you‟ve seen corn all the way to the Canadian border and at yields that will make you money. You know, I could have counted the number of farmers who grew corn in 1973, „72, on oneBloomquist hand. It was just the maturities were so long that the guy on the north end of the valley wouldn‟t even think of it. Now, with your shorter maturities, there are growers up thereC. on the Canadian border that are growing 120, 140 bushels of corn (per acre). The same thing with soybeans. They‟re getting 30 to 40 bushels of soybeans (per acre), and that did not happen then. And, of course, you‟ve got your potato growers. But, again, theSociety big acreage is still wheat, besides sugar beets. Well, the 400,000 acres thatAldrich we grow, the 100,000 that Minn-Dak does, and 100,000 at Renville, 600,000--that‟s out of 1.3 million, almost 50 percent of all the sugar beets in the country are grown inof Minnesota and North Dakota.

JF: Which is incredible. Historical

AB: Incredible. interview JF: What has ever happened to sunflowers? Remember in the seventies?

AB: Sunflowers, and again I‟m certainly not an expert on it, but it seems to me that about eight or ten years ago theyMinnesota got smidge--I think that‟s what it was--a disease that just took over the sunflowerhistory and growers were losing their shirts with them. They got out. Sunflowers, because of the stalk, are hard on the land. How do you grind those things up to getOral it back into other crops? So whatever that period of time was eight or ten years ago, you almost had sunflowers equaling sugar beets as far as acreage in the valley is concerned. Today I would guess that of 400,000 acres of beets that we have in that area that those beets are grown, there‟s probably 20,000 acres of sunflowers that just practically dropped out. Now, they‟ve gotten varieties, of course, and they‟ve gotten rid of some of these disease problems. But this one that I know--I‟ve heard a lot of our growers talk about why they stayed out of it is that the stalk just louses up your rotation.

JF: And there‟s nothing you can do with it.

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AB: No. And, again, there‟s certain areas of North Dakota, particularly, where sunflowers not only do well now, but they don‟t have sugar beets, they don‟t have potatoes, but they can grow sunflowers.

JF: That‟s interesting, because that verifies my thinking of what it was like when I was traveling up here in the late seventies. It seemed like sunflowers were everywhere. And all of a sudden, I thought the last couple of years, “Where are they? There‟s no sunflowers.”

AB: No, you‟re right. Because I can remember, you know, driving as I do in the fall of the year, out looking at beets, and it seemed like just about every other field was sunflowers looking at you. Beautiful.

JF: I remember big dumps in Fargo where they had cellophane covering or something, because they didn‟t have enough storage space for them till they were shipped. I notice that Crystal has, it looked to me like the third largest dailyBloomquist slicing capacity in the industry. It looked like Amalgamated‟s slicing capacity was a little larger. Is that accurate? C.

AB: I think that‟s pretty accurate. Society JF: I‟ve been reading Sugar Journal. I was interestedAldrich in that because it looked like they say that Crystal has 25.5 and Amalgamated 36. of AB: Even though we‟re showing 25, everything is based on 27 and we‟re doing that. We‟re slicing about 27,000 tons a day. If youHistorical look at the individual factories in Amalgamated, what they are doing is what the Europeans do. That is, you increase the slice per factory so that you shorten the campaign. We differ in our philosophy with them, and not only in our philosophy,interview but also in our weather, which lends itself to the long campaigns that we have.

Over the last eight years, we have built storage for the beets, 100,000 tons at each of the five factorieshistory of beets, 50,000Minnesota in a building. These buildings are about $1 million each and they pay for themselves in just one year. Now, we‟ve had them before, but this year the campaign extended into April--mid-April, in fact--and we figure we would have lost almostOral 100,000 tons of beets in each of our factories if we had not had that storage.

That would not work in Amalgamated area, because they don‟t get the deep-freeze cold that we get here. It wouldn‟t work in Montana where they get the Chinooks, same thing, you know, and Nebraska the same thing. So this is probably the one area where you have sugar beets where it would work. It wouldn‟t work at Southern Minnesota. The weather patterns are such there that they couldn‟t freeze them solid.

See, with the weather that we had this year, and it was probably the mildest winter on record, but we still had that real cold blast early. We got those 50,000 tons in each of the

102 buildings frozen solid, and you shut the door and so you‟ve got 50,000 tons of beets. As the campaign goes on, you‟ll see the extractions start dropping because the beets are deteriorating, and this year they deteriorated more rapidly than they have in the past because of the very mild winter. We lucked out in that we didn‟t have to destroy any beets, but we were losing sugar from the warm weather. But then you open the doors and get into those beets that are in deep freeze, and all of a sudden your extraction just goes right back up. It‟s almost like back to day one.

JF: Which is incredible in economic terms.

AB: Well, it is. That‟s right. Of all the beet companies in the United States, we‟re the only one that has that weather pattern where it probably would work. Now. Canada could do the same thing, and they don‟t, you know, like at Fort Gary in Winnipeg. But the people that own that facility there say, “Well, we get enough sugar out of that. We take care of the Winnipeg market.” And that‟s all they‟re interested in. Bloomquist JF: That‟s all they care about. So your slicing capacity is, in fact, which is what I suspected, rather deceiving. C.

AB: It is. Well, let‟s see the 27-7--I think those are the right numbers--that would be about 10 percent higher than that. This year we‟re putting a newSociety diffuser in at Grady. Aldrich That will increase the slicing capacity up there by maybe 1,000 tons a day. We have a program that we‟re going to do that in eachof of our factories, to increase the capacity. We will not get any one of ours as big as that 11,000-ton one in Amalgamated, but we will get closer to what Minn-Dak and Southern MinnesotaHistorical are slicing. Southern Minnesota is up to almost 8,000 tons now. I don‟t know what they show.

JF: They show 9,000, andinterview they‟ve done this little article and it says that they want to go to 10,000.

AB: They probably are, because that‟s a good operation. historyMinnesota JF: I‟ve been there. It was an interesting place.

AB: OralYou know the surprising thing is the interest in beets. They‟re not paying the same per acre as I mentioned that the growers in the valley are, but they‟re paying a lot more than anybody ever thought they would for the privilege of growing beets down there.

They did something this year that Mark Grissel is looking at. When they added this ion- exclusion process, they decided to add--I think it was 10,000 acres. In order to pacify some of these younger farmers down there, 5000 acres--I think that‟s the right number-- was sold only to non-growers, and they couldn‟t be to family members. It had to be somebody that had never been in the beet business or at least not in it in the last half a

103 dozen years. And the other 5,000 then were sold to existing growers.

It accomplished two things. It put some capital into the coffers of the company to almost pay for this ion-exclusion process they put in, and at the same time it took care of some of the nit-picking on the side. These people that wanted to get into business said there was no way to get in, and they sold out the new acres. The interest is there. I suppose it would be the same if you were in business. If a certain type of shoe is selling, you hope you‟ve got that entire model that you can get your hands on. And in southern Minnesota with corn and bean prices depressed, why, beets have been a good crop for them.

JF: That‟s interesting. Because your comments get to a point I was going to ask you about, and that is all the carping that was going on a few years ago down there by corn farmers saying that the beet farmers were driving up the price of land so they couldn‟t rent it for corn. There was an article in the Wall Street Journal about it.

AB: Yes. I think there was a certain amount of that going on in theBloomquist valley at the same time, but not to the extent it was down there. At least since the growers came out with this program down there at Renville, I have not heard complaining.C. The problems, I‟m sure, are still there.

JF: Tell me your perspective on this tempest in a teapot overSociety environmental problems that Crystal has had. Aldrich

AB: In trying to analyze what has gone onof and why the company has its problem, I think we, meaning American Crystal, had some people an staff who were dealing with the Minnesota Pollution Control Agency who probablyHistorical thought they knew more about the problems than the state did or the federal government. As a result, the relationship between the MPCA and the people in our organization who were dealing with them may not have been the best. Youinterview know, you always have 20/20 hindsight, and I obviously was involved for a year with that. In hindsight, we listened to people, who told us we should sue the MPCA, when, you know, in a second look at it, we certainly would not.

And I‟ll say this. It hit theMinnesota fan just about the time the new CEO (Joseph Famalette) took over, and I thinkhistory he decided to go down into the lion‟s den and say, “Look, I‟m just taking over. I don‟t know. We‟re going to be good citizens, period. You tell us what we‟re doing wrong,Oral what we have done wrong, and we‟re going to correct it. We know we have three factories in the state of Minnesota, if we‟re going to survive, we have to have a good working relation with you.” And that is where it rests right now.

We have problems. We‟re going to pay a fine. We know that. We‟re going to lose six months to a year in our production time on this ion-exclusion process. Again, I think the mistake that was made on that, in defense of our people, was that they looked at the law, they looked at what we were doing, and they felt that what we were doing was proper.

The ion-exclusion process has two buildings. One is a sealed unit that has nothing; we do

104 not put anything into the air. We had to add a steam unit, another boiler unit, and we knew that we had to have a permit for that, and we had applied for a permit for that. But we were building the sealed unit first, and we would follow with the other. Our interpretation of the law was that we didn‟t need a permit for the one, we did for the other. The MPCA said that we needed it for both, and that‟s where the problem arose.

Whatever the fine is $75,000, $80,000, that‟s a lot of money to a lot of people. But that‟s not the big thing. The big thing is the time we lost, because we had a contract, we were proceeding with the idea that we‟d be in operation by the fall of 1993. We will not be, so we‟re going to lose essentially about a year on processing the molasses. But I think our relations, because of somebody going back to square one, and that was Joe Famalette, I think our relations with the MPCA are going to be better, hopefully, from now on.

JF: Well, that‟s good.

AB: Yes. Because you‟ve got to live them. You can‟t have an antagonisticBloomquist relationship. We have too much at stake. Three of our five factories are in Minnesota. C. JF: Looking at the farmers, too, I wanted to ask if you would comment on changes you‟ve seen--and you‟ve mentioned a couple--in the farmers that the company relates to. Are they progressively younger? Are they better educated? ThatSociety presumes they weren‟t, and I don‟t really mean that. But are they moreAldrich businessmen than they were before?

AB: You know, I don‟t have any figures orof any statistics to back up what I‟m going to say, but I have the feeling that a lot of the people that I first knew when I went up there-- and it‟s now their sons or sons-in-law who areHistorical doing the farming --I think there are probably a larger percentage of college graduates today than there were, and better businessmen. Instead of going learning how to run a tractor, which you learn on the farm, and instead of learning wheninterview to do this and when to do that on the farm, I think a lot more emphasis has been put on the financial end of running a farming business.

You know, you talk about small business. You take somebody like an average grower with 200 acres of sugar beets.Minnesota Two hundred acres of sugar beets, you know, that‟s better than a half a historymillion dollars in gross revenue from one crop. So they‟re not small business; they‟re big business. Oral We talked earlier about some of this equipment. I‟ve heard that the number to get into the beet business, just in specialized equipment you‟re looking at $150,000. This would be in addition to what you have in other things, because the number of trucks that you need. One thing that‟s unique about the sugar beet grower in the Red River Valley--I think the same is true of Southern Minnesota and Minn-Dak, too--as opposed to some of the other areas of the country, is that because of that short window that we have to harvest the crop, our growers have their own equipment. You could not depend on custom harvesters like they do in California. When you want to dig your beets and you‟ve got this short window, you have your own equipment and you get out and dig. Most growers, in addition to

105 having a major piece of harvest equipment, have a backup unit, and instead of having one truck, they‟ll have two to three trucks. Because that short period of time, we do a little digging between Labor Day and the first of October, but starting on the first of October, we‟ve got 80 percent of our crop to get out in a period of about twenty days. And it‟s “Katie, bar the door.” You just better have the equipment to do it. Like I say, that‟s why so many have backup units. You know, it‟s not that you can‟t get a beet lifter repaired, but you can‟t afford the ten days that it might take you to get it repaired.

JF: And if a truck breaks down.

AB: Yes, same thing with a truck. There would be some who would look at what a grower has and they‟d say, “My god, he‟s over-equipped.” But anyone who‟s ever gone through a harvest would probably understand why. I‟ve heard our growers say, “Well, I‟ve got this one. It just sits there, but it could be used if I have to use it rather than turning it in or trading it in.” So you‟ll see some equipment that may not be utilized every year, but, nonetheless, it‟s running, it will run if necessary. Bloomquist

JF: And if you don‟t have it, you could lose money. It‟s justC. that tough.

AB: That‟s right. Society JF: Tell me about your board of directors. YouAldrich commented before, which isn‟t a surprise that all of a sudden in the seventies they became owners of what is now a very big company. A company with a half a billion ofdollars a year in revenue is not at all a small business. Do you think more of them are more comfortable with overseeing the affairs of an enterprise that big? Historical

AB: It‟s been almost twenty years now. Well, it is twenty years. I think they are learning year by year, almost monthinterview by month, how to run a business, and what their role is. There are still some directors who feel that they have to get in on the day-to-day operations. As time goes on, and I certainly have seen it in the years I have worked with them, I think they‟re seeing more of the long range--recognizing what their role is, rather than getting involved in, as I say, the Minnesotaday-to-day operations. “This is what the company is going to do down the roadhistory and this is what our role is.” They‟re spending more time going to seminars, going to meetings on how farmer co-op directors should operate. They‟re a muchOral better group today than they were.

JF: That‟s interesting, because that directly leads to what my next question was going to be. What kind of training do you have to help people become board of directors?

AB: We belong to one very large trade association, the National Council of Farmer Co- ops, in Washington. They have a full staff. They have workshops for directors at their annual meeting every year, and a number of our directors have started going almost on an annual basis. In addition to that, the Minnesota Association of Co-ops runs a three-day workshop in January, I believe, of every year, and that‟s under the auspices of the

106

Association and the University of Minnesota. They will bring in people who can talk on various aspects of being a director. Very, very worthwhile.

If you go back to day one, I remember when we got the loan at the St. Paul Bank of Co- ops; the suggestion was made that an outside director be added to our board. Well, this is twenty years later and our board has not done that. My personal feeling is that it would have eliminated some of the problems that we‟ve had over the years by having an outside director who had that business background. But considering the fact that we have not, I think our board has been reasonably successful. They certainly are not overpaid. Nobody‟s going to retire or live on the wages that are paid to our board of directors. It‟s still very much like you would think a farmer board would be.

JF: But, of course, they do own the company.

AB: That‟s right. But that also means they can do as Congress does; they could vote themselves an increase. Bloomquist

JF: Sure. Reflect if you would, just a little bit on your year-plusC. as president. Was this a surprise to you?

AB: Yes. I don‟t think anyone realized that they were about toSociety make a change. The gentleman (Ron Hayes) who had been presidentAldrich during that period had a hard time dealing with the outside world, and that was his problem. Heof had been operations vice president. He had done a good job in reorganizing our operations setup. He was a good manager from that standpoint. But he had a hard time dealing withHistorical industry people, and our board felt that it reflected on them, and they just wouldn‟t tolerate it any longer. They indicated to me they had warned him several different times, but that it was like water off a duck‟s back; it didn‟t sink in. And so it wasinterview very much a surprise.

When they approached me initially at the annual meeting in 1990, it was to be an interim president and it would be a short-term thing until they decided what they were going to do. I think when they stoppedMinnesota and reflected on what they had said to me, they decided that, “We‟ve historybeen in a hurry the last couple of times that we‟ve named presidents. Let‟s make sure this time. Let‟s take our time.” Oral And so it really was fourteen, fifteen months that I did that, and my charge from the board was just keep a level hand on the operation. We did nothing out of the ordinary during that period of time. We had a resignation in vice president of research and development, and rather than replace that individual, we decided that we would eliminate one vice president and we would handle that with a manager of ag research, a manager of operations. We put somebody in charge of the building and the physical facilities that we have, which are exceptional. It seems to have worked very well. I‟ve heard nobody indicate that they‟re about to change it now.

107

Anybody who looks over the records will find that that particular year was the best year in the history of the company, through no fault of mine. It just was a question of keeping everybody sitting in their normal spots.

The company, in addition to the board growing up and doing a better job today than they did, say, ten years ago, has got a seasoned staff. These are people who in their area of responsibility are very competent, all the way through: in finance, marketing, agriculture, human resources, and operations. No matter where you look, we‟ve got good, good people and they do a good job.

JF: You knew all of them and you knew the company, so it must have been of immense benefit to the board to have you there.

AB: We talked earlier, Jim, about the previous president. I was going to retire, and he had picked somebody to take my slot. He probably would have workedBloomquist out. I didn‟t know him. I thought there were others who had applied for the job that were more qualified. The way it worked out, I think ultimately the record will1sayC. that the fact that we didn‟t put somebody in my spot at that particular time was good. I continued to do it that one year when I was president, and it worked out. I didn‟t get down there (Washington, D.C.) as often as I had in the past, but I got there with enough frequencySociety to keep the contacts alive, and that was the main thing. Aldrich

JF: Any particular challenges during the year?of

AB: Only the one that came up right at the tailHistorical end with the MPCA. In retrospect--I know that now--I should have done what Joe Famalette did, and that is the minute that thing came up; I should have gotten down to the legislature--not the legislature. You stay away from the legislature on thisinterview one. I should have gotten to and visited the MPCA people.

JF: But, as you say, hindsight is good.

AB: You always have 20/20Minnesota hindsight. history JF: You never know, particularly when the people that you‟re dealing with are giving you differentOral advice.

AB: And, you know, over the years, it‟s not that we‟ve never had any occasion to pay fines. We‟ve been found guilty of other infractions of the law, in dealing, our people have always said, with interpretation. We have competent people, supposedly, that are handling that end of the business, and this one just turned around on us.

JF: That‟s one of those things that can happen. I wonder if you‟d comment just a bit. You, of course, know all these people and have known them for many years and your year as president. What‟s the relationship between Crystal Sugar, as the sugar industry is

108 solidifying and developing, between Crystal and Minn-Dak and Southern Minnesota? I mean, you and Minn-Dak share the same geographical area.

AB: That was one thing that we tried to do that didn‟t work out. The three of us, the three co-ops, have a co-op called Midwest Agra Commodities to market our byproduct. The three of us, the three CEOs, had gone to Japan last summer to visit with the Japanese customers, and while we were over there, the three of us had a chance to talk about our mutual co-op and also to say, you know, maybe it would benefit all of us if we also marketed our sugar cooperatively. So we set up a commission, or a committee, members from each of the three co-ops, to look at the problems, the pluses and the minuses. We asked the Farmer Cooperative Service of USDA to help us in that effort. To make a long story short, one of the three felt that there are inequities and that they were not ready to pursue this marketing of sugar.

We, meaning American Crystal, still feel that there is much to be gained by marketing our sugar cooperatively. We are our own worst enemy. Having anotherBloomquist marketer in our prime market, what do you do? You go in and cut the price. If you cut the price, we all have to. Who pays the bill? Now, I don‟t know if you could substantiateC. these numbers. We think we can. There‟s $10 million left on the table every year that should be in our growers‟ pockets--you know, so much in ours and so much in Minn-Dak‟s. Society JF: This is because of the price cutting? Aldrich

AB: It‟s because of price cutting. And alsoof that we‟d be able to take care of some of these things with our customers better than we do today. My guess is that over the next year, maybe two years that that discussion is goingHistorical to be revisited and that ultimately there will be some kind of an organization that will market the sugar. Either that or, as you indicated, we may see eye to eye with the Minn-Dak people more so than with Southern Minnesota and we may workinterview out an arrangement with them. But, again, it‟s the farmer who ultimately pays the bill. None of the people who are on the payroll benefit one way or the other. It‟s the people who own the company that would benefit, because it would increase, we think, the net selling price. Minnesota It‟s very interesting,history and this is a little aside to your question, but I note in that copy of the Sugar Journal something I also know is going on-discussions between C&H, which is a co-op,Oral and British Sugar.

JF: I was going to ask you about that.

AB: The interesting thing is back in 1972-73 when we put this thing together originally, we were approached by C&H marketing people. Of course, at that time, our growers were the ones, who said “No, we don‟t want anything to do with it.” Again, 20/20 hindsight shows that that would have been an absolutely unbelievable marketing coup if we had proceeded with that one. They are great marketers and always have been, and it would have been a combination of cane and beet in the co-op sense that would have been hard to

109 beat. I don‟t know what‟s going to happen with this British Sugar discussion. I haven‟t heard anything recently other than that the talks are continuing.

JF: I was trying to figure out exactly what the economic implications of it would be it, because British Sugar, I presume, is mostly--I don‟t know what they do. I presume they market British beet sugar.

AB: Yes, it is. And they are not a co-op.

JF: Weren‟t they government-owned for a while and now they‟re privatized? I thought that was an interesting--I couldn‟t quite figure it out.

AB: It‟s one of those things. You know, if you can put together a publicly held company like British Sugar with a co-op, it also would indicate to me that that‟s an area that American Crystal may look at down the road, is some kind of an arrangement with something other than another co-op. Bloomquist

JF: Actually, the thing that interested me about it was that inC. a very different sense, it reminded me of some of the--all of a sudden there are talks about international airline mergers. Here you‟re not just talking about something like American Crystal and C&H. You‟re talking about British Sugar, which is very different, marketingSociety at least cooperatively with an American Company. Aldrich

AB: I think one of the things that have givenof all of the domestic producers of sugar a pretty good feeling is that you have Tate & Lyle, the biggest sugar company in the world, which has substantial investments now in theHistorical U.S. domestic market. They own Western Sugar, they own Domino, and they own Staley. So they‟re in the sweetener business more substantially than any U.S. company. Then you have this discussion with British Sugar. You have the South Africansinterview who own Monitor. You have a lot of foreign money invested in the United States sugar business. So they must feel that the future is good.

JF: Yes, which is nice. historyMinnesota AB: That‟s right. Or they wouldn‟t be pouring the money into it.

JF: That‟sOral an interesting way to look at it. Right.

AB: We have an arrangement with the Danes on sugar beet seed with a subsidiary of DANESCO, the Danish Sugar Corporation. We were over there in October, and the president of the Danish Sugar Corporation was talking about the European Community and their view about what the future of sugar is. When the East Germans joined Germany, there were forty-three beet factories in East Germany that were immediately bought. German companies bought the largest share, but the Danes bought seven beet companies in East Germany, with the idea that eventually they would close all but one. This first year they closed, I believe it was, three or four and operated the others. But their plan is that

110 eventually they would close all but one. Getting back to what the Amalgamated numbers look like, you‟d put all of your eggs in one basket. They feel they‟re close enough that with transportation that you can handle the crop from that basic area. But they were very optimistic. The Danish Sugar Corporation is very optimistic about what‟s happening in the European Community.

In another area, Denmark was divided about the way Holland was. You had the large co- op and a publicly held company that more or less divided the market. Danish Sugar Corporation made a very substantial offer, probably paid more than it was worth, to buy the co-op.

In Holland, you know, the co-op was doing what the Danish Sugar Corporation--they were trying to buy the publicly held CCM, and they have a division of-

JF: Sort of an antitrust thing? Bloomquist AB: Antitrust thing, who came in and said, “You guys have gone too far. You cannot monopolize the sugar industry in Holland.” So they really hadC. to get out of it and sell their CCM stock. Whereas in Denmark, they let it go through, and so the Danish Sugar Corporation today owns the sugar industry in Denmark lock, stock and barrel. But, as I indicated, they feel very bullish on sugar in the (European) Community.Society Aldrich JF: That leads into an interesting question. What did they think, what do you think is going to be the effect of European unificationof on EC sugar production? All the problems have been with dumping, you know, alleged dumping, overproduction and dumping on the market. Historical

AB: Well, I suspect, and I‟ve heard this opinion expressed by others, that they feel that the market for other typesinterview of agricultural produce is such in that Iron Curtain rim and into Russia the market for crops other than sugar will increase. As I understand the economics of sugar in the EEC, it‟s about like the Red River Valley. Sugar beets are the best crop. That‟s why they want to grow them. That‟s why the farmers want to grow them. They make more growing sugarMinnesota beets than they do anything else. And, of course, the French will not let thehistory Germans out-do them. They‟re going to do as well or better.

There‟sOral been some cutback in sugar production in the EEC because the European Community cost of supporting agriculture in the Community is, you know, like $60 billion a year. What is it here? Six billion or‟ 4 billion, for our farm program. Unreal.

The feeling over there, from the people that I talk to, is that the generation that‟s now reached the voting age and have never been hungry don‟t understand why their fathers have built this thing up that costs so much. That‟s the biggest reason the taxes are what they are, because of the cost of the agricultural programs. You know, if you had a farm, the average size of the Red River Valley farm, you‟d be wealthy in Europe because of not only sugar beets but all the crops, like $7 wheat or whatever the prices are, $10 beans. In

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Holland, where you do have some reasonably sized farms, they‟re very wealthy. And France. There‟s some big land holdings in France, the same in Germany. They go back hundreds of years, and people who have never farmed a day in their life collect the fruits of all these high prices because people on the land are able to pay large rents.

In France, you talk to some of those people whose ancestors went over to the Caribbean and got involved in Trinidad or wherever, planting, owning land, and they have clipped coupons, or whatever, for all these generations. Yet they‟re never been over here, have never seen, and they don‟t understand that that‟s why the European sugar market is what it is, because of paying those exorbitant prices for sugar that comes out of Martinique, for example.

JF: So there is no real feeling that increased efficiency in production of sugar in Russia, Czechoslovakia, and places like that is going to flood the market even more than it is now? Bloomquist AB: It‟s like we were talking about here. Transportation is so horrible. They just can‟t get it to the beet plant. Like I say, if they ever got to the point whereC. they had even reasonably efficient industry, they have enough factories; they have enough acreage to produce probably twice what they produce today. Society JF: What has the effect of the collapse in EasternAldrich Europe had on the destination of Cuban sugar, which I always understood was being used to pay back debts. of AB: Well, I think that‟s true. Cuban sugar today, which at one time pretty much buoyed the whole economy in Cuba, all of a suddenHistorical it‟s not worth probably half of what it was under those trade agreements. But, you know, a lot of that was bartered. It wasn‟t real cash; it was barter. You know you send me a $20,000 car that‟s worth $10,000 on the barter system, really whatinterview are you getting? Anybody that‟s ever tried to put a dollar-and- cents value on a Cuban-Russia exchange has said that Cuba was getting something like thirty cents a pound equivalent. It gets down to that when you get thirty cents in barter, what are you paying for the oil that you‟ve got in return? Minnesota I think that bringshistory up an interesting point. What is going to happen to the sugar industry? Probably in the not too distant future, when the Cubans finally throw in the towel and say that Oralthey want to join the capitalistic world again. It‟s about the same as what‟s going to happen with this North American Free Trade Agreement. From the standpoint of sugar, we don‟t have that problem with Canada, really, but we could have it with Mexico.

I remember in the years that I‟ve been in the sugar business when at one time Mexico was shipping into the United States market substantial quantities of raw cane. Then all of a sudden the cane industry went over, and today they are a net importer. They need to import sugar, and they are not producing enough to even take care of their own needs.

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Right as we speak, it is one of the issues that is to be resolved with this Mexican Free Trade Agreement as to whether or not there will be an opening for Mexican sugar, when they produce it, to come into this market. Of course, the thing you always worry about there is, are there going to be sufficient rules and regulations. Would Mexico be able to import sugar from Cuba, for example, in order to fill a quota that they would have in the U.S. market, or would it have to be Mexican sugar? You know, we have that arrangement with Canada. We know how much sugar they produce. They produce it right above us and over in Alberta, two beet plants in Canada. And we wouldn‟t worry about that sugar, but the thing we worry about is sugar coming in from Cuba or someplace else and being refined in Canada and then shipped across the border.

JF: As part of a Canadian quota.

AB: Right. So when their quota gets above a certain point, we know that it‟s not Canadian sugar, and that‟s been a sore point. Bloomquist JF: I know that the sugar industry has been under some pressure, for instance, to help out the Caribbean nations by buying their sugar to give them an C.economic boost. You can clearly see that one of the problems might be that if Cuba all of a sudden became capitalistic and there was a big push in Congress to help them out, that there would be pressure to allow Cuban sugar back into this market. Society Aldrich AB: I don‟t know if you and I have ever talked about it, but in the case of some of the Caribbean sugar that we‟re talking about, whenof we increase the quota to them, it puts another Rolls Royce in the back yard of the families that own that industry, and it gives them more money. Certainly they‟re entitledHistorical to send their kids to Yale and Harvard and wherever, but the workers that we supposedly are helping are still getting a dollar a day. And who do we really help other than this--well, it‟s a landed gentry. There are some families in the Caribbean interviewcountries that I‟ve gotten to know in negotiations over the years that are wealthy--I mean, beyond anything that I would ever dream of. And sure, it‟s family. But we increase their quota at our price, and do they pass it on to the people that work in the fields? No. Minnesota There‟s somehistory in our State Department who are willing to accept that, that we really don‟t help the masses. I think we have talked about this. What I have seen about sugar in world productionOral is sugar is a social problem more than an economic problem. You can put 10,000 people at work in cane fields at a dollar a day instead of putting them on welfare, and they would prefer that. But if you have to produce sugar as an economic crop-- Landau Mills have done a couple of studies. That‟s the British economic firm--they do economic studies. We‟ve had them--meaning the U.S. sugar industry--we‟ve had them do several studies on costs of production. If you believe their studies--and this gets back to what we talked about a long time ago--we can produce sugar at a lower cost than any of these countries that we‟re talking about. We know that. And this is today. So that if the Caribbean‟s didn‟t have a quota in our market to get this eighteen cents, they‟d be out of business, because their costs of production are so high. Even paying the wages they pay,

113 they are inefficient. But it is a crop they know how to grow. They‟ve grown it for--I shouldn‟t say centuries, but they‟ve certainly grown it for many, many years, and it is something that their land lends itself to, rather than growing the crops that would feed their people.

You know, like the Dominican Republic. There shouldn‟t be any hungry people. The climate and the soil should grow enough food to take care of them. But who owns the land? It‟s owned by, like we‟ve talked about, the Fanjels and people like that. They have an economic enterprise. The cane growers do not own the land, Say every parcel of twenty acres or forty acres was owned by an individual who worked that land and all that cane then went to a mill that was a co-op, for example. Yes, I would think then that you‟d have a lot of people that were making a reasonable living and not one family making a big living.

JF: And yet, I suppose the families you‟re talking about have enough political clout so that the governments of those places are the ones that put the pressureBloomquist on.

AB: You bet they do. Not only there, but they play both sidesC. against the middle in the United States. They‟re big contributors to the party in power and also to the political aspirations of people who are not in power. Just like we‟ve talked about ADM. They‟re in the corn business as well as the cane business, and politicallySociety they know how to play it probably better than any company that I‟m familiarAldrich with. They do very well in the political arena as well as in the economic arena. of The corn industry today, you know, in addition to high fructose, is looking at ethanol, alcohol, and that‟s political just as much as Historicalthe sugar end of it is. So they are saying, for example, if all government vehicles were required to burn whatever that formula is in their gasoline, all of a sudden, why, there would be that many more millions of bushels of corn that would have to gointerview through to produce ethanol. Very interesting.

JF: I‟ve often wondered why in the Third World there hasn‟t been more push to use the cane that they grow, not so much for sugar, although I realize that offers them foreign exchange, but for fuel. Minnesota history AB: That‟s right. Oral JF: Like the Brazilians were talking about.

AB: Yes. And, you know, Brazil does, to a certain extent, use their cane to make ethanol because they have developed engines that will burn nothing but ethanol, or ethyl alcohol. But, again, it‟s a matter of economics. They‟ll take one of their government-owned cane enterprises down there, and when the price of sugar on the world market gets above a certain point, they‟ll sell the sugar. When it‟s below that, they‟ll make alcohol.

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JF: Totally a numbers game.

AB: Yes, a numbers game. Economic.

JF: Tell me your perspective about the GATT (General Agreement on Trade and Tariffs) talks that are going on right now and the effect that they‟re going to have on the sugar industry around the world.

AB: It‟s the old level playing field. We‟ve said, as we did at the outset, Jim, if there‟s a GATT agreement that puts everybody on the same level, we should have no quarrel with any GAT? Agreement that includes sugar. If, on the other hand, sugar is going to be treated differently here than it is in other areas, yes, we have some problems.

I have never felt that this round, the Uruguay Round, was going to be successful in reaching an agreement that would include agriculture. And I still believe that, but I believe the next round, whatever it‟s called, will. Bloomquist

I think by the year 2000 there will be a GATT that will coverC. everything. We talked for a minute ago about the cost of agriculture subsidies in the (European) Community. That‟s a key. The key is the Community. They are not ready. They‟re leaning, but they‟re not ready yet to put their agriculture on the same level as ours, whetherSociety it‟s sugar or wheat or whatever. But I think they‟re getting there and Aldrichthey‟re going to be forced to do it because of the cost of the subsidizing agriculture in the Community. of At the end of this year they‟ll get together on their trade and get a common currency, which, I think, will come, even though the BritishHistorical have been opposing it more than anyone else. The French have been holding out because of their agriculture. Again, anyone been in Europe has seen a city, whether it‟s Amsterdam, Rotterdam, or Paris, where the farmers decide interviewto block the traffic, for example, and there‟s no way that you‟re going to get agricultural commodities into the city. All of a sudden you‟ve got millions of people who are aware of what goes on. You know, here we tried to have a blockade in Washington. Anybody in Minneapolis or St. Paul, were they really aware of it if they hadn‟t been reading the paper?Minnesota No. But in Europe where you can take a major city and really blockadehistory it, all of a sudden, why, you get attention.

The Oralother thing is that here in the United States, agriculture‟s political clout has diminished. We don‟t have the votes. Because of our political action committees we may have over the years built up a reasonable awareness that agriculture exists, only because we have raised a lot of money and we have put it in the right places. In Europe, they have both. They have the money, agriculture does, to put in the right places, and they have the votes. You know, again, not talking exact numbers, but they feel that the farm vote in France is four times as potent as the farm vote here. You know, we can provide some money, but we can‟t provide votes.

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The sugar industry, what have we got? Twelve thousand beet farmers? Well, you spread that among fourteen states. You know, that‟s nothing. You won‟t elect a dogcatcher, really. But you have to have the combination of the money and the vote, and they‟ve got it in Europe. As I say, you can blockade Brussels or Amsterdam or Paris, and all of a sudden everybody is aware of agriculture.

What I‟m saying is, and I think this is true, certainly in the next decade you‟re going to see Europe come around to the point where they‟re going to have to quit subsidizing agriculture as they do it today, and when they do that, a GATT agreement is going to be possible and feasible and will come into existence. Not today. I have friend who was on the European parliament for a number of years, who‟d been a former senator in Holland, and is a beet farmer, and not only a beet farmer, he‟s a farmer. He says that if we--we, meaning the United States--had entered those GATT negotiations at a reasonable level, we probably would have gotten an agreement this time. But we came in with the idea that you‟re going to change everything just night and day. That was too drastic. They weren‟t ready for that. As time has gone on, we are now at a point where Bloomquistwe are probably where we should have been when we started. If we had been there when they started these negotiations, we would have probably had an agreement by C.now. His feeling is by the year 2000 that there will be.

JF: They will be ready? Society Aldrich AB: Yes. of JF: What does he think, just out of curiosity, about the European unification in „92? The Dutch are pragmatists. Historical

AB: Well, it‟s very interesting. He has a master‟s degree out of the University of Illinois, Ag Econ, so he has a littleinterview understanding of our concerns. His father was very active in the equivalent of the farmer‟s union in Holland. So you kind of get a feeling for his political feeling or philosophy. He‟s done very well, because, as I indicated, if you have a reasonably sized operation you do well. In his lifetime, in Holland, he has added two polders to his farm. TheyMinnesota have reclaimed another piece of land. And you know the way that works inhistory Holland. If it abuts your property, you pick it up, and you go through that three-year cycle of reclaiming it, using the rapeseed to take the salt out and all of that. So his farmOral today is sizable by Dutch standards. But he thinks that where it‟s been great for him with the prices they get sugar beets and all the other crops that the time is going to come when it will take a unit the size of his now to maintain a family.

JF: Do you think the Japanese fall in some of the same categories as the Europeans? They have, as I understand it, pretty dramatic price supports for things that they actually don‟t produce economically like beef and rice, even.

AB: Well, the dairy is an example. We visited dairy farms right outside Tokyo where you‟d get out and you‟d look, and you know what a square foot of land sells for. Why is

116 this guy allowed to keep dairy cattle? I‟m sure the property that your building sits on is a large--well, it‟s larger than this guy keeping thirty-six milk cows. And the land that this guy‟s thirty-six cows sat on, if he sold that and built an apartment or sold it to somebody to build an apartment, you know, the guy would have millions. He could retire. But they try to maintain that domestic milk supply. I don‟t know what‟s going to happen over there. But, as you point out, the rice industry is subsidized, and the dairy industry. I think, again, some of it must be based on what happened in the war. All of a sudden there must have been a shortage of food, because they didn‟t produce enough to feed themselves and they had to import. Our people have never been hungry in the United States from that standpoint. It‟s been available if you had the money. In Japan or in Europe, it didn‟t make any difference how much money you had, the food was not available. Europe will pay anything as long as they can get it. But it‟s getting to the point now where, because the market is not providing that return, they have to subsidize in order to keep these guys growing it. Like my friend says, we‟ll still be farming our land, but not at the prices we are today. It‟s the old landed gentry, really. Bloomquist JF: As you said, too, maybe the political climate is changing because the voters are getting younger. They don‟t remember the World War II. TheyC. don‟t remember the hunger. They don‟t remember all o the problems like that.

AB: This friend of mine has a daughter that is married and livesSociety in the suburbs of Rotterdam, and she complains about the high costAldrich of food, raising her family. He says she complains about it, but, by the same token, her husband has a good job and he‟s paid because it takes that much. He works for theof government. He has to get so much for them to keep him; otherwise he‟d go someplace else. Historical JF: It‟s complex.

AB: It is. It‟s a very complexinterview system. But when you look at what it costs, when you take all of the countries in the part of the Community, and what they subsidize agriculture for and add it all up, it‟s not like us paying of f the debt here or paying interest on the debt. That is the cost of agricultural programs, $60 billion a year or whatever the number is. Minnesota JF: How are historythings going here? What‟s the current farm legislation like?

AB: OralI have a feeling, and this is just a gut feeling, that the farm programs we have become accustomed to, when they come up for renewal in 1995, will not be anything that resembles what we have had. I think there will be some kind of a farm program. My feeling is that by the year 2000 we will not have any type of a sugar program. 1995 may be a modification of what we presently have, but by the year 2000, I think there will not be a sugar program.

JF: And the industry will survive.

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AB: You hear more and more farmers are saying the present farm programs are not doing anything for us, and they may opt for nothing, no farm program. That may be true with sugar, too, that there will be no program. You eliminate a huge bureaucracy. Right now you‟re getting people who are--well, (Senator Richard G.) Lugar, the ranking minority member of the Senate Ag Committee, is saying we‟ve got to get this octopus under control. I think the story was between St. Louis and Kansas City, I forget how many hundreds of people work for USDA just on that one highway. You start looking at the various programs that you‟ve got.

JF: And yet you wonder in this country whether anyone has the stomach to close it down.

AB: Yes. Although, you know, I think what‟s happening now--we were talking earlier about what happened to Sikorski at his DFL meeting and Sabo at his--maybe the time has come when all of these sacred cows are not quite as sacred as they have been, and maybe this is the time that it will all be thrown overboard and you go back to square one. Bloomquist JF: Common sense. C. AB: Yes. Also, you know, we talked about the farmer today who is a heck of a lot more sophisticated than he was ten years ago, and maybe there are more of them that would like to be on their own to market their crops. Society Aldrich JF: As a side note and we‟ve talked about this before, but in light of current reality and your predictions, what do you think will happenof to the Hawaiian industry which has been, I understand, so enormously efficient but still has very high costs relatively because of the union labor? Historical

AB: Well… You know, every time that a sugar program has come up people talk about reducing the support level.interview When it went to eighteen cents, I had said, “There‟s no way that we can stay in business at that.” Well, all of a sudden, when you‟re faced with that, somehow you become sufficiently efficient at that level to stay in business. Under the terms of a GATT agreement that they‟ve been talking about and that you would reduce that by ten percent,history and tenMinnesota percent, and ten percent more, when do you go out of business? I don‟t think the Hawaiians really know what that bottom line really is. If you take eighteen cents and reduce it by 10 percent, you‟re down to 16.2. Another 10 percent, do youOral still have an industry in Hawaii? I don‟t know. And, you know, somebody says, “How many golf courses can you build in Hawaii to take this Hawaiian cane land? How many golf courses can the Japanese support?” I guess that‟s what it boils down to. Or how many macadamia nuts can you grow? Because I understand the land that you grow cane on also does very well if you planted it into macadamia nut trees. What other crops can you grow in Hawaii? Their big crops have been apartment buildings, condos, and golf courses. How long can that type of expansion continue to take up this land? I don‟t know. Everyone has always said, you know, that if you do get a continual reduction in the support level of sugar, that Hawaii would be number one to go, California would be

118 number two.

I remember a fellow by the name of Eric Thor, who back in 1972 was running the Farmer Co-op Service at that time. He was very helpful in our operation in putting this thing together. Several years later when he‟d gone back to Berkeley--I ran into him at a farm forum in Spokane--at that time he was saying that the Red River Valley would probably be the last to go under if there was no support program. And I guess that‟s where he and I would disagree. I think without a support program--and that may be true that Hawaii and California would be first out, some of the other areas would go down--but we would still survive. I still believe that.

JF: How about Louisiana and Florida?

AB: The surprising thing is Louisiana has become very, very efficient in the last decade. In fact, the last six years they have just really tightened their belts and are now running a very efficient cane industry. This is the growing end of it, where Bloomquistif you had asked me ten years ago, “Will they survive?” I would have said, “Chances are they won‟t.” Florida had been considered a very efficient cane operation, but not so withC. Louisiana. I guess today I would have to say that Louisiana has reduced. They‟ve reduced the size of their operation to the point where today they are a very efficient industry. Society We looked at our own industry, the beet industry,Aldrich a little differently. I think if you look at the cane, the most efficient, but not cost effective, of course, is Hawaii. Secondly, we would say that you‟re going to lose the Texasof industry, that Rio Grande Valley area. I understand now that Louisiana, at its present size, would probably prove to be quite efficient. We‟d always felt that Florida has beenHistorical a very efficient and a very lucrative business.

Now, the question is that interviewland around Lake Okeechobee that is in cane today. They raise radishes and a few other garden crops. Sugar cane has been to that area around Florida like sugar beets have been to the area in Red River Valley. If you reduce the price--and obviously if you reduce the price, you reduce the profit potential--do you drive them out of business or do they justMinnesota make a little less and stay in business? Obviously, there are some fringe areashistory around Lake Okeechobee that may not make it if you tighten up. But I think there will be a cane industry there about as long as there will be here. In the beet industry,Oral as we said, probably all of California would go out first. That land is high- priced, and they are just not that efficient.

JF: Will Spreckles survive? They look really, really little on this list.

AB: Spreckles today is suffering from debt taken on in the buy-out, when it was purchased from Amstar.

JF: Talking about the industry here, what do you notice the climate being right now in Congress for price supports generally? The sugar industry has always had its nemeses on

119 the East Coast, people who screamed that you were all costing consumers so much money, which, of course, was always a little hard to understand since your price supports are so much different than other people‟s. They don‟t operate like CBS. When you start working toward a sugar program, this one or whatever, you always have a group, the sugar users‟ group, and ostensibly it‟s made up of people who buy sugar. It would be true if it was the people that buy paper products. You‟re going to try and buy paper products at less than what the market is. So if there is a federal program that‟s supporting the price of paper at a higher level, you‟re going to have a group that‟s going to be opposed to it.

The irony of the sugar program is when you get to the legislative end of it; your opponents are people who are your best customers. They are the people who buy your sugar. But when it comes to legislation, their objective is to try to buy that sugar at a lesser price. You are dealing with your best customers. In that one year when you‟re looking at a sugar program, your best customer is the guy who‟s out there trying to cut your throat. Bloomquist JF: Doing combat with you all of a sudden. C. AB: Yes. I think the problem is less today than it‟s been. I can remember, and, of ours, that goes back many, many years, when the chairman of the House Ag Committee would say to us, meaning everybody that was interested in a sugar program,Society “You guys go downtown and you argue out your problems. YouAldrich take care of your problems. When you have a program that you can all subscribe to, you come back and we‟ll pass it.” And in those days, we had the fellow who was theof buyer at Coca-Cola. At that time, Coke was probably the biggest single buyer of sugar in the United States--not today, but at that time. He would be the head of that group, and weHistorical had then, of course, the rest of the industry and the users and the labor. You had all of these segments who had a so-called role in the sugar program, a position. interview We‟d go downtown. We‟d argue and we‟d fight, and we‟d finally get a program that we would all agree to. We‟d get a little less, they‟d get a little less or whatever it was that they were fighting for. Labor would get a little increase in the wages that were paid for the field workers. Minnesota history Then we‟d go back on the Hill and we‟d get the chairman of the committee and we‟d say, “Mr.Oral Chairman, we have reached an agreement that we can all live with.”

He‟d look at it. He‟d say, “All right. The lawyers will write a program and I‟ll introduce it and the committee will all back it. We‟ll go to the floor and that will be the sugar program.”

Then he‟d go to the Rules Committee and he‟d tell the Rules Committee, “This program is so complicated that the members would not understand it, so I want it to go under a closed rule. It cannot be amended on the floor.” And he‟d get it.

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I remember Harold Cooley from North Carolina doing that, Bob Pogue from Texas doing that. Finally, in 1974, Bob Pogue tried that again, and it didn‟t work. It went to the floor in an open rule--not with a closed rule, but with an open rule--and it was defeated. That was the beginning of the type of a program we have today. Because the sugar program was a separate program, and in 1974 that was the end of the sugar program as we knew it.

We survived for a couple of years without a program. That was when the price of sugar went through the roof. Then in 1977 we had the De La Garza Amendment to the program, and that kept sugar alive with a support level from the government. Then, of course, in 1980, and with each successive five-year period, we became part of the farm program, and that‟s where we are today.

JF: You haven‟t seen in the last couple of years any escalation in consumer protests? They‟re pretty much the same? Bloomquist AB: No. In fact, not as1 great as it was even back in 1974. I still have the feeling that in 1974 we beat ourselves--when I say “we,” I mean the domesticC. industry --because we couldn‟t reach an agreement with our own growers in the Colorado area, and so you had a divided group, and we didn‟t get the votes in areas from which we normally would expect support, and we were defeated. Society Aldrich JF: Sugar has survived despite losing--and you just mentioned this indirectly and I talked about it before--the soft drink market. But ofit retains the candy and the confectionery markets. Do you see any more erosion? Are there new products? Last time we talked, you mentioned a new type of high fructose sugarHistorical that would, in fact, crystallize.

AB: The technology is available. Dry fructose. They have not brought the cost down-- that‟s granulated fructose--interviewto the level where it would be competitive. The other thing is it‟s still hydroscopic. For example, if you put a half pound of crystallized fructose on the table and we went to lunch, when we got back there would be a wet place on the table. But they‟re working on it. Anytime that you say it can‟t be done, chances are it‟s going to be done. There will be a Minnesotagranulated fructose that‟s going to be on the market that someday willhistory not be hydroscopic to the point that it poses a problem, and it will have a price that‟s right. Oral JF: But even there, even those producers, even those manufacturers, need a base price to make it economic to manufacture.

AB: Yes, that‟s right.

JF: So that if sugar prices declined too much and theirs slid with it-

AB: Then all of a sudden they have more problems.

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JF: Yes. So supporting the price of sugar to a certain level is in everyone‟s best interest.

AB: It is.

JF: Insofar as it becomes a benchmark for the others.

AB: Right. That appears to be right. And, you know, there‟s Nutrasweet. Well, Nutrasweet was a niche and Nutrasweet filled, obviously, a void. But it has not taken sugar volume. That‟s the thing that‟s surprising. People don‟t realize that. We still sell as much sugar as we did after we lost that, you know, about 52-48. Fifty-two percent of the people who use sugar still have to use sugar, 48 percent do not. They use fructose or one of these synthetics like Nutrasweet.

JF: And yet Nutrasweet would appear to have a really definite market.

AB: Oh, it does. Very definitely. Bloomquist

JF: The calorie counter and that sort of thing where neither C.fructose, high fructose, corn syrup, or whatever could ever compete with that probably. Society AB: I think that sucrose, per se, has done a better job of telling the people, the consumer, that it‟s not bad for you. Aldrich

And I think we‟re telling what sugar is. We‟reof telling the story a lot better than we did ten years ago, and, as a result, we‟re not losing additional market. Historical JF: That‟s an interesting point. It has always seemed to me that there, was a lot to say for plain old sugar. I mean, you couldn‟t pay me to use Nutrasweet. I don‟t want a bunch of chemicals. interview

AB: Yes, that‟s right.

JF: But therehistory has never appearedMinnesota to be the kind of coordinated advertising budget out there. I mean, Nutrasweet and some of the others just bang away at the health aspects even though in some cases they are highly manufactured. Oral AB: Jim, the interesting thing, if you look at how much money is spent in advertising sugar, it‟s about $3 to $4 million a year as an industry, and Nutrasweet like $130 million a year, you know--100 to 1, or almost. About all we‟ve done is scratch the surface with our advertising. Now, whether or not it would pay to continue that…

JF: Which is the other question, yes.

AB: Yes. You just don‟t know… Or should we put more money into it?

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JF: You made the interesting point when we were talking a couple of years ago that the retail consumer market for packaged sugar is actually a very tiny percentage, despite the fact that when I think of Crystal sugar, I think of five- pound, ten-pound bags on the grocery shelf. And yet you mentioned that that is a tiny, tiny percentage of your business.

AB: Yes, and it still is. The amount of sugar that we sell at American Crystal in the grocery stores is about--say we do half a billion in gross business--$450 million of that is what we call industrial and maybe $50 million is retail. It‟s still a substantial quantity, but that‟s not where the growth is. The growth is in the industrial side.

JF: And there you‟re not selling directly to consumers.

AB: No.

JF: So then any kind of advertising like we were just talking about, you‟re really talking about educational advertising… Bloomquist

AB: That‟s right. C.

JF: So that consumers don‟t stop using it, and, therefore, the Societyindustrial people don‟t stop buying it. Aldrich AB: That‟s right. Yes. Interesting dilemma. of JF: When you look at the future of sugar in the U.S. right now, we talked a little about this, but do you think there is going to be a declineHistorical in the number of beet sugar farmers in the next twenty years?

AB: Yes, but the three co-opsinterview here, because of our location, because of our cost structure, we‟ll probably increase in that period.

JF: The number of farmers. historyMinnesota AB: The number of farmers. But I think the number of beet companies in the areas that beets are grown in definitely are going to change. There are some areas that are growing. We mentionedOral California earlier; they will be first out. Irrigated areas. Now, Michigan, they have agriculture very similar to ours. Beets are grown in non-irrigated areas and in the rotation program like we do the same basic crops. I think they will stay in business.

JF: So you think both Monitor and Michigan Sugar will.

AB: Both Monitor and Michigan will probably stay in business. You know, you‟ve got Western. That‟s marginal, at best. But you‟ve got Tate & Lyle in there. You know, we mentioned briefly, when you get the European money coming into this market, they‟re not out to throw money away, and they must have felt there‟s & market there. Now, they

123 own a factory in Montana, in the Billings area. That‟s always been a good beet growing area. They‟ll probably stay in business at the level they‟re at now. I think of Holly Sugar in Texas, for example. If you have the price drop, you‟re going to have the Texas beet industry out, and you‟re going to have the Texas cane industry out. We‟re going to lose Texas.

This is another reason, Jim, why I think the chances of another sugar program are minimal. California is going to have over fifty congressmen as a result of this reshuffling. We‟ve always had that support. We‟ve always had the support of most of the Texas delegation. Okay. If you lose the beet industry out of California and lose both the beet and cane industry out of Texas, you‟ve lost a lot of congressional votes. The survivors of the growing states, Florida is about the only one that I think will survive, and it‟s growing, and the number of members. But, you know, we‟ve never had the industrial states. Now, how long we can keep the support of New York and Pennsylvania and New Jersey, I don‟t know. It‟s going to be very interesting in 1995 to see how the thing shakes out. Bloomquist JF: Your possible prognosis for the Texas industry is interesting. What will happen to Imperial Holly? Will they be down to Holly, minus Imperial?C.

AB: No. Imperial, surprisingly, has bought a lot of their cane from Louisiana and shipped it over there. I think their cane business will remain. Society Aldrich JF: So the Sugarland plant will continue to be… of AB: Yes, be very efficient. You know, they were in business long before Texas had the Rio Grande Valley Sugar Company. And althoughHistorical they take most of that and process it and refine it, it would not put them out of business if they lost that. Some of the other Holly properties that were part of this, I think, will stay in business--Wyoming, what they have left in Colorado, Nebraska.interview But I think Texas--this year, you know, that was the one area that I‟m sure if they had a profit and loss statement on the Hereford operation this year it would be negative. They lost a lot of beets. It‟s not a good growing area, although the surprising thing is they‟re putting an ion- exclusion process in there. But, of course, you can take molasses fromMinnesota other areas and run it through that plant. history JF: And use it for that. Oral AB: Yes, right.

JF: What‟s the prognosis for Amalgamated, do you think?

AB: That‟s well-run, been a very profitable operation, and I expect that they will stay in business. They have to buy their beets, and they buy them from growers who are pretty sophisticated. They‟re good growers. They may have a problem getting beets when the price drops because of what they‟ll have to cut back on. That‟s high cost production because it‟s all irrigated. Now, they‟ve started going up into the state of Washington and

124 trucking beets. Now, how long they can do that, I don‟t know, because you‟ve got a tremendous freight cost. But they are efficient.

JF: Have any of the farmers who used to grow for U&I (Utah-Idaho Sugar Company) in Idaho turned to growing beets for Amalgamated?

AB: There are a couple of them and they‟re big growers, and that‟s where the beets have been shipped these long distances. There‟s a group now that‟s looking at reestablishing the industry up there. I can‟t see that. You know, they‟re looking at a co-op and $75 million. They were going to buy the Chandler, Arizona plant, ship it up there, and reconstruct it. They were talking to Spreckles about just slicing the beets and shipping the thick juice to the Spreckles plant in California for refining. Technically that should work, but I don‟t know where the economics is.

JF: Because, once again, transportation costs would be-- Bloomquist AB: That‟s right. It has to be. It may not be astronomical, but they‟re going to be high. C. JF: How is your former old plant in Clarksburg, California doing out there? Society AB: How they stay in business… Aldrich JF: Is that a co-op now, too? of AB: No, but it‟s owned by the growers. They‟re the stockholders. Historical JF: That‟s Delta Sugar.

AB: Delta Sugar. And theyinterview have not had a good crop since they‟ve bought it. Of course, they didn‟t pay anything for it to speak of. But they have not had a good crop. They have not had the million bags that they need. About half that is all the production they‟ve gotten out of it, and how they can keep growers growing for them--well, I know a couple of them who historyhave said, “TheMinnesota only reason we grow is we own it. Otherwise, we‟d grow something else and make more money.” I just can‟t see much of a future for that one. That would probably be the first one to close. Oral Holly‟s got some good plants in California. But, again, if you reduce the price by a couple of bucks, the beet price, those growers are not beholden to anyone. If you cut the price they get per ton, they‟re going to look to other crops. And as the population of California goes up, the more market for jams, jellies, and fruits, a lot of that land will go into crops and make more in growing tomatoes.

JF: And sometimes they can grow more than one crop a year.

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AB: Oh, yes. That‟s the thing, too. You can double crop a lot of that land.

JF: Great Lakes Sugar. What is that?

AB: That‟s northern Ohio. It‟s been a good operation.

JF: Is it an independent company?

AB: Owned by Savannah (savannah Foods & Industries).

JF: Oh, it‟s part of Savannah.

AB: Yes.

JF: So it and Michigan (Sugar Company) are both part of Savannah. I didn‟t realize that. Bloomquist AB: Deep pockets. That‟s a well-run operation. Billy Spragg. Of all the people in the sugar business today, Billy Spragg is probably not only the mostC. knowledgeable on both the beet and cane side and the cornside; he‟s just a real smart operator. And that Savannah plant in Georgia is a beauty. It‟s very efficient. And then, of course,Society he got into Michigan. He bought Michigan Sugar Company. They‟ve got a good market. Aldrich JF: There‟s still the Flegenheimers? of AB: It was an ideal thing for Ernie (Flegenheimer), because by selling out, both he and his sister got their money to put in the bank Historicalor in stock, whatever they wanted. Ernie‟s kids apparently had no interest in staying in. One of them is a broker, works for one of the big brokerage houses owned by the French, and he‟s happy there. Another kid is in advertising, printing, promotioninterview work, like that, and has no interest in going into the sugar business. So I think when Ernie becomes sixty-five he will move to Florida and leave. David Roach has pretty well taken over the operation. And, really, it‟s been a good investment for Savannah. historyMinnesota JF: We were talking about labor and employment earlier, and I wanted to ask if you could comment briefly on the future that you see for the use of migrant labor in the valley.Oral

AB: Migrant labor has a lot to do with the change in who‟s running the operation on the farm. Many of the people that I worked with originally always used labor. That was part of the sugar beet enterprise, labor for thinning, hoeing, and some then holding over and getting involved in the harvest.

We have almost half of the growers today who use no labor, absolutely none. Some use labor because dad used them and it kept the fields clean, besides beets. They have the housing, and so they just like to keep them around. It will take some education on our part

126 in some economic problems where people really start looking at their bottom line before we completely eliminate it. Without a question, the whole crop, 400,000 acres, could be grown without labor. Without labor, I mean the Texas Mexicans, migrant labor. Because, as you know and I know, they‟ve been--I shouldn‟t say a headache, really, but they‟ve been a thorn in our side, with adverse publicity. No matter what happens, they are attributed to the sugar beet crop, no matter who they‟re working for.

We‟re having, over the years, more and more of the migrants who come up establishing homes in the valley. I don‟t know what the numbers are, but I do know there are a number of year-round families now. Kids are being educated up there, and they contribute to some of these small towns that were disappearing. How soon that will come about, growing the beet crop without the use of migrant labor, I just don‟t know. I do feel very strongly that it could be done today, but you‟ve got a lot of growers who just feel that it‟s part of the whole operation. I think it will disappear. Bloomquist JF: What do the workers who stay year-round do during the off season? C. AB: Well, a lot of them work in potato warehouses. We have a number of people who work through the campaigns. We have a number of workers who work our campaign crews. I suppose as time goes on, we‟ll pick up more and moreSociety of them. They work with our receiving crews in the fall of the year whenAldrich we‟re looking for short-time labor. There are a number of them, surprisingly, that have finished their education. Some have gone on to either one of the technical schools in theof valley or Moorhead State (University). We‟ve got a number that have gone there. Both the growers and the company have provided scholarship money for migrants along with generalHistorical scholarship funds.

JF: I‟m particularly interested in that because one of the communities that we try to work with is the Hispanic communityinterview of Minnesota, because there are permanent communities now in places where there were really only migrant communities twenty years ago.

AB: Right. You‟ve got quite a stronghold right here in St. Paul. Minnesota JF: Very strong,history yes.

AB: OralYou know, Willmar, which was where I was born and raised--of course, that was many, many years ago--but when I lived there, there were no 1Iispanic families, and now they are quite a large group on the east side of town. I think that‟s one of the unfortunate things, is that they do settle in one area rather than integrating into the total community. That is probably one of the reasons that we have problems. But, on the other hand, if you move into a house and you can‟t talk to either one of your neighbors because they don‟t speak your language and you don‟t speak theirs, why, your tendency is to move where you can talk to your neighbor, which is one of the reasons that you build up these communities, everybody in a certain area being Hispanic.

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JF: Probably the same reason the first immigrants, the Germans and the French, all clustered together, too.

AB: Right. That‟s the thing. You wonder how the Red River Valley ever got together when you‟ve got that group up around Minto and the Polish communities. Then there was the French community around Graft, and then you had the Icelandic group up at Mountain. And, of course, you had Norwegians up and down, and Swedes, Germans. We go through the roster, you know, looking at who grows sugar beets today, and you‟ve got everything. Growers of every nationality you can think of have got beet contracts.

JF: You‟re very well connected within the industry and probably know as many people as anybody. What do your colleagues, when you talk about things at sugar meetings, say about the future of sugar worldwide, in an international context, not just in the United States?

AB: We talked briefly about what the Danes thought, DANESCO,Bloomquist the Danish Sugar Corporation. Certainly, you take Tate & Lyle, a worldwide organization, and their most recent expansion. They were in Canada and they came into theC. States, and their major, major financial commitment in the last five years has been in the United States. They obviously are bullish on the sugar industry around the world. Society Tate & Lyle is highly diversified, through theirAldrich Domino and A.E. Staley and Western (Sugar). They‟re in the beet, the cane, and the corn. Savannah Foods, both refining, growing, and both the beet and the cane. Imperialof Holly, the same thing there. You‟ve got a combination of cane operation and then buying the beets and merging the two. Very, very interesting. I don‟t think either one of usHistorical really knows what is going on in the talks between British Sugar, which is one of the big players in Europe, in the European Community, and C&H, which is a California-based Hawaiian co-op operation. Very interesting. interview

I‟m bullish on our operation in the Red River Valley and American Crystal. I think the willingness on the part of our directors and growers to continue to invest is critical to how fast we move ahead you Minnesotaknow sugar is a capital-intensive crop. history JF: That‟s a nice segue into my next question. Do you see in the United States any further constructionOral of sugar beet or sugar cane, processing plants?

AB: We talked briefly about this activity up in the Pacific Northwest. There‟s one thing that everyone in the sugar industry would agree on and that is that the Toppenish, Moses Lake area, as far as agriculture is concerned, is probably some of the finest sugar beet growing area in the country. As good, if not better, than anything else. They had exceedingly fine crops when they grew beets. That operation up there was owned by U&I Sugar which was controlled by the Mormon Church, and the church hired an outside firm to come in and look at its total business operations and to make recommendations. The recommendation was that they get out of the sugar business.

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Of course, other than First Boston or whoever made that study, and the directors or trustees of the Mormon Church who went along with it, nobody has figured that one out, why they went out of business. We know they had labor problems. When I say labor problems, they had problems between the people that were contracting for the company and the growers. There was a problem that the growers got too strong, and they were getting more from the company than the company could afford to pay out in the split, the percentage divided between the grower and the processor. U&I, as I say, just pulled the plug and they said, “Okay, we‟re going to close down.” And they did.

There‟s a group now that we talked about a little bit this morning that is looking at buying this facility down at Chandler, Arizona, moving it up there and rebuilding it, and maybe working out something with Spreckles. I think those negotiations are still in the middle stages. To get back in, the people that are pushing the deal are growers, farmers. They‟re looking at another crop. Even though they do very well with sugar beets, they‟ve got forty other crops they can grow in the Pacific Northwest that we in theBloomquist valley, for example, can‟t grow. You know, you grow everything from mint to hops to better yields on other crops than we get. It‟s a fantastic area, really. C.

JF: If there was further development out there in the Pacific Northwest, do you think that will accrue to Amalgamated, or do you think they might buildSociety their own plant? Aldrich AB: I don‟t think anyone that‟s as savvy financially as Amalgamated--and about the time I say that, we‟ll probably read that they‟ve ofdecided to go in with them--but I just can‟t conceive of an existing beet company, given the political climate, putting its own money into a new facility. We can afford to do it, becauseHistorical over a period of time we would get more than the equivalent of a new plant for our dollars. I think most people in the business today feel that to build a new plant from scratch, you‟re looking at $150 million, and I think at $150 millioninterview you‟d have a hard time coming up with a bottom-line return. If you can do it incrementally over a period of years, even though ultimately it does that, you‟re going to pay much of it off before you ever get the whole thing.

If we have a restrictive sugarMinnesota program, of course, expansion is going to be very difficult for anybody, historyincluding American Crystal. If, on the other hand, there is no restrictive legislation… I think we‟ll see the day when American Crystal will have a half-million acresOral of sugar beets and probably a 35,000-ton-per-day capacity and two ion-exclusion facilities, which is another $50 million for two of them.

JF: Does expansion by 106,000 acres mean that you would be building another plant?

AB: No, you‟d be adding.

JF: Adding the slicing capacity to existing plants?

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AB: Right. Going from the 27,500 that we currently have up to 35,000 over a period of seven or eight years, probably.

JF: Adding a bit to all five of the plants that exist already?

AB: Yes, right. For example, at Drayton right now, we‟re replacing, I believe it‟s a 4,500- ton diffuser with a 6,500-ton diffuser. Once you‟ve done that, you‟ve increased the ability to slice that many more beets on a per-day basis, but then you have to add all the way through the plant to take the increased volume that‟s going to go through. I think that will happen. I think you‟ll see the five plants that we currently have increase by 7,500 tons per day over the next eight to ten years, maybe less.

JF: Are there advances that you are aware of in beet seed research and things like that that you think will add significantly to production or to disease resistance? I know they are constantly experimenting, and, of course, Crystal has a very fine research facility. Bloomquist AB: You keep looking for that great breakthrough. At the time we put this package together back in 1972-73, we were looking at 12.5 tons and C.15 percent sugar. Today we‟re looking at a 17-ton average and 17.5 percent sugar. So the seed today is better than the seed was ten years or fifteen years ago. Whether or not you continue to make the kind of increase in productivity that comes from seed, I don‟t know.Society We‟ve got a good program, and all seed companies do. It‟s a veryAldrich competitive business, and the more competitive a business is, the more somebody is trying to come out with something a little better than the other guy so you increaseof your share of the market. Today the top people in the seed business are all putting out a product that‟s very comparable. No one has come through with something that standsHistorical out above the rest. They all say they do, but really they don‟t. That day may come when you have as many people working as hard as they are in trying to come up with the right seed. interview The other thing that goes into seed breeding, you know, is breeding into the seed disease resistance. As we get more and more involved in the environment and what you can and can‟t do in the way of using herbicides and insecticides and things like that, the more important this program isMinnesota of breeding disease resistance into the seed. history American Crystal for umpteen years has had a program of breeding in leaf spot resistance into Oralour varieties, and they do a pretty good job. Some of the other seed breeders, and ours, too (for seed to be sold in other areas) will come up with something to take care of the root maggot. This genetic engineering that‟s going on in seed research today is fascinating. All of a sudden you just may have seed that will be resistant to most of these diseases that we‟re plagued with and also will come out with, say, 20 percent sugar and higher tonnages.

You know, anytime you can increase the value of a ton of beets, you help the grower. Because that means that if he can deliver a ton and get so much more because of the quality of it, he saves labor, he saves trucking and all those various things. It would be

130 nice to have 500,000 acres of sugar beets that would produce enough sugar to be the equivalent of another new mill--I mean, that increase. And I think it would be.

JF: Interesting to see if it happens. What is next for you at this particular moment in time?

AB: I think the company has indicated that they feel the Washington work on behalf of the sugar program, or on behalf of not having a sugar program, is very essential in the future of American Crystal. I think the new president, with the concurrence of the board, is going to continue the program that we‟ve had in Washington. The new president, Mr. Famalette, has indicated that there are two people that he‟s looked at, very interested in pursuing this job, but that neither one would be available until after the election, probably mid-November.

We have reached an agreement where I‟m going to do this Washington work on the basis of going to Washington once a week and probably go in and at leastBloomquist take care of all the political action committee activities that need to be taken care of a couple of hours a week or whatever it takes to do it. So I‟ll do that rather than retire C.as I had hoped to. But, you know, I think this will be a nice way to move into retirement, not like, “I quit smoking. I quit today. That was it.” That may have been the way to retire, but I think this way of kind of easing into it might be a little easier for me and for my wife.Society I have to bring that up. I‟m not too sure she‟s ready to have somebody,Aldrich around the house twenty-four hours a day.

JF: Well, and good for the company, too, Iof would think, because the one thing I know we‟ve found here, and I‟m sure it‟s true for Crystal, particularly with your expertise, is that you can‟t reproduce contacts and connectionsHistorical and people, knowledge of who‟s who and what they are likely to buy or not to buy. You just can‟t replace that overnight.

AB: No, that‟s true. I wouldinterview hope that some of the contacts that I‟ve gotten, I can pass on to whoever takes my spot. The fact is that it‟s the company, really, that‟s important, and I‟m sure that they‟ll work out an arrangement and get the support that we need.

The other thing that‟s interesting,Minnesota in looking at 1992 and what has already happened, is that somethinghistory like forty-five or fifty-two members have indicated they‟re not going to run for reelection. Some are just dropping out, some are running for governor, some are runningOral for the Senate and things like that. As a result of votes that have already been taken, I think the general feeling is that there will probably be maybe another dozen or more that may not make it through the election process this year. Where normally you have twenty to thirty in the House, we could have upwards of sixty to seventy-five new ones this year. You‟re getting new people, and, you know, with the beet area as limited in geographic scope as it is, you‟re not going to have people that are going to come down there and know much about the beet industry. You‟re going to have a lot of people to educate and point out the importance o the sugar industry to not only your district, but probably to theirs because of what it does for the country. So there‟s going to be plenty to

131 do.

JF: If, indeed, some of the things you‟ve talked about come true, and, of course, nobody can tell the future perfectly, but if there turns out by the year 2000 not to be a farm program and price supports are gone and it‟s a considerably more open market worldwide, that‟s certainly going to make a need for contacts. But the sort of contacts one would be making might be completely different, or if not completely different, at least different on a large scope. Do you think or not?

AB: I think that‟s true. Of course, you look at any business, you know, I can‟t think of a single business that really can operate in a vacuum, that doesn‟t have reason to have contact in Washington, whether it‟s on the environmental side, or it may be on the financial side for the tax issues. All of those things come into play in running any business. During the years I‟ve spent in Washington, I‟ve gotten to know people from just about every walk of life representing other industries, and they all have things that they‟re watching all the time. Bloomquist

When you turn 535 people loose to write laws, you‟ve got toC. watch them to make sure they don‟t get into your terrain, or at least if they do, that they know what they‟re talking about. And that‟s really what you do. There is no one, I believe, in Washington, a member of the House or Senate, who would say that people representingSociety specific industries are not helpful to them, because I don‟t believe anyone,Aldrich either a senator or a member of the House, would say he‟s smart enough to know everything. of It‟s amazing what kind of an audience you can get. You‟re dealing with very intelligent people in most instances. You spend fifteen,Historical twenty minutes with them and talk to them a year later, and it‟s surprising; they‟ll pretty well remember almost exactly what you told them. You have to be honest with them, and you‟ve got to know where they come from and whether or not the constituencyinterview that they‟re elected by has the same interests as we do. If you get one that doesn‟t and they aren‟t going to support your position, you know why. You‟ve got to watch it.

JF: So you see the need Minnesotafor the same kind of work but maybe with a little different focus. history AB: That‟s right. And, you know, this is not only on a federal level, but on the state level, too. OralIt depends on who you‟re listening to, but I think everyone in the political arena feels that the states‟ are going to be more involved in the day-to-day operations of business than they have been in the past. You‟re not just going to have to deal with the federal legislation. When you talk about delivering sugar beets, you‟ve got umpteen thousands of trucks hauling beets. They have to go across highways, and you‟re looking at weight restrictions, weight limitations, and all of those things that are handled either at a country, state, or federal level.

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JF: And those are the kind of things an outsider doesn‟t even see.

AB: That‟s right.

JF: That‟s interesting. You think of the price supports as being the most important, and you don‟t think of the myriad of other restrictions.

AB: Like the last two years, most of the discussions in Washington have not dealt with prices. We got the new bill passed in „90. Okay, that‟s two years ago. Since that time, you have to write the enabling legislative history. You passed a bill that‟s going to support sugar at eighteen cents. All right. How do you do it? They‟ve got to write the rules and regulations, and you‟ve got to make sure that after the rules and regulations are written that they were written the way our intent was to have them written. Because, again, you‟re going to be dealing with people that probably know nothing about it. They‟re good technicians, but they don‟t know the business. So you‟ve got to make sure that when the rules and regs are written, that they will fit and they‟re somethingBloomquist that you can live with.

This is the same thing as you go down the road. We‟ve beenC. having GATT discussions now for the last two years, and we‟ll probably for the next two. Now there is this North American Free Trade Agreement. If you don‟t stay on top of those things, you have people negotiating on behalf of the United States who probablySociety know nothing about sugar. So you have to make sure that you get yourAldrich input. You may have to go the political route, use your senators and the members of the House who have better access, obviously, than we would have, but you‟ve got to makeof sure that those points of view are on the table if they‟re going to talk about sugar. Otherwise, you could wind up behind the eight ball. Historical

JF: With language that you can‟t live with. interview AB: That‟s right, yes.

JF: If you had to do something that is really difficult, and that‟s sum up your career at Crystal and yourhistory career withMinnesota sugar, more importantly, because it‟s really spanned much more than your work with Crystal Sugar, how would you do it?

AB: OralTo say it couldn‟t be done or wouldn‟t be done is not right. You know, people say, “Don‟t you get tired?” The only thing I get tired of is flying back and forth to Washington. I‟ve never counted the number of weeks I‟ve spent there, but I‟m sure it‟s the equivalent of several years. I‟ve never found any two weeks that are not different. Every day you run into something different. You meet an awful lot of really wonderful people, both in the bureaucracy and on the Hill and among staff people. I supposed that‟s why I‟ve stuck with it as long as I have. It‟s been a paycheck, but, on the other hand, it‟s been very interesting. You talk to people that can‟t wait until they‟re sixty-two so they can quit and start collecting Social Security and pension and do something. I‟ve never had that feeling. I‟ve tried hard enough to get out. But there‟s something like this opportunity

133 to stick around for another six months. It‟s interesting enough to do it, particularly now because we‟re in an election year, and I‟ve learned that Congress does only what it has to do in an election year. The rest of the time they‟re politicking and running for office. It‟s interesting to see what is going to happen.

You know, the hue and cry out in the hinterland is, “Throw the buzzards out, and let‟s get a new crew in there.” I‟m sure there will be some of that. But all 435 members of the House are up, and a third of the Senate. That‟s probably thirty, thirty-five. That would be 470 that put their jobs on the line. We‟re going to have a lot of new faces and probably some new philosophies. Anytime you elect a new president you have uncertainty. If we get Mr. Bush back, we have a general idea of what his philosophy is toward agriculture and sugar. If the Democrats win, you‟ve got to find out where we sit, where does he sit with agriculture and what‟s the committee structure going to be like. Really, what it boils down to in the House is the Ag Committee and more specifically the Cotton, Rice, and Sugar Subcommittee. You get over in the Senate, each of the senators hasBloomquist so many more committees that they don‟t get as deeply involved on any one issue as they do in the House. But the Ag Committee, we have a lot of people on theC. Ag Committee that I would say are not basically in favor of agriculture or in favor of any ag programs. And as we‟ve said earlier, Jim, when we were talking about what might happen in 1995, I have a feeling that „95 will be the transition between what we have today andSociety what I envision we‟ll have in 2000, and that is basically no farm program.Aldrich Under either scenario, I think agriculture will survive and certainly sugar, as far as the Red River Valley is concerned. of JF: Looking back over this interview, which has taken a couple of years to finish, what haven‟t I asked you that you think I should have?Historical What have I neglected?

AB: The suggestion I‟m going to make, Jim, is that I will await getting this in this form and taking the two pieces,interview putting them together, and making sure that it reads right and that, as a result of the questions that you asked and the answers that I gave, that it makes sense. If then I feel that we‟ve skipped a period or an area that might add to it, I‟ll pick up the phone and say, “Jim, we‟ve got to do one more for a couple of hours.” I‟ll jot, as I go through it, some questionsMinnesota that I probably should have answered that you should have asked that wehistory didn‟t think of at the time. So that when we finally do say this is it, we‟ve done as good a job as we can. Oral JF: Super. Fair enough. I appreciate that.

AB: Great.

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