Old World values; modern-day success

Steve Young

Argus Leader, Sioux Falls, South Dakota, Tuesday, Novenber 16, 2003

NEW ELM SPRING COLONY - In his black hat, striped shirt and black suit coat, Mike Tschetter Sr. could be a 19th century sodbuster trying to scratch a living from the Dakota prairie.

He could be a 16th century preacher as well, for the High German rolling off his lips during nightly devotions at New Elm Springs Colony is the very echo of words chanted almost 500 years ago.

In appearance and speech, Tschetter, a modern-day Hutterite minister, is practically a mirror image of his ancestors who fled the Ukraine 130 years ago to seek religious and personal freedoms abroad.

Yet for their Old World ways, the approximately 6,000 Hutterites living in South Dakota today have transformed themselves into something quite remarkable in this computerized era of high-tech farming: a large and powerful force within South Dakota's agricultural economy.

How big a force is difficult to say. Agricultural economists say nobody has ever measured the Hutterites' effect on the state economy.

But with their numbers and land holdings growing, and hog and turkey operations thriving, today's 53 Hutterite colonies clearly defy the trend that has seen thousands of family farmers leave the land every decade in South Dakota, largely for economic reasons. According to an Argus Leader study, today's Hutterite colonies:

• Produce 40 to 50 percent of all hogs sent to market in this state, as many as 800,000 each year.

• Raise at least 80 percent of South Dakota's 6.2 million turkeys produced yearly.

• Account for up to $500 million of the estimated $18.2 billion effect agriculture has on salaries, jobs and spending throughout the state.

"In eastern South Dakota, there is no doubt" that they have become major players in the farm economy, especially with hogs and turkeys, said Mike Held, administrative director of the South Dakota Farm Bureau.

In fact, the economic influence the Hutterites wield is unheard of in American agriculture today, said Donald Kraybill, senior fellow at the Young Center for Anabaptist Studies at Elizabethtown College in Pennsylvania.

No other state has the concentration of agriculturally based communes that South Dakota has, Kraybill said. The Amish in Pennsylvania, Ohio and Indiana don't live communally and are less involved in agriculture, he said. The Society of Brothers has a few colonies on the East Coast but in much smaller numbers than the Hutterites.

"You have a very unique situation there in South Dakota and in the Upper Midwest," Kraybill said. "You won't find that kind of agricultural group anywhere else in the country."

According to the federal government's Farm Service Agency, the Hutterites collectively own almost 270,000 acres of farm land and rent another 77,750 acres - or 1.92 percent of the available land in the South Dakota counties in which they operate.

The continued growth of the Hutterite settlements spread across eastern South Dakota is in stark contrast to what has happened to small farms in the state over the past three decades. Since 1973, South Dakota has lost 13,000 farms, and small producers have fought fierce political battles to stave off the entry of large corporate farms into the state.

The Hutterites' ability to buy sections of ground when they want can be unsettling for other farmers, especially those who see the price and scarcity of available land as a threat to their existence.

"Whenever they buy land, you can pretty much say it will never come up for sale again," Madison farmer Charlie Johnson said. "That's probably the biggest rub people have about Hutterites. Having access to land is very key out in rural areas."

Settlements evolve

The colonies initially appeared on the Dakota landscape in 1874, when the first Hutterites carved out the Bon Homme settlement along the Missouri River near Tabor. They practice a communal lifestyle based on the fundamental principle of a community of goods. "What is mine is thine," the Hutterites believe, according to Acts 2:44 and 45. "And all that believed were together and had all things in common."

Within the communal structure, each member is given a job, whether it's teacher or preacher, head cook or hog boss. To make the operation workable, the colonies limit themselves to 120 to 150 members. Once they get beyond that number, they simply buy additional land and create new "daughter" colonies.

Measuring the Hutterites' economic impact is a difficult proposition, since their culture is as deeply private as it is religious.

"I can tell you," said Jeff Sveen, an Aberdeen lawyer who does legal work for the colonies, "that it would leave a major hole in this state's farm economy" if the Hutterites disappeared tomorrow.

That's especially true when it comes to the production of hogs and turkeys - two agricultural ventures the Hutterites dominate in this state.

Tschetter, the New Elm Springs minister and spokesman for the colony, said many colonies got into hogs 30 to 40 years ago, "when the prices were good, and it was easy to get into.

"You just turned your boar loose with the sows in the summertime and raised them all out in the sunflowers," he said.

Now with hog-confinement operations on virtually every colony, the Hutterites produce between 40 and 50 percent of all the South Dakota feeder pigs that go to market, said Bob Thaler, a swine specialist with the state Cooperative Extension Service.

"They've got the manpower, obviously, to run large operations," Thaler said. "They have good genetics in the hogs they produce. And with their computerized hog-confinement systems, they are very efficient."

Most of the colonies sell their hogs through a marketing group called Prairie Land Pork, Sveen said. By working together, observers say, they are able to negotiate better contracts through their agents.

"With anything, whether it's Wal-Mart or Kmart, the hog industry or the cattle industry ... people would rather deal with one person representing large numbers than a lot of people representing small numbers," said Rick Morren, a Beresford hog farmer and past president of the South Dakota Pork Producers Council.

Together, Prairie Land and South Dakota Hutterite colonies send about 800,000 feeder pigs to market each year. Most of Prairie Land's hogs are sold to John Morrell & Co. in Sioux Falls. Most of the rest go to Swift in Worthington, Minn., and IBP in Madison, Neb.

"We market 10,000 to 12,000 hogs a week to all the different places, so we are a constant supply," Sveen said.

For a meatpacker that slaughters 4 million hogs a year - and is always searching for more - there is little dispute about the importance of the 350,000 hogs that come to Morrell's annually from the Prairie Land colonies, according to Dave Poppen, corporate director of procurement for Morrell's. "When you look at 350,000 head against 4 million, on the surface that doesn't look big," Poppen said. "But it's huge when you consider that we have 12,000 customers we get our hogs from."

And they're good hogs, Poppen added. Through their use of genetics technology, the Hutterites are producing leaner animals. Their sows have bigger litters, too.

In a state where the average market price of a 250-pound market hog in 2002 was $90.75, Prairie Land hogs typically earned at least $4 above that average from Morrell's, Poppen said, and as much as $8 more.

To lose that many top-quality hogs certainly would send shudders through Morrell's world, Poppen said. "It wouldn't close us down; we wouldn't be out of business," he said. "But certainly it would affect us."

It obviously would affect South Dakota's farm economy as well. Conservatively speaking, the Hutterites received about $75.8 million for the hogs they sent to market last year.

And since the Hutterites' track record has been to produce more hogs while others are cutting back, "if nothing changes in this state, the future of South Dakota hog production is pretty much dependent on the colonies," Poppen said.

Other products

Of course, hogs aren't the Hutterites' only big sources of income. The colonies are also huge producers of turkeys. Of the 6.2 million tom turkeys raised in the state and sent to market each year, at least 5 million come from the colonies, Sveen said. He estimated that the colonies earned at least $69.7 million from turkey sales last year.

"As far as I know, there are only two or three other growers other than the colonies in the entire state," he said.

The colonies send almost all of their turkeys to processors in Willmar, Minn., and Storm Lake, Iowa. But that could change if the Hutterites succeed in an effort to start their own processing plant. Earlier this year, a group of 40 colonies working under the banner of Dakota Turkey Growers received a $200,000 state grant to study the feasibility of building a $30 million plant in the state.

"If Dakota Turkey Growers does this, it will be a plant built somewhere in South Dakota, employing South Dakota people, and with the profit staying in South Dakota," said Sveen, who also represents that group.

Such a facility could employ 600 to 1,000 people, most of them noncolony workers, he said. The group should know by the end of the year if the project will proceed, Sveen said.

Beyond hogs and turkeys, the Hutterites also grow corn and soybeans, though virtually all of the corn goes to feeding their own livestock.

Soybeans represent the colonies' one significant cash field crop, Sveen said. The colonies sold an estimated $20.6 million in soybeans last year.

The Hutterites are into many other agricultural ventures as well, though to a smaller degree. Many have butchering shops and butcher everything from pheasants and ducks to chicken, geese, even buffalo.

There are 14 colonies in the dairy business, averaging 300 head per operation. "They are starting to build back up, and big time," said Tschetter. "It's starting to become profitable again."

Few colonies raise beef cattle. "The land," Tschetter explains, "is too expensive to graze them."

Hutterites sell their vegetables and baked goods in surrounding communities. Some colonies are even diversifying into ag-related small businesses. For example, the Millbrook Colony southeast of Mitchell produces heat pumps. And Riverside Colony near Huron manufactures hog feeders.

"Colonies would like to do more and more manufacturing, especially farm-related manufacturing," Sveen said. "But you need to find someone who needs them to build a product for them."

There is one other significant source of income for the Hutterites as well - federal government payments.

In a state where ag producers realized $334.6 million in federal payments in 2002, the 53 colonies collectively received at least $2.5 million in corn, soybean, wheat, livestock and conservation-reserve subsidies, with Spink Colony north of Huron getting the most at $153,778.

Taken together, the money the colonies received for their hogs, turkeys and soybeans - combined with their subsidy payments - came to about $168.6 million in 2002. When those dollars trickled through the economy, from the elevators to the processing plants, from paychecks to Main Street transactions, it meant a $365.9 million impact on the state, estimates Gary Taylor, an agriculture economist at South Dakota State University.

Observers say that when the miscellaneous other ventures are figured in, that total is closer to $500 million.

Tschetter insists that his people understand their influence on the South Dakota economy.

"Absolutely we do," Tschetter said. "That's why you'll hear us grumbling because everything has to go out of state. Why does our pork have to be hauled to Minnesota and Nebraska? Why do practically all of our turkeys have to go to Minnesota or Iowa? We'd like to see more of those staying in this state."

Larger effect on state

Colonies have an economic impact in other ways, as well. They pay property and income taxes, Sveen said, just as other South Dakotans do.

"They don't get any breaks on those taxes," he said.

And Hutterite children, though educated in classrooms at the colonies, bring in dollars for their neighboring school districts under the state funding formula.

For example, 14 children in kindergarten through eighth grade at New Elm Spring Colony northeast of Parkston generate $3,967.88 apiece in state education dollars for the Parkston School District.

The Parkston district pays for a teacher and teacher's aide to work at the colony. It also provides books, curriculum, computers and other supplies. In turn, New Elm Spring takes care of the classrooms and utilities.

"I think it's beneficial to the districts overall," Parkston Superintendent Shayne McIntosh said. "If it weren't, if it was costing districts money to send teachers and supplies out there, you would probably see a struggle between the colonies and the school districts trying to get those kids into the mainstream schools."

Indeed, for a culture that exists on the fringes of American society - that speaks a different language around the dinner table, dresses differently from everyone else, and eschews materialism for the most part - the Hutterites seem to have found peace with those around them.

The colonies are viewed as nonprofit religious corporations by the IRS, Sveen said, but still must pay income and property taxes.

"In the 1970s in this state, it started to become important that the colonies be an identifiable entity," he said. "They weren't up to that point and, it's like the banks were saying, 'We'll lend you money, but what exactly are you?' "

Colonies didn't show up in statutes as being legal entities. So the IRS began looking through its codes to see where they might fit and came upon 501D, which defines nonprofit religious corporations.

"What that says is, a religious corporation has to have its holdings held in a community treasury," Sveen said. "There is no individual ownership of assets.

"That's where they put the colonies. It doesn't mean that since they are nonprofit, they get any benefits. Like for example, if you donate to your church, you get a tax deduction. They are not exempt from any taxes. They just fit into that code because there is no individual ownership; it's all community-owned."

Most South Dakotans in agriculture say they view the colonies as family farmers and not corporate farmers.

State Sen. Frank Kloucek, D-Scotland, said he doesn't believe there was ever any intent to limit Hutterite expansion when lawmakers put together Amendment E, the state's anti-corporate farming law.

"They've always been viewed as family farmers," Kloucek said. "They live on their land as families. They make the daily decisions. And if something goes wrong, they're responsible, and they suffer, too."

There are undoubtedly farmers who envy the Hutterites' purchasing power, said Held, of the Farm Bureau.

"I know some of the local farmers around here think of them as corporate from the standpoint of purchasing land," he said. "Sometimes it does create, I'm not sure animosity is the right word, but competition. But then other operators create that competition, too. It's just a fact of life you deal with in farming."

State Sen. Paul Symens, D-Amherst, once introduced a bill that would have slowed Hutterite expansion after constituents in northeast South Dakota approached him with concerns about the colonies' ongoing purchase of land. But he also knew that such a bill would be unconstitutional.

"I think there are jealousies out there," Symens said. "But people who know the Hutterites and have them as neighbors, I don't think they view them negatively. They are good neighbors."

Community relations

In communities and the countryside south of Mitchell, where there are at least half a dozen colonies, that belief holds up.

In Parkston, for example, Janelle Varney runs the Medicine Shoppe pharmacy. Many of the area colonies do business at another pharmacy in town, in large part because they get a better deal there. But Varney understands that.

"They are very demanding people, but a lot of people are that way," Varney said. "They want the best price. So does everyone else. I understand that."

At Farmers State Bank in Parkston, owners Bob and Scott Bormann do business with five colonies. That hasn't always been true, they say. Bob Bormann said a majority of the colonies took their money out of area banks in the 1970s and deposited it in large out-of-state institutions.

But in the 1990s, they started bringing their business back to South Dakota banks, Bob Bormann said.

"Obviously, they're going to go where they can get a fair deal," Bob Bormann said. "But I've found here in the bank, if you're open with them and honest with them, that reciprocates on both sides. They are good customers."

Sveen said the colonies make a conscious effort to buy locally or in state, whether it's gasoline, oil, feed or groceries. To highlight that point, he tells about a nationwide pharmaceutical company that once offered the colonies big discounts if they would buy medicine from them, Sveen said.

"What that would have done is not allow them to buy their pharmaceuticals from the local guy," he said. "They didn't do it. They like their local pharmaceutical guy. They are part of their community, so they didn't do it."

Neighbors say they get along with the colonies for the most part.

Dick Varney farms near Old Elm Spring Colony south of Alexandria. He has rented pasture land from the colony and has borrowed machinery from them. When he's needed help on his place, the Hutterites were there.

"The colony people are just like anyone else," Varney said. "There are a lot of good folks in this state, and a lot of good colony people. And you always have a few of each that are no good."

Near Parkston, farmer Wayne Tiede knows the frustration of trying to bid on farm land against the Hutterites. While he counts many on the colonies among his friends, he also understands that the Hutterites' purchasing power often puts him at a disadvantage.

"It's tough to buy any land in our area because they are in there, and they will pay whatever it takes," Tiede said. "They don't have to worry about making money for retirement. ... And once they buy the land, they never give it up. It'll never be available to anyone else."

With control over only about 2 percent of the farm land in the counties where they operate, the Hutterites don't seem to be major land owners.

But Johnson, the Madison farmer, asks this question: If the colonies were viewed as one entity collectively, how many entities could you have in each county before the farm land was all gone?

"You could have 50 entities per county, at 2 percent each," Johnson said, quickly answering his own question. "Obviously that's not the situation. But at 50 farms per county, that's not going to be good for school districts and spending on Main Street and other ag-related services."

A century down the road, as more colonies form, the Hutterites could own 4 percent of all the land, or 6 percent, he said. "What that means is that I think they'll have an even greater influence."

Is that good or bad? Johnson isn't sure.

Sure, they are a little different in their Old World ways. But they are friendly, thoughtful people, too, he said.

"It's like this," Johnson said. "I guess as a neighbor, I really like the Hutterites a lot. And as a farmer out here, I have my apprehensions about them. I'd say that captures it the best."

Reach Steve Young at 331-2306.