Color them plain
but successful:
Growing Hutterite colonies find successful—and sizable—niches in district economy

Kathy Cobb, Contributing Writer
Fedgazette, Federal Reserve Bank of Minneapolis, January, 2006

For the past few decades, many pundits have bemoaned the shrinking number of family farms and with that the loss of small town businesses and population. But there's a unique and growing niche of family farms in Ninth District states using a combination of old-fashioned hard work and technological savvy.

Though they shun the attention, Hutterite colonies are significant producers in a number of agricultural sectors. Their simple life belies the fact that Hutterites are smart, efficient farmers, using the latest technology to keep up with the competition.

Named after their original leader, Jakob Hutter, Hutterites came to North America from Eastern Europe in the 1870s to escape religious persecution. Hutterites first formed colonies in Europe in 1528 and, similar to the Amish, are an Anabaptist sect; that is, baptism is chosen by adults. Their belief system is based on strict interpretation of the Bible.

Hutterites are the oldest continuous communal religious order in the United States, having originally settled in South Dakota in 1874. From that base, South Dakota has become home to the largest number of Hutterites in the country, with about 54 colonies and 6,000 residents. Montana is not far behind with 50 colonies and 4,000 residents. Minnesota's eight colonies and North Dakota's six have largely formed since the 1980s. (See map.) All totaled, there are about 460 Hutterite colonies with 40,000 residents spread across North America, concentrated in Great Plains states, the Pacific Northwest and Canada.

Source: Hutterite Phone Book, U.S. Edition, James Valley Book Centre, 2004

All the colonies are in rural locations and are largely self-sustaining; that is, they grow and raise what is needed to feed an average population of between 60 and 160 residents. The size of a colony is based on how many workers are required to maintain the farm and other businesses. If a colony's population grows beyond what's needed, land is purchased to start a “daughter” colony.

German is still the native colony language. Colony members dress simply and avoid modern media and technology, except where it pertains to their farm or business operations. There is no individual ownership of assets or personal income, but money may be doled out from the colony treasury to purchase necessities and small personal items.

The organizational structure of a Hutterite colony is not unlike that of a major corporation: The CEO is the minister and spiritual leader, who works in conjunction with an advisory board, similar to a board of directors. The colony manager (think chief operational officer) handles the finances and business matters. The farm manager supervises all field work. And other members of the advisory board are responsible for additional areas of colony life as needed.

Building an ag presence

That corporatelike structure has led to much-admired efficiency in farm and business operations. And while they adhere to many traditional values and practices, Hutterites have become sophisticated businesspeople, adroit at finding industry opportunities and building very competitive businesses for the good of their colonies.

That's particularly the case in farming. Although many perceive that Hutterites use only natural methods to raise their crops and livestock, most use the same techniques and applications as other modern-day farmers to increase yields in a cost-effective way. Regardless of the methods used, Hutterite farms reach a scale and production level that would probably surprise most people.

In South Dakota, for example, Hutterites raise about 50 percent to 60 percent of hogs sent to market, according to Jeremy Freking, executive director of the South Dakota Pork Producers Council in Sioux Falls. That's more than 1 million a year and about 1 percent of total U.S. production, Freking added.

Hutterites also have a corner on Montana's hog market: Over 90 percent of hogs raised in that state come from Hutterite colonies. “They've been able to absorb low prices because they're so diversified,” said Todd Gahagan, Milk and Egg Bureau chief for the Montana Department of Livestock, while others may get out of the business when prices drop.

In addition, about 98 percent of Montana's eggs come from Hutterite farms, using state-of-the-art equipment. In 2003, the latest year for which statistics are available, 107 million eggs were produced in Montana. According to Gahagan, between 35 and 40 colonies are licensed for egg production, with each farm having 10,000 or more birds. Other private owners have gone out of business over time, Gahagan said, but even 20 years ago, Hutterites had a large part of the market. “They have the advantage in nearly free labor,” and because of their size, they realize some savings on feed and other related products, Gahagan said. Hutterites also built their own slaughterhouses to turn older, nonproductive hens into meat for sale at retail outlets throughout the state.

Let's talk turkey(s)

Turkeys are probably the biggest story in South Dakota. The colonies raise about 80 percent of the 6.2 million turkeys in the state, and starting this month, most of those are heading to a new Hutterite processing plant in Huron. The Dakota Turkey Growers plant, owned largely by 44 Hutterite colonies in the Dakotas and Minnesota, will open with about 400 non-Hutterite employees and process 17,000 to 18,000 birds a day. When fully operational in the next two and a half years, the $45 million plant is expected to turn about 9 million turkeys annually into lunchmeat, turkey filets and so on, and employ more than 1,000, with a payroll of between $28 million and $30 million.

The plant is an “opportunity to create a large number of jobs” in the community, said Jim Borszich, executive director, Greater Huron Development Corp., whose organization worked with state and county officials to get the project off the ground. He added that the plant grew out of Hutterite farmers seeing profit margins squeezed as they contracted for their processing. They simply wanted to be more profitable and to take control of their own destiny, Borszich said.

That destiny has been a matter of small, methodical business steps. One particularly important step came in the 1980s with the formation of a soybean feed cooperative, according to Jeff Sveen, an Aberdeen, S.D., attorney who has represented Hutterite colonies for more than 25 years. Hutterites banded together largely to sell soybeans and purchase meal and to enjoy co-op dividends, which at one time amounted to about $15 a ton, Sveen said. But what the co-op really succeeded in doing was fostering greater cooperation and marketing strength among the colonies. Now, Sveen said, “65 to 75 semi [truck] loads of soybean meal are purchased on behalf of co-op members each week to feed their turkeys and hogs.”

Sveen also encouraged colonies to file with the Internal Revenue Service as a 501(d) nonprofit religious organization, that is, one with a communal treasury, which the colonies already had. That status has allowed them to function better as a unit in financial and business ventures, Sveen said. Until that time, each colony operated quite independently.

There's a common misconception that Hutterites don't pay taxes because they're a religion-based community, but that's not the case. The colonies pay property taxes on farmlands and businesses in the same way a family farm corporation or business would. Because there are no salaries for colony members who work within their community, individual Hutterites are not subject to state or federal income taxes. They don't pay Social Security taxes-but then Hutterite workers don't collect Social Security, either.

And then there's manufacturing

Some Hutterite colonies have also diversified into other businesses. According to Sveen, 10 to 12 colonies in the Dakotas and Minnesota have substantial manufacturing businesses. Most employees are colony residents, but several hire non-Hutterite salespeople. One of the larger operations is Millbrook Industries near Mitchell, S.D., anchored by the Hydronic Division, builder of the Hydron Module Ground Source Heat Pump, which uses the earth's warmth to heat and cool homes and businesses and is sold in 35 states and Canada. Other businesses at the site include commercial feed production, poultry, farming, metal fabrication and a major machine shop.

At Newdale Colony in Elkton, S.D., the specialty is metalworking, where Hutterites manufacture metal cladding for buildings and feed mill equipment, among other products. The operations are state-of-the-art; equipment includes the latest in laser cutters, CAD/CAM software, robotic welders and more.

And in Gibbon, Minn., at the Starland Colony, workers operate a machine shop that makes steel tools and produces metal parts and accessories for complex commercial applications. One person spends most of his time on the Internet buying and selling steel for precision steel fabricating.

Wind power is the focus at the colony in Martindale, Mont. A dozen wind-powered electric generators are operated by Two Dot Wind LLC, which sells power to Montana Power Co. According to Dave Healow, Two Dot's managing partner, the project is the perfect marriage of Hutterite mechanical expertise and his goal of harnessing wind energy through refurbishing and reinstalling otherwise outdated turbines. Hutterite blacksmiths, welders, electricians and mechanics help get the salvaged equipment running again, Healow said, and he also uses the Forty Mile Colony's machine shop to fabricate replacement pieces.

“The Hutterites had a hard time believing this would work,” Healow said. But once he installed the first turbine, which provides enough electricity to power the colony's homes and operations, they were sold on the idea. Now there are 11 other turbines on land leased from the colony, with many more planned. Healow said he likes the fact that the refurbished equipment is about a third of the cost of new turbines, and “the money stays local.”

Just typical farmers?

According to a number of non-Hutterite sources, what makes Hutterite business endeavors so successful is a combination of work ethic, smarts and the cultural idiosyncrasies of being Hutterite.

Donald B. Kraybill, senior fellow, Young Center for Anabaptist Studies at Elizabethtown College in Elizabethtown, Pa., has written extensively about Hutterites and other Anabaptist sects. He described a colony's operation as “basically a large corporate farm,” averaging about 3,000 acres. "Because of their scale, they can negotiate," said Kraybill, adding that “their technology is communally owned so they can control it more.”

“They pay attention to detail, utilize the latest technology and provide an excellent environment for raising hogs,” said Freking, of South Dakota's Pork Producers Council. “Some people like to lump them together, but they're not much different from any other farmers. They learn from each other and talk shop, just like you'd find in any small town coffee shop talk among farmers,” Freking said.

But because of their traditions and unique financial situation, Hutterites may be able to create more opportunities for their colonies than some other farmers. Mike Held, administrative director for the South Dakota Farm Bureau in Huron, said, “They run intensive modern livestock operations,” a value-added product. “They are also famous for getting involved in allied industries,” he said, noting that Hutterites have developed an expertise in making livestock equipment to expand their job and sales opportunities. But overall, Held said, “I would say they're successful due to their work ethic and skills of their people.”

Regardless of their colony structure and distinct lifestyle, Hutterites don't seem to have any problems marketing their products. There are no barriers, said Mike Tschetter Sr., president of the New Elm Spring Colony in Ethan, S.D. “We can market anything we want.” Each colony decides what to specialize in—be it manufacturing or farm products, Tschetter said.

That's not to say that every entrepreneurial Hutterite idea turns into a bonanza. The Riverview Hutterite Colony in Chester, Mont., which has been producing baby carrots for the past 10 years, had reached capacity and wanted to expand. So the colony and five other growers asked the Bear Paw Development Corp. to conduct a feasibility study for a processing plant. Given the limited growing season in Montana, carrots would have to have been imported from the South to keep the plant running year round, and the capital costs were just too high, according to Craig Erickson, director of community planning for Bear Paw. That and other issues sank the project.

Still, Riverview continues to grow and process enough carrots on three acres of land to supply the local Wal-Mart and a couple of supermarkets in Great Falls and Shelby, according to Erickson. “I take my hat off to them—taking a garden product and making it a cash crop.”

Some things don't change

Despite their growing participation in business and industry, at the end of the day, Hutterites return to the colony's cultural and religious traditions, which haven't changed in hundreds of years. Though Tschetter, of the New Elm Spring Colony, admitted that more young people leave to taste the secular life, for most it's only a temporary diversion-90 percent return to the colony. “They come back to work for their own future,” Tschetter said.

“The average age of colony members is under 21,” Sveen said. “When I set up a health plan in 1990, there were 5,000 members. Now there are over 6,000.”