Links in the Beginning Farmer Chain

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If sweat equity is a key ingredient in launching a farming enterprise, then Jim and Alan Ideker have enough venture capital to fire-up half-a-dozen enterprises.

“This is our second herd we’ve milked this morning,” Alan told me as he emerged from a dairy parlor on a crisp morning last fall, stifling a yawn that he’d been working on since 4:30 a.m.

The brothers had just milked 34 of their own cows on this place, which is owned by western Wisconsin farmer Gene Hansen. Before that they had done the milking on a farm a few miles away with its own 75-cow herd. A few weeks from this particular day they would be milking a dozen of their own cows on yet a third farm across the road.

“I guess we’ll have to get up even earlier then,” said Jim nonchalantly.

Jim is 22 and Al 21—both have that young farmer’s ability to work atrociously long hours under harsh conditions. But they are also savvy enough to know that one cannot sustain a farm in the long term on brawn and caffeine alone. Without some sort of infrastructure in place, all that sweat equity just takes a one-way trip—like so much fertilizer poured onto barren land.

That’s why these recent graduates of LSP’s Farm Beginnings program have created a support network of sorts as they make their move into farming. It’s a network that has brought together established and retiring farmers, lenders, and even another young farmer to help them channel all that energy toward their ultimate goal: the creation of an agricultural enterprise that’s sustainable from an economical, environmental and quality of life standpoint.

There is no magic formula for launching a successful agricultural operation, but the Idekers’ experience provides a glimpse at some of the key links needed by beginning farmers—links that are forged by community support.

1st link: Farm Beginnings
Jim and Al did not grow up on a farm, but frequently helped out on the dairy operations owned by relatives and neighbors near their hometown of Hokah, in southeast Minnesota. That was all it took.

“It just kind of sticks with you,” said Jim of farming.

“You can see it grow,” added Alan. “Even if you’re working for someone else, you feel you’ve accomplished something at the end of the day.”

At the suggestion of Matt Fendry, a 2001 Farm Beginnings grad from nearby Lanesboro, the Idekers took the course in 2007-2008 while Alan was still in high school.

During the fall and winter, they traveled to La Crosse, Wis., twice a month and sat in on classes taught by established farmers and other agricultural professionals from the community. The Idekers say the most helpful part of the course was the financial training and the creation of a business plan.

“We really didn’t know a lot in that area,” said Jim. “Setting up the cash flow, profit and loss statements, was helpful.”

How helpful? Well, when asked how many cows they will need to milk on a regular basis in order to be financially viable, they are confident enough in their business planning to answer without hesitation: 75. The Idekers decided early on they wanted to produce milk organically. Their number crunching has shown that organic milk premiums, combined with low-cost production methods such as managed rotational grazing, can make a 75-cow herd pay its own way, despite the conventional wisdom that dairies can only survive if their herds number in the hundreds or even thousands.

As Farm Beginnings graduates, the Idekers were eligible for an interest-free livestock loan from Heifer International. They each got 15 dairy heifers through the program, which has served as a basis for building their herd toward that eventual 75-cow number.

2nd link: the established farmer
Farm Beginnings graduates say one of the invaluable aspects of the program is the opportunity to create networks with established farmers—networks that pay off down the road when the grads are ready to head out on their own. Indeed, the Idekers have struck gold in that department. During one of the last sessions of the Farm Beginnings course, western Wisconsin dairy farmer Paul Olson spoke on a panel and mentioned be was looking for someone to help milk his cows. That proved to be the next link in the chain.

Paul and Judy Olson produce certified organic milk with a herd of about 75 cows on the farm Paul grew up on near Taylor in Jackson County. They sell their milk through Organic Valley, a cooperative that is headquartered some 90 minutes south of them. When the Olsons went organic eight years ago, they were some of the first to do so in their area. Paul says he never liked dealing with chemicals and “it just makes you feel better farming this way.”

Olson is the president of the National Farmers Organization (NFO), which keeps him away from the farm more than he would like, and means he must rely on hired help. When he met the Idekers at the Farm Beginnings class, he was impressed with their enthusiasm for farming and commitment to good herd management.

He invited the brothers to the community of Taylor, which is a little over an hour’s drive from Hokah, and rented them a farmhouse. The young men then set to work putting into practice what they had learned in Farm Beginnings.

“Jim and Al have been just superb in helping us,” said Olson while taking a break from moving snow, adding  that in the past hired labor has not always worked well on the farm.

But the Idekers are more than hired hands—for two years they’ve milked the Olsons’ cows, but they’ve also traded labor with the established farmers and shared equipment. And in general, they’ve become members of a community that respects hard-working, competent farmers.

Paul Olson grew up in the area and has been farming for 42 years. This deep background, along with his connections through NFO and Organic Valley, makes him an invaluable touchstone for someone just getting started farming in the area.

This area has become a bit of a hot spot for organic dairy production. Olson estimates there are 12 to 15 organic dairy farmers in the county alone. Some of them are aging and have stopped milking cows, but the land is still organic.

“And many of them would love to help a younger farmer get on the land and keep it organic,” he said.

Olson himself is 59, and isn’t considering retirement soon. But he’s the kind of person who, within a few minutes into a conversation, will invariably ask, “Do you know of anyone who wants to dairy farm?” Further conversation reveals he’s asking the question because he knows of opportunities in the community for people who are interested in such an enterprise, and he’s more than willing to serve as a go-between.

The Olsons have three grown children, but none have shown an interest in farming.

“We think about it a lot—about what we will do here in the future,” says Olson. “I’d like to see the farm continue as organic.”

It was through Olson that the Idekers came to milk their own 34 cows on Gene Hansen’s farm. Before the brothers came along, cows had not been in the barn in over eight years, but Hansen wanted livestock back on the operation to help build soil fertility and to put the milking parlor back into use. (It cost them around $3,000 in used milking equipment to get the parlor back in working order).

Olson has been renting the Hansen cropland for the feed, but the Idekers will be taking over that rental agreement in the spring. A neighbor who was getting out of farming sold the brothers a full line of implements on a four-year interest-free loan. While milking cows on the Hansen farm, the brothers learned of a farm across the road that was for rent—its owner stopped milking just two years ago so the barn was still in good shape. That’s where they started milking a dozen of their own cows in November.

3rd link: the peer
Matt Fendry is only 28, but he’s already looked up to by other young farmers like the Idekers. After graduating from Farm Beginnings in 2001, Fendry established a 35-cow organic dairy operation on his family’s hobby farm near Lanesboro. He set up everything from scratch—from the step-up milking parlor to the foul-weather housing to the rotationally grazed pastures.

But a few years ago it became clear that in order for he and his wife Rebekah to expand the farm to the point where it could sustain them financially, they needed to move to an area where they could have access to more contiguous acres of pasture, hay ground and cropland. In December 2009, the young couple bought a farm some 20 miles from the Idekers, where they now milk 75 organic cows.

When Fendry first visited the farm he now owns, he stopped by to pick up the Ideker “boys,” as he calls them, so they could provide some advice on the place. They now trade field work and Fendry recently sold some heifers to the brothers to help them further build their herd.

“It’s been real nice having Matt in the area,” says Jim.

Fendry may appear to be a self-made farmer, but he’s the first to admit that no one can do it alone, especially when it comes to a management-intensive production system like organics. “You do need a little help getting started,” he told me on a recent winter evening while doing the milking. “My parents helped me and Jim and Al got help from area farmers.”

4th link: financing
The Idekers’ interest-free livestock loan through Farm Beginnings not only served as a foundation for starting their dairy herd, but also primed the pump for obtaining credit to build an even bigger one.

“Fifteen cows alone does not cash-flow well,” says Jim. “But lenders give you more credit when they see you’ve qualified for a program like that. It tells them you are accountable and someone else believed in you.”

And having a business plan in hand was a huge plus as well, said the Idekers’ lender, Loren Rausch. He’s the agricultural loan officer for the Union Bank, which is down the road from Taylor in Blair. As with any good banker, a key business guideline for Rausch is, “You have to find the right credit risk to lend to.”

The banker has tried to follow that philosophy since he was working in Minnesota’s Renville County, where he loaned money to large-scale corn and soybean farmers.

Dairying is a capital-intensive enterprise, and Rausch says farmers who have a business plan that sets five- to 10-year goals and projections is important.

Rausch told me he’s particularly excited when a dairy farmer finds a way to reduce a major cost of production like, for example, feed. That’s why he likes to see loan applications from farmers who are utilizing managed rotational grazing to feed the cows during the growing season.

“Definitely rotational grazing reduces investment and equipment,” he says. “During the high production months it supplies feed. It’s good for the cows and the environment.”

5th link: the market
Lenders also look at how the final product will be marketed from the applicant’s operation and whether the farmer can guarantee an income throughout the year, says Rausch. The consistent premium organic dairy farmers get makes them an attractive credit risk, especially in an area where Organic Valley and other organic processors have had a long presence.

“With organics you can build your cash flow and build a marketing plan,” says Rausch. “Initially, people thought organics was going to be a fad, but there’s a real demand in the market sector. That’s what you look for.”

Paul Olson agrees: “It’s not just about the premium, but I’ve appreciated a lot more stability with organic dairy prices.”

6th link: the cheerleader
Bankers like Rausch may be convinced of organics’ financial viability, but it’s still a hard sell in the ag lending community in general, says Paul Dettloff, a veterinarian who has served on Union Bank’s board of directors since 1982.

“They can’t believe that the organic milk price is going to stay that way all year,” Dettloff told me over the phone.

Dettloff is a major reason the Union Bank first took a chance on lending to organic dairy farmers. About 20 years ago he started taking an interest in organics when he noticed that his clients who converted to the system had their vet bills drop as much 80 percent. Dettloff, who is now a staff veterinarian for Organic Valley and who runs his own vet supply business, is a vocal advocate for organics, which he sees as an excellent lending risk for small, rural banks in his area.

“These loans cash flow very well—they are building equity,” he says.

In some ways, Jackson County’s location and geography make it an ideal place for organic dairying. The rolling landscape and in some cases lower quality soil makes it difficult to do large-scale cash cropping there, which keeps land prices relatively low. This means smaller dairies—both conventional and organic—tend to predominate. It also means the land lends itself well to low-cost production methods such as managed rotational grazing.

And despite the hesitancy of the general ag credit industry to embrace organic dairying, it turns out organic milk prices have proven fairly resilient, even during tough economic times. Recent prices paid to organic farmers in Wisconsin have averaged around $5 per hundredweight more than what their conventional counterparts receive.

Even in 2009 and 2010, when consumer demand for organic products flattened, prices paid to Wisconsin organic farmers dropped a few dollars per hundredweight. In comparison, conventional prices paid to farmers plunged as much as $9.

“It’s a market that’s here to stay,” says Rausch.

A study done by the University of Wisconsin’s Center for Dairy Profitability found that on average organic dairy farms retained 21 percent of their business earnings, once the bills were paid (extensive use of rotational grazing increased earnings even more). Conventional confinement farms retained 14 percent of the farm’s total income.

Such statistics give people like Dettloff hope for dairy farming communities. On a recent afternoon, he was preparing to travel the next day to a western Wisconsin organic dairy to help work out the transition of the operation from a 65-year-old producer to a younger farmer.

“It’s going to be kind of a fun morning,” he told me enthusiastically.

7th link: a positive environment
All these links in the chain loop together to create what for want of a better term is simply a positive environment for farming.

“The previous generation has to be positive about agriculture to really make it possible for the next farmers,” says Fendry.

Surprisingly, that’s not always the case in rural areas. As the LSP play Look Who’s Knockin’ shows in dramatic fashion, many retiring farmers are not willing to help beginners because they don’t see a future in agriculture and don’t want to set them up for failure. Oftentimes the dominant philosophy is that the days when a moderate-sized family farmer could make it are long gone, and the future lies with large-scale corporate-controlled agriculture. Being a good farmer isn’t enough anymore, goes this thinking.

But the Idekers and Fendry say in their particular community farmers and non-farmers alike seem to believe young producers with modest operations can turn a consistent profit. “The biggest thing around here is people know good herd managers can do well,” says Jim.

Such a supportive environment doesn’t pop up overnight, says Faye Jones, executive director of Midwest Organic and Sustainable Education Service. She says organic farmers, for example, need support services—everything from soil consultants, grain companies and lenders to veterinarians, milk haulers and seed dealers—that cater to their needs. And of course, they need established farmers who are willing to serve as mentors.

“It comes from all angles and they all kind of feed on each other, ” she says.

Making an impression
It may be some time before the benefits of being in a supportive community fully bear fruit, and the Idekers are established on their own farm. But they continue to take key steps. The brothers have been thinking recently of ending their milking arrangement with the Olson family in the near future and concentrating on building their own herd. That sort of entrepreneurial ambition is respected in a farming community, and promises to pay dividends long into the future.

Said Jim as he and Alan wrapped up chores on the Hansen place and prepared to check out the latest farm they’ve rented, “Once you get into an area, get a foot in the door and people see you work hard and are a good manager, they just kind of put you in the back of their mind when they’re ready to hang it up or move on.”

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