Farming for a Future

Farming for a Future

High land costs block many young people from becoming farmers.

Among a group of seven first cousins, Ben Ludeman was the only one of his generation to return to his family’s farming operation in Tracy, in southwest Minnesota. It was 1996 and he was about to graduate from South Dakota State with a bachelor’s degree in ag business. Some family members encouraged him to get exposure to the work world away from the farm. Ludeman did not heed that advice.

“I’ve known I wanted to be in agriculture since I was 5 years old,” Ben says. Today, at 45, he farms around 3,000 acres with his uncles Sandy, 71, and Brian, 69.

The ages of the Ludemans illustrate the silver tsunami that has been sweeping across Minnesota’s farm country. The 2017 Census of Agriculture, released this year, shows the average age of a Minnesota farmer is 56.5, up three years from a decade ago.

The Ludemans, who’ve expanded their farming operation over many decades, offer a case study in what it takes to succeed over the long haul in a business that is buffeted by volatile crop prices, weather uncertainty, and recently, trade wars.

Ben says it would be extremely difficult for a large number of young people to get into farming in the current economy. “Production agriculture is such a capital-intensive industry driven by technology that there isn’t room for that many people,” he says, “or opportunities to enter.”

To farm or not to farm

When he got his start in farming after college, Ben worked full time for wages in the Ludeman hog business, which the family operated in addition to growing crops. Ben also started selling seeds to farmers on commission. If he had gone to work for the Chicago Board of Trade or pursued another job out of college, Ben says, he could have earned much more, but, he says, “I was willing to make the early sacrifices to reap some of the rewards down the road.”

“The majority of farmers are still sole proprietors, although most of the larger farms have created” family corporate structures, says Dale Nordquist, associate director of the Center for Farm Financial Management at the University of Minnesota.

Ben joined a family operation that had been firmly established by earlier generations. The Ludeman family was living in Iowa when Sandy’s great-grandfather purchased a southern Minnesota farm in 1904. A few years later, Sandy Ludeman says, “Grandpa met a neighbor girl and married her. He operated [the farm] until the middle of the 1940s.”

Sandy’s father, Sander, was the prime operator until the 1970s. Sandy’s father and his mother, Mary Lou, had four sons; Sandy is the eldest. “None of us intended to come back” to the farm, Sandy recalls.

After earning a bachelor’s degree in ag economics from the University of Minnesota in 1969, Sandy was planning to go to law school. He had taken the LSAT. But he went back to Tracy to help his father on the farm after a hired man left his job, and Sandy stayed on.

“By the early ’70s, three of us boys were back here,” he says. At this stage, the Ludeman farm was about 1,000 acres. “My wife, Peggy, and I had the opportunity to purchase [another] farm in 1971,” he recalls. “We slowly expanded.”

In the early years, Sandy took the lead on growing corn and soybeans. His brother Brian ran the hog operation, and his brother Cal was in charge of the beef cattle. In 1973, the Ludemans incorporated their family farm into a C corporation named SanMarBo.

They farmed together “until Cal got the political itch,” Sandy says. Cal, Ben’s father, served in the Minnesota House before he became the Republican-endorsed candidate for governor in 1986. He also served in commissioner roles for eight years in Gov. Tim Pawlenty’s administration and now works as the secretary of the Minnesota Senate.

Cal’s absence from Tracy prompted the Ludemans to exit the beef business. “We decided nobody wanted to get up at 2 a.m. or 4 a.m. and check on the calving process,” Sandy says wryly.

Building equity and markets

Beyond taking steps to run an efficient farm operation, Sandy says he became heavily involved in agriculture associations. As a leader in soybean organizations for 20 years, he says, “I spent a fair amount of time in China trying to open up that market.” He’s frustrated by President Trump’s trade war with China, which has depressed market prices for soybeans. “We always tried to be a fair and reliable supplier for the protein needs of the rest of the world.”

In the 1990s, the Ludemans made an acquisition that helped secure their financial futures. The three brothers and their wives bought 1,600 acres of land in a neighboring county that had been used as a Hutterite colony. It was being sold at an auction. The Ludemans paid about $700 an acre, held onto the land for 15 years, and then sold it for more than $4,000 an acre.

Over the years, the Ludemans built more structures to house their hog operation. In 2019, they have enough space for 10,000 young feeder pigs. Ben says the hog “finishing” facilities—where the hogs are raised before being taken to market—are leased to a neighboring operation.

Barriers for young farmers

When Ben was in his 20s, earning a paycheck from his uncles and selling seeds as a side business, he was stashing away as much money as he could. “I did that for nine years before I could make the down payment on my first land purchase,” Ben says. He bought 240 acres from a neighbor in 2005.

The Ludeman family has been farming in southwest Minnesota since 1904. Ben Ludeman (left) grows corn and soybeans with his uncles Brian (middle) and Sandy.

Ludeman Family Farm Timeline

Sander Ludeman II buys a farm in southwest Minnesota near Tracy and sends his 24-year-old son, Sander III, from Iowa to operate the farm.

Sander Ludeman IV takes over operation of the farm.

Early 1970s
Three sons of Sander IV—Sandy, Brian, and Cal—join the farming operation.

Cal Ludeman runs for Minnesota governor as the Republican nominee.

Ben Ludeman, Cal’s son, graduates from South Dakota State and returns to the Ludeman family farm.

Ben buys his first farmland, which was 240 acres, from a neighbor.

Access to land is the biggest barrier for beginning farmers, he explains. “My grandpa told me a lot of stories about the land he purchased. He said the unique thing is that it was always purchased on a contract-for-deed [installment payments] from the guy who was previously farming.”

But Ben notes there are factors that artificially depress the amount of land on the market. The fear of capital gains taxes, Ben says, causes older farmers to hold on to their land because they may have purchased it for a few hundred dollars an acre, and would have to pay a hefty tax bill if they sell it for several thousand dollars an acre.

Farm commodity prices were high during a “modern-day golden age” from 2008 to 2013, but the cost of buying or renting farm land also was elevated, Sandy says. In recent years, prices for corn and other crops have dropped. By 2018, commercial farms tracked by University of Minnesota Extension reported the lowest median farm income in 23 years ($26,055). Many farmers lost money.

Yet there has not been a commensurate decline in land prices. Sandy says lenders now require bigger down payments, which adds another barrier.

Beginning farmers face other impediments. “Health insurance has become such a huge burden for people,” Ben says. In addition, he says, some young people graduate from college with the intention of getting into farming after they save money from corporate salaries, but the appeal of agriculture wanes after they get accustomed to good-paying jobs, excellent benefits, and urban amenities. Their spouses also often hold rewarding positions in those same cities.

Hard work and high risk   

An especially wet spring this year delayed planting for the Ludemans and many other Minnesota farmers. Sandy and his brother Brian are past the traditional retirement age of 65, but Brian was out tilling the land and Sandy was planting corn and soybeans.

By Memorial Day, Sandy was worried about how many of their acres would remain unplanted because they were waterlogged. Ultimately, they planted about 85 percent of their corn and soybean crops, and they filed crop insurance claims on the remaining acres. Because they lost several days of the growing season, they might see lower yields—fewer bushels per acre—when they harvest.

While the weather and worldwide supplies of major farm commodities affect farm income, Minnesota producers have been dealing with another market factor in recent months.

Many farmers voted for President Trump in the 2016 election, but both Sandy and Ben are worried about the short- and long-term consequences of Trump’s tariff battles with China and other countries.

“I work with a commodity broker,” Ben says. “We try and build a risk management plan, which can be thrown out the window with one tweet.”

The next generation

This year, Sandy planted crops for his 50th season, and he’s also celebrating his 50th wedding anniversary with his wife, Peggy. Agriculture has provided a very good livelihood for him and his family. “Our goal as operators has been not to try and hit a home run, but to have successful singles,” Sandy says—“make a profit and work our way around the bases.”

Our goal as operators has been not to try and hit a home run, but to have successful singles. Make a profit and work our way around the bases.
—Sandy Ludeman, longtime farmer

The Ludemans have been shrewd about setting money aside for investments and working with attorneys and financial advisers to create the best legal structures to serve the needs of multiple generations. “We began the transition to a subchapter S corporation a half-dozen years ago,” Sandy says, “to make it easier to pass the farm to the seven cousins and grandchildren. There is a buy-sell agreement so those heirs can decide if they want to own part of the Ludeman land or exit.”

Brothers Sandy, Brian, and Cal own shares in a corporate entity that owns roughly two-thirds of the acres farmed by the Ludemans. Their seven children are in line to inherit the shares.

Ben is the only cousin currently farming, so as Ben’s siblings and first cousins inherit shares of Ludeman landholdings, he will get the first option to buy the land. While Ben expects to farm for many years, it’s an open question whether any Ludeman family members from the next generation will succeed him in actively farming.

Ben and his wife, Stacey, have three daughters, ages 15 to 20. “I have no doubt that women can run an operation just as well as men,” Ben says, but he doesn’t know if his daughters will become farmers.

He’s seen parents in other families pressure their children to take over family farms. He’s made peace with the possibility that someone other than Ludemans may farm the land in the future. “My goal is to make it a [farm] business that is healthy financially and sustainable,” Ben says. “If one of my children chooses to enter the business, they’ll have that opportunity. That’s all I can really worry about.”

Young Farmers Face High Hurdles

The cost of buying or renting land is a huge barrier to getting into farming in Minnesota.

Millennials are a huge presence in virtually any Minnesota workplace, but it’s harder to find them on farms.

Only 10.1 percent of Minnesota farmers are 35 or younger, according to Dan Loftus, state statistician for the National Agricultural Statistics Service.

“Farms are getting bigger, and farmers are getting older,” Loftus says, describing the main takeaways from the federal 2017 Census of Agriculture. The average age for Minnesota’s farmers was 56.5 in 2017.

Multiple financial factors are preventing young people from becoming farmers and prompting older farmers to stay in business.

“Land prices have made it very difficult for young people to get into farming,” says Thom Petersen, Minnesota’s agriculture commissioner. It’s not uncommon to find farmers still in business in their 70s. “The generational shift hasn’t happened,” says David Bau, a University of Minnesota Extension educator based in Worthington. “I have farmers in their 80s who are still farming.”

Some farmers don’t retire because it’s such a strong part of their identity. Others remain on the land because “they are underwater right now,” says Rep. Jeanne Poppe. She chairs the agriculture division of the House Ways and Means Committee. “I’ve heard of people who, even if they sell their animals and land, they would still owe money. It’s a cyclical market,” so some older farmers are staying on the land and waiting for commodity prices to rise.

Some are still operating their farms because they don’t have enough income from investments or retirement accounts to easily retire. In his work, Bau says, he’s seen instances in which one farm cannot generate enough income to support two farm families. Consequently, a young adult child doesn’t become part of the operation.

Thus, if they are in good health and identify strongly with a life in agriculture, many farmers are in business longer than their parents and grandparents were.

Consolidation has caused a 5 percent drop in the number of Minnesota farms between 2014 and 2018. The Census of Agriculture shows the trend is pronounced among Minnesota’s largest farms. In 1969, there were 1,935 Minnesota farms with 1,000 or more acres. By 2017, that number more than tripled to 6,427. During the same 48-year period, total farms dropped from 110,747 in 1969 to 68,822 in 2017, while average farm size rose from 260 to 371 acres.

In the state, the average price for an acre of farmland is $5,000, and an average tractor costs $200,000, according to Joleen Hadrich, an agriculture economist with the U of M. “That is a large capital investment for a beginning farmer,” Hadrich says, adding that it can take 15 to 30 years to build equity in farm assets.

“Agriculture is always changing,” Hadrich says. “It’s difficult to put a metric on how many from the young generation we need to replace [existing] farmers.” Hadrich, who grew up on a dairy farm in central Minnesota, says she and university colleagues have been teaching farm transition workshops. In many cases, she says, moving a family farm from one generation to the next takes five to 10 years.

“I am very optimistic about the younger generation going into agriculture,” Hadrich says, based on the quality of students she’s taught in farm management classes. They recognize they may need to work in nonfarm jobs to accumulate capital before they can afford to become farmers.

“We have never suggested that those who are trying to get started should begin by buying land,” says the U’s Dale Nordquist. “A better route is usually to try to rent a farm and invest in assets that provide a faster return, such as equipment and breeding livestock.”

Nordquist says university staff recently surveyed farmers of all ages who are enrolled in farm business management programs. Among the 270 respondents, 18 percent said they got started in farming on their own, 49 percent got help from their parents, and 30 percent started in a partnership or as part of a farming entity with family.

In state government, Petersen says, some tools exist to help young people get into agriculture, including a beginning farmer loan program. In 2017, Gov. Mark Dayton signed a “beginning farmer tax credit” measure into law. It provides a financial incentive for existing farmers to sell or rent their land or other farm assets to young farmers. This year, $6 million is set aside for that program.

“It’s a tough life,” Petersen says. “You don’t know what your income is going to be every year. You really have to love it.”

Liz Fedor is the Trending editor for TCB and reported on agriculture issues for the Grand Forks Herald.