South Dakota Hutterites

This article was published in the June 2006 South Dakota Labor Bulletin.

Hutterite colonies are a unique segment of the South Dakota economy and contribute to the state’s workforce in an unusual way. Understanding the past of this group of our fellow South Dakotans can help all of us better understand how those unique contributions came to be.

Present day South Dakota Hutterites are bilingual, as they speak Hutterite German and English. They are often known by their neighbors as being some of the best farmers, goods producers and manufacturers – along with being hard working and efficient. They have high standards and are able to maximize available resources. The South Dakota Hutterite colonies hold steadfast to the same beliefs as their forefathers hundreds of years ago. This is likely why most of their neighbors consider them good neighbors, as the Hutterites avoid conflict, are fairly reserved, live a simple life and seem willing to maintain good relationships with those around them.

As mentioned above, the ability to maximize their resources is one of the traits for which Hutterites are known by their neighbors. The number of non-Hutterite South Dakota farms keeps decreasing as large farmers specialize in what they raise (whether it is crops or livestock) and practice economy of scale (savings that are acquired through increases in quantities produced), forcing smaller farms out of business. The larger farms then become even larger and more competitive as they grow. Meanwhile, the Hutterites have found their niche in South Dakota’s agricultural industry by practicing economies of scope (savings that are acquired through simultaneous production of many different products). For example, the Hutterites have to pay as much for land as a large specialized farmer; but the Hutterites would not make enough money to support all of their population off of only the land. So the Hutterites maximize their resources by letting their livestock graze on their harvested fields, then feeding some or all of their harvested grain to the livestock (which is value adding in South Dakota). Afterward, the Hutterites use the livestock’s manure to fertilize the land, lowering fertilizer costs. In another example, crop farming Hutterites remain productive in the winter by farrowing sows, calving cows, raising poultry or manufacturing products. There are few idle hands on a Hutterite colony; all resources are used to their fullest extent, and many products and goods are produced and sold.

As the Hutterites expanded all of their operations, they acquired more market shares or market power (the ability to get a better price because of the volume they produce). The increased market power they possess also lends to the ability for vertical integration (owning some or all of the processes or steps from creation to final production of a good). The well managed vertical integrations allowed for more efficiency and therefore more profit. A good example of their vertical integration would be the new joint venture Dakota Turkey Growers processing plant in Huron, South Dakota. The plant allows the Hutterites and other turkey growers to process and package the turkeys they grow into a final product that is more beneficial for the growers of the turkeys and those that buy the processed turkeys.

While the Hutterites live according to traditions handed down since the 16^th century, they are frequently described as being among the early adopters of new technology. According to a Keloland.com article from September 13, 2005, certain colonies specialize in producing certain types of products using some of the newest technology available, including oak furniture, clocks, down-filled bedding, candles, brooms, laser-cut metal napkin holders, meats and fresh garden produce.

The January 2006 fedgazette, a publication of the Federal Reserve Bank of Minneapolis, featured an article on Hutterite colonies in which they sourced Aberdeen, South Dakota attorney Jeff Sveen, who has represented Hutterites for more than 25 years. According to Sveen, some colonies have diversified into other businesses. For example, Millbrook Industries near Mitchell is the location for building the Hydron Module Ground Source Heat Pump. Other businesses at the site include commercial feed production, metal fabrication and a major machine shop. In Elkton, where a colony specializes in metalworking, the Newdale Colony operations use state-of-the-art equipment, including laser cutters, CAD/CAM software and robotic welders.

Because of their efficiency and constant evaluation of opportunity cost (cost of giving up the next best alternative use of their resources), the Hutterites have become so competitive in farming, manufacturing, construction, general labor and other areas that they are sometimes accused of having an unfair advantage. The Hutterites have all of the costs that any other business has, but it is in different forms. It is true that Hutterites do not pay unemployment insurance taxes or social security tax on members of their colonies, but neither are they eligible for benefits under those programs. In that respect, they have liabilities of their own. If a Hutterite is hurt and/or disabled, the colony takes care of all of the food, housing, medical care, transportation and retirement needs of that individual, just as when he/she was working.

As time moves on, we will likely continue to see more business ventures by this unique segment of the South Dakota economy and more cooperation between the colonies and other South Dakota businesses and cooperatives.