By Nicholas Bergin, Lincoln Journal Star
Malinda Villwok's grandpa was an all-or-nothing kind of guy.
In 2006, Gerald Stevens offered the family farm to Villwok and her husband, Greg. They thought maybe they ought to start their life in farming by renting 160 acres from him.
"He said, 'No. If I'm going to rent it out, I'm going to rent it all out,'" Greg Villwok tells the Lincoln Journal Star while in the cab of a tractor as he hauled feed for his family's Wayne County cow and calf herd.
"I grew up on a farm, and that is a lot of farm kids' dreams, to have their own operation. We were overwhelmed, yet we had faith it would work."
And it did. They prospered, paid off debt and took on more to expand, tiled some cropland and bought a ranch out west.
Then commodity prices collapsed, and farm income collapsed right along with it. Young farmers like the Villwoks are now experiencing firsthand the roller-coaster lows that older producers had warned them about for years.
"It's a reality check," Greg Villwok said.
U.S. farmers are expected to make 56 percent less in 2016 than they did in 2013. U.S. Department of Agriculture has forecast total farm income will be $54.8 billion this year, compared with $123.3 billion in 2013. If the forecast holds true, it would be the lowest for U.S. farmers since 2002 in both real and nominal terms.
With profit margins razor thin, and in some cases nonexistent, operations with high rents and debt are feeling serious financial pressure.
"This is an area there has been a lot of focus on recently," Omaha-based economist Nathan Kauffman of the Federal Reserve Bank of Kansas City said during a recent interview. "With the downturn, we and others have been saying that younger farmers are perhaps one of those groups that are at risk."
Newer farmers generally have had less time to build equity, and they're more likely to rent land than own it and to have high debt, Kauffman said.
As income has slipped, so has loan repayment rates, although commercial banks continued to report low delinquency rates on agricultural loans, according to the Federal Reserve Bank of Kansas City's first quarter Agricultural Finance Databook.
Still, financial experts say the situation is far less dire than during the 1980s farm crisis. Farmers have less debt on average, and the debt they do have is at lower interest rates.
Farm banks increased ag lending in 2015 by 7.9 percent in 2015 and by the end of the year held $100.3 billion in farm loans, according to the recently released American Banker's Association (www.aba.com) annual Farm Bank Performance Report.
Farmers are getting older. In 2012, the year of the USDA's most recent ag census, only 16 percent of producers were younger than 45 while the biggest age group, a full third, was of farmers 65 or older.
With a large number of farmers getting ready to retire, younger generations have been getting a lot of attention, and they have responded.
University of Nebraska-Lincoln Assistant Professor Brad Lubben has seen the interest firsthand in the thousands of students he interacts with every year. The number of undergraduate students enrolled in UNL's College of Agricultural Sciences and Natural Resources has nearly doubled over the past decade, from 1,264 in 2005 to 2,267 in 2015.
"The motivation and interest in returning to the farm has been higher than ever, including what we see here at the university in terms of students with definite plans to return to the farm after getting a degree," he said.
Some have to start from scratch, but others, like Greg and Malinda Villwok, have the benefit of taking over established operations.
The Villwoks met at a high school track meet nearly 20 years ago. He was a senior at Logan View. She was a sophomore from Norfolk.
His buddies dared him to ask her for her phone number and bet he wouldn't get it.
"For whatever reason, I gave him my phone number," she recalled recently as she maneuvered the farm truck down a gravel road. ". I don't remember why. That wasn't a normal practice."
And then, he didn't call.
A year later, Greg had enrolled at Northeast Community College in Norfolk for building construction. While he was going through a box, he came across her number and remembered she lived in the same town.
She had all but forgotten him, but they went out and began dating, then fell in love and married right after she graduated from high school in 1999.
Greg worked as a carpenter for a few years out of college, then started his own contracting business working on houses and building new homes.
Meanwhile, they began helping Malinda's grandfather care for his cattle, and farm the rolling hills of the family farm in northeastern Nebraska.
Her grandfather's health was failing, and he wanted to see family take over the business he had inherited from his own father and spent decades building, Greg said.
They had spent five years building the home construction company and were making enough money to live comfortably. But farming called to them. They used the contracting company to finance their farm operation and got loans with the help of federal programs for beginning farmers to pay for seed, fertilizer and chemicals. They bought equipment from her grandpa on contract.
During the 2012 drought, their dry land produced next to nothing, but their irrigated land put out 180 bushels of corn an acre when commodity prices were at the all-time high of about $8 a bushel.
When corn and soybean prices came down, cattle prices went up.
But within the past year, cattle prices also have taken a downturn.
Rent, chemicals, fertilizer, fuel, used machinery and seed have begun to edge down, but they remain high compared with the dive that row crop prices took.
Historically, it takes five years for input prices to adjust to drops in crop prices, according to one survey from Ohio State University.
Conventional row crop farming with its high input and startup costs isn't for everyone.
Equipment to work and harvest the land costs hundreds of thousands of dollars. The price tag for a new Case IH combine, for example, runs $330,000 to $500,000. Center pivot-irrigated cropland in eastern Nebraska was valued at $9,480 an acre on average as of February, according to the most recent Farm Real Estate Market Survey released by the University of Nebraska-Lincoln.
Many young farmers are gravitating toward less cash-intensive alternatives like organic products, which have lower input costs and sell at a premium.
Another option is to sell produce direct to consumers through farmers markets and community-supported agriculture clubs, commonly known as a CSA, in which members pay into the farm and receive a share of the harvest in return.
Interest in those alternatives, which are less affected by the commodity markets, is growing, said Lindsey Lusher Shute, who co-founded the New York-based National Young Farmers Coalition and is a leading advocate for independent and sustainable farms.
"They are selling direct to consumers so they're getting the best price," she said. "Often, they're starting with vegetable operations because vegetable operations are much more scalable than doing grain commodities, dairy or even in some cases livestock.
"Being able to access thousands of acres for a commodity or to build a dairy or to have enough pasture for a livestock operation is really challenging and capital intensive. The young people we're working with, very few of them are in a position, unless they are inheriting a land, to pursue those types of operations."
But those operations come with their own challenges and could face downward price pressure as more competition emerges.
Organic corn, for example, was selling for $14 a bushel a few years ago and now is going for closer to $9, Lubben noted.
"It's facing competitive pressure just like every agricultural product eventually faces."
Malinda and Greg Villwok say they're not giving up.
But they are adjusting.
"I've never thought about quitting," said Malinda. "You get attached to everything. You're working the same piece of ground your grandparents did and their parents before them."
Greg agrees. "It's not an option to quit. This is what we do."
While they're waiting for profit margins to rebound, Malinda and Greg are looking at every expense and re-evaluating their business and household budgets. They've canceled an extra health insurance policy and are trying to go a year without updating equipment.
"If we're spending money on it, we're making sure it's making money or it's a really important thing," said Malinda, who has gotten a second job as a representative for an online machinery auction company, bigiron.com.
They hope to one day pass the farm to their own children, Addison, 15, and Cadein, 13 -- if the kids want it.
"We're keeping things going for them, too, so they can decide if they want to farm. I hope they do," Malinda said.
The kids already have 14 head of cattle between them, and Addison plans to raise Christmas trees, pumpkins and sweet corn after high school.
Greg and Malinda have been active in the Nebraska Farm Bureau Federation, where they have found support and often meet with other young farmers.
"With these tough times, it's nice to be involved with an organization to help us navigate these waters that we're in," Greg said.