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HOWARD HOARD: It looks pretty good. Outside of the mines, even if the mine doesn't start up, it looks pretty good. It won't be nothing like when the mines were going big wages and all that. But I think we'll make out all right.

KEN BAUMAN: Ever since I was real small I always told my parents, I think, when I get big, I'm going to move to Northern Minnesota and be a trapper. Well, I don't know if I'll be a trapper or not, but, yeah, I can pretty much visualize Lori and myself as growing old here, as living here the rest of our lives, as being able to give this land to our kids, maybe.

RON SCHMIDT: In 20 years from now, I may be working for the guy that farms the whole township. I'll still be here in the country 20 years from now. I may be working for somebody else, but I'll be on the farm.

CAROLYN ALLEN: The worst possible scenario I could offer is that we become a further south suburb of Minneapolis. [CHUCKLES] And that's a fear. And it's a legitimate fear as far as who wants it to happen. Nobody. You've got to have the small town, the small community.

RACHEL REABE: Rural Minnesotans struggling with change, change that threatens their ability to live where they want, how they want. The forces behind the change are different in each region of the state. In this program, we'll visit four distinct rural Minnesotas-- the Northeast with its mining and logging, the northern lakes vacation area, the farm country of the southwest and west, and the southeast, the state's emerging industrial belt.

Experts say the population of rural Minnesota will continue to decline at a slow rate, just as it has for the past 50 years. We'll meet people all over rural Minnesota who plan to stay where they are. We'll hear how they propose to make a go of it in their home towns and the difficult odds some of them face "Against the Grain."

[LIGHT MUSIC]

The city of Babbitt sits in an isolated clearing on the northeastern edge of Minnesota's iron range. Duluth is 65 miles straight south, the Canadian border is half that distance north. This is a relatively young town. The trees lining residential streets are mostly slim and short, but it's a town with a volatile history. If the reserve mining company hadn't needed men to staff its operation here in the 1950s, there would be no Babbitt. Now, instead, there is no reserve mining.

After the reserve shut down two years ago put 85% of Babbitt's labor force out of work, the exodus of residents emptied two of the town's three schools. One of them now holds offices, a library, and this senior citizen center. On a wintry afternoon, a dozen men cluster around several pool tables. They range in age from 55 to 75, all of them used to work for reserve. Howard Hoard was laid off during a temporary closing in 1983.

HOWARD HOARD: I'm on pension, I'm on Medicare, plus my retirement from reserve, which amounts to $450 a month. That's not very much. I think we got shafted pretty good. The great Armco, they're not as great as people think they are.

RACHEL REABE: Armco Steel was a co-owner of reserve mining before the shutdown. While most of the working age miners are gone from Babbitt now, Hoard and many others who were nearing retirement have stayed. They've stayed because they like it here. A lot of them have been around since the town was started in 1951. And while the town has shrunk from 3,000 residents to 2,000 since the 1970 census, those who remain have redoubled their efforts to keep Babbitt afloat.

Mayor Don Cole works with a local development group, which makes small business loans to high risk clients.

DON COLE: We've made 23, I think is the right number, loans. Our smallest being $500, the biggest being $10,500. We made all those loans to people who could not get money out of bank or financial institution. But we knew the people. We have one that's gone bankrupt on us, unfortunately. But the bankers tell us you did better than we do. And so I'm told that we made 50 jobs out of that, which I think is quite impressive with such a small amount of money.

RACHEL REABE: At the Kasson pool table plant on the edge of Babbitt, a bandsaw operator bevels clear hard maple boards into bumper rails for billiards. Kasson started up about four and a half years ago with one of those small development loans. Now the company is the second largest manufacturer of home pool tables in the country. Founder Dave Kasper says 1987 brought more sales and production than anyone expected.

DAVE KASPER: 1987 projections were just under a thousand. And so far this year, we've already sold over 3,500.

RACHEL REABE: That rapid growth, Kasper says, allowed the company to start bringing in large truckloads of raw materials, which meant a discount in shipping costs and bigger profits. Kasson employs 11 full time workers at present, and that number may increase soon.

DAVE KASPER: We hope to grow. We'll, we've grown over 400% this year. But we like to think that, maybe next year, we can grow another 25%. The market is real good right now. All the manufacturers are running three to four weeks late on deliveries, which we are. And hopefully, it'll stay there.

RACHEL REABE: Pool tables aren't the only success story in Babbitt. Since the reserve shut down, the city has landed Tire Cycle, a company that takes waste tires and reduces them to a rubber base easily used in manufacturing. Another new business, Whirl Air Incorporated, produces exercise mats and similar products using rubber from Tire Cycle just down the road.

There's talk in town that several larger firms, a furniture company and an outfit that rebuilds locomotive engines, may decide to locate in Babbitt. And a recent study by a consulting firm suggested it would be profitable to reopen reserve mining on a limited scale. Still, such options are mostly talk. At least, so far.

Former reserve worker Howard Hoard displays a knock-on-wood optimism that is common in Babbitt, the hope that a mining town can survive without a mine.

HOWARD HOARD: That's pretty good. Outside of the mines, even if the mine doesn't start up, we've got this Tire Cycle out here, and Whirl Air Rubber, and there's a couple of computer outfits that are talking about coming in. It won't be nothing like when the mines were going big wages and all that. But I think we'll make out all right, I think.

RACHEL REABE: It's about a 20 minute drive from Babbitt, north to Ely on Highway 21. An observant out-of-towner driving this route will see an occasional eagle, possibly a moose or mink along the road, and a million pine trees that seem taller and denser as the highway continues north.

Ely is a town built on several hills, with streets one could sled down in winter. In fact, sledding is important here. This is the home of Arctic adventurer Will Steger who led the 1986 expedition to the North Pole.

[MACHINE WHIRRING]

In the back room of a modest shop off Main Street, a pair of Eskimo-style mukluks take shape on Nancy Schwartz's sewing machine. The machine is industrial strength. The heavy elk hide soles and uppers make for hard going. The shop belongs to Patti Steger who learned to make mukluks from Indians in Northern Canada while on expedition with her former husband.

PATTI STEGER: You want to always have flexibility in your footwear. And the mukluks are completely flexible. They don't inhibit your circulation. The reason that you buy your name brand winter boots in a size too big is so you can wiggle your toes. So with a mukluk, you don't have that problem. You can get your size and wear them just comfortably that way.

RACHEL REABE: Sneakers mukluks have gained a sort of notoriety around Ely. Local sportsmen and loggers have taken to wearing them in the woods. And fishermen say they can spend a whole day out on the ice without getting cold. Patti Steger will also be making the mukluks for Will Steger's upcoming Antarctica expedition. And that kind of word gets around. Her company, Steger Designs, has been approached by a number of exclusive stores who want to market her mukluks.

PATTI STEGER: I'll explain to them, I cannot guarantee you delivery, and I cannot take anybody on until I can guarantee delivery. We'd like to keep it in perspective. But I do want to grow. I want to see the company grow steadily and stably. I don't want to jump off the deep-end like some businesses do.

RACHEL REABE: While Steger hopes her company will eventually become a large employer, she says Ely's economy has improved in recent years because of its entrepreneurial diversity. The surrounding wilderness, she says, attracts a breed of independent and creative business minds which are a needed supplement to the region's existing industries.

On the southwest edge of the range, timber is dominant. Leonard Hill is cutting Aspen today in the woods 10 miles south of Grand Rapids. He's quick and careful about his work. His heavy chainsaw carves a neat wedge about knee-high in one side of a tree, then rips a deep slice into the other side. There's only one direction the tree can fall.

Just 100 or so yards through the woods, Leonard's brother Dwayne is putting the felled trees in order, first stripping off branches with a chainsaw, then skidding the logs into stacks the size of boxcars.

[MACHINES WHIRRING]

The two brothers are their own operation. Leonard Hill says clearing the forest from this 27 acre plot will provide them work for the rest of the winter.

LEONARD HILL: In one day, Dwayne and I are working together on a saw, we can possibly cut and limb six cord balsam to seven cord a day. And that's ready for the truck. When we got the skidder and we don't have to use a saw, we can do 12 to 15 cord a day, maybe a little better.

RACHEL REABE: Like many of the region's thousand-plus logging outfits, the Hill brothers shipped their wood to the Blandin paper mill in Grand Rapids. Here, the logs are chopped into pulp, which is mulled with other ingredients and rolled into paper, mostly the glossy type one sees in magazines. If you've ever picked up a copy of Sports Illustrated or an Eddie Bauer catalog, you've probably handled Blandin paper. Blandin is big, and getting bigger.

ED ZABINSKI: The expansion, which began here at the paper company in August will add 80% to our current production capacity.

RACHEL REABE: Ed Zabinski is manager of corporate communications and public affairs for Blandin paper.

ED ZABINSKI: We'll go from making approximately 280,000 tons of paper per year now to about 500,000 tons of paper after the expansion starts up in late 1989. So this substantial increase in production capacity will mean that we will consume a lot more wood. Wood that comes primarily from within a 50 to 70 mile radius of Grand Rapids.

RACHEL REABE: The modernization of Blandin's papermaking operation will also make about 40 jobs at the plant obsolete. But Zabinski says at least a hundred additional logging jobs will be supported by the increased need for wood. There's also the matter of the modernization process itself.

ED ZABINSKI: The construction phase of the project, which, essentially, we're in now and will last for another two years, will involve at peak 800 to 900 employees. And we'll have on an average, I suppose, about 400 to 500 employees during that 18 to 22 month period. And those people will be hired from this region primarily.

RACHEL REABE: Back in the woods, Dwayne and Leonard Hill are taking a coffee break in the small green fishing shack they've dragged through the trees. A tiny fire in the stove makes it warm enough for bare hands. Dwayne, the older of the two, says he's glad about the Blandin expansion. He'd like to take on a third man. At the same time, he's cautious about predicting growth in the timber industry.

DWAYNE HILL: A lot of guys won't go into it because the money isn't there, if you follow me. A man working for the mines isn't going to go work for a lager for half of what he was getting in the mines and have to work twice as hard.

RACHEL REABE: What the Hill brothers, and most other northeast Minnesotans agree on, is that the economic base of the region must remain in the mines. A decade ago, taconite was reaching its peak. Some 15,000 men and women across the range were pulling shifts, collecting large paychecks, living on the boom.

Today, only 4,800 miners remain, working in streamlined operations that seem to be slowly regaining ground. Al Zdon is managing editor of the Hibbing Tribune and a longtime range observer. He says diversity is necessary for a healthy economy, but mining is still the heart of the range.

AL ZDON: Just for instance, we have an extremely successful electronics company called Hibbing Electronics. It employs about 400 people, and those 400 people earn about $6, $7, $8 an hour. Right on the edge of our town, we have Hibbing Taconite, one of the six taconite mills still running on the range. It employs about 800 people at about $27 an hour. I think you can see the difference.

RACHEL REABE: Zdon is one of a growing number of rangers who are beginning to look to the mines for more than taconite. At the Department of Natural Resources minerals division in Hibbing, a search for treasure is underway.

[BANGING]

Geologist Hank Dahlberg stands at a bench in a brightly lit room, splitting apart what appear to be tubes of rock. The DNR has a huge library of drill cores here, specimens of stone from experimental drill holes all over the northeast. And Dahlberg and his colleagues are taking a new look at this old rock.

HANK DAHLBERG: We realize now that where you find iron ore, there is a good chance to find gold, or silver, or cobalt. And in other places where nickel and copper is known to occur in certain rock types, we know there is platinum and palladium. And with that in the back of our mind, we started to study these drill cores again, but now for these specific minerals. And we analyze them, and we started to find these metals.

RACHEL REABE: As with more traditional treasure hunts, this one depends on a map. Actually, a number of maps. Dahlberg points to one that shows where a series of experimental holes were drilled by a company looking for nickel in the 1960s. He's encouraged, he says, by the fact that valuable minerals are showing up in drill cores from more than a single site.

HANK DAHLBERG: That is important, that you can prove that the area, as a whole, has potential, that it is not one isolated accidental occurrence because that will not make a mine. You need enough material that you can mine. It is a matter, indeed, of beginning somewhere, and then time will show that you are in the right area.

And because just across the border, they're finding all these goodies in Canada, we have no reason to believe that gold has been so [LAUGHING] distributed the wells so unevenly across the border.

RACHEL REABE: Canada's success notwithstanding, exploitation of any new minerals in Minnesota is at least a few years away. And when and if it comes, will almost certainly never approach the level of production or employment found in the taconite industry.

DNR minerals operations manager Roger Johnson quotes a study showing that taconite could be mined at current levels for another 150 to 200 years if the demand is there and if the range can be competitive.

ROGER JOHNSON: We feel taconite will continue to be mined. Minnesota still produces at least 2/3 of the domestic supply. We have the availability. We got the capital expenditures in the plants. We've got the labor. But it's a global issue, and it's tied strictly to the steel industry. And what happens in the steel industry is going to obviously affect the iron ore industry.

AL ZDON: People come up to me and say, what's the future of the iron range? Well, our future is iron mining.

RACHEL REABE: Hibbing Tribune editor, Al Zdon.

AL ZDON: There are still six mines operating, and there are still 5,000 people employed. And those 5,000 people still earn about the highest blue collar wage being paid anywhere in the country. They're at the top of the steelworkers scale. So that's a real nice base upon which to base the rest of your economy.

[LIGHT MUSIC]

KERMIT BJERKE: I and some other young fellows would go to the Park Rapids area, and we would spend one week each summer. We started going to a resort that I got to know the fellow real well, and you kind of idolize this guy. That's what I want to do later in life. There's the thing for me, my little thing. And I told Mary before we were married that someday, we were going to have a resort. And, of course, she just laughed about that, and she says no way. And we're here. [CHUCKLES]

RACHEL REABE: Kermit and Mary Bjerke came north 17 years ago with their five children to take over a small resort. They made a decision to leave their dairy farm in South Dakota for a new life at Wolf Lake Resort, east of Bemidji. The Bjerkes built a new lodge and added a swimming pool and several cabins to make Wolf Lake Resort into one of the larger mom-and-pop facilities in the area.

Glossy color brochure of the resort is full of summer scenes, grinning families with stringers heavy with fish, a young mother helping a toddler learn to float, three beauties sunning on a diving raft. The Bjerkes work hard but say the resort business isn't going to make anyone rich. Every bit of money made goes right back into keeping up with the changing tastes of tourists.

MARY BJERKE: They definitely want more and more nicer facilities. Like the newer cabins that we put in are completely remodeled. They're almost booked for all of next year. The ones where we have openings are the smaller older units that the people just don't want anymore.

KERMIT BJERKE: Well, pretty soon, we're going to have to have dishwashers in all of the units. I mean, people want it that way. It's not the old fishing camp type thing that people are still running with fishing camps and thinking it's a modern up-to-date resort. And that was for back in the '50s and '60s. We're in a different era now.

MARY BJERKE: People aren't content to-- for example, double beds are no longer all right. Brothers don't sleep with each other. Sisters don't sleep with each other. Their standard of living has just gotten to be so much more. Their expectations are so much higher.

RACHEL REABE: The Bjerkes, who head the Bemidji Area Resort association, say resorters who aren't willing to upgrade their resorts are going under. 10 years ago, 65 resorts belonged to the local chamber. Now, there are about 40.

DONNA WARD: We see them struggling. And then, eventually, they're gone. There was 13 resorts on this lake, I don't know how many years ago, 20 years ago. And we're down to three now. And we are the only active one. The other two just-- they don't advertise. It's just mainly for whoever drops in, or family, relatives, so forth.

GARY WARD: But people's been coming here for the last 30 years. And both these people retired. One of this one down here, what's he, 70 something?

DONNA WARD: So really, we don't have anyone on the lake to help promote the lake.

GARY WARD: No.

DONNA WARD: See, it's us all by ourselves.

RACHEL REABE: Gary and Donna Ward run Rainbow Resort on Turtle River Lake, 10 miles north of Bemidji. A short gravel driveway leads to the new mobile home where the couple lives. The older cabins that make up the resort are scattered down the hill below them, most within shouting distance of the lake. Donna works in town at a grocery store to supplement their seasonal resort income.

GARY WARD: We've got eight cabins, nine, if I would get the other one finished. We got a nice lodge-- bait, gas, some food, it's just a good place to relax. Good people.

DONNA WARD: We don't have any hired help. We do it all ourselves. So we deliberately try to keep it within our own means. So I think--

RACHEL REABE: The Wards sold their resort once but got it back when the new owners defaulted on their payments. Donna said they had to work hard to get the business built back up, and now they're going to hold on to it.

DONNA WARD: Once the resort is paid for, then this payment we've been putting out will be income. And we will be at the age then we can slow down if we don't want to rent out all these cabins, or work as hard. That's our plans is to use this resort as a retirement. And it will take care of us.

GARY WARD: I like to go fishing. I don't get to go fishing very much.

DONNA WARD: [LAUGHS]

GARY WARD: I figured in 10 years, I'm gone. So--

RACHEL REABE: The Bjerkes and the Wards run two of Minnesota's 1,200 resorts. Every year, tourism officials estimate another 35 go out of business. Yet tourism continues to grow as an industry. A survey taken by the state tourism office indicated that 1987 was the best year ever, especially for the large upscale resorts.

Joe [? Eggie ?] who until recently directed the State Office of Tourism in Brainerd, says the industry is changing, the same way retail sales are changing.

JOE: We have seen retail sales actually go up, but it's gone to the larger shopping centers, the larger communities, the small communities and the small shops are dying or dead. And you're going to see, I believe, the same thing happen in tourism where those larger communities, those larger facilities are going to continue to grow and the mom-and-pop operations continue to decline.

LODGE PERSONNEL: Good afternoon, Cragun's Lodge and Conference Center. May I help you?

RACHEL REABE: It's been another big year at Cragun's Lodge and Conference Center on Gull Lake outside of Brainerd. Owner Dutch Cragun says it just keeps getting better.

DUTCH CRAGUN: It's hard to keep your enthusiasm down when you're on a roll. And we are on a roll. And in any way you measure it, our guests seem happier with it. Our gross is higher. The staffing is better. The people working for us are happier and better trained. Gosh, it's hard to turn off the water faucet, the spigot, when everything's going great.

RACHEL REABE: Cragun grew up in the resort business. His father bought the property on the south end of Gull Lake in 1941. Cragun says it was a family operation.

DUTCH CRAGUN: I was a ripe old eight years of age. I was in charge of worms, minnows, and all the frogs I could catch. I had the bait department.

RACHEL REABE: When Dutch Cragun took over the resort in 1957, it had a dozen cottages and a six-unit motel. He's been building and expanding ever since. The year-round convention center which sprawls along a half mile of pricey Gull Lake shoreline has 220 rooms, most with fireplace, wet bar, and balcony. Work is just being completed on a sports dome that will offer indoor volleyball, basketball, tennis, and a running track for guests.

45,000 people stayed at Cragun's Lodge last year. Cragun says most of them were there for a convention or meeting.

DUTCH CRAGUN: The conferees who stay further than an easy-driving distance from the home, they're not bothered by their secretaries to come on back and slip back the office, do a little work, or handle a little problem. So we found a couple of hours drive, three hours drive from the Twin Cities is a real advantage, because it isolates people from their environment.

So we sell that idea, we hope, successfully to groups that you really need to be away from the Metropolitan area to have a successful conference.

RACHEL REABE: Minnesota's Northwoods has traditionally relied on its God-given attributes to attract visitors-- lakes, trees, loons, fish. But there's a growing sense that in today's high stakes, high profile tourism competition, nature isn't enough.

LORELEI KRAFT: What everyone up here needs to realize is that it is the multitude of things that's going to bring people in in the future, rather than the lakes and the trees like we had before. Everybody has lakes and trees. Wisconsin has lakes and trees. Michigan has lakes and trees.

RACHEL REABE: Lorelei Kraft is one of a dozen founding mothers of a homegrown, homemade attraction in the Park Rapids area that has quickly become one of Minnesota's big tourist destinations.

LORELEI KRAFT: Everybody said we were totally crazy. And we told the bank we'd get maybe 20,000 people a year. Well, the result of it is, we get over 100,000 people a year. We have 90 people employed. We have about 300 people that sell their handcrafts at the village of the Smoky Hills. And we have really put a shot in the arm for tourism. And tourism was dying around here for lack of a major attraction.

RACHEL REABE: The village of the Smoky Hills is tucked in the woods 10 miles west of Park Rapids. Although it's just a step away from the highway, a daydreaming motorist who overlooked the small sign could easily go right by. Visitors pay an admission fee, and then spend more money inside the village at the shops, bakery, and restaurants. Last year, the village took in over $1 million and has now expanded to a retail shop in Detroit Lakes.

LORELEI KRAFT: We've gone from being those crazy women to being almost respectable in just three years, which is really great. They see what we have done for our poverty area, and we have done it without smokestacks and acid rain.

RACHEL REABE: Tour buses full of paying customers arrived last summer. The village of the Smoky Hills had another banner year with 110,000 visitors. Some of the people who spend their vacation in Northern Minnesota like it so much, they move here. The 1980 census showed a substantial population increase for counties in North Central Minnesota.

RANDY CANTRELL: 33% growth rate in Hubbard County, 21% in Cass County, 19.8% in Crow Wing County, 17.5% in Aitkin County, 21% in Itasca County.

RACHEL REABE: University of Minnesota sociologist Randy Cantrell said most of the newcomers were retirees, moving north to turn lake cabins into year-round homes, or buying property in areas where they'd vacationed. Harry and Pat Moore are out in their workshop putting the finishing touches on several walnut music boxes. They're making them for their granddaughters.

HARRY MOORE: We'll be installing the movements and sewing this off for a lid. You can lift it up and--

RACHEL REABE: The Moores left their Coon Rapids home behind two years ago to retire to their lake place. Perched high above Kabekona Lake, their cedar-sided home is about a half hour southeast of Bemidji. It's a popular spot for area birds. Feeders of various shapes and sizes surround the house. A satellite dish stands off to one side. Harry likes his football.

A concrete sidewalk leads up to the house. It's decorated with the handprints and footprints of the Moore's children and grandchildren, a permanent gallery created in the wet cement. Harry and Pat say their days are full, working on their hobbies, studying conversational Spanish for an upcoming trip to Mexico, finishing off the inside of their house.

HARRY MOORE: The main response was you want to retire north, you're out of your mind. You'll never be able to handle the winters up there. It was a concern. But no longer. I don't have to go anywhere if I don't want to. I just throw another log on the fire, and we do whatever we want to do around here.

PAT MOORE: We liked it more and more and more as we came up. We didn't want to stay in the cities. We knew that. The busyness and we just love it up here.

RACHEL REABE: Sociologists say they don't think retirees will continue to move to Northern Minnesota in the numbers they did in the '70s. Like most of rural Minnesota, the northern part of the state is expected to continue losing population slowly.

KEN BAUMAN: We've been considering putting our house right back in here. We have a 200-foot setback from the river, which is a state requirement. We have a big swamp in the center of the property or a piece of lowland, so we want to stay away from that as far as our septic system and everything goes. But if we can fit it in between the river here with our 200- foot setback and the lowland over there, we like to put our house here.

LORI BAUMAN: Just clear enough trees out, to set the house in between there and have enough space for a garden and a little yard and that'll be about it.

RACHEL REABE: Lori and Ken Bauman are surveying their 34-acre tract of land on the Big Fork River, west of International Falls. Koochiching County has agreed to turn over the land to the couple in 10 years if they'll move up here, build a house, and pay taxes. It's all part of the Bidstead program, an effort to populate the county and reduce the amount of tax forfeited land, patterned after the original Homestead Act. The Baumans are the first couple to be accepted into the program.

LEE HERVEY: We're looking for people that want to come here and want to make their life here, and they want to contribute to our economies. And in return, we have a lot of land.

RACHEL REABE: Lee and Gloria Hervey and a group of their neighbors came up with the Bidstead concept. They were looking for a solution to declining enrolments at their rural elementary school.

LEE HERVEY: We like it up here. But yet, if we don't find a few neighbors to share it with us, we're not going to have the tax base to plow our roads. We're not going to have the tax base to keep the schools open, so on and so forth. And there again, we'll have to leave also if we don't get a few people to share it with us.

RACHEL REABE: Jobs are hard to find in this remote northern Minnesota County that borders Canada. The community has only partially recovered from a Boise Cascade plant shut down three years ago that put 500 people out of work.

LORI BAUMAN: Is this back far enough? Nice and quiet if you listen. You can't hear anything. This is another reason why we like it. Just-- there's nothing. It's just so quiet and peaceful. One of the things we were looking forward to.

KEN BAUMAN: It's far enough off the main road to be out of the way, but it's not an inconvenient distance.

RACHEL REABE: Ken and Lori Bauman are in their mid 20s. They've saved enough money to build a small house without going into debt. They hope to start work on it this summer. Ken is a machinist and contracts to make everything from metal casting to wooden Christmas toys. He says he and Lori can make things in their shop at home and ship them out, where he might open a custom machine shop here.

KEN BAUMAN: So yeah, I can pretty much visualize Lori and myself as growing old here, as living here the rest of our lives, as being able to give this land to our kids maybe.

[UPBEAT MUSIC]

[DOOR SCREECHING]

DON SCHMIDT: More. John Deere makes-- I'll go up open the door-- two combines bigger than this. This happens to be a size-- a size that handles our operation.

RACHEL REABE: Don Schmidt surveys the machinery on his farm near Milroy, a few miles East of Marshall in southwestern Minnesota. He owns and operates the farm together with his twin brother, Ron. They grow corn and soybeans on their own 400 acres and on 560 acres that they rent from neighbors. The Schmidts who are 33 bought this farm from their father in 1974.

DON SCHMIDT: Our biggest investment is the combine. And we bought that in what-- 1980-- 1980. And so you're looking at a sizable investment. At that time, I think, you are looking at roughly what $60,000. So that's a sizable investment when we talk about living off depreciation when five or six years from now, when we have to replace that combine and it's costing $80,000 to $100,000, that's where you run back-- then you're back into a debt load you can't handle anymore. So--

RACHEL REABE: Most of the Schmidt's machinery is at least 10 years old, some much older. Don says they do a lot of their own repair work and put off purchases of new equipment for as long as they can.

DON SCHMIDT: Looking around, you can see we wouldn't make the front page of successful farming with our shop or machine shed, but it gets by. And we kind of stay that way. We're conservative by nature, I think. Don and Ron Schmidt, like many Minnesota farmers, had a good year in 1987. Grain prices were up and crop yields were the best ever. Still, the brothers say fully a third of their farm income the last couple of years has come from government price support payments. Those payments are scheduled for gradual cuts the next three years. And Ron Schmidt says that makes him nervous.

RON SCHMIDT: You hate to say it. Everybody wants a government out of agriculture, but right now, that's what's supporting you. If they cut their programs these next few years and the prices don't go up like they're supposed to make up the difference, you're going to be back probably in the shape you were three years ago. A lot of farmers are going to be in trouble again, including it's going to be tough on us too.

RACHEL REABE: The Schmidt's farm in the heart of Minnesota's ag belt. Agriculture is the state's number one industry. And it's important in most parts of the state. But in the ag belt, which encompasses southwestern Minnesota and moves north through the Red River Valley, farming is not just a major industry. It's practically the only industry.

The farm crisis has left a permanent mark here. The landscape still consists mainly of contoured fields dotted with farmhouses and their protective groves of trees. Now many of those farmhouses are abandoned. Farms are fewer and larger.

It's become next to impossible for modest scale farmers like the Schmidt's to survive on their farm income alone. Ron Schmidt says he and his brother each draw just $1,000 a month from the farm operation for their family's living expenses. That isn't enough.

RON SCHMIDT: My wife's got a job in town. And Donny's doesn't have a job in town, but she does bake-- and does out-- bake cakes and stuff on the outside for an outside income. But if you look on the average young farmer our age that's farming, either the wife is really active in the farm operation and in the hogs and really into it or the-- his wife has a job in town. And that never used to be in the past either. And I foresee that continuing.

LOIS SCHMIDT: I'm working in town, yes. But we think of our career as in farming. And we see no other future for us. And it's with that gumption and determination that we're still around and we're going to stay around. I don't think that--

RACHEL REABE: Lois Schmidt, Ron's wife, works full time with the Countryside Council, a rural citizen's group based in Marshall. She says spirits are higher in Southwestern Minnesota than they were a couple of years ago, partly because farmers incomes are up, but also, she says, because expectations are down.

LOIS SCHMIDT: We've accepted that things aren't going to be as good as they were in the late '70s, that we aren't going to be having-- enjoying the kind of incomes we were then. And I've seen that a lot-- many families have tightened their budgets and their resources. And there's-- I think there's an optimism that we're going to make it. We probably don't need all the luxuries that we could easily get used to.

ROGER HAGLUND: Yeah, I'm Roger Haglund and farm northeast of Moorhead. With farm approximately 1,900 acres. We raise sugar beets, wheat, and barley. Well, I've lived here all my life since 1934. My folks moved on this farm when I was two months old.

RACHEL REABE: In the Red River Valley, farming is just as important as in Southwestern Minnesota. But here, the dominant crops are sugar beets, wheat, barley, and sunflowers. And the flat land allows larger machinery to cover more ground more efficiently, which means bigger farms. Roger Haglund's 1,900-acre farm is enormous by Southern Minnesota's standards, but not here.

ROGER HAGLUND: Probably slightly above average. There are a lot of farms that are larger. Probably the largest that I would know of would be around 10,000 acres.

RACHEL REABE: Haglund is one of 1,800 sugar beet growers who collectively own American Crystal Sugar company of Moorhead. Sugar beets have been a profitable crop in recent years. The prices that farmers like Haglund get are propped up by government quotas and tariffs placed on imported sugar.

Haglund plants beats on just a third of his land, but the crop brings in 2/3 of his income. Still, driving around his farm in an eight-year-old pickup, Haglund says sugar is not making him rich if you take into account his investments in machinery and in the American Crystal co-op.

ROGER HAGLUND: It does show a fairly good gross return. But when you get down to the bottom line, it's not all that great.

RACHEL REABE: But Haglund does admit he's in a solid financial position. His appears to be a farm of the future, large, efficient, and profitable.

ROGER HAGLUND: Our overall situation is fairly secure. I would say we are quite secure barring a weather disaster. I feel quite comfortable that we'll be able to continue. And as times get better, it's going to improve.

ROGER KINGSTROM: So overall, we had a real good year. And it's-- I don't think we'll match it next year. It's-- as I visit with people, I say what do we do for an encore next year? And everybody kind of chuckles because we don't know what we're going to do to match what we did last year. Mother Nature has a lot to do with how good our yields are going to be. We can go out and apply the best management that we know how, and then we're at the mercy of the weather.

RACHEL REABE: Roger Kingstrom raises hogs corn and soybeans on a 280 acre farm near Olivia in Renville County about 100 miles West of the Twin Cities

ROGER KINGSTROM: I came home-- I grew up on this farm. And I spent 10 years in business after I got out of college and I came home in 1981. And so we're in our-- this is-- we went through our seventh harvest this fall. And it's a lot of fun. I may not have chose the best time to come home farming, but that's as good as any other business.

RACHEL REABE: Kingstrom says 1987 was the best he's had in his seven years of farming, thanks largely to the high price of hogs. His hogs brought as much as $62 per 100 pounds last year. But with more farmers raising more hogs, to get in on the good profits, the price has dropped. And could fall below $40 in 1988.

ROGER KINGSTROM: That is a big swing, but again, that's the nature of the hog business. And it's been that way. And I guess I think it'll continue to be that way for a long time to come.

RACHEL REABE: Kingstrom, who is 37, is a mid-scale farmer who's confident that he'll be around for a long time. Many of the farmers who've gone bankrupt in recent years are those who expanded their operations in the late '70s and early '80s when land values and crop prices were soaring with no end in sight. When the bottom fell out of land and commodity prices, those farmers were crushed under the weight of their debts. An estimated one third of Minnesota farmers are still at risk. Kingstrom never got into a serious debt problem.

ROGER KINGSTROM: I was conservative from the start. I kind of had the attitude of if I can't pay for it with cash, I don't need it.

RACHEL REABE: Kingstrom is helped by his side job as a seed salesman, which he says brings in about a fourth of his income. He says the shift toward large and corporate farms and the death of modest sized farms like his is not inevitable.

ROGER KINGSTROM: We, in America, believe that bigger is better. And I don't think that's really true. And I think some of that's going to come back and haunt us. I think there are places in agriculture where that may come back to haunt us. But a single individual running his own farming operation-- if he can become efficient at what he does, he's there and he can stay there. And nobody can push him around.

RACHEL REABE: Roger Kingstrom farms on some of the best agricultural land in the country. Renville County is blessed with rich soil and more consistent rainfall than farmers get just an hour west of here. Quite rightly, most of the county's economy is tied to farming.

TOM BOOKER: There's very little that isn't. I'm saying, I'll say 80%, maybe even more than that. We normally gross around $200 million a year in gross agricultural sales from Renville-- from Renville County.

RACHEL REABE: Tom Booker is the county's agricultural extension agent in Olivia. He says farm incomes in the county were the highest in years in 1987. But Booker says it's not time to celebrate with crop prices and government payments both expected to fall.

TOM BOOKER: '88, we should probably still hang in there. In '89, we could be looking at another crunch, another crisis. What we are recommending right now-- if the farmer had a profitable year in '87 here, use that to pay down debt. Don't expand. Use it to pay down debt and to get the interest down, so that when '89 comes, you're better equipped to handle the interest. Won't be such a big factor in the operating expenses.

RACHEL REABE: Despite the good farming year in 1987, clearly all is not well in Renville County. Unofficial census data says more than 1,000 people, or about 5% of the county's population, have moved away since 1980. Only Olivia, the county seat, has a healthy retail base. By all accounts, the other eight towns in the county are struggling. Their main streets are dying.

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Hector is a town of about 1,000 people in Eastern Renville County, 15 miles from Olivia. It's the home of two high tech companies, one that makes telephone components, and the other, a TV cable company. Together, the two companies employ more than 300 people here. That makes Hector a relative success story among farming communities. But Curt Sampson, who is CEO of both companies, Communication Systems and North American Communications, says the growth of industry in Hector has just kept the town's head above water.

CURT SAMPSON: Even with all of that activity in a town of 1,000, all we did was stay even or a little bit less in our population over the last three decades.

RACHEL REABE: Curt Sampson was born and raised in Hector. He bought the telephone parts company in 1970 so that the company and he and his family could stay in his home town.

CURT SAMPSON: I do not like traffic. I think it's a huge waste of time to see all these people lined up in the freeways in the streets, just sitting there trying to get to work when it takes me a minute to get to work. And--

RACHEL REABE: Sampson's companies now earn revenues of about $50 million a year and pump millions into the area's economy. But Sampson says if you want to know about the real health of Hector's economy, look not at his companies but at the businesses that his companies have replaced.

CURT SAMPSON: Hardware, grocery, furniture, clothing, power company, local office, and an International Harvester dealership, and then there's one other building downtown, a relatively good sized building where we have a box factory. And that was the John Deere dealership. So there's six businesses that used to be retail businesses that are now buildings which we have operations in. So it kind of demonstrates that basically, I think those buildings would be empty because they were all vacant when we moved into them. So--

RACHEL REABE: The pattern is similar throughout Minnesota's ag belt. Fewer farmers buying less of everything and going to the larger county seats to buy what they do need. So smaller farming communities must scramble to create manufacturing jobs. A few, like Hector, succeed. Most do not.

PAUL GRUCHOW: It's puzzling to me how quickly a crisis of this kind can be declared to be all over. I realize that's the conventional wisdom. It is true.

RACHEL REABE: Paul Gruchow of Worthington is a writer on rural issues and former newspaper editor. He says what's being called by some a recovery in agriculture is like every farm recovery since World War II, that is not a true recovery.

PAUL GRUCHOW: I've used the analogy-- and I think it bears repeating-- of the man who falls under the wheels of a train and loses his right leg, and somehow miraculously survives. And the amputated stump somehow heals. And one day, he goes home from the hospital. And the doctors say, wonderful success, the man has recovered. And indeed he has recovered. But the sad and incontrovertible fact is that he is still nevertheless missing a leg.

RACHEL REABE: Barring some fundamental change in the economy, experts agree that in the coming decades, there will be fewer and fewer people in Western Minnesota, the state's ag belt. But those who've lived in the country for generations say they won't give up easily. Ron and Don Schmidt, twin brothers and farmers of Milroy.

RON SCHMIDT: Once you live on the farm and you start farming even a year or two and you get it into your blood, it's pretty hard to leave unless you have to. It'd be really tough for me to go to the city and get a job right now. You can do it, you'd adapt, but it's a different way of life. In 20 years from now, I may be working for the guy that farms the whole township. Instead of my neighbors, my seven neighbors here, there may be one big farmer, and myself and my six other neighbors will be working for him. Or it may be a big corporation. I'll still be here in the country 20 years from now. I may be working for somebody else, but I'll be on the farm.

[UPBEAT MUSIC]

[PAPER TEARING]

ALLYN ELLINGSON: We kind of do things the old fashioned way here, you see. That's eight-year-old cheddar that was made December 29th, 1979. We like to say it has character. You want a taste?

RACHEL REABE: Allyn Ellingson is the proprietor of the Zumbro Cheese Mart in Zumbrota, a community of 2,100 about a half an hour Northwest of Rochester on Highway 52. He's been running the tiny shop for 15 years. Most of what he sells comes from the cheese plant just a couple hundred yards down the road, the Mid-America Dairymen co-op.

ALLYN ELLINGSON: Zumbrota has had a cheese factory since I don't know when but way back. They've, over the years, developed a reputation for producing excellent cheese. And when I opened up, I inherited a lot of very fine customers that came just for the Zumbrota cheese. And there's some of them are still coming.

ROBERT HAWLEY: Yeah, this is the receiving area of the plant. All the milk comes here first.

RACHEL REABE: Robert Hawley is plant manager at the Mid-America co-op.

ROBERT HAWLEY: In Zumbrota, we have about 125 full time. And we also employ some part-time people. We not only make cheese at the plant, but we process the way we also dice cheese for pizza industry.

RACHEL REABE: The Mid-America plant uses more than a million pounds of milk every day. Most of it comes from Southeastern Minnesota dairy farms. To the extent that this part of the state has an indigenous industry, it is dairy. But a growing proportion of jobs in the area are in manufacturing and services. George Donohue is a rural sociologist at the University of Minnesota.

GEORGE DONOHUE: Southeast is probably the best-- second best developmental area in the state outside of the Twin Cities. And that's because it does have employment possibilities that are growing in an area such as Rochester. The other thing is it's the closest area to markets in the country. And traditionally, location has been very important in locating firms. You notice South of the Twin Cities is developing much better because of the airport and everything else South of the Twin Cities rather than North.

RACHEL REABE: In contrast to Southwestern Minnesota, the Southeast is gaining rather than losing population. The region is dotted with small cities boasting healthy and varied economies. Besides Rochester, there are towns like Mankato, Faribault, Northfield, Owatonna, Albert Lea, and Winona. It's these towns with populations of 15,000 to 50,000 that act as engines driving this area's economy.

They make the Southeast less dependent on swings in major industries like agriculture and mining. Its unemployment rates are consistently lower than other rural areas. Rural sociologist Randy Cantrell says it's these small cities that allow southeastern Minnesotans to stay close to home.

RANDY CANTRELL: The population moving out of the rural areas in those counties tends to gravitate to those cities rather than toward the Twin Cities, or at least not in the same numbers. Whereas if you're out in Nobles County or Rock County, and what's available to you is going to be the Twin Cities.

RACHEL REABE: In Winona County, people looking for jobs tend to gravitate to Winona. Tom Stark is President of Winona State University.

TOM STARK: It's little known that this little community of Winona is a national center for the manufacturing of composite materials.

RACHEL REABE: Winona State is currently planning a four-year engineering curriculum in advanced composites, which are plastics combined with fibrous components for strength. Stark says the University is trying to create a leading role for itself in the burgeoning composites industry.

TOM STARK: Composites are very much in demand in the space industry, in the airline industry, in recreation materials like canoes.

[MACHINE BUZZING]

MARK WALTERS: Just like the one you looked at outside, it's a solo, flatwater marathon racing canoe. It's made for one person and one person only, strictly racing.

RACHEL REABE: At the Winona Canoe Company, production manager Mark Walters says composite built canoes have advantages over conventional wood or aluminum boats.

MARK WALTERS: Being a high tech manufacturer, our biggest emphasis on the weight of a canoe we build sophisticated ultra lightweight canoes canoes ranging from 20 23 23 pounds up to 65 67 pounds so we have quite a variety of constructions and laminates to use. And our biggest thing is weight of a canoe.

RACHEL REABE: Winona Canoes began about a decade ago, producing an average of one boat every week. Now, the homegrown business employs 26 people, puts out 100 boats a week, and ships them to customers and dealers worldwide. Winona Canoes is one of the town's most visible users of composites, but it's just one of 10 Winona companies that use the materials, make them, or supply the composite industry. Chamber of Commerce officials say those companies employ nearly 2,000 people here. Winona State University President Tom Stark.

TOM STARK: We were in the Iron Age, and then Bronze Age. And we went into the Industrial Age, and we got into the Computer Age. And many people that I visit with say one of the ages that we're moving into right now is the age of the composites.

RACHEL REABE: Winona's aggressive effort to move into the future is characteristic of Southeastern Minnesota towns. Owatonna, which is 40 miles West of Rochester, has long been an entrepreneurial breeding ground. Owatonna's Chamber of Commerce President Ted Ringhofer.

TED RINGHOFER: There's over 40 industries in Owatonna that are national companies, 11 of which are doing business on an international basis. So for a community of 19,000 population, that's a pretty good feather in our hat.

RACHEL REABE: Owatonna's industrial park is filled with the manufacturing plants of thriving homegrown businesses, companies making products as diverse as violins, processed glass, fitness equipment, and class rings. Jerry Wenger is principal owner of Wenger Corporation, a musical equipment company that employs 230 Owatonnans. Wenger says his father started the business out of his basement following the lead of other local entrepreneurs.

JERRY WENGER: In a small town like Owatonna, you can walk down the street and see all these companies growing. And you see these people that are starting-- you say, these people really-- I don't know that they know any more than I do. Maybe I ought to think about this. Once you get over the fear of getting started and get on with it, it just starts to happen. And the main thing is getting the first step and getting going on whatever it is you want to do. And you see a better way of doing it and getting on with that. And in Owatonna, there is a lot less fear to do that.

RACHEL REABE: With the growth of Owatonna and other Southeastern Minnesota towns, experts now talk of the seven-county metro area eventually becoming a metro corridor, extending from Saint Cloud to Rochester. Owatonnans, for their part, seem uninterested in being part of that. Carolyn Allen is publisher of the local newspaper, The Owatonna People's Press.

CAROLYN ALLEN: The worst possible scenario I could offer is that we become the furthest South suburb of Minneapolis, which is probably highly unlikely. But I have heard that discussed as they move into Lakeville-- as the metro area moves into Lakeville and starts developing. It would then mean Northfield, then Faribault, then Owatonna. And that's a fear. And it's a legitimate fear as far as who wants it to happen. Nobody. You've got to have a small town, the small community.

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RACHEL REABE: "Against the Grain" was written and produced by the Main Street Radio team, Leif Enger, John Biewen, and Rachel Reabe. The engineer was Randy Johnson. Editorial assistance from Rich Dietman and Sara Meyer. I'm Rachel Reabe.

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