Farm bankruptcies on the rise
Illinois farmers hold their own as U.S. farm debt projected to hit record $416B
Farm bankruptcies are on the rise across the nation, although Illinois farmers are faring relatively well. (One Illinois/Ted Cox)
By Ted Cox
Farm bankruptcies are on the rise across the nation as farmers deal with President Trump’s trade wars and two straight years of tough weather.
Drawing on U.S. court data, the American Farm Bureau Federation released a report last week finding that, as of the end of September, Chapter 12 family-farm bankruptcies were up 24 percent from the previous 12-month period. Some 580 family farms filed to reorganize and repay their debts, the most since 676 in 2011 in the immediate wake of the Great Recession.
Illinois farmers fared relatively well. A dozen Illinois farms filed for protection, just one more than the previous year. But there were trouble signs all around.
Wisconsin had the most farm bankruptcies of any state, 48. Nebraska, Kansas, and Georgia all reported 37. Minnesota had 31, up seven from the previous year, and Iowa 24, up 10 from the previous year.
The Midwest had the most bankruptcy filings of any region, 255, but that was up just 13 percent from the previous year. Other regions saw fewer bankruptcies, but higher spikes, with filings up 74 percent in the Pacific Northwest, 65 percent in the West, comprising California and Nevada, and 31 percent in the Southeast.
The Farm Bureau projected 2019 farm income at $88 billion, the highest since $92 billion in 2014, but 29 percent below the record $137 billion posted in 2013.
The bureau also pointed to warning signs in that 40 percent of this year’s farm income, $33 billion, came in the form of Trump’s trade bailout payments, disaster assistance, insurance indemnities, and subsidies in the new Farm Bill. Former Labor Secretary Robert Reich tweeted: “Farm aid has now cost more than double the 2009 auto bailout.”
Trump himself said in Illinois last year that China had targeted American farmers for its retaliatory tariffs after Trump imposed tariffs to benefit the U.S. steel industry. So he handed out $12 billion in bailouts in what was termed the Farm Market Facilitation Program, and another $16 billion this year as the trade war persisted. The $28 billion total was about twice the amount handed out to U.S. automakers in 2009 to keep the industry afloat in the midst of the Great Recession.
A study this summer found that farm bailouts went to the largest farms, not smaller family farms. The Farm Bureau reported added that much of the farm bailout money “has yet to be fully received by farmers and ranchers.”
Chapter 12 was created for family farms in 1986 in the midst of the Reagan-era farm crisis, and basically paralleled Chapter 13 for reorganizing and repaying debt for individuals filing for bankruptcy.
“Chapter 12 farm bankruptcies continue to increase as farmers and ranchers struggle with a prolonged downturn in the farm economy that’s been made worse by unfair retaliatory tariffs on U.S. agriculture as well as two consecutive years of adverse planting, growing and harvesting conditions,” the Farm Bureau report concluded. “While filings remain well below the historical highs experienced in the 1980s, the trend is a concern. The support provided to farmers in 2018 and 2019 is expected to alleviate some of the financial stress; however, not all farmers will benefit from trade assistance, Farm Bill programs, crop insurance, or disaster aid. As a result, it could take some time for the financial relief to manifest in the farm bankruptcy trends. Chapter 12 bankruptcies in the third quarter of 2019 were down only slightly, 2 percent, from the previous quarter.”
The report found another warning sign in that farm debt was projected to hit a record $416 billion this year, $257 billion of that in land and $159 billion in other debt such as equipment, seeds, and livestock. “Put simply,” the report stated, “farmers are taking longer to service their debt — a trend made easier due to historically low interest rates.”