American farmers continue to suffer under shrinking markets and slumping prices, and according to a recent Wall Street Journal review, U.S. farmers are filing for Chapter 12 bankruptcy at a rate not seen since the Great Recession.
Bankruptcies in three regions covering major farm states last year rose to the highest level in at least 10 years. The Seventh Circuit Court of Appeals, which includes Illinois, Indiana and Wisconsin, had double the bankruptcies in 2018 compared with 2008. In the Eighth Circuit, which includes states from North Dakota to Arkansas, bankruptcies swelled 96%. The 10th Circuit, which covers Kansas and other states, last year had 59% more bankruptcies than a decade earlier.
The Journal said that U.S. Department of Agriculture data show that these states accounted for almost half of all farm products in 2017.
President Donald Trump’s ongoing trade wars, particularly with China and Mexico, have only served to worsen the situation for America’s farmers, who have suffered for several years as prices for corn, soybeans and other commodities fail to rise.
Prices for soybeans and hogs plummeted after those countries retaliated against U.S. steel and aluminum tariffs by imposing duties on U.S. products like oilseeds and pork, slashing shipments to big buyers.
Low milk prices are driving dairy farmers out of business in a market that’s also struggling with retaliatory tariffs on U.S. cheese from Mexico and China. Tariffs on U.S. pork have helped contribute to a record buildup in U.S. meat supplies, leading to lower prices for beef and chicken.
The effects have roiled farms both big and small, The Journal reported, and agribusinesses like Archer Daniels Midland Co. and Cargill Inc. are also feeling the pressure.
Nebraska farmer Kirk Duensing has been in the business for four decades and is all too familiar with market downturns — but this time, he is not so sure he will make it. Filing for bankkruptcy was his last resort, he told The Journal.
Mr. Duensing has managed to keep farming, hiring himself out to plant crops for other farmers for extra income and borrowing from an investment group at an interest rate twice as high as offered by traditional lenders. Despite selling some land and equipment, Mr. Duensing remains more than $1 million in debt.
“I’ve been through several dips in 40 years,” said Mr. Duensing. “This one here is gonna kick my butt.”
Duensing is far from alone: according to the USDA, “more than half of U.S. farm households lost money farming in recent years,” and the estimate for median farm income in the U.S. was negative $1,548 in 2018.
Chapter 12 bankruptcy, created during the 1980s farm crisis, allows distressed family farmers or fishermen to devise a plan to repay creditors over three to five years. Only farms with debts that don’t exceed about $4.1 million may file for the protection.
U.S. farm debt—covering operations, land, equipment, livestock and more—last year climbed to more than $409 billion, according to a USDA forecast. That’s the largest sum in nearly four decades and a level not seen since the 1980s, when farmland values plunged and interest rates skyrocketed, boosting debts and pushing many farmers and lenders out of business.
Nationwide, the volume of loans to fund current operating expenses grew 22% in the fourth quarter from year-ago levels, hitting a quarterly record of $58.7 billion, according to the Federal Reserve Bank of Kansas City. The average size of these loans rose to $74,190, the highest fourth-quarter level in history when adjusted for inflation, the bank said.