Bureau: Farmers crippled by debt

Bankruptcy rate increases by 20%

The number of U.S. farmers utilizing Chapter 12 bankruptcy protection to reorganize debt is increasing, according to a study by the American Farm Bureau Federation.

Chapter 12 filings were up 20% last year compared with 2018, the study said, citing data from U.S. bankruptcy courts. For the past decade, that increase is second only to 2010, the year after the most recent recession.

John Newton, chief economist for the Farm Bureau, said farmers faced significant challenges in 2019.

“This hasn’t been idyllic conditions for our farmers,” he said.

Last year there were 595 Chapter 12 farm family bankruptcies, data show. That is nearly 100 more than in 2018 and the most since 2011, when there were 637 filings.

Wisconsin, which is reeling from dairy farm failures, saw the most Chapter 12 filings last year with 57, followed by Georgia, 41; Nebraska, 38; and Kansas, 36. Arkansas, a major producer

of rice, soybeans and chickens, saw 13 filings, unchanged from the previous year.

Despite the increase, the rate of farmer bankruptcies is well below that of the 1980s. The study shows the latest rate to be approximately 2.95 Chapter 12 bankruptcies per 10,000 farms. In 1987 the rate stood at more than 7 bankruptcies per 10,000 farms.

The Chapter 12 provision was created in 1986 to give farmers more favorable bankruptcy reorganization rules and let them continue to farm.

Reasons for last year’s 20% increase vary. Industries such as dairy have been pinched by a prolonged period of low commodity prices.

Tariffs and natural disasters such as 2018’s Hurricane Michael also hurt farmers last year. Farmers in Georgia only began seeing federal hurricane aid in October, the Atlanta Journal-Constitution reported. Payments were made on about 18% of applications as of November, and the program is designed to cover between 70% and 95% of the losses.

“Farmers needed a plan or act to accommodate more debt,” said Tim Tarvin, a law professor at the University of Arkansas, Fayetteville, with expertise in bankruptcy topics.

President Donald Trump in August signed the Family Farmer Relief Act of 2019. It expands the amount of debt that can be covered by Chapter 12 bankruptcy to $10 million.

“It’s not that it didn’t help, but it was too little too late” for many, Tarvin said.

Farmers received recordhigh levels of farm aid from the government in fiscal 2019, totaling $23.6 billion, up from $13.7 billion the year prior. A trade deal with China was signed earlier this month, a welcome event for farmers. But as the coronavirus slows China’s economy and purchasing of U.S. farm goods, Trump hinted at more bailout money for farmers in a tweet on Friday.

Arkansas escaped much of the damage because of strong demand for rice, soybeans and other commodities, Tarvin said.

Over the past 10 years, data show, California had the most Chapter 12 bankruptcies with 388, followed by Wisconsin’s 375 and Georgia’s 351. Arkansas had 134 filings.

Chapter 12 bankruptcy filings are used as an indicator for how farmers are faring. But farmers can file under Chapters 11, 7, 13 and others if necessary, Tarvin said.

“You could still be seeing a loss of family farms under other chapters,” he said.