Agricultural bankruptcies in 2020

The recent rise in commodity prices and the ad hoc financial support underway to offset natural disasters, tariff retaliation and coronavirus-related damage have come a bit too late for some farmers in the United States, that is, to say Agricultural profitability 2020: a false positive. The impact of several years of low commodity prices and delayed distribution of disaster relief, followed by a global pandemic is visible in statistics on the number of recently published cases U.S. courts, which indicate that Chapter 12 family farm and family fishery bankruptcies totaled 552 filings in 2020, down 43 filings, or 7%, from 2019, but also the third highest in the last decade.

Bankruptcies by district court

District court-level data indicates that Chapter 12 bankruptcies were highest in western Wisconsin with 39 filings, followed by Kansas with 35 filings, Nebraska with 32 filings, and eastern Wisconsin with 30. deposits. The 10 district courts with the most filings accounted for 48% of all Chapter 12 bankruptcies in 2020. In 17 districts, the number of Chapter 12 farm bankruptcies was linked or reached decade-high levels. These areas include, but are not limited to, eastern Wisconsin, Iowa, South Dakota, Montana, and Vermont. Many of these regions have been hit hard by several years of low commodity prices, such as corn, soybeans, wheat and cotton, lower yields, and low prices for milk and livestock.

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In 33 of 94 districts, Chapter 12 bankruptcies increased from previous years. The increase in Chapter 12 filings was highest in eastern Wisconsin with 15 filings, followed by Vermont with 13 filings. In 44 districts, the number of Chapter 12 filings decreased compared to previous years. The decline was greatest in central Georgia, which had 10 fewer depots, and western Pennsylvania, which had nine fewer depots.

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Over the past decade, there have been nearly 5,000 farm bankruptcies – less than a quarter percent of all farms in the United States, according to a survey by the Chapter 12 Trustees Association, more than half of those filings were likely to complete a Chapter 12 reorganization or negotiate a mutually acceptable outcome, which may lead to a dismissal of the case or a conversion to Chapter 7 (Farm bankruptcies slow, more help needed).

The total number of deposits over the past decade was highest in western Wisconsin with 255 deposits, followed by Puerto Rico (not shown) with 214 deposits, Kansas with 209, eastern California with 203 depots and central Georgia with 192 depots. The 10 districts with the highest number of deposits recorded 1,850 deposits over the past decade, or about 38% of the national total.

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In recent years, many farmers have experienced low commodity prices, high production costs, an increase in the value of farmland, an increase in cash rents, an increase in labor costs. work and high financial barriers to entry, among other issues. Off-farm income, on which many farmers depend, has also been a challenge given COVID-19 restrictions and inadequate broadband access. For many heavily indebted farmers, including new and beginning farmers, low commodity prices and high input costs could not be sustained.

According to the Kansas City Federal Reserve, commercial bank default rates continue to rise, and USDA recently temporarily suspended debt collection, foreclosures and other activities on farm loans to support struggling farmer borrowers. According to the USDA, more than 12,000 farmer borrowers will benefit from these recently announced debt suspension plans.

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Although Chapter 12 bankruptcies have declined from levels a year ago, these numbers should not be taken as a sign that the farm economy has recovered. Additionally, given the difficulty of working remotely during the pandemic, the decline in bankruptcies, which can only be filed online for now, may not fully reflect economic conditions on the farm. For example, there were over 230,000 fewer bankruptcy filings in 2020 compared to 2019 (774,940 filings in 2019, up from 544,463 filings in 2020). In addition, since bankrupt debtors still cannot access Paycheck Protection Program loans, some small farm businesses may be delaying filing for bankruptcy in hopes of qualifying for the PPP.

Chapter 12 bankruptcy is often the last option for agricultural producers, as many of them have likely already taken steps with their lenders to reduce their operating costs, liquidate assets, or upgrade their operations to avoid bankruptcy. Simply put, a single year of favorable farm income is unlikely to reverse a farm’s multi-year path to bankruptcy.

The USDA’s first farm income forecast for 2021 will be released on February 5. While many expect increased cash receipts from crop and livestock sales, some expenses are likely to increase and ad hoc federal support will certainly be lower. The net effect is likely to be lower, but higher than average, than net farm income in 2021.

Key to recovering the agricultural economy is the recovery of COVID-19, restoring demand for biofuels, increasing U.S. agricultural trade, and new sources of income, such as those resulting from the adoption of smart practices. in the face of climate and ecosystem services markets.

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