Farm Bankruptcies in 2020 Climb to Third-Highest Level

WASHINGTON, DC – For some producers, 2020 will be a year remembered for its extreme turnaround in prices and demand, and a more profitable end due to historic ad hoc government payments. For others, however, it may be remembered as the year of the bankruptcy.

According to Dr. John Newton, Chief Economist with the American Farm Bureau Federation (AFBF), the impact of multiple years of low commodity prices and delayed distribution of disaster assistance relief, followed by a global pandemic is visible in recently released caseload statistics from the U.S. Courts, indicating the third-highest level of Chapter 12 family farm bankruptcies in a decade.

Data at the District Court level indicates that Chapter 12 bankruptcies were the highest in western Wisconsin (39), followed by Kansas (35), Nebraska (32), and eastern Wisconsin (30). The 10 District Courts with the highest number of filings represented 48 percent of all Chapter 12 bankruptcies during the year and in 17 districts, the number tied with or reached decade-high levels.

While Chapter 12 bankruptcies have declined compared to year-ago levels, Newton explains, these numbers should not be considered 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 at this time, may not fully reflect on-farm economic conditions.

Chapter 12 bankruptcy is often the last option for agricultural producers, as many have likely already taken steps with their lenders to reduce their operating costs, liquidate assets or transition their operation to avoid bankruptcy. Put simply he says, “a single year of favorable farm income is unlikely to reverse a farm’s multi-year journey toward bankruptcy.”
(SOURCE: All Ag News)