Wisconsin continues to lead U.S. in farm bankruptcies
The number of family farms filing for bankruptcy last year jumped nearly 20% from the previous year, according to data released by the U.S. Courts.
Although the spike in the number of farms struggling financially was well below historical highs reached in 2010 following the Great Recession when Chapter 12 bankruptcies increased 33%, it's plain to see the pain of the prolonged downturn in farm income is still impacting America's Dairyland.
Wisconsin continues to hold the dubious distinction of leading the nation in family farm bankruptcies with 57 filings, up 8 filings over 2018. During 2019 the state lost more than 10 percent of its dairy operations as farmers sold their cows amidst a fifth year of poor milk prices.
According to American Farm Bureau Federation Chief Economist John Newton, last year there were 595 Chapter 12 family farm bankruptcies, up nearly 100 filings from 2018 and the highest level since 2011’s 637 Chapter 12 filings.
"Given that there are slightly more than 2 million farms in the U.S., the 2019 bankruptcy data reveals a bankruptcy rate of approximately 2.95 bankruptcies per 10,000 farms, slightly below the rate of 2.99 filings per 10,000 farms in 2011," he pointed out.
During the fourth quarter of 2019, there were 147 Chapter 12 bankruptcy filings, which was up 14% from the prior year but down 8% from the third quarter of 2019. On a year-over-year basis, Chapter 12 filings have increased for five consecutive quarters, Newton said.
Although milk prices rose over the $20/cwt. mark in November 2019, it was not enough to save some family farms that have struggled under the multi-year downturn in the farm economy. Add to this record farm debt, the uncertainty on global trade relations and recent changes to the bankruptcy rules in 2019’s Family Farmer Relief Act, which raised the debt ceiling to $10 million.
Despite the signing of a trade deals with Japan and China and the USMCA agreement, Cambridge dairy farmers and members of the Wisconsin Farmers Union Duane and Tina Hinchley blamed President Donald Trump's trade policies as "too little, too late" for dairy farmers.
During a recent tour of their dairy and crop farm, the Hinchley's stated that failed trade policies "cannot turn back the clock on the irreparable damage" caused to state farmers.
Bankruptcies by State
Following Wisconsin, Georgia had 41 Chapter 12 filings in 2019, which was up 15 filings from 2018. Chapter 12 filings were at, tied with or above decade-high levels in 10 states: Iowa, Illinois, Kansas, Minnesota, Nebraska, New Hampshire, Ohio, South Carolina, South Dakota and Wisconsin.
Chapter 12 farm bankruptcies rose in many states across the Midwest, West and Southeast. Georgia had the largest increase — 14 more filings than the prior year. Following Georgia were Iowa and Florida with 14 additional Chapter 12 bankruptcy filings and Nebraska with 11 additional filings, Newton said.
All but three regions of the U.S. experienced higher bankruptcy rates in 2019 compared to 2018. Nearly 46% of the Chapter 12 filings were in the 13-state Midwest region, followed by 22% in the Southeast. The Midwest had 273 Chapter 12 filings, up from 234 filings in 2018, while the Southeast had 132 filings, up from 89 filings the previous year. Figure 4 highlights Chapter 12 bankruptcy filings by region and the year-over-year change, according to U.S. Court data.
Newton says that there have been more than 5,000 Chapter 12 farm bankruptcies across the U.S. over the last decade, representing a quarter of 1% of all farm operations. Nationwide, California saw the most filings – 388 – during this time followed by Wisconsin with 375 filings and Georgia with 351 filings.
"Depending on perspective, net farm income in 2019 inflation-adjusted dollars is either down 33% from a record high or up nearly 40% from the decade low set in 2016," Newton said. "Regardless of perspective, net farm income in 2019 is slightly above the 20-year average but was supported in large part by the Trump administration’s efforts to financially shield farmers from unfair retaliatory tariffs."
Without this support, Newton said farm-related income from crop and livestock sales in 2019 inflation-adjusted dollars would have been at the second-lowest level in the last decade at $63.6 billion.
"The corollary to this is that farm bankruptcies could have been worse considering the record-high farm debt of $415 billion (in nominal terms) and the likely difficulties servicing this debt without the revenue from the Market Facilitation Program," Newton said.
The Hinchleys have their own perspective.
“(Donald Trump) thought he could buy us off with bailouts and now thinks he can pull the wool over our eyes with these new trade deals, but it’s too little too late," the Hinchley's said. "If he actually came out and spoke with us dairy farmers he’d know this isn’t going to get us over the hump.”
In the wake of recently signed trade deals, Newton says the Trump Administration isn't likely to announce a third round of trade assistance.
Wisconsin Farmers Union President and dairy farmer Darin Von Ruden said farmers across Wisconsin held out hope that Donald Trump’s trade war would be worth it .
"It's clear that the USMCA and the Phase 1 agreement with China won’t come close to fixing the widespread damage he’s caused to our way of life," Von Ruden said. "He broke his promise to us to expand markets and help our balance sheets, putting countless farmers in a perilous situation."