Farm Bankruptcies in the United States
Declining farm income and farmland values are creating financial pressures for US farmers especially for farmers who have high debt-to-asset ratios. These pressures could lead to an increase in the number of US farmers being delinquent on their loans and farmers filing for bankruptcy.
Bankruptcy rates seem to be a lagging indicator of financial stress after debt levels rise and delinquencies on agricultural loans for land, equipment and supplies increase. According to the USDA’s Economic Research Service, the national debt-to-income ratio is projected to be 14 percent this year, a rate that has risen steadily since 2012.
Farm bankruptcy rates (chapter 12 filings) have remained relatively low during the last decade. The rate rose from 1.93 bankruptcies per 10,000 farms in 2015 to 2.15 bankruptcies per 10,000 farms in 2016. The agricultural downturn during the last three years has resulted in a small uptick in farm bankruptcy rates.
While there is a considerable variation across the US, farm bankruptcy rates remain low and stable for several Midwest states. According to Katchova and Dinterman say that if we experience another two to three years of flat or declining income levels, it will be much harder to farmers to service debts, putting them in a vulnerable position.
They add that there are steps farmers can take today to address vulnerability which include reducing costs, renegotiating land rents, and restructuring. If farmers are facing severe financial stress, they can utilize Chapter 12 that allows farmers to continue farming while their debt is restructured.
View Katchova and Dinterman’s USDA Ag Outlook Forum presentation and read their April 2017 Farm Bankruptcies Policy Brief. Learn more about research conducted by Ohio State’s Farm Income Enhancement Program by visiting go.osu.edu/farmincome.
Key Highlights: · Farmers have a variety of chapters to file for bankruptcy with Chapter 12 being specifically designed for farmers and fishermen to reduce their financial burden while continuing operations. · Farm bankruptcy rates (chapter 12 filings) have remained relatively low during the last decade, but the agricultural downturn during the last three years has resulted in a small uptick in farm bankruptcy rates. · While there is a considerable variation across the US, farm bankruptcy rates remain low and stable for several Midwest states.
How Trump’s Proposed Federal Budget Cuts Could Impact Farmers
Zoë Plakias, Assistant Professor (firstname.lastname@example.org)
Ian Sheldon, Professor and Andersons Chair of Agricultural Marketing, Trade and Policy,
(email@example.com) and Carl Zulauf, Professor Emeritus (firstname.lastname@example.org)
While the proposed budget cuts point to changes to the scope and breadth of the United States Department of Agriculture (USDA) and other federal agencies, it is still uncertain which cuts will survive the budget process.
Trump’s plan calls for a 21 percent reduction to the U.S. Department of Agriculture and includes cutting staff at agricultural service offices, along with statistical reports on crop prices and production levels that some farmers and others in the agricultural community use to operate their agribusinesses. Many farmers use these reports to help make decisions, and researchers and analysts use them in their work to inform decision makers in both industry and government. Since the USDA is an unbiased information provider and access is open to the public, trends in agricultural production and well as information on supply and demand for agricultural products would not be as readily assessable as it is today.
In addition, fewer staff at USDA offices could hinder farmers’ ability to access important services such as loans, crop disaster assistance and land conservation measures, including water quality preservation and erosion control.
Besides Trump’s budget, another crucial consideration for farmers is his proposed international trade policy, which, based on statements made during the election, could include a 45 percent tax on products from China and a 35 percent tax on Mexican imports. It is still unclear whether those taxes will be imposed, but if they are, China could retaliate with tariffs against U.S. products as the U.S. exports a significant amount of corn to Mexico and soybeans to China.
An outline of Trump’s proposed budget is available here:
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