Farmers have a number of different options when faced with mounting debt caused by low prices, high interest rates, and export complications, including filing for Chapter 12 bankruptcy. However, deciding which course of action is best in a particular case can be difficult, so if you own a family farm and are struggling financially, it is important to contact a bankruptcy attorney who can evaluate your case and explain your legal options.
Types of Bankrupt Farms
While many kinds of family farms across the country have struggled financially over the last few years, certain operations have proven to be especially at risk of bankruptcy. For instance, one recent study revealed that in 2019, corn and dairy operations had the highest rate of bankruptcy, with more than 16 percent of filers falling under these categories. Other struggling agricultural operations include farms that grow soybeans, which account for nearly 15 percent of all bankruptcy filings and beef cow operations, which make up around 14 percent of farming bankruptcy proceedings. Other notable filing categories include:
- Produce farms;
- Wheat farms; and
- Poultry operations.
Of these groups, dairy farmers are reportedly having the hardest time staying financially afloat, a fact that has largely been attributed to new export tariffs. Grain farmers, on the other hand, who have seen historically low prices for their products over the last three years, but who have also experienced higher yields, have largely been cushioned by the threats of higher interest rates, low prices, and new tariffs.
The Decreasing Price of Agricultural Products
Many experts have reported that the increasingly dire financial situation of many farmers across the country is due to the low prices currently being charged for certain products, including produce, soy beans, dairy products, corn, wheat, poultry, and beef. Low prices have in turn caused farm revenues to drop and made it more difficult for farmers to stay on top of debt payments and also cover the cost of short-term liabilities, such as fertilizer, seed, and herbicides. The latter has become particularly difficult, as farmers who find themselves in these situations are often short on easily accessible assets like cash, stored grain, and market-ready livestock.
Increasing Interest Rates
These problems have only been exacerbated by increasing interest rates, which, after being held at zero percent by the Federal Reserve until 2015, have steadily begun to rise in recent years. The previous low rates encouraged many farmers to take on cheap debt, buy farm equipment, and purchase more land. Unfortunately, when national interest rates rose, the payments on previous debts also increased, which has had devastating consequences for farmers.
The current financial woes of farmers can also be linked to the implementation of new tariffs, which have closed international markets for soybeans, milk, and pork. China’s decision to place a number of steep tariffs on U.S. farm products, has proven to be particularly damaging to the agricultural industry, as it has resulted in a significantly decreased number of exports. This, combined with poor weather conditions and low commodity prices have made it nearly impossible for many family farmers to pay off loans or plan for their next harvest.
Unfortunately, these problems are not expected to go away anytime soon. In fact, with a tough growing season ahead, record spring rains and a delayed harvest caused by sub-freezing temperatures, experts anticipate that prices are not likely to improve and could go down even further. In these cases, filing for Chapter 12 bankruptcy is often the best option for farmers who are attempting to get back on their feet.