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David Sparks Ph.d Farm Bankruptcies
by David Sparks Ph.d, click here for bio

Program: Line on Agriculture
Date: February 21, 2019

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Here’s what we know: Caseload statistics from the United States Courts indicate that in 2018 Chapter 12 family farmer and family fisherman bankruptcies nationwide were down from prior-year levels. Chapter 12 farm bankruptcy provides a flexible and seasonal repayment schedule, and at times may provide lower interest rates and reduce the overall debt burden.

 

Chapter 12 filings in 2018 totaled 498 and were down 1 percent, or three filings, from the 2017 calendar year. This echoes recent Farm Bureau analysis that revealed that Chapter 12 bankruptcy filings were lower when comparing filings from the fiscal year 2017 to fiscal year 2018 (Chapter 12 Bankruptcies Lower Across Farm Country). Statistics from the U.S. Courts also show Chapter 12 filings during 2018 were down slightly from the 10-year average of 504 bankruptcies per year.

 

We also know, however, that Chapter 12 bankruptcy filings in 19 states were higher than prior-year levels. In these states, there were 303 bankruptcy filings, up from 204 filings the year before. In the Midwest, for example, bankruptcies totaled 223 filings and were up 19 percent from prior-year levels. Bankruptcies in the Midwest were also double what they were in 2008 and at the highest level in more than a decade. So, farm bankruptcies are both up and down. Today’s Market Intel seeks to provide perspective on 2018 farm bankruptcies by reviewing historical trends and year-over-year changes.

Bankruptcy Rate Across Agriculture

 

We had fewer farm bankruptcies in 2018 than the year before. We also likely had fewer farms in the United States in 2018 relative to 2017. Therefore, while the total number of farm bankruptcies was lower in 2018, it’s possible the number of farm bankruptcies as a share of total farm operations was higher. To evaluate this possibility, the bankruptcy rate per 10,000 farms was calculated from 1987 to 2018. Farm numbers in 2018 are not available from USDA, so a trend estimate of farm numbers was implied based on historical farm numbers.

 

Using data implied from USDA’s Farm Production Expenditures survey, in 2017 there were 2.04 million farms in the U.S. Based on the 501 Chapter 12 bankruptcies, the bankruptcy rate per 10,000 farms was 2.456 in 2017. The U.S. has lost an average of 1 percent of U.S. farms annually during the last decade, putting the 2018 trend estimate for farm numbers at 2.025 million. When we put that 2.025 million farms up against the 498 farm bankruptcy filings, the bankruptcy rate per 10,000 farms is estimated to have climbed slightly in 2018 to approximately 2.459. This is the highest level since 2011 and the fourth consecutive year of rising bankruptcy rates as a proportion of the farm population.

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