The 2019 year-end bankruptcy filing data is finally in, and not surprisingly, Chapter 12 filings increased significantly–almost 20%–from the previous year. Nationwide, there were 595 Chapter 12 filings in 2019, compared with 498 for calendar year 2018. The 2019 levels are the highest in eight years, with the last peak being 637 in 2011 (immediately following the financial crisis).
According to Farm Bureau data, almost half (273) of last year’s filings were in the Midwest, driven by Wisconsin’s decade-high 57 cases. Given the extraordinarily difficult state of the dairy market, this should not be surprising.
Perhaps even more alarming is the state of net farm income and outstanding farm debt: both point to a burgeoning crisis. If trade assistance (Market Facilitation Program) payments and crop insurance proceeds are subtracted, 2019 inflation-adjusted net farm income would have been $63.6 billion, the second lowest of the past decade. Meanwhile, 2019 farm debt hit a record high $415 billion (not adjusted for inflation).
The “Phase 1” China trade deal and USMCA theoretically offer a flicker of hope for leveraged producers in 2020. But headwinds like the coronavirus outbreak and other unknowns may dampen a recovery and force more producers into Chapter 12, especially now that Chapter 12 eligibility has been significantly expanded to allow producers with up to $10 million in debt to file).
