Economist concerned, even with fewer farm bankruptcies

The number of farm bankruptcies was down in 2020, but American Farm Bureau’s chief economist says tough times still lie ahead for many farmers. John Newton says, “I don’t know if I would read too much into the declining bankruptcies as any evidence that things are getting better.”

John Newton tells Brownfield everyone must wait and see until there can be a better assessment of this particular farm financial indicator. 

Newton says although down, there was still a lot of Chapter 12 cases. “in 2020, we had 552 Chapter 12 family farm and family fishery bankruptcy filings during the year. That was down 43 filings or about 7% from what we saw last year.”

And, across all categories of bankruptcy, Newton says there were 230-thousand fewer filings in 2020 than there were in 2019, indicating COVID might have impacted the process. “That tells me that in a COVID work-from-home world that it was probably pretty difficult to get a Chapter 12 plan approved by a bankruptcy judge, and that’s probably another reason why we saw filings come in a little bit lower this year (2020) compared to last year (2019).”

Newton says the payments from risk management programs and ad hoc sources like CFAP and the Paycheck Protection Program helped 2020 cash flow, but he says bankruptcy is a journey and one good year doesn’t necessarily end the risk of going bankrupt.  He tells Brownfield maintaining a positive cash flow is especially hard on new and young farmers who are paying higher land rental and purchase costs.

Newton tells Brownfield dairy states continued to take a hard financial hit. “Dairy states like Wisconsin had a high level of bankruptcies. Vermont had nearly 20 bankruptcies this year. Those are two states that are pretty dairy-intensive, and the challenge in Vermont in particular, their costs of production are significantly higher than that which you see in Wisconsin on the dairy side.”

Wisconsin led the nation with 69 farm bankruptcies during 2020, and even if divided into east and west District Court regions, Wisconsin had two of the top four in the number of bankruptcies along with Kansas and Nebraska.

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