Farm Bankruptcies on the Rise

 

Farm bankruptcies across the country are on the rise. So, what does that mean for suppliers to the farm market?

Record-high debt leads to an increase in farm bankruptcy filings

While we’re experiencing the highest net farm incomes since 2014, the American Farm Bureau Federation is estimating that farm debt in 2019 will reach a record-high of $416 billion. This is, in part, because “…nearly 40% of that income – some $33 billion in total – is related to trade assistance, disaster assistance, the farm bill and insurance indemnities and has yet to be fully received by farmers and ranchers.”

This increase in debt has farmers across the country filing for bankruptcy at the highest rate since 2011. “Data from the U.S. Courts reveals that for the 12-month period ending September 2019, Chapter 12 farm bankruptcies totaled 580 filings, up 24% from the prior year and the highest level since 676 filings in 2011.”

What does this mean for suppliers?

While the full impact of what these bankruptcies mean for suppliers is yet to be seen, it’s reasonable to assume that farmers will be cutting costs wherever possible. This may lead to delays in some spending. For example, attitudes like ‘I can get one more season out of this’ may begin to be more common.

As agriculture suppliers, you may need to prepare your business for a decrease in revenue from farms while this bankruptcy trend continues. There is hope that farm assistance payments will be fully received soon, which could lessen the impact, but it’s better to prepare for the worst and hope for the best.

There was, however, a slight bright spot in the third quarter of 2019, in that total bankruptcy filings dropped 2% from the previous quarter. We’ll continue to monitor the number of filings through the end of the year and keep you updated on any new developments.

Read the full article from the American Farm Bureau Federation here.