Farm bankruptcies declined in 2020. However, as Micheal Clements shares, that doesn’t necessarily mean the outlook for agriculture is improving.
Clements: Chapter 12 farm bankruptcy filings in 2020 were the third highest over the last decade, despite a decline in 2020, according to American Farm Bureau Federation Chief Economist John Newton.
Newton: For 2020, we had 552 Chapter 12 family farm bankruptcies. That was down about seven percent from what we saw in 2019, 43 filings less than last year.
Clements: Newton says the agriculture sector is not out of the woods yet. Chapter 12 bankruptcy is often the last option for farmers and ranchers.
Newton: It’s not something that folks make lightly and it’s not something that happens just with one bad year. We’ve had several years of low commodity prices, and while things have turned around this year, I doubt that the improvements this year saved anybody from ultimately having to make that unfortunate decision to seek Chapter 12 reorganization.
Clements: Newton says there are other factors that may impact the data.
Newton: This whole year nearly, we’ve been in a remote work environment, and when you look across all the chapters of the bankruptcy code, we saw 230,000 fewer filings than last year. So, that tells me that the reduction in bankruptcies might be attributable to the difficulty trying to file a case remotely. The struggles continue, delinquency rates on commercial loans, they were up more than five percent compared to year-ago levels. And then we also say USDA recently issue new guidelines on farmer loans to help those folks who are distressed delay repayment.
Clements: Read more on the Market Intel page at fb.org. Micheal Clements, Washington.