More American farmers are filing for Chapter 12 bankruptcy as the U.S. and China continue to negotiate an end to their trade dispute. The American Farm Bureau (AFB) says Chapter 12 filings rose by 13% between July 2018 and June 2019.
The U.S. Department of Agriculture says nearly 13,000 farms are no longer in business compared to a year ago as loan delinquency rates have reached a 6-year high. The National Farmers Union reports more and more farmers are reaching their breaking points every day.
Several factors contribute to farm bankruptcies
While farm economists say it’s too soon to call the situation a crisis, they say agriculture trends are heading in the wrong direction. Farmers face several challenges, including:
- Market limits: China was the No. 1 buyer of U.S. agricultural goods and when that market closed, producers had massive surpluses of products and no other buyers in sight.
- Low prices: The AFB says commodity prices have been low since 2014 and were just beginning to rebound when the trade war hit in 2018. China responded to U.S. tariffs on Chinese goods with billions of dollars of tariffs on U.S. products, many of them agricultural.
- Equipment costs: Equipment is expensive as farmers can pay $100,000 for one tractor, meaning debt can accrue quickly and if their crops cannot be sold, they will have trouble making loan payments as well as meeting other obligations.
U.S. and China continue negotiations
While the U.S. hinted that the two sides are working on a “Phase 1” trade agreement, which could lead to the removal of some tariffs, no concrete progress has been announced by either Chinese or American negotiators. If a deal isn’t reached, the next round of U.S. tariffs on Chinese products is scheduled to go into effect on Dec. 15, amounting to $156 billion.
Seminars highlight potential benefits of Chapter 12 bankruptcy
Farm groups across the country are holding seminars and workshops to explain how bankruptcy could keep struggling farmers in business. Chapter 12 is designed to help over-extended farmers develop a plan to restructure their debt according to their current cash flow and remain in business until markets and prices improve. If you are struggling, an experienced bankruptcy attorney here in Indiana can answer your questions and help you find the best plan to repay your debts and rebuild.