The American Farm Bureau Federation (AFBF) released a new report Tuesday (Aug. 4) showing farm bankruptcies continue to increase.
AFBF found bankruptcies rose 8% over the last 12 months (from June 2019 to June 2020), with 580 filings. The Midwest, Northwest, and Southeast recorded the most bankruptcies, representing 80% of all filings across the US. Wisconsin was the epicenter for filings, followed by Nebraska, Georgia, and Minnesota.
Filings slowed in 1H20 partly because of financial assistance provided by the Coronavirus Aid, Relief & Economic Security (CARES) Act, including direct payments to farmers via the Coronavirus Food Assistance Program (CFAP), along with Paycheck Protection Program (PPP) loans.
Farmers are on government life-support.
AFBF’s President Zippy Duvall said the new rounds of farm aid helped cushion farmers from the economic impact of the virus-induced recession.
AFBF’s Chief Economist John Newton said CARES Act assistance was only a “bandage,” warning filings could increase if aid programs are not continued.
AFBF said, “approximately 60% of farm bankruptcies have been completed successfully – the highest successful percentage of all the reorganization chapters.”
Even before the virus pandemic, a global farm glut pressured agricultural prices. Farm incomes imploded, and bankruptcies began to increase in 2016. President Trump then unleashed a trade war against China, which in itself forced Chinese buyers to abandon US markets for South American ones.
Even with a phase one trade deal, China continues to abandon US markets. We noted earlier this week that purchases are significantly lagging.
Missouri’s Food and Agricultural Policy Research Institute expects the Trump administration to dish out a record $33 billion in aid payments to farmers this year. What this all means is that farmers are on government life-support.