Family Farm Bankruptcies Dramatically Increase Across Farm Belt; Oregon and National Farmers Fare Better

By Litigation and Creditors’ Rights & Bankruptcy Practice Groups

More and more farmers in America’s Midwest are filing for bankruptcy under Chapter 12 of the U.S. Bankruptcy Code. The rate of Chapter 12 cases in those states has reached its highest level in at least a decade. Chapter 12 filings in the Tenth Circuit in 2018, which consists of Colorado, Kansas, New Mexico, Oklahoma, Utah, and Wyoming, are up 21% from the prior 2017 year. And in the Eighth Circuit, which consists of Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota, the heart of America’s “Farm Belt”, filings increased even more, about 45% from 2018 over the prior 2017 year. The primary cause for Chapter 12 filings in these states is believed to be consistently low commodity prices year over year for the traditional row crops grown in these states, such as corn and soybeans, as well as consistently low livestock and dairy prices.

Meanwhile, in the Ninth Circuit, the region that includes Oregon, Washington, California, Alaska, Hawaii, Arizona, Nevada, Idaho and Montana, farm bankruptcies under Chapter 12 have decreased in 2018 by about 41% over the prior 2017 year. Despite the rising farm debt across the country and the higher filings in the Midwest, filings are down nationally as well by about 8% from 2018 over the prior year. The total number of Chapter 12 cases in 2018 (468) is still up nationally from its lowest recent filings in the last ten years; in 2014, total Chapter 12 filings were 372.

Understanding market trends is always important when making credit decisions as a financial institution or trade creditor. Based on the increasing Chapter 12 bankruptcy case filing rates in certain parts of the country, a more conservative approach to avoid becoming an unexpected creditor in a farm bankruptcy case may be warranted. For example, proactively taking steps now to ensure you have comprehensive, lawyer drafted terms and conditions with your customers, a robust process to track and preserve agriculture lien rights and limiting market segment exposure can all help to eliminate or limit farm bankruptcy risk. While many documents for these issues are available from your competitors or quickly found using a search engine, such forms are often incomplete or fail to address the unique issues that each business may have with its customers.

If you have any questions about protecting your interests in a pending farm bankruptcy case or would like to discuss your options for protecting your company from potential bankruptcy cases we have the experience and expertise to help limit problems before they arise or the damage created by a Chapter 12 bankruptcy when filed.

Elayna Matthews is an associate in the Litigation and Creditors’ Rights & Bankruptcy practice groups and the Financial Services Industry Group. The information in this article is not intended to provide legal advice. For a professional consultation, please contact Elayna Matthews at Saalfeld Griggs PC.  503.399.1070.  © 2019 Saalfeld Griggs PC