By Grant Gerlock and Esther Honig
Farm income has taken a long, hard fall, dropping 50 percent since hitting a high point in 2013. Add to that near-record levels of farm debt, and you have a recipe for financial stress.
But while economists say they can see storm clouds building, it’s not a full-blown crisis. That’s because relatively few farms have been pushed past the breaking point into Chapter 12 bankruptcy — or, worse, into losing the farm entirely.
Nebraska farmer Ben Steffen felt it worst with last year’s milk prices. Sales from his 150-cow dairy dropped 20 percent as the U.S. trade dispute with Canada and Mexico dragged on and exports lagged.
“We’ve gone through 2018 with nothing on the horizon for better markets,” said Steffen, who also grows corn, soybeans and wheat near Humboldt in southeastern Nebraska. “Sad to say, 2018 was a tough year but 2019 is where we’ll run out of our ability to manage this cash-flow crisis.”
Like many farmers, Steffen has been putting off purchases in an attempt to save money. Normally, he keeps a year’s worth of hay on hand to feed his dairy herd, but he didn’t fill that reserve last year.
“(T)hat bill is coming and it’s staring at us. That’s happened across agriculture. We’re eating up our equity,” he said.
It feels like walking a financial tightrope, he added, like a wrong step could be catastrophic: “That’s pretty hard to look around the community and say some of us will survive and some of us won’t."
‘Check engine lights,’ but no crisis
More farms filed for bankruptcy in many states in 2018, raising concerns that the downturn in the farm economy is reaching a new level. But looking at loan repayment rates and how debt levels compare to farm assets shows the ag sector is getting by — at least on paper.
Take Chapter 12 bankruptcy, which was designed specifically during the 1980s farming crisis to allow farmers and fisherman to restructure their debts without selling off the whole business.
Last year, nearly 500 farms filed for Chapter 12 and several states have seen numbers rise for three consecutive years including Nebraska and Kansas. Wisconsin led the nation with 49 filings in 2018.
While the prospect of mounting bankruptcies evokes memories of farms going out of business by the score, U.S. Department of Agriculture Chief Economist Robert Johannsson
said last month that the rate is low even compared to the farm economy boom from 2010-2012 and “much lower than the rates in the 1980s.”
“There are a lot of check engine lights on with the dash,” said David Widmar, an economist with the website
Agricultural Economic Insights. “The metrics that we all talk about are trending the wrong way.”
Farm income stands out as a warning sign among the financial statistics, said Nathan Kauffman, the Omaha branch executive with the Federal Reserve Bank of Kansas City.
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