After three years of increases in farm bankruptcies, Chapter 12 filings were considerably lower in 2021.
The number of Chapter 12 filings in 2021 was down 50 percent from 2020, and for the first time in a decade, there were fewer than 300 filings. Total filings in 2021 were 276, compared to 560 in 2020 and 599 in 2019.
“For the first time in the last decade, every region in the United States had fewer farm bankruptcies in the last year, compared to the year before,” Veronica Nigh, senior economist for the American Farm Bureau Federation (AFBF), said in a statement. “This decline is certainly worthy of celebration; however, it is important to not lose sight of the fact that 276 Chapter 12 bankruptcies were filed in 2021.”
Chapter 12 bankruptcies were down in every region last year. The region with the largest decrease in Chapter 12 filings by absolute number was the Midwest, which had 144 filings, down from 297 filings in 2020. Still, the region leads the rest, with the number accounting for 52 percent of all Chapter 12 filings in the U.S.
Other parts of the country also had significant declines in the number of filings in 2021, with four regions having double-digit decreases in the number of Chapter 12 filings by both absolute numbers and by percentage.
The Northwest had 42 fewer filings in 2021 at 10, down 81 percent from 2020. Despite severe drought conditions, the West and Southwest were down 53 and 40 percent, respectively, from 2020.
Overall, bankruptcies were down in 36 states, and 10 states had no Chapter 12 filings. Wisconsin and Minnesota led the nation for most state Chapter 12 filings with 27 and 26, respectively. Nigh said given the number of dairies in those states and consolidation in the industry, it is likely that many of the filings in those states were on dairy operations.
AFBF stated net farm income has been “volatile over the last decade, ranging from $58.6 billion to $134.5 billion between 2012 and 2021.” USDA currently projects $95.2 billion in returns this year. According to AFBF, many producers saw an increase in income from crop and livestock sales last year, but input costs moving forward could decrease income substantially the other way.
“How the latter compares to the former will dictate whether the trend of fewer bankruptcies will continue to be ‘in’ or ‘out’ in 2022,” Nigh said. “For once, this is a trend we hope has some staying power.” — Charles Wallace, WLJ editor
