Several U.S farmers in the Midwest have filed for chapter 12 bankruptcy protection as a result of instability in the agricultural sector.
The rise in farm bankruptcies in major farm states across the US is gradually becoming a major cause for concern in the nation. According to a Wall Street Journal review, the level of farm bankruptcy that the U.S is currently facing has not been seen in the last ten years.
The U.S. Department of Agriculture data reports that States in the Seventh Circuit Court of Appeals, the eight circuit and the tenth circuit have recorded the highest level of bankruptcy since 2008. Unfortunately, those states accounted for almost 50% of the total sales of U.S. farm products in 2017.
The bankruptcy has been attributed to a number of factors including a fall in the prices of farm commodities especially corn and soybeans, growing competition from Russia and Brazil and the trade dispute between the US and major buyers like China and Mexico. The outrageous tariffs imposed on US products by these countries have driven farmers out of business. Before this time, China and Mexico were huge markets for US products.
Small scale farmers are not the only people feeling the heat of the tariff. Big agribusinesses are also complaining that the tariffs have affected the global flow of goods causing a reduction in price and decreasing profit.
In recent years, many farmers have had to borrow money to sustain their businesses. However, with all of these issues affecting agriculture on ground, most of these farmers are unable to pay their debts forcing them to sell their second homes, look for off-farm jobs, give up their lands and even sell their equipment.
Chapter 12 bankruptcy allows distressed fishermen or family farmers to come up with a strategy to repay creditors over a three to five year period. Farms with a debt of over $4.1 million cannot file for a chapter 12 bankruptcy.