‘This One Here Is Gonna Kick My Butt’—Farm Belt Bankruptcies Are Soaring

‘This One Here Is Gonna Kick My Butt’—Farm Belt Bankruptcies Are Soaring

Trade disputes over agriculture add pain to low commodity prices that have been grinding down American farmers for years

Note:  This is an article that ran in the Wall Street Journal on February 7, 2019. I felt that it did a good job encompassing most of what farmers are dealing with...low prices, bankruptcies, depression, suicide, etc.  

A wave of bankruptcies is sweeping the U.S. Farm Belt as trade disputes add pain to the low
commodity prices that have been grinding down American farmers for years.
Throughout much of the Midwest, U.S. farmers are filing for chapter 12 bankruptcy protection
at levels not seen for at least a decade, a Wall Street Journal review of federal data shows.
Bankruptcies in three regions covering major farm states last year rose to the highest level in at
least 10 years. The Seventh Circuit Court of Appeals, which includes Illinois, Indiana and
Wisconsin, had double the bankruptcies in 2018 compared with 2008. In the Eighth Circuit,
which includes states from North Dakota to Arkansas, bankruptcies swelled 96%. The 10th
Circuit, which covers Kansas and other states, last year had 59% more bankruptcies than a
decade earlier.
States in those circuits accounted for nearly half of all sales of U.S. farm products in 2017,
according to U.S. Department of Agriculture data.
The rise in farm bankruptcies represents a reckoning for rural America, which has suffered a
multiyear slump in prices for corn, soybeans and other farm commodities touched off by a
world-wide glut, made worse by growing competition from agriculture powerhouses such as
Russia and Brazil.
Trade disputes under the Trump administration with major buyers of U.S. farm goods, such as
China and Mexico, have further roiled agricultural markets and pressured farmers’ incomes.
Prices for soybeans and hogs plummeted after those countries retaliated against U.S. steel and
aluminum tariffs by imposing duties on U.S. products like oilseeds and pork, slashing
shipments to big buyers.
Low milk prices are driving dairy farmers out of business in a market that’s also struggling with
retaliatory tariffs on U.S. cheese from Mexico and China. Tariffs on U.S. pork have helped
contribute to a record buildup in U.S. meat supplies, leading to lower prices for beef and
chicken.
Agribusinesses such as Archer Daniels Midland Co., Bunge Ltd. and Cargill Inc. are feeling
the heat, too. Even though lower crop prices translate into less-expensive raw materials for
the commodity buyers, tariffs impact the global flow of goods and in some cases drive down
prices, cutting into profits.
Low prices and mounting farm debts have sparked fears of more farm closures to come, among
both large-scale farms that grew rapidly on rented land and small farms run by families
working multiple jobs.
For Nebraska farmer Kirk Duensing, filing for bankruptcy was a last resort, his only choice after
several years of low corn and soybean prices meant too many bills he couldn’t pay.
Mr. Duensing has managed to keep farming, hiring himself out to plant crops for other farmers
Feb. 6, 2019 10:59 a.m. ET
By Jesse Newman and Jacob Bunge
Mr. Duensing’s white corn stock. He now hires himself out to plant crops for other farmers and has taken a high-interest loan.
PHOTO: TERRY A. RATZLAFF FOR THE WALL STREET JOURNAL
Mr. Duensing has managed to keep farming, hiring himself out to plant crops for other farmers
for extra income and borrowing from an investment group at an interest rate twice as high as
offered by traditional lenders. Despite selling some land and equipment, Mr. Duensing remains
more than $1 million in debt.
“I’ve been through several dips in 40 years,” said Mr. Duensing. “This one here is gonna kick my
butt.”
More than half of U.S. farm households lost money farming in recent years, according to the
USDA, which estimated that median farm income for U.S. farm households was negative $1,548
in 2018. Farm incomes have slid despite record productivity on American farms, because
oversupply drives down commodity prices.
Chapter 12 bankruptcy, created during the 1980s farm crisis, allows distressed family farmers
or fishermen to devise a plan to repay creditors over three to five years. Only farms with debts
that don’t exceed about $4.1 million may file for the protection.
U.S. farm debt—covering operations, land, equipment, livestock and more—last year climbed to
more than $409 billion, according to a USDA forecast. That’s the largest sum in nearly four
decades and a level not seen since the 1980s, when farmland values plunged and interest rates
skyrocketed, boosting debts and pushing many farmers and lenders out of business.
Nationwide, the volume of loans to fund current operating expenses grew 22% in the fourth
quarter from year-ago levels, hitting a quarterly record of $58.7 billion, according to the Federal
Reserve Bank of Kansas City. The average size of these loans rose to $74,190, the highest fourthquarter
level in history when adjusted for inflation, the bank said.
To stay in business, some farmers have sold second homes purchased during a prosperous
period earlier in the decade. They or their spouses have sought off-farm jobs to bring in
additional income or pay for health insurance. Others have shrunk their operations, giving up
rented ground or selling equipment to lower debt loads. Those struggles are driving
consolidation, shifting a greater number of acres under fewer, larger farms.
Agricultural lenders, bankruptcy attorneys and farm advisers warn further bankruptcies are in
the offing as more farmers shed assets and get deeper in debt, and banks deny the funds needed
to plant a crop this spring.
“We are seeing producers who are running out of options,” said Tim Koch, senior vice president
at Omaha, Neb.-based Farm Credit Services of America, which lends to farmers and ranchers in
Iowa, Nebraska, South Dakota and Wyoming.
He said bankruptcy filings among the bank’s customers doubled last year compared with 2017,
though they still represent a tiny fraction of its overall portfolio. Anticipating the rough patch,
the bank three years ago added 30 lenders to focus exclusively on stressed accounts, and
dedicated a team of a dozen analysts to such accounts.
Curt Hudnutt, who oversees rural banking for Rabobank North America, one of the biggest U.S.
farm lenders, said that while its losses have been minimal so far, the bank’s farm-loan portfolio
is deteriorating and he expects bankruptcies to increase among U.S. farmers this year.
“We thought 2019 would be the year things turned around,” said Mr. Hudnutt. “Then the trade
dispute happened and that really put a damper on things.”
Nathan Kauffman, Omaha branch executive at the Kansas City Fed, called the recent rise in
bankruptcies modest. He said that while further increases are likely, he doesn’t anticipate a
sharp jump in filings, though the downturn in agriculture could drag on for years to come.
The slump in commodity prices followed a period of historic profitability in the Farm Belt,
which left
operators with
significant cash
‘I’ve been through several dips in 40 years,’ said Mr. Duensing. ‘This one here is gonna kick my butt.’ PHOTO: TERRY A.
RATZLAFF FOR THE WALL STREET JOURNAL
reserves.
Interest rates,
while on the
rise, have
remained
relatively low.
Farmland
values, a major
factor in a
farm’s net
worth, have
declined
modestly, as demand for land continues from fund investors and large farms that are still
well capitalized.
Nationwide, chapter 12 bankruptcy filings are below highs reached in 2010, when commodity
prices dropped following the U.S. recession. But bankruptcies are climbing across swaths of the
Midwest that produce much of the nation’s grain and meat. Last year, bankruptcies in the
Seventh, Eighth and 10th Circuits made up 48% of the U.S. total of chapter 12 bankruptcies,
versus 37% a decade earlier.
Mounting stress in the Farm Belt has meant big, if somber, business for the region’s
bankruptcy attorneys. In Wichita, Kan., the firm of bankruptcy attorney David Prelle Eron
filed 10 farm bankruptcies in 2018, the most it has ever handled in one year. Wade Pittman, a
bankruptcy attorney based in Madison, Wis., said his firm filed about 20 farm bankruptcies last
year, ahead of past years, and he said he expects the numbers to continue to rise as milk prices
remain stagnant.
Joe Peiffer, a Cedar Rapids, Iowa-based attorney, said his office is the busiest—and most
profitable—it has ever been. Just before Christmas, he sent letters to eight farmers declining to
represent them because he didn’t have sufficient staff to handle their cases promptly. He is
doubling his office space and interviewing new attorneys to join the firm.
One factor driving bankruptcies is tighter lending standards, said Mr. Peiffer, including at
agricultural banks, which are under pressure from regulators to exercise greater caution over
their farm-loan portfolios.
“I’m dealing with people on century farms who may be losing them,” said Mr. Peiffer, whose
own father sold his farm in the late 1980s.
Conversations with distressed farmers have become more frequent for Frank Friar, a retired
agricultural lender who mans phones at the Wisconsin Farm Center. The organization advises
dairy farmers and crop producers on financing options, bankruptcy and when to leave the farm
behind. Last year, it received more than 2,300 calls, the most since 2010, and the center has
hired more staff in the past two years.
About a dozen times a year, Mr. Friar and his colleagues talk with a farmer who seems to be
contemplating suicide, he said. The center’s staff often calls family members or neighbors who
can check on the farmers, and sometimes Mr. Friar drives out to farms himself. “The
uncertainty, will they survive on the home farm, is [causing] more people to think negatively,”
Mr. Friar said.
It was a Sunday in April 2017 when a queasy feeling in Darrell Crapp’s stomach sent him
rushing home. He found his wife, Diana, lying crumpled on the floor of their Lancaster, Wis.,
bathroom. She had swallowed a handful of pills.
Overwhelmed with debt and with little prospect of turning a profit that year, the Crapps knew
BMO Harris Bank NA wouldn’t lend them money to plant. The bank had frozen the farm’s
checking account.
Byron, Neb., where Mr. Duensing lives. PHOTO: TERRY A. RATZLAFF FOR THE WALL STREET JOURNAL
Diana and Darrell Crapp, in Lancaster, Wis., on farmland they once owned. PHOTO: ERICH SCHROEDER FOR THE WALL
STREET JOURNAL
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Mrs. Crapp managed the fifth-generation corn, cattle and hog farm’s books. She had stayed up
nights drafting dozens of budgets to try to stave off disaster, including 30-day, 60-day and 90-
day budgets.
“It was too much for her,” Mr. Crapp, 63, said of his wife, who survived the incident.
Crapp Farms filed for chapter 11 bankruptcy the next month, with a total debt of $36 million.
In a written statement, Patrick O’Herlihy, a BMO spokesman, said the bank doesn’t comment on
specific customer relationships but strives to “approach every situation with empathy, and to
help our customers manage challenging financial situations.” He said the bank had been
working in the agricultural sector for more than a century and was committed to the industry.
At its height, Mr. Crapp and his two sons had grown crops on 17,000 acres. The farm’s last 197
acres, homesteaded by Mr. Crapp’s ancestors in the 1860s, will likely be auctioned this month.
Mr. Crapp now sells farmland for a regional realty company and helps run the family’s trucking
business, which transports grain and livestock feed for area farmers. His younger son drives
trucks for the company. His older son repairs grain storage bins. Mr. Crapp said he would have
to file bankruptcy again—likely under chapter 12—to discharge his remaining debts.
“We haven’t won very many battles,” said Mr. Crapp. “The bank pretty much owns us.”

Write to Jesse Newman at jesse.newman@wsj.com and Jacob Bunge at jacob.bunge@wsj.com
Appeared in the February 7, 2019, print edition as 'Wave of Bankruptcies Hits Farm Country.'