US Farm Bankruptcies Rise Amid Falling Prices, Rising Costs

The agricultural sector is experiencing a significant upswing in bankruptcies, a trend that, while currently below historical peaks, signals growing financial strain on American farm operations. This increase marks a reversal from a period of decline and points to systemic issues within the farm economy impacting profitability and liquidity for producers.

Farm Bankruptcies See Concerning Rise

Recent data from the Federal Reserve Bank of Minneapolis reveals a concerning uptick in farm bankruptcies. In the second quarter, filings rose to 93, a notable increase from 88 in the preceding quarter and nearly double the 47 recorded at the close of 2024. While these figures remain considerably lower than the 2020 peak of 169, the upward trajectory since 2022 is a clear indicator of mounting economic pressures.

Factors Driving Financial Distress

This resurgence in financial distress within agriculture is largely attributed to a confluence of factors, including escalating production costs and a dramatic decline in crop prices. For instance, corn prices have plummeted by approximately 50% since 2022, while soybean prices have seen a roughly 40% decrease. These market dynamics significantly erode the revenue streams for farmers, making it challenging to cover operational expenses.

Adding to these challenges, ongoing trade disputes have disrupted traditional export markets. The current trade tensions have impacted China’s purchasing of U.S. soybeans, a historically significant buyer. This disruption, coupled with a generally weak decade for crop prices outside of a brief pandemic-era surge, creates an environment of uncertainty for farmers facing the upcoming harvest season.

Government Payments Mask Underlying Weaknesses

Despite forecasts from the U.S. Department of Agriculture suggesting an increase in farm incomes for the current year, a substantial portion of this projected growth is expected to stem from government payments, rather than market-driven revenue. This reliance on subsidy support highlights the underlying fragilities in the sector’s profitability, underscoring the limited capacity of current market conditions to sustain farm operations.

Weakened Income and Tightening Credit

Financial assessments from the Federal Reserve further corroborate these concerns. A recent survey on farm financial conditions indicated that weakened income has diminished liquidity among farmers, consequently driving up demand for financing. Simultaneously, credit conditions have tightened, with a significant percentage of respondents across various Federal Reserve districts reporting a decrease in repayment rates compared to the previous year.

Chapter 12: A Path to Restructuring

It is important to note that the current rise in farm bankruptcies does not necessarily imply widespread cessation of operations. Chapter 12 filings, specifically designed for family farmers, offer a legal framework to restructure debts and continue operations, potentially on a reduced scale. This mechanism allows farmers to avoid complete liquidation and seek a path toward financial recovery.

Calls for Government Intervention

Nevertheless, the severity of the situation has prompted agricultural trade groups to actively seek government intervention. These organizations are urging the current administration to implement measures aimed at stimulating demand for U.S. crops and addressing the farm economy crisis. Key proposals include negotiating trade agreements to re-establish robust export channels, particularly with China, and advocating for increased ethanol blending mandates, which would boost demand for corn. The American Soybean Association has directly communicated the critical financial strain on soybean farmers, highlighting the unsustainable combination of falling prices and rising input costs, and warning of the precarious position of U.S. soybean farmers in prolonged trade disputes.