Although nearly 10,300 Chapter 12 farm bankruptcies have occurred since October 1996, a disproportionate number have happened in regions where commodity volatility is highest. Meanwhile, national economic conditions such as the Great Recession have contributed to temporarily widespread upticks in filings. Those are among the findings of a new report by researchers at The Ohio State University.
“Some regions have experienced relatively low and stable bankruptcy rates,” write Robert Dinterman and Ani Katchova. “One such region coincides loosely with the Corn Belt, encompassing the states of Iowa, Missouri, Illinois, Indiana, and Ohio post-2000.”
Meanwhile, the Northeast and Southeast “appear to have elevated levels of financial stress post-2009,” the authors note. The West Coast and states such as Hawaii and Nebraska also have higher bankruptcy rates per 10,000 farms.
Much of this discrepancy can be attributed to the structure of commodity markets in specific geographic areas, explains Jackson Takach, Farmer Mac economist.
“Those low rates are probably indicative of the good economics of grain producers throughout that time period,” Takach says. “In the Southeast and in the Northeast, I think it’s more that there are fewer farms. They’re also more susceptible to swings in commodities because those commodities are typically nonfungible commodities. They’re not like the futures markets. There’s no way to easily hedge them.”
Read more insights from The Feed, Farmer Mac’s quarterly update on agriculture, at farmermac.com.
