A farm crisis on par to what was observed in the early 1980s could be coming, especially since the US Senate passed a bill late last week that makes it more accessible for farmers with larger debt loads to file for bankruptcy protection, reported Reuters.
The bipartisan bill, designated as the Family Farmer Relief Act of 2019, increases the total debt load of how much a farmer can have to meet the qualifications to file Chapter 12 bankruptcy, to $10 million from the prior $4 million ceiling.
According to the US Department of Agriculture (USDA) data, operating a farm today involves much higher costs than it did three decades ago. Experts say without a complete reform of the law, mom-and-pop farmers would be subjected to Chapter 11 bankruptcy protection, which is expensive and chaotic.
The bill was passed last Thursday and earlier by the US House of Representatives, is headed for President Trump’s desk to sign. Judging by the president’s comments on Tuesday morning about the potential of a third farm bailout, it seems that this bill will most likely get passed.
Republicans and the Trump administration are preparing for Farmageddon with new interventionist measures that will hopefully cushion farmers from retaliatory tariffs by China.
The new bill once signed, will support President Trump’s farm base that has been walloped by retaliatory tariffs by China on agriculture products.
The bill’s intended purpose is to help farmers avoid “mass liquidations and further consolidation in the largest sectors of the industry,” said US Senator Chuck Grassley, a Republican from Iowa where soybean, pork, corn, feeds and fodder, and processed grain products are the top exports of the state.
Bankruptcy lawyers and agriculture trade groups have been quickly pushing for the change due to farm incomes collapsing in the last several years, which have unleashed a tidal wave of bankruptcies not seen since the 1980s farm crisis.
“With farm bankruptcies at a record high in some regions of the country, Senate passage of the Family Farmer Relief Act sends an important signal to family farmers and ranchers that our elected officials are willing to act in these challenging times. The bill gives more farmers an opportunity to qualify for financial restructuring so they can keep their land and livelihoods. We are eager for the President’s signing of this bill and appreciate the leadership of Senator Chuck Grassley (R-IA) and all the cosponsors for their support of America’s farmers and ranchers,” said American Farm Bureau Federation President Zippy Duvall.
Reuters notes that not everyone is excited about the change. The American Bankers Association told lawmakers to oppose the bill and warned “credit terms would tighten considerably for many family farms, with a disproportionate impact on the most distressed farms most in need of credit,” according to a memo sent to House lawmakers on July 25.
A Reuters investigation of the Federal Deposit Insurance Corporation showed that major Wall Street banks are now winding down risky lending to farmers as farm incomes decline and delinquency rates soar.
Government is preparing for a farm crisis; this time, it could be worse than the 1980s.