
Farm bankruptcies on the rise according to new Fed report - petethomas
https://thehill.com/policy/finance/418263-farm-bankruptcies-on-the-rise-according-to-new-fed-report
======
nickysielicki
I live in Wisconsin. I feel confident saying that this is just an anomaly
based on a strange summer weather pattern here in Wisconsin, not anything that
indicates some kind of issue with international trade policy or structural
issue with farming.

We have 68,500 farms in this state [1]. This summer was dry for a very long
time, then it was very wet, and then it stayed very warm well into September.
I suspect a lot of farmers had issues with moisture in their harvests. The
thing about farming is you are taking a huge risk every year with what you
invest, and farm equipment isn't cheap. If you make money, you make a decent
amount of money. But if you can't make the payments on your machinery, you're
basically done for.

I think this article was written with the intention of insinuating that this
is somehow related to the Trump Trade war, and to be fair, I am sure that made
or broke the profit margin for some farmers. But in general, I don't think
that's what's going on here, and I think it's cheap journalism for them to
play into that.

Somewhat related: Checkout "MN Millenial Farmer" on YouTube, it's some of the
most relaxing content you'll find online. [2]

[1]:
[https://datcp.wi.gov/Pages/Publications/WIAgStatistics.aspx](https://datcp.wi.gov/Pages/Publications/WIAgStatistics.aspx)

[2]:
[https://www.youtube.com/channel/UCp0rRUsMDlJ1meYAQ6_37Dw](https://www.youtube.com/channel/UCp0rRUsMDlJ1meYAQ6_37Dw)

~~~
peteradio
Why would farmers extend themselves so much that one bad year breaks them? Why
wouldn't they set aside some of that good money so in bad year they could
still pay the bills?

~~~
andreakate
You should watch Food, Inc. on Netflix. They have a segment on Monsanto and
how farmers have no choice but to buy seeds from them but the prices are so
high most farmers are barely able to keep their businesses running even with
subsidies from the Federal Government.

~~~
rcchyssser
Food inc is a rage piece. You can buy whatever seed you want. Does it yeild
like shit? Sure does. You WANT to buy next gen seeds every year.

~~~
andreakate
Have you watched it? Seed yield has absolutely nothing to do with the scene I
was referring to.

[https://www.huffingtonpost.com/2013/02/20/supreme-court-
mons...](https://www.huffingtonpost.com/2013/02/20/supreme-court-
monsanto_n_2720057.html)

------
kevmo
For the Chapter 12s that fail, many of these farm owners will end up working
the same lands in the same sorts of jobs. They just won't own the capital
anymore, and the surplus value of their labor will accumulate in the factory
farming companies. All but the largest organizations are currently struggling
in America. This tendency towards monopolies needs to be curbed, it degrades
food systems and reduces national resiliency. This is particularly dangerous
giving the imminent threat of climate change.

Bankruptcy is an area of American law that is ripe for use for restructuring
debtor-creditor relations to fight back against these trends. The entire Code,
particularly Chapters 7 and 12, could and should do more to assist consumer
and farmer debtors.

~~~
dmix
Sadly most interventions that western governments keep making in the name of
the little guy keep benefiting the megacorps, whether by unintended side
effects or from flaws in the policy-writing process (ie, countless small
political-favours, lobbying, etc).

Thomas Sowell wrote a great book about this:

[https://www.amazon.com/Wealth-Poverty-Politics-Thomas-
Sowell...](https://www.amazon.com/Wealth-Poverty-Politics-Thomas-
Sowell/dp/046509676X/)

There have been countless policies since the 1950s intended to offset wealth
disparity that have backfired and _hurt_ the poor. For example, the rent
control and other "tenant friendly" laws in Toronto and NYC in the 1970s
resulted in decrepit urban ghettos littered with arsoned apartment buildings,
because the only way a landlord could "renovate" was burn down their own
building. Just look at pictures of Harlem in late 1970/1980s...

It also created a massive disincentive to invest in new low-income property,
as the developers knew they'd make less money targeting the poor. So
development went towards upper/middle class housing (resulting in an even
worse lack of low-income housing in NYC and to a lesser extant Toronto by the
1990s).

Modern rent control laws have attempted to factor these "unintended side-
effects" but there are a hundred similar examples in that book. It keeps
happening and happening with every clever scheme concoted to help the poor.

The only winners of the massive growth in the US gov since the 1970s were
consistently large firms, who had their competition wiped out or huge barriers
of entry created in their markets in the name of 'progress'. And countless
well-meaning socially conscious economic policies usually works for a small
group while hurting a much larger group in the process, or works at the
beginning then as the side-effects build up it becomes a net-negative...where
it would have been better off to let the market function as is.

------
nostromo
Entrepreneurship is dying in America and it should concern us all.

[https://www.census.gov/newsroom/blogs/research-
matters/2018/...](https://www.census.gov/newsroom/blogs/research-
matters/2018/02/bfs.html)

While unemployment and asset prices have recovered in the past decade,
business starts have remained at historic lows. When these small businesses
die they aren't being replaced by upstarts. I wish we knew why.

I'm worried the future will be a small handful of oligopolist mega-corps. You
see this consolidation in every industry: banks have consolidated (there are
fewer banks now than at any point in modern US history), a few leading tech
firms, agriculture, energy, etc.

~~~
mdorazio
I'm in the process of shutting down my business, so anecdotally:

1) Globalization has made it almost completely impossible to make things in
the US unless they are massively overpriced goods (ex. luxury items or niche
specialty goods). Customers simply won't pay enough to cover your costs. And
there's a good chance that if you are successful, someone will copy your
stuff, make it in China, and sell it for half your price within 12 months.

2) In California at least, costs are pretty ridiculous for small businesses.
Between state, county, and city taxes, high labor costs, ridiculous healthcare
costs, rent, insurance costs, etc. etc. It is _far_ more expensive to start a
business today as a percentage of expected revenue than it was a few decades
ago.

3) The US IP protection and regulatory systems are out of control. Fending off
patent trolls, tiptoeing around trademarks, dealing with licensing systems
specifically designed to be too burdensome for small companies to bear,
spending time and money to deal with regulatory compliance, etc. puts small
businesses at a massive disadvantage.

4) Unpopular opinion, but I think today's workers are less suited to small
businesses than they used to be. Many younger workers say they want to work
for startups, but what they really want is a venture-backed cushy office with
catering and perks completely untied to actual business revenue. These types
of businesses account for a tiny percentage of actual small business starts in
the US, which are often not places today's workers want to work at, let alone
stay loyal to.

~~~
Aloha
I'll disagree with you on point one.

I can buy all sorts of US made shit, that is profitably sold, at reasonable
prices, overalls, jeans, mattresses, washing machines, boots, cars - its that
the margin is lower in the states as it costs 2-5% more to make something
here.

The issue is, many things here cannot be made here with any ease, because the
ecosystem for them no longer exists.

I'm willing to pay 10% more for american made things - I suspect most
americans would be too, given the option.

~~~
zjaffee
Exactly this, for most generic goods, automation has reached the point where
the cost of producing goods somewhere not too far from a major American rail
route is only marginally more expensive to deliver to the end consumer than
had you produced it in China or elsewhere. The problem is that the Chinese
manufacturing environment has a much tighter supply chain, where all the
precursor products needed are also manufactured nearby with heavily optimized
supply chains for getting raw goods where they need to be. This is especially
true with high weight added products such as appliances.

The real problem is that we absolutely suck at manufacturing anything other
than items that only really make sense to manufacture locally (certain food
items, detergents), where in terms of exports we only exceed at certain types
of heavy machinery along with certain chemical and polymer products.

~~~
Aloha
I think its possible to bring the ecosystems back - but you have to start at
the top of the chain, and work backwards. Not at the bottom up - make a price
competitive business with foreign made bits, and eventually thru protectionist
trade policy, bring back lower and lower parts of the supply chain - we may
find it makes sense to stop half way down, and not try to bring it all back -
we may not.

------
mrleiter
Farming is harsh and without subsidies even more farms would go bankrupt.
Prices for goods are low, manufacturing cost is high, margins are ridiculously
low. Add the fact that maintaining a farm is hard work, both physically and
mentally.

I worked on an alp in the mountains for a month, doing everything from
cleaning the stables, milking cows, herding them on steep mountainous terrain,
cooking, feeding the sick animals. I had a 16h work day; all while earning
almost nothing (I did it to know what it means to work in tough situations).
My boss and his family hardly had anything left when the month ended.

I don't know how to fix this, but it's important.

~~~
goplusplus
Also, Americans are used to paying subsidized, artificially low prices for
agricultural products. I don't think many of us realize the actual cost of
food production.

~~~
mrleiter
Yes, correct.

------
tracker1
I don't think it's entirely surprising. Not to mention desertification without
proper grazing and crop rotations. Competition from mega farms. And the
practices of organizations like Tyson, where farmers are encouraged to take
out huge growth loans "owning" everything that costs money, and not owning the
product itself. Add to this what the likes of the farming equipment companies
are doing to lock in maintenance costs and ever growing expenses.

I think the first thing(s) that should be done is eliminate farm aid to farms
that own more than X acres, or are owned by parent companies owning more than
X acres of land. Significantly roll back the DMCA. Third, would probably be to
re-secure those loans on better terms. It's a national security issue at its'
core.

------
wcchandler
Honestly the writing has been on the walls for quite some time now. I’ve
argued this with a few applications to YC. Farming in America is about to have
a hard pivot. I definitely see it going from large-scale, monocultural
enterprises to small-scale, mostly independent, polycultural, bio-intensive,
sustainable farms. (Sorry for all the buzzwords, not sure of a better all-
encompassing term)

If you’re looking for something to invest in it’d be AgTech with a focus on
these new farmers as users.

~~~
Loughla
Please explain.

Because what I'm seeing is a pivot in exactly the other direction. Near urban
centers you're seeing more 'specialty' farms like you spell out. These farms
cater, almost exclusively, to the wealthy.

But out in the breadbasket, there has been an absolute crush of consolidation.
Fewer, larger farms are producing the goods.

I argue that we're going to see (or rather are already seeing) the wal-
martization of farming. Few, HUGE scale producers who work at a scale that is
just so much larger than what we have now they can still turn a profit.

~~~
atourgates
Yes. You just described the split perfectly.

Small scale production is going for specialty products, at higher prices, to
specialty consumers. Think of a local vegetable farm that sells to farmer's
markets, or a goat dairy that's making chevre to sell at specialty groceries
in a 50 mile radius of their farm.

On the other hand, gigantic companies are increasingly controlling land used
for industrial agriculture. Near me, a recently incorporated LLC (aka holding
company for investors) just paid $171-million for 14,000 acres of irrigated
farmland in Eastern Washington [1]. At that scale, there's simply no way that
the traditional "small family farmer" can compete with industrial ag.

The few that have near me, are large families that essentially operate like a
business. They've managed to hold on to their traditional farmland, and then
expanded into what are essentially family-owned large-scale industrial ag
operations. Good for them, but they're the strong minority.

[1] [https://www.heraldnet.com/business/big-farm-
deal-171m-for-14...](https://www.heraldnet.com/business/big-farm-
deal-171m-for-14500-acres-in-eastern-washington/)

------
duxup
Historically speaking farming has been a bit of a gamble as far as occupation
/ running a business. Booms and busts abound.

There's a bit of a myth about how farming should be, or was, but it really
just had some booms here and there and then busts rather than any real golden
age that lasted very long.

~~~
Loughla
Agriculture was the main driving force of the world economy for eons? It was a
stable source of food and income for families and communities for generations.
How is that not a golden-age?

As for boom and bust - agriculture is like investing. You may not make much in
a year, and you may lose money in two or three, but over the course of your
lifetime, you accumulate wealth (land) and prosper. The issue, at least in my
area, is that property is just prohibitively expensive. I am by no means in a
hot area of the country, but the price of an acre of land has almost tripled
in the last 15 years.

Also - that so much of our food is produced by so few individuals is an
incredibly recent development, like less than 40 years recent development.

I'm not really sure what all that adds up to, but I'm sure it's something.

~~~
froindt
> The issue, at least in my area, is that property is just prohibitively
> expensive.

There's a dangerous mentality which comes across farmers frequently. The
neighbor is getting out of farming for whatever reason and putting their land
up for sale. Land is typically held for decades, and having any of your
neighbors selling their land may never happen again in your lifetime.

So farmers end up paying ridiculous amounts of money for land which will give
them a very small positive, or often a negative, return on investment.

And good luck if you want to get into farming. The capital expenditure is
ridiculous, even just for 40 acres of land. Medium quality farmland was
running $6,800/acre in 2017. [1] $272,000 get you 40 acres without buildings,
equipment, animals, seeds, a well, etc. It's so easy to hit $500k even if you
went with used equipment. If you tried this, you'd probably want to build your
own brand and get people willing to pay a significant premium for your product
rather than trying to grow commodity products.

[1] [http://dreamdirt.com/blog/iowa-farm-land-land-values-
up-2-in...](http://dreamdirt.com/blog/iowa-farm-land-land-values-
up-2-in-2017/)

~~~
Loughla
In my area, again anecdotal, no local guy has purchased property over 5 acres
at any land auction in the last 5 years. Either mega-farm-corps have, or
hunting/outfitting mega-corps.

The huge companies get involved and take the price for 40 acres from a
relatively sensible $120,000 (what I purchased at 10 years ago) to $750,000+.

If you can't work at a scale that is so much larger than anything a family
farm can, then you're priced out immediately. And if the farming mega-corps
are not interested, it's because the ground isn't fit for row-cropping and the
mega-corp nationwide hunting trek outfitting companies will double your bid
without blinking.

It's a sad state of affairs, really. The only people who have enough money to
play the game are either corporations or are in their 90's and bought the
ground when it was $30/acre.

~~~
jonknee
> It's a sad state of affairs, really. The only people who have enough money
> to play the game are either corporations or are in their 90's and bought the
> ground when it was $30/acre.

I don't think it's sad, more efficient users of resources are bidding them up
which is exactly what they should be doing. The idea of a small farmer is
great and has a lot of American nostalgia, but in general a giant company that
produces much more food on the same land is way better for the country as a
whole. It gets messy with subsidies, but the idea of more efficient players
replacing small timers is how we keep upping productivity year after year and
get richer as a country.

~~~
Sileni
We're not getting stronger as a country.

A handful of corporations are gaining massive influence over our political and
legal systems. The "small farmer" is precisely what our country was founded on
and was considered our strength. It allowed us to be something closer to a
true democracy as opposed to the functional oligarchy we're running at this
point. You're not an independent citizen if you have to depend on an employer
to keep you fed, sheltered, and healthy.

It's only more efficient if you consider "generation of theoretical GDP" the
ultimate badge of efficiency. If it's sitting in some banker's pocket, extra
productivity doesn't really benefit anyone.

~~~
Loughla
You nailed it. Honestly I couldn't say that any better.

It is more than nostalgia. It's a strength. What we're seeing in SO many areas
is just a race to the bottom.

------
chabes
So much for that $12 billion in farm aid. Who’s actually getting that money?
Big ag?

~~~
duxup
It benefits a lot of farmers actually.... it's just not "enough" for everyone.
The whole system seems so propped up by various systems that I'm not sure what
a relatively simple one would even look like.

Not to say I disagree with incentivizing food production at home
altogether.... it's just such a mess.

~~~
adrr
Doesn't the US spend around $100B a year on farming subsidies from buying
crops, to paying people not to farm etc? Not even counting indirect subsidies
like requiring ethanol be added to gas.

------
howard941
Small solace it'll be but Chapter 12 bankruptcies are a lot more more flexible
and the debtors more likely to complete their plans than the Chapter 13 and 11
option afforded the rest of us.

See [http://www.uscourts.gov/services-
forms/bankruptcy/bankruptcy...](http://www.uscourts.gov/services-
forms/bankruptcy/bankruptcy-basics/chapter-12-bankruptcy-basics) for ex

------
adreamingsoul
I’ve started, invested, and sold several startups and small buisnesses.

I was alurred into “stability” by staying with the corporation that aquired a
startup I was working for. It was my decision, but now I regret it.

I’ve been working tirelessly to transition back into being independent, but
now I too have a family to support and the current state of health care
coverage in the US is one of the biggest risks I see.

Interestingly, I’ve seen more entrepreneurs lately from countries like Canada
and Norway who have founders that aren’t as stressed when compared to here in
the states. I don’t have any data points to prove my hypothesis, but I often
wonder if we are doing a disservice to ourselves here in the US. I guess only
time well tell.

~~~
sjg007
We absolutely are. The only workaround has been a spouse who works who carries
the insurance or you go without. The ACA actually helped increase
entrepreneurship initially. I think it gets harder with a family though vs
being single.

------
blang
Interestingly farm land prices are stable and rising slightly (in Iowa, 2017
numbers)

[http://dreamdirt.com/blog/iowa-farm-land-land-values-
up-2-in...](http://dreamdirt.com/blog/iowa-farm-land-land-values-
up-2-in-2017/)

~~~
mrleiter
> 2017 has been a really good year to sell a good quality farm.

Who buys them? Maybe big agro? Or maybe convert it into building-approved
land? Report doesn't exactly say as far as I can tell.

~~~
bluGill
In iowa it is illegal for corporations to own farms. (with exceptions for seed
companies and equipment companies)

~~~
mrleiter
Interesting, didn't know. Thanks!

------
driverdan
These numbers aren't meaningful without looking at the bigger picture.

What percentage of farms are going bankrupt? 70 farms seems like a very small
percentage.

How many new farms started?

------
gammateam
I think I'm going to start learning Mandarin next semester

Not because China is more structurally sound, because its not, but the
opportunities - partly because of the inefficiencies - seem massive on
mainland and greater China

I just want to know what people think about anything, out there, from their
perspective.

I was in Australia and a young blond woman in college was on her social
justice kick, talking about how horrible the US must be, and it was funny to
me because her perspective was so limited to civil rights abuses and valid
healthcare and education inequalities.

I told her "yeah but none of that would apply to you".

Because she doesn't know about the socioeconomic component, and the heavy
correlations to the demographics of socioeconomic brackets, and the history of
those demographics, along with the accessibility and strength of legal
defense, if you can afford it.

and I bet China is the same way or similar, especially if you come to the
environment with a bankroll already.

< End Tangent

------
empath75
So it turns out that trade wars are bad?

~~~
latch
The article says bankruptcies have "increased steadily" since 2014. It does
mention China, and the trade war, but I think when they say "falling commodity
prices" they are referring to a longer/broader issue. But it doesn't say why
else commodity prices are falling, and I'm be happy if someone enlightened me.

~~~
caublestone
The value of brand is rising which increases the prices paid by consumers for
commodities. This makes people buy less of the underlying commodity and more
of the overarching brand.

Think about coffee. It’s a commodity. But more people are spending $4-5 on a
single cup instead of $4-$5 on a pound of grounds. Spending power does not
match price change.

A good historical case study is Standard Oil. In an effort to stabilize prices
and reduce peaks, Standard oil established last mile delivery for refined oil.
People bought Standard Oil at the grocery store. Standard didn’t start buying
oil wells until 20 years into the company after they had pressured prices down
to the bottom.

~~~
heavenlyhash
Grains are sold as a bulk commodity. The sale typically takes place at a
"grain elevator" where the grain is dumped into a shared storage pool by the
truckload.

I'm not sure how anything about brands could apply. Any "brand" ends at the
grate where you dump the grain.

Similar with other ag products. Remember how we just had that E. Coli outbreak
in lettuce and nobody had any idea for several days where exactly it came
from, so they had to broadcast the warning across the entire nation?

