Advance Notice: Briefs

Farm bankruptcies rising in Michigan

By: - September 10, 2019 10:48 am

Tina Hinchley milks cows on the family farm she shares with her husband Duane on April 25, 2017 | Scott Olson/Getty Images

Delinquency rates for commercial agricultural loans are at a six-year high, a report from the Federal Deposit Insurance Corp. shows. 

Following several years of low farm income and increasing debt, the American Farm Bureau Foundation found that both the real estate and non-real estate lending sectors are at a six-year high. 

The report says 2.5% of commercial real estate loans in agriculture were more than 30 days past due during the first quarter of 2019, up .4% from the prior quarter. Non-real estate loans experienced a similar uptick in delinquency with 2.3% more than 30 days overdue, up 0.8% from the prior quarter. Both real estate and non-real estate delinquency trends were above the historical average.

The foundation said although delinquency rates are far below what they were during the Great Recession — when, at one point, 4% of real estate loans were more than 30 days past due —  the current trend is concerning. 

For the past 24 quarters, rates of loan delinquency have increased.

Farm bankruptcies are on the rise, too. In Michigan, there were 14 fillings for Chapter 12 farm bankruptcy from July 2018 to June 2019, according to U.S. courts calculations, five more than the previous year. The Midwest experienced 240 fillings of Chapter 12 farm bankruptcies from July 2018 to June 2019, a 12% increase from the previous year and more fillings than any other region.

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The American Farm Bureau Foundation notes that to combat these changes, the federal government has offered assistance to farmers, including passage of the Family Farmer Relief Act. Eligibility for Chapter 12 bankruptcy claims is broadened under this act, which allows those eligible to have a seasonal repayment plan schedule at a lower cost than other chapter filings.

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Anna Liz Nichols
Anna Liz Nichols

Anna Liz Nichols is a former Michigan Advance intern. She is a Michigan State University graduate who has reported for several publications, including MLive and Michigan State University’s award-winning student paper, the State News, where she covered the many tendrils of the Larry Nassar sexual abuse scandal.