Trade disputes over agriculture add pain to low commodity prices that have been grinding down American farmers for years.
Throughout much of the Midwest, U.S. farmers are filing for chapter 12 bankruptcy protection at levels not seen for at least a decade, a Wall Street Journal review of federal data shows.
Bankruptcies in three regions covering major farm states last year rose to the highest level in at least 10 years. The Seventh Circuit Court of Appeals, which includes Illinois, Indiana and Wisconsin, had double the bankruptcies in 2018 compared with 2008. In the Eighth Circuit, which includes states from North Dakota to Arkansas, bankruptcies swelled 96%. The 10th Circuit, which covers Kansas and other states, last year had 59% more bankruptcies than a decade earlier.
States in those circuits accounted for nearly half of all sales of U.S. farm products in 2017, according to U.S. Department of Agriculture data.
More than half of U.S. farm households lost money farming in recent years, according to the USDA, which estimated that median farm income for U.S. farm households was negative $1,548 in 2018. Farm incomes have slid despite record productivity on American farms, because oversupply drives down commodity prices.
Nationwide, the volume of loans to fund current operating expenses grew 22% in the fourth quarter from year-ago levels, hitting a quarterly record of $58.7 billion, according to the Federal Reserve Bank of Kansas City. The average size of these loans rose to $74,190, the highest fourth-quarter level in history when adjusted for inflation, the bank said.
To stay in business, some farmers have sold second homes purchased during a prosperous period earlier in the decade. They or their spouses have sought off-farm jobs to bring in additional income or pay for health insurance. Others have shrunk their operations, giving up rented ground or selling equipment to lower debt loads.
Bankruptcy by the Numbers
The articles also discusses suicides, forced auctions, and massive piles of debt that some farmers accumulated. The numbers do not seem all that large. But there just are not many farmers.
Assessing the Blame
This is not all Trump's fault. Heck, it's easy to claim that it's mostly not Trump's fault. But some of it is. Soybean and other agricultural exports to China plunged.
For many of those filing now, Trump's trade war with China was undoubtedly the final blow following a long sorry trip.
Rapidly Aging U.S. Farmer
This census, which is published every five years, shows that during the last 30 years, the average age of U.S. farmers has grown by nearly eight years, from 50.5 years to 58.3 years.
It’s important to remember that this figure includes only principal operators, meaning any large farms that have one farmer at the helm but other, younger farmers helping out will only have that one farmer at the top represented. Still, the increase reflects that for many years, new, young farmers were tough to come by, one expert says.
Canadian Beef Producers Enjoy TPP Trade Boost in Japan
The surge is due to Canada and Japan being in a TPP deal which Trump dropped out of.
As a result of the TPP agreement, Japanese tariffs on Beef imports from Australia, Canada, and New Zealand are 27.5% vs 38.5% for US beef exporters.
Japan is willing to cut tariffs on US beef, but guess what? Japan wants trump to lower tariffs on Japanese cars.
Trump's trade policies have been an unmitigated disaster.
Because of the plight of US farmers, I expect Trump will get a trade deal with China sometime in March. Both China and the US are losers in the fight.
Just don't expect an earthshaking agreement. Do expect earthshaking bragging over a deal that likely will not do much.
The US has trillion dollar deficits as far as the eye can see, and recession hasn't even hit. Unfortunately, the most likely way the trade deficit drops is via an import demand collapse in the next recession.
Mike "Mish" Shedlock