Chapter 12 bankruptcy, a vital safety net for American farmers and ranchers, offers flexible debt repayment options when all other avenues have been exhausted. However, the recent surge in filings reflects deeper struggles within the U.S. farm economy. According to the U.S. Courts, 216 farm bankruptcies were filed in 2024—a 55% increase from 2023—marking the end of a four-year downward trend.
Regional and state-level impacts
Most regions across the country saw increases in Chapter 12 filings last year. Territories outside the contiguous 48 states, categorized as "Other" by the U.S. Courts, experienced a threefold rise to 14 bankruptcies, the highest in five years. In the Northwest, filings doubled compared to 2023, tying the Southwest with 12 filings each.
Other regions recorded significant increases: the Northeast experienced a 25% rise with five filings, the Southeast saw a 55% increase with 62 filings, and the Midwest faced the highest surge, with a 69% increase bringing the total to 71 filings.
On the state level, California had the highest number of bankruptcies at 17, followed by Nebraska (15), Arkansas (16), and Louisiana (13). Michigan recorded the most dramatic increase, going from zero filings in 2023 to 12 in 2024. In contrast, 14 states and territories reported no filings, although seven states that had none in 2023 recorded at least one in 2024.
Economic pressures and declining row crop revenues
The increase in bankruptcies coincides with declining farm incomes. Row crop markets have suffered sharp decreases in cash receipts for three consecutive years. Further declines are expected in 2025, with corn and soybean receipts projected to drop by over 4% and 6%, respectively. Cotton experienced a nearly 24% drop in 2024 but is forecast to see modest gains in 2025.
Mounting debt
Net farm income in 2024 fell to a four-year low, declining nearly 24% over two years. Rising production costs and declining revenues have diminished farm liquidity, forcing many to rely on loans to cover expenses. According to the Kansas City Federal Reserve, non-real estate farm loans surged by 25% from late 2023 to 2024, while agricultural loan interest rates remained at decade-high levels.
Farm debt rose by 4% in 2024, reaching nearly $562 billion, and is projected to grow further in 2025. Loans rated as "less than acceptable" also increased, signaling a higher risk of default. In the Midwest's Seventh Federal Reserve District, default risks reached their highest level since 2020, though delinquency rates remained below 1%.
A struggling farm economy faces an uncertain future
Financial challenges continue to mount for U.S. farmers. The Federal Reserve Bank of Chicago estimates that nearly 2% of farmers may not qualify for loans in 2025. Declining farmland values—down 1% in 2024—further limit borrowing capacity.
For more information:
American Farm Bureau Federation
Tel: +1 202 406-3600
Email: media@fb.org
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