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Farmers fear 2020 will bring more bankruptcies, closures

By
Jessie Higgins
Farmers remain skeptical that China will fulfill its promise to buy $80 billion of American agricultural goods. File Photo by Jessie Higgins/UPI
Farmers remain skeptical that China will fulfill its promise to buy $80 billion of American agricultural goods. File Photo by Jessie Higgins/UPI

EVANSVILLE, Ind., Feb. 5 (UPI) -- American farmers are beginning to fear that, despite the flurry of trade deals that came through at the start of 2020, this year will bring more low commodity prices, farm closures and bankruptcies.

Commodity prices have remained low this year -- even after the Jan. 15 signing of a phase one trade deal with China that includes a promise to purchase $80 billion of American agricultural goods over the next two years.

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Market experts and farmers immediately questioned whether China would make good on its promise. Until they know for certain, commodity prices likely will remain low.

"All of agriculture has really been struggling for four or five years now, and it all boils down to what farmers are getting paid for their products," said Darin Von Ruden, a Wisconsin dairy farmer and president of the Wisconsin Farmers Union.

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Commodity prices started to fall in 2014, said John Newton, chief economist at the American Farm Bureau Federation. At that time, the global supplies of many commodity foods rose above demand, pushing prices down.

It's common in agriculture for commodity prices to rise and fall in a cyclical pattern every few years. But this period of low prices has endured longer than normal because in 2018, as prices were beginning to rebound, the United States entered a trade dispute with its No. 1 agricultural buyer -- China.

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As trade with China slowed to a trickle, commodity prices plummeted further. At these levels, some farmers say they are struggling to break even -- much less earn a wage or pay down farm debt.

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According to data compiled by the American Farm Bureau Federation, family farm bankruptcy filings rose by 20 percent in 2019.

"If you have a bad year, you add the debt on," said Donald Swanson, an attorney who handles farm bankruptcies at Koley Jessen in Omaha, Neb. "Then you have another bad year, and you add that debt on. Sooner or later, you're in trouble."

With so many farmers struggling to pay their farm debt, banks that extend farm loans are likely no longer taking on new clients, Swanson said. The question now is whether those banks will continue to extend loans to existing clients.

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For many farmers, now is when they take out loans to pay for their 2020 crop.

"Farmers are feeling really on edge," farmer Von Ruden said. "This is the time of year when they're booking seed and fertilizer, and a lot of farmers are wondering if the money will be there."

If it's not, those farms could be heading for bankruptcy court this spring, he said.

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"The reality is this is what we're facing," Von Ruden said. "It's not a positive picture. And I want people to understand that."

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