What a difference a year can make. After a near-record number of Chapter 12 farm bankruptcy filings in 2020, according to data from the US courts, Chapter 12 bankruptcy filings fell 50% in 2021. The number of Chapter 12 filings in 2021 is the lowest in a decade and the first time in at least 10 years that ‘there are less than 300 deposits. The decrease in bankruptcy filings is a notable change given the significant increase in the number of bankruptcies over the previous three years.
Chapter 12 Bankruptcies by Region
Chapter 12 bankruptcies declined in all regions in 2021. The region with the largest percentage decrease in Chapter 12 filings was the Northeast â Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island and Vermont â which saw an 82% decline from 2020, with 23 fewer Chapter 12 bankruptcies. The region with the largest decrease in Chapter 12 filings in absolute numbers was the Midwest â Iowa, Illinois, Indiana , Kansas, Kentucky, Michigan, Minnesota, Missouri, North Dakota, Nebraska, Ohio, South Dakota and Wisconsin, which had 144 bankruptcy filings. in 2021, compared to 297 filings in 2020 â a decrease of 153 filings. The Midwest still leads all regions in the number of filings, accounting for 52% of all Chapter 12 filings in the United States.
Other regions of the country also saw significant declines in the number of filings in 2021, compared to 2020. Four regions saw double-digit declines in the number of Chapter 12 filings, both in absolute numbers and percentage. The North West saw 42 fewer filings in the past year, down 81% from 2020. The South East saw 35 fewer filings in 2021, down 40% from 2020. West and Southwest, despite drought conditions that persisted through much of the growing season, had 10 and 18 fewer Chapter 12 bankruptcies, respectively, over the past year, in down 53% and 40%, respectively, from 2020. Finally, Mid-Atlantic has had two fewer Chapter 12 bankruptcies in the past year, down 8% from 2020 , making it the region with the lowest year-over-year decline.
Chapter 12 Bankruptcies by State
The total number of bankruptcies filed by state varies widely, ranging from no bankruptcies in some states to as many as 27 filings in others, as shown in Figure 2. Alaska, Connecticut, Hawaii, Maryland, New Hampshire, Nevada, Rhode Island, Utah, West Virginia and Wyoming had no Chapter 12 bankruptcy in the past year. These states have consistently had a low number of bankruptcies over the past decade. In contrast, Wisconsin (27) and Minnesota (26) led the nation in Chapter 12 filings. Six additional states saw double-digit filings in 2021: Kansas (19), Iowa (17), Nebraska (17), North Carolina (12), Alabama (10) and Georgia (10).
As shown in Figure 4, the total number of bankruptcy filings decreased in 36 states and 10 states had no filings in 2020 or 2021. Contrary to the general trend, five states saw no decline in the number of bankruptcy filings. filings in 2021 compared to 2020. Three states â North Carolina (12), Alabama (10) and New York (nine) saw an increase of seven, three and one filing, respectively, in 2021 compared to 2020.
For the first time in the past decade, every region in the United States had fewer farm bankruptcies in the past year, compared to the year before. This decline is certainly worth celebrating; however, it is important to remember that 276 Chapter 12 bankruptcies were filed in 2021. Farmer returns have been incredibly volatile over the past decade, ranging from 58.6 billion $134.5 billion between 2012 and 2021. The USDA’s current projection of $95.2 billion in returns in 2022 falls almost in the middle of this range. So while the past year has led to higher commodity prices for some, it has most certainly led to higher input costs for all. How the latter compares to the former will determine whether the downward trend in bankruptcies will continue in 2022. For once, this is a trend that we hope will continue.