Chapter 12 Filings Increase 24% Compared to 2018.
Farm debt for 2019 is projected to be a record-high $416 billion, with $257 billion in real estate debt and $159 billion in non-real estate debt. The repayment terms on this debt, according to data from the Kansas City Federal Reserve, reached all-time highs for a variety of categories.
All non-real estate loans saw an average maturity of 15.4 months, feeder livestock had an average maturity period of 13 months, other livestock had a maturity period of 18 months, and other operating expenses, i.e., loans primarily for crop production expenses and the care of feeding livestock, had an average maturity period of 11.5 months – all record highs. Put simply, farmers are taking longer to service their debt – a trend made easier due to historically low interest rates.
Across the U.S., farm loan delinquencies and Chapter 12 bankruptcies are rising. The deteriorating financial conditions for farmers and ranchers are a direct result of several years of low farm income, a low return on farm assets, mounting debt, more natural disasters and the second year of retaliatory tariffs on many U.S. agricultural products.
John Deere expects U.S.-China trade war to hurt its bottom line in 2020.
John Deere said in its fourth-quarter earnings report that it expects lower earnings in 2020 due to a decline in worldwide equipment sales, Reuters reports.
The world’s largest farm equipment manufacturer cited ongoing tensions from the U.S.-China trade war as well as harsh weather in the U.S. as factors that have led farmers and construction companies to decide against large new investments.
Deere CEO John May states that, “John Deere’s performance reflected continued uncertainties in the agricultural sector. Lingering trade tensions coupled with a year of difficult growing and harvesting conditions have caused many farmers to become cautious about making major investments in new equipment.”
Deere said it predicts sales of its agriculture and turf equipment will decline between 5% and 10%, while sales in its construction and forestry division may be down between 10% to 15%. It also believes agriculture sales in the U.S. and Canada — its largest markets — will slump by 5%, citing decreasing demand.
America’s largest milk producer, Dean Foods, is set to file for bankruptcy.
The company has struggled to stay alive as U.S. demand for cow milk has dropped, in part due to a growing preference for non-dairy substitutes such as almond or soy milk. The company’s stock fell 80% this year, having lost 7% in sales during the first half of 2019. Profits also plummeted by 14%.
Dean Foods produces Land O’Lakes milks, Dairy Pure and Organic Valley products. The company is filing for a Chapter 11 bankruptcy to help reorganize its debts, which include workers’ pensions.
According to a company statement, Dean Foods is looking to sell and is in talks with the Dairy Farmers of America for a potential deal.