For the first time in the past decade, every region of the United States recorded fewer farm bankruptcies in 2021 than the previous year.
With dramatic declines in Chapter 12 farm filings, mid-Atlantic states, including Virginia, are maintaining a slower pace, with an 8% decline in filings in 2021.
Chapter 12 bankruptcy allows family farms to avoid liquidation or foreclosure. According to US court data, nationwide Chapter 12 bankruptcy filings fell 50% last year.
“What a difference a year can make,” said Veronica Nigh, senior economist for the American Farm Bureau Federation, in a report by AFBF Market Intel. “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 have been fewer than 300 filings. The decrease in bankruptcy filings is a notable change given the significant increase in the number of bankruptcies over the previous three years.
Five farm bankruptcies were recorded in Virginia in 2021, similar to 2020. Mid-Atlantic recorded 15 fewer Chapter 12 bankruptcies than in 2020.
A snapshot of previous years reveals a positive trend in Virginia. While farm bankruptcies in 2019 rose nearly 20% nationally, there was no significant increase in the number of Chapter 12 filings in Virginia. Six Chapter 12 farm bankruptcies were listed for Virginia in 2018 and 2019.
Industry experts hope this slow but steady trend will continue for Virginia and surrounding states.
MidAtlantic Farm Credit regional lending manager Matt Ritenour, based in Winchester, said the report gave rise to optimism.
“Every farm operation is truly unique, but despite the many challenges 2021 has brought us, the Virginia farming community as a whole has had a positive year,” he said. “Our members and the industry have shown resilience and continue to successfully provide food, fuel and fiber to our country.”
Economists agree that the decline is worth celebrating; however, they do not lose sight of the fact that 276 Chapter 12 bankruptcies were filed in 2021.
“Farmer yields have been incredibly volatile over the past decade,” Nigh said. “So while last year brought higher raw material prices for some, it most certainly led to higher input costs for all. How the latter compares to the former will dictate whether the trend towards decline in bankruptcies will continue in 2022. For once, this is a trend that we hope will continue.