Digest Highlights

Chapter 12 bankruptcy filings lower in 2020

Ongoing government financial support and recent higher commodity prices likely slowed the pace of Chapter 12 farm bankruptcy filings in 2020, according to data from the American Farm Bureau Federation (AFBF). However, the decline should not be considered a sign that the farm economy has recovered.

Natzke dave
Dave Natzke
Editor / Progressive Dairy

Citing district court caseload statistics, the number of Chapter 12 filings declined to 552 in 2020, down 43 (about 7%) from 2019, AFBF chief economist John Newton noted in a recent AFBF Market Intel report.

By district, bankruptcies were the highest in western Wisconsin (39), Kansas (35), Nebraska (32) and eastern Wisconsin (30). Chapter 12 filings in the two Wisconsin districts combined, at 69, were up 12 from 2019.

Among the 24 major dairy states, Chapter 12 filings totaled 364 for the year ending Dec. 31, 2020, down 34 from the year before. The total does not necessarily mean all filings were dairy operations, however.

Outside of Wisconsin, 2020 Chapter 12 bankruptcies in other dairy states were up slightly in Colorado, Indiana, Iowa, Oregon, New Mexico and South Dakota.

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Looking ahead, cash receipts from the sales of crops and some livestock are expected to increase in 2021, but some expenses are likely to increase and federal support is expected to be lower. The net effect will likely be lower but above average net farm income in 2021.

In addition to agricultural financial factors, off-farm income has also been a challenge given COVID-19 restrictions and inadequate broadband access.

One other condition may be factored in the decline in 2020 bankruptcy numbers: Due to the COVID-19 pandemic, only online filings were completed.

Global Dairy Trade index higher

The index of Global Dairy Trade (GDT) dairy product prices rose 1.8% in the latest auction, held Feb. 2. A price summary of individual product categories follows:

  • Skim milk powder was down 1.5% to $3,198 per metric ton (MT).
  • Butter was up 6.2% to $5,028 per MT.
  • Whole milk powder was up 2.3% to $3,458 per MT.
  • Cheddar cheese was down 2.3% to $4,178 per MT.

The next GDT auction is Feb. 16.

WFU, teamster leaders seek end to Canadian TRQ challenge

Leaders of the Wisconsin Farmers Union (WFU) and Teamsters Central Region Dairy Conference have called on the Biden administration to call off a challenge of Canada’s allocation of dairy tariff rate quotas.

In December, citing establishment of the tariff rate quotas as a potential dairy trade violation under the U.S.-Mexico-Canada Agreement (USMCA), the U.S. trade representative (USTR) office called for a consultation between the two countries. If a resolution could not be reached through consultation, the U.S. could initiate formal USMCA dispute settlement procedures.

The USTR action was backed by most major U.S. dairy organizations, including the National Milk Producers Federation (NMPF) and U.S. Dairy Export Council (USDEC), as well as members of Congress.

In a release in late January, the teamsters’ Tom Strickland and WFU President Darin Von Ruden urged the Biden administration to drop the “misguided enforcement petition” filed under the Trump administration, charging the action was another an attempt to undermine the Canadian dairy supply management system.

The WFU, through its Dairy Together project, is pushing for federal supply management policies in the U.S. The Teamsters Dairy Conference represents U.S. and Canadian members in dairy processing and bulk milk hauling.

USDA dairy product activity

The USDA’s Ag Marketing Service is soliciting bids for dairy products for domestic feeding programs. Bids will be accepted until Feb. 9, with contracts awarded that day for the following:

  • 82,000 pounds of print salted butter in 1-pound packages for delivery to various locations, April 1-June 30
  • 176,826 pounds of blueberry, strawberry and vanilla yogurt in cases of 4-ounce containers for delivery April 14-May 14 and 4,200 pounds of vanilla yogurt in 32-ounce tubs for delivery April 28-30
  • 38,800 pounds of shredded pepper jack cheese in 5-pound packages for delivery June 1-15

The USDA also awarded a contract for 75,600 pounds of mozzarella string cheese in boxes of 360 1-ounce packages for delivery April 1-June 30. Prices ranged between $2.60-$2.65 per pound. The winning bid came from Miceli Dairy Products, Cleveland, Ohio.

Ag Economy Barometer reveals near-term optimism, longer-term policy concerns

One measure of economic sentiment – the Purdue University/CME Group Ag Economy Barometer – indicates U.S. farmers are optimistic with short-term financial conditions but concerned about the future.

Latest survey results, revealed Feb. 2, show little change in how ag producers view current economic conditions compared to the previous month. That’s likely due to ongoing crop price rallies that support near-term income, according to James Mintert, director of Purdue University's Center for Commercial Agriculture. Nearly one-third of survey respondents expect better financial performance in the coming year compared to 2020.

Ag producers continue to think now is a relatively good time to make large investments in their farming operations. The percentage of farmers expecting to increase their machinery purchases held at its highest level over the last year.

However, producers responding to the survey are more wary of future deterioration in conditions, motivated by longer-run concerns about policies that could impact U.S. agriculture. The weakening expectations for the future appear to be tied to the ongoing trade dispute with China, possible changes in environmental policies, and the expectation of higher estate and income taxes over the next five years.

The Ag Economy Barometer provides a monthly snapshot of farmer sentiment regarding the state of the agricultural economy. The monthly survey collects responses from 400 producers whose annual market value of production is equal to or exceeds $500,000. Minimum targets by enterprise are as follows: 53% corn/soybeans, 14% wheat, 3% cotton, 19% beef cattle, 5% dairy and 6% hogs.

Things you might have missed

  • Dairy cow slaughter. Weekly dairy cull cow slaughter under federal inspection was estimated at 67,400 head for the week ending Jan. 16, 2021. That compared to 67,200 head for the corresponding week a year earlier, makes it the first time since early May 2020 that slaughter topped the corresponding week a year earlier.

  • CFAP 3 payments frozen. The USDA has suspended processing applications and distributing payments under a third installment of the Coronavirus Food Assistance Program (CFAP 3) until further notice. The Biden administration said a review of the program was needed to evaluate how payments were distributed. U.S. dairy farmers received about $2.975 billion through CFAP 1 and CFAP 2 but were not specifically targeted for CFAP 3 payments. Local USDA Farm Service Agency (FSA) offices will continue to accept CFAP applications during the evaluation period, which closes Feb. 26.

  • Washington overtime pay. A bill introduced in the Washington (state) Senate would protect dairy and other farmers from having to make retroactive overtime payments to employees. The state Supreme Court previously ruled as unconstitutional a 60-year agricultural exemption for employee overtime payments after 40 hours of work per week. The court’s majority opinion was silent on whether overturning the law meant farmers would be required to retroactively make up to three years of overtime payments. Since then, more than 25 class action lawsuits have been filed against farmers, most targeting dairy farms, according to state Sen. Curtis King (R-Yakima).

  • 2022 Ag Census. The USDA’s National Ag Statistics Service (NASS) recently mailed 2022 Census of Agriculture content test materials to 36,000 agricultural producers nationwide. Participants in the test are asked to provide information on the effectiveness of the 2022 questionnaire for various modes of data collection, including mail, telephone interviews and online reporting. The Census of Agriculture is conducted every five years.

  • PPP request. In a letter to heads of the U.S. Treasury Department and U.S. Small Business Administration, U.S. Sens. Tammy Baldwin (D-Wisconsin) and John Thune (R-South Dakota) asked that administration of the Paycheck Protection Program (PPP) reflect agriculture’s unique financial structure. To help ensure that more producers can obtain a PPP loan, a proposal would allow producers filing a Schedule F to use their 2019 gross income (up to $100,000) when calculating their PPP loan rather than net income, since many producers showed a net loss on their 2019 Schedule F due to the wet planting season and low commodity prices. They’re also asking for guidance excluding CFAP payments from farmers’ 2020 gross receipts for purposes of obtaining a second PPP loan.  end mark