Small farm bankruptcies doubled in past five years, report shows

Small farm bankruptcies in the state have more than doubled in the past five years, a Wisconsin Policy Forum report shows.

This comes amid sustained pressure on farmers due to low milk prices. The report says lower prices lead to less profit for farmers, who often resort to buying more cows to boost sales. That increased production contributes to falling prices, creating a “vicious cycle” with many small farms folding as a result.

WPF says other factors are also at play, including falling demand for liquid milk and high operating costs.

Milk prices in the state are down 13.1 percent from 2008, and 33 percent from the most recent high in 2014. Meanwhile, Chapter 12 bankruptcies — specifically for family farms — more than doubled between 2014 and 2017, going from 22 per year to 50. And since 2001, annual Chapter 12 filings have increased “more than sevenfold.”

Report authors say these trends are causing some farmers to borrow money to “ride out” the low commodity prices, but that practice is likely contributing to the higher rate of bankruptcies.

In the midst of these challenges, dairy farmers are becoming more efficient by driving up the amount of milk each cow can produce. Although the number of dairy cows in the state has remained somewhat stable, the report shows milk output rose 13 percent from 2012 to 2018.

Compared to the national average, Wisconsin farm profits have fared slightly worse, with farms losing half of their net income between 2011 and 2018.

At the same time, farms are consolidating into “fewer, larger farms that may better handle price shocks.”

The report shows the state had 11,400 total dairy cow herds in August 2012, but by August 2018 that had decreased to 8,419. The number of dairy cows rose slightly over the same period, going from 1,271,000 to 1,274,000.

Between 2011 and 2017, the number of concentrated animal feeding operations in the state went up from 233 to 315, for a 35 percent increase.

Although CAFOs have been widely criticized by environmental groups as major polluters, they’ve also been shown to reduce costs for farmers.

Total costs for farms with fewer than 50 cows averaged $22.79 per 12 gallons of milk, the report shows. But farms with 2,000 or more cows had average total expenses of $17.16 per 12 gallons of milk. The report cites the USDA’s Economic Research Service for these figures.

“Larger numbers of animals in confined spaces mean more waste for farmers to safely manage in order to avoid environmental impacts,” report authors wrote. “Likewise, state regulators have added duties and costs under state law to provide oversight of large farms and ensure clean water.”

Despite Wisconsin farmers’ current financial woes, the report shows farm revenues are a little above the national average. Dairy farmers in the state averaged $21.19 in revenue per 12 gallons of milk sold before costs, the report shows. That’s compared to the national average of $20.19.

And in the Midwest, report authors say Wisconsin dairy farmers have the “best margins in the region.” But they caution the figures provided in the report aren’t “all-encompassing.”

The conversation about how to improve the situation for farmers is a difficult one, report authors say, as the core issues of milk price and supply can’t be easily dealt with at the state level. The state would need to lobby the federal government for recommended changes.

But even at the state level, WPF says dairy industry stakeholders “seem to lack agreement on what those changes should be.” It’s noted that some producers are saying milk prices are “unlikely to recover” without federal pricing policy change aimed at addressing over-production.

See the full report: