Are Farmers Headed for Bankruptcy

Mar 18, 2014 | Bankruptcy

America’s Heartland has seen the worst drought in at least 50 years. Is the family farm done for? Will this be a bust for the farmer and a boon for the bankruptcy attorney?

Where are all the Real Rainmakers Anyway?

We keep hearing on the news about drought and crops failing. There are low yields of things like soy beans and corn. This leads to across-the-board higher costs for grains, for things that eat those grains, and for fuel made from grains.

Though the drought may be a rainmaker for bankruptcy attorneys, when is some actual rain going to fall? Almost the entire country is still suffering from the drought. It has remained most severe in the Midwestern states, which produce a large percentage of our critical grain crops like corn and soy beans.

Will the Heartland go Belly-up?

With such a severe drought, you might assume that across the country farmers are flocking to the nearest bankruptcy attorney’s office like sheep to the slaughter. But this has not been the case. In the states most affected economically by the drought, there has been little increase in the filings for bankruptcy. How is this so?

Supply and Demand

American farmers export more soy beans and corn than farmers anywhere in the world. The same drought that has affected the United States has affected the rest of the planet. Since the supply of these crops worldwide is down, the price has gone up. This increase in price has helped make up for the crop losses due to drought. Farmers who have been fortunate enough to avoid the drought-related losses have actually seen a dramatic increase in profits.

Crop Insurance: a Farmer’s Best Friend

It has become commonplace for farmers to invest in crop insurance. It’s a simple and logical business practice in an industry that is so at risk of being devastated by natural disaster. You will be hard-pressed to find a farmer who hasn’t invested in a crop insurance policy. And although their premiums might be going up next year, most farmers have been partially if not fully compensated by their insurers for any damages to their crops caused by the drought.

A Happy Ending, Perhaps?

Shakespeare’s comedies all have happy endings, but some are awfully dark in spite of the cheery finale. Dead corn stalks and barren fields are hardly the stuff of picture postcards. Fortunately though, market dynamics and careful planning have largely insulated America’s farmers from bankruptcy.

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