Money Makers Mentor

COVID-19 Causes Stress on U.S. Agriculture

Daily Chapter 11 filings have shown how the pandemic has wreaked economic havoc on retail, tourism, and energy businesses. Despite receiving less coverage, farmers and ranchers have also been suffering nationwide, directly and indirectly.

Chapter 12 bankruptcies, designed for family agriculture operators with regular income, have surged over the 12-month period through June 2020. Nearly 580 filings, 8% above the prior year, have been reported, according to U.S. Courts data.

Multiple factors have contributed to the increase of struggles amid COVID-19, according to the American Farm Bureau Federation (AFBF). The Midwest, Northwest, and Southeast were the hardest-hit regions of the U.S., representing 80% of nationwide filings, according to Feedstuffs.com.

Direct Impact of the Pandemic

There are looming concerns about worker safety at meat packing facilities that the White House administration has ordered to remain open.

The bankruptcy-led closure of the second largest U.S. lamb packer will likely affect 150 ranchers across 15 states. This shutdown will reduce the national lamb processing capacity by at least 20%, according to Food Navigator USA.com.

Similarly, the cattle industry has undergone unprecedented effects from the pandemic, ranging from labor disruptions to meat shortages. Increased consumer prices and falling rancher prices are another example of the pandemic-driven phenomena.

READ MORE: New Chapter 11 Filings, Disclosures: August 3 – August 7, 2020

Secondhand Effects: Supply Chain Chaos

There are more problems than the reduced lamb processing capacity. The sheep industry was already forecast to lose $350 million to market declines that the pandemic has triggered.

The pandemic has also exposed the cattle sector to the vulnerability of the beef supply chain, according to the House Agriculture Committee.

Supply demand from restaurants, hotels, and schools that were closed in light of the COVID-19 outbreak have substantially eroded. Farmers have had to discard 3.7 million gallons of milk each day, an estimate according to Dairy Farmers of America. Produce growers buried or plowed millions of pounds of crops back into the soil.

At the same time, food banks were facing mile-long traffic jams and overwhelming demand. Some farmers have donated their surplus to charities, yet the charities’ limited capacities could only absorb so much perishable food.

This resulted in the skyrocketing cost of harvesting, processing, and transporting produce and dairy products to areas of need, which further worsened Farmers’ financial strain.

Nevertheless, there is a positive outlook for the U.S. agriculture. Bankruptcies during the second quarter of 2020 fell to 115 filings, owing to multiple federal assistance programs, according to AFBF.

Furthermore, the Association of Chapter 12 Trustees reported that the average completion rates of Chapter 12 reorganizations are in 60% range. An average completion rate for Chapter 11 is 15% or less, according to Feedstuffs.com.

Leave A Reply

Your email address will not be published.