State farm bankruptcies rise; milk prices, debt loom

Posted at 1 p.m. on March 21, 2019

See a complete story in the March 28 print edition of The Brillion News

The Brillion News

MADISON – Amid declining milk prices, the number of small farms in the state filing for bankruptcy has more than doubled in the past five years, according to the latest issue of The Wisconsin Taxpayer from the independent, nonpartisan Wisconsin Policy Forum (WPF).

The report, “Going for Broke in America’s Dairyland” examines the correlation between low milk prices and the increase in Chapter 12 bankruptcies filed by small farms of all types in Wisconsin.

Milk prices have declined 13.1 percent since 2008 and 33 percent since their recent high in 2014, while Chapter 12 bankruptcies more than doubled from 22 in 2014 to 50 in 2017, the last year for which complete figures are available.

Although the bankruptcies are relatively small in number compared to the total number of dairy farms in Wisconsin, they are a sign of the challenges farmers here face, the WPF report said.

The report notes that milk prices are affected by several factors, including supply and demand. WPF researchers found that in recent years, supply has generally exceeded demand as farms have consolidated and become more efficient.

After accounting for inflation, the report estimates Wisconsin farmers have lost half their net income between 2011 and 2018, slightly higher than the average decrease nationally.

“The 2017 margin is relatively narrow at just 24 cents per gallon in Wisconsin and that positive number may not fully reflect producers’ costs. Such slim margins mean a drop in the milk price, or a rise in costs such as feed, can quickly turn a challenging business environment into an untenable one,” the report states.

In some cases, declining milk prices and tighter margins may push some farmers to borrow money to ride out the low commodity prices. While this may be practical in the short-term, it becomes unsustainable if prices and profits continue to drop.