Family Farmer Relief Act Passes Congress with Bipartisan Support

Farm debt has increased by 30 percent since 2013. Commodity prices are decreasing while input costs are rising, and ongoing trade disputes add another level of uncertainty to an already precarious situation.

“I think most people involved in the farm economy are going say [the economy] goes up and down,” said Ulibarri. “You have to have thick skin, and you have to be prepared to manage potential outcomes.”

Verity Ulibarri, Chairwoman of the Sorghum Checkoff board of directors, is a farmer from McAlister, New Mexico, as well as an agricultural lender for Farm Credit of New Mexico. She said although facing financial challenges can be overwhelming, there are options for those looking to work through them.

Restructuring Debt

When looking to restructure debt, Ulibarri said farmers should work with their creditors to better align their cash flow with their debt service, evaluate what they truly need and look into scaling down their operation. Although it may not seem worth it to downsize, she said it could close the gap enough to help farmers survive long term.

“In agriculture, we have a tendency to get emotionally connected with what we do as producers,” Ulibarri said. “While it allows us to have a passion often not found in other sectors, sometimes we don’t make decisions as fast as we need to, such as downsizing.”

Other options, she included, were diversifying the operation or sitting out a growing season. Ulibarri said obtaining a part-time job can also provide some stability and relieve some stress from volatility in the agricultural sector.

Throughout the lending process, Ulibarri said, having a good relationship with creditors is important, especially with the primary lender. She also emphasized the importance of being proactive, working through debt and not avoiding creditors for too long. When farmers take the time to work with their creditors, she said, the creditors will often be prompted to work with them, as well.

Family Farmer Relief Act of 2019

For farmers who are working to cope with large debts, there is a new piece of legislation farmers should be aware of that recently passed Congress at the time of writing. On August 1, 2019, H.R. 2336, also known as the Family Farmer Relief Act of 2019, was passed by the Senate. The bill was first introduced to the House of Representa­tives in April by a bipartisan group, including House Agriculture Committee Chairman Collin Peterson (D-MN). The purpose of this bill is to amend the United States Code concerning Chapter 12 Bankruptcy by increasing the amount of debt covered from $4.1 million in inflation-adjusted dollars to $10 million.

Chapter 12 Bankruptcy is a specific type of bankruptcy designed for farmers and fishermen. Its purpose was to create a more streamlined process for farmers to restruc­ture their debt pursuant to a repayment plan under the supervision of a bankruptcy trustee. Chapter 12 was first introduced in 1986 in response to the large farm debts that occurred as a result of the 1980s Farm Crisis. It was originally enacted on a temporary basis but was made permanent in 2005 after being extended multiple times due to the volatility of the agricultural market.

Statistically, Chapter 12 Bankruptcy is not extensively utilized with only 438 cases filed in 2018. However, when producers have reached a last resort, bankruptcy can some­times be the only accessible tool, especially when creditors are unwilling to work with the producers to pay their debt.

Chapter 12 Bankruptcy takes into con­sideration the seasonality of farm cash flow, Ulibarri said, and creates a more manageable plan for farmers to pay off their debt over a period of time. She said Chapter 12 Bank­ruptcy is a good tool if farmers need it, but they should go into the process very intentionally and as a final option.

Ulibarri noted these challenging financial times in agriculture have led to consolidation in many sectors, particularly in production. There is a finite number of profitable farming acres, so consequently there are fewer farmers producing on more acres with larger operating budgets than ever before. Ulibarri said the current amount of farm debt cov­ered by Chapter 12 bankruptcy closes the option off to many large farm operations.

“It just takes so much more to operate farms,” Ulibarri said. “Whether that be row crop, or feedlot, or dairy or any of those things. Those operations can get very sizeable.”

Billy Bob Brown, a farmer from Panhandle, Texas, said many people do not recognize the amount of money it takes to operate a successful farm, and many farmers are running from year to year. Some farmers who are well balanced and well financed can weather a financial storm, but a stroke of unlucky circumstances could lead another to have large financial needs that must be met quickly. Brown thinks H.R. 2336 could give farmers facing a difficult financial outlook a chance to continue their business.

“[H.R. 2336] will give them an opportunity to make a decision they wouldn’t otherwise have,” Brown said, “whether they can continue or not. If their backs are against the door, they will have an opportunity to decide.”

Brown was National Sorghum Producers Chairman from 1989-1990 and noted the importance of having good relationships with lawmakers, especially in challenging times. He said when farmers’ or organizations’ voices are heard by Congress, positive legislation, like H.R. 2336 devel­ops. Farmers have needs, Brown said, and sometimes those needs must be met quickly.

1980s Farm Crisis

Brown was actively farming during the 1980s Farm Cri­sis and said he recognizes similar patterns today to the harsh financial uncertainty faced by farmers in the 1980s.

The 1980s, especially the early years, Brown said, were an economic battle for farmers. Crop prices were low, rain was scarce, interest rates went up as high as 20 percent, and the United States placed a grain embargo against the Soviet Union.

Brown said government programs in the 1980s helped farmers get the financing they needed to stay afloat, but sound management practices and farm diversity were also key aspects of what kept his farm alive, and that same wis­dom applies today.

Brown said he saw many good farmers go by the wayside in the 1980s because things happened that were completely out of their control, and they just could not get back on their feet. Today, Brown believes H.R. 2336 is farmer-oriented legislation that can help farmers survive into the next season whether they are running from year to year, were devastated by the weather or facing other circumstances completely out of their control.

Ulibarri said as a farm lender, she enjoys helping farmers reach the dreams they have envisioned achieving for a long time, but she also finds joy in helping them get through the hard times. She recognizes times are tough for farmers, but she knows they have thick skin.

“There’s a lot of hardship out there, but one thing I do know is farmers are pretty tough, a little stubborn in good ways and always looking for ways to make things work,” Ulibarri said, “[Farmers] are pretty industrious, and that is one thing that makes you feel somewhat optimistic in some of the worst situations that we find ourselves.”

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This story originally appeared in the Summer 2019 Issue of Sorghum Grower magazine as a feature article.