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SCHMIDT: Proposed bill could provide family farm debt relief
May 17, 2019

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If passed, the Family Farmer Relief Act of 2019 will increase the debt limit to $10 million.

The 2019 financial outlook for U.S. farmers growing corn, soybeans and wheat appears reluctant to improve, says Bryon Parman, North Dakota State University Extension agricultural finance specialist.

Farmers currently face lower commodity prices, near-record inflation-adjusted debt and production costs that have been very slow to adjust downward relative to revenues. The lower commodity prices are particularly concerning in North Dakota where cash prices are typically lower than many other states.

"While there certainly have been years where farmers faced greater financial challenges than 2019, this may be a good time for farmers and lenders in North Dakota to be aware of proposed changes to the Chapter 12 bankruptcy laws," says Parman.

Above-average yields the last few years for many North Dakota farmers has helped them financially, sparing those who might otherwise be in substantial financial trouble from having to make some tough choices this year.

The fourth quarter of 2018 survey of lenders for the Minneapolis Federal Reserve Bank reported a 46 percent increase in loan renewals or extensions in North Dakota, with 44 percent also expecting a decrease in net farm income heading into 2019. The story is similar in other parts of the U.S. as the Kansas City and St. Louis Federal Reserve Banks expect higher loan demand in 2019 compared to the last 3 years.

Delinquency rates have remained relatively low, though they have begun creeping upward recently. Those who have found problems meeting financial obligations have been aided by stable land prices and low interest rates, allowing for debt restructuring in a debt-friendly environment, Parman says.

Established in 1986, Chapter 12 is a unique form of bankruptcy for family farms and fishermen allowing for reorganization of current debts and developing a plan for future repayment over 3 to 5 years. There are limits on who may qualify for Chapter 12. The qualifications can be found by searching www.uscourts.gov/ for "Chapter 12 bankruptcy."

The basic requirements are:

- the individual (or married couple) must be engaged in a farming operation

- have at least 50 percent of the fixed debts related to farming

- have more than 50 percent of the gross income from the preceding tax year come from farming

- have total debts not exceeding $4.15 million

Corporations or partnerships are eligible for Chapter 12 protection as long as 80% of the value of assets are related to farming, the family does the farming and most of the operation is owned by one family.

If passed, the U.S. Senate bill "Family Farmer Relief Act of 2019" will increase the debt limit to $10 million, as many family farms and partnerships these days can easily exceed the current $4.15 million threshold. Those who currently meet the description of a family farm or partnership who exceed the $4.15 million debt cap are forced to utilize the more complicated and restrictive bankruptcy avenues that include Chapters 7 and 11.

During the last 10 years, North Dakota has had relatively few Chapter 12 filings, according to the American Farm Bureau Federation: a total of 25 Chapter 12 filings, nine of them occurring in 2018.

Compared to other states such as Nebraska at 154, Minnesota at 135, Georgia at 353 and California at 408 filings, North Dakota farmers have used the Chapter 12 reorganization tool infrequently.

Parman concludes, "Without the big yields North Dakota producers have enjoyed for the most part and well-below breakeven commodity prices, some North Dakota farmers may find themselves in a situation where Chapter 12 protection is their only option. The Family Farmer Relief Act of 2019 could help increase the number of eligible operations."

Grazing Readiness Progress of Key Species in Pierce County

This week's grazing readiness report for Pierce County key native and tame grass species is: Western Wheatgrass 2.5 leaf ready to graze at 3.5 leaf stage; Green Needlegrass 1.5-2 leaf ready to graze at 3.5 leaf stage; Crested Wheatgrass 2.5 leaf ready to graze at 3 leaf stage; Smooth Bromegrass 2.5-3.5 leaf ready to graze at 3 leaf stage

In North Dakota, most cool-season native range grasses typically reach grazing readiness in mid to late May, which is the recommended time to begin grazing native range. Domesticated grass pastures, such as crested wheatgrass and smooth brome, reach grazing readiness two to four weeks earlier than native range, permitting grazing in late April to early May.

Basing grazing readiness on calendar dates may be the right decision in some years, but due to the variability of spring temperatures and growing conditions, the calendar date method may not always match the recommended growth development stage of native and tame grass species.

Grazing too early can lead to a shortage of forage during the second half of the growing season which can reduce stocking rate and animal performance.

To aid ranchers and land managers in determining carrying capacity and setting stocking rates, NDSU Extension Rangeland Specialists, Miranda Meehan and Kevin Sedivec have developed a set of grazing management tools:

- "Determining Carrying Capacity and Stocking Rates for Range and Pasture in North Dakota," a publication which can be found at tinyurl.com/CarryingCapacityStockingRates

- NDSU Range and Pasture Calculator, a web-based calculator that allows you to export files for your records which can be found www.ag.ndsu.edu/sheets/range-and-pasture-calculator/

For more information on grazing readiness, visit www.ag.ndsu.edu/naturalresources/gearing-up-for-grazing or call the Pierce County Extension office at 701-776-6234 ext. 5.

Schmidt is the NDSU Extension Agent for Pierce County.

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