022419-wsj-biz-farm-bankruptcies

While the number of dairy herds in Wisconsin continues to shrink, the number of cows has not dropped significantly.

Wisconsin farmers showed the effects of continued low prices for their products in 2018 as the state led the nation in farm bankruptcies for the third straight year and dairy farms closed at the highest pace this century.

The state had 47 Chapter 12 bankruptcies, a chapter designated almost specifically for family farms last year, according to data from the U.S. Bankruptcy courts. That was 16 more than second-place Nebraska. That was also two more than Wisconsin had in 2017 and seven more than 2016.

Nationally, there were 498 Chapter 12 bankruptcies in 2018, three fewer than in 2017, the data shows.

Dairy farms of all sizes as well as grain, beef and specialty farms across the state experienced bankruptcies, according to Paul Mitchell, a professor of agriculture and applied economics at UW-Madison. There were actually 54 farm bankruptcies in the state but seven weren’t counted because they were large dairy farms that were listed in another chapter of bankruptcy, he said.

Dodge County had the most bankruptcies with five, the data shows. Polk County had four and Green was one of two counties with three.

“There’s no rhyme or reason” to explain the bankruptcies in Wisconsin, Mitchell said. “The cranberry industry is in rough shape. The processing vegetables aren’t doing very well. Potato farms just had a rough year. They had a bad harvest. So that’s what’s going on. It’s just a lot of persistent low prices for a lot of different commodities that we produce,” he said.

The state had 22 bankruptcies in both 2014 and ‘15 and 27 in 2013.

Bankruptcies don’t automatically put a farm out of business but Mitchell said they are usually a farmer’s last line of defense and the result isn’t usually good. “I was told that a lot of these guys that declared bankruptcy end up with nothing,” he said. “They have their suitcase and maybe their house. It’s partly what the bankruptcy is: It protects a few of your personal assets, but not much.”

Most farmers have walked away from their farms before reaching that point, according to Mitchell.

“This generation of farmers are wiser in the sense that they’re quitting before the equity is gone,” he said. “So the baby boomers are retiring just a little earlier than what they were planning on.”

7.9 percent drop

There were 691 dairy farm closings, which reduced the state’s total by 7.9 percent to 8,110 as of Jan. 1, 2019, according to data from the National Agricultural Statistics Service. The previous record was 670 in 2011 but that specific data category has only existed since 2004. Prior to that, another NASS data category that counted farms with milk cows from 1965 to 2007 shows that 6,000 farms closed in 1967.

Retiring farmers continue to have equity in their land but cows are losing their value and machinery is depreciating.

“Depreciation is what erodes the balance sheet, which means your net worth is diminishing and that net worth is what farmers retire on when that day comes,” says Mark Hagedorn, the ag agent for UW-Extension’s Eau Claire County office.

“But there’s (no money) left to replace old machinery, which is how you replenish that depreciation bucket. So cash flows are so tight for even those that are surviving.”

Lost legacies

Some dairy farmers in northwest and western Wisconsin are selling their milking dairy cows and investing in other livestock such as beef cattle and goats, according to Katie Wantoch, the ag agent for UW-Extension’s Dunn County office.

So she wasn’t surprised to learn that the Wisconsin counties with the highest percentage of closings last year were Eau Claire (15.5 percent), Dunn (14), Polk (13.8), Trempealeau (13.2) and Barron (11.8), according to the NASS data.

“A lot of these farms that have closed that I’m familiar with in Dunn County, I would say three quarters of them are people closer to that retirement age,” Wantoch said. “There is nobody interested in taking over for them, their barns are older, they’re not in a position where they want to upgrade the facilities and there’s nobody to continue to milk the cows for them.”

But the cows aren’t leaving the area because farmers getting out of the dairy business are selling their cows to neighboring farms, according to Wantoch. As of the end of 2017, the number of cows in Eau Claire, Dunn and Trempeleau counties hasn’t changed since 2013 while Barron County has 500 fewer cows and Trempeleau has 100 fewer, according to NASS data.

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Rob Schultz has won multiple writing awards at the state and national levels and covers an array of topics for the Wisconsin State Journal in south-central and southwestern Wisconsin.

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