In an earlier report, our analysis of federal data showed the number of farmers across the Midwest filing for bankruptcy soared to its highest level in a decade. Now it seems some of those farmers are closing up shop, liquidating machinery and land, all to stem financial pressure, a dozen or so farm-equipment auction houses told Reuters.
The farming crisis unraveling in the Midwest has created a monsterous boon for auction houses, which reported that their collective business activity jumped 30% in the past six months, compared to the same period a year earlier.
Reuters noted that the revival of the family farming tradition has collapsed. Ahead of the US recession of 2007-2008, agriculture prices were soaring, attracting many young people from their city jobs to their family's fields.
But spot prices crashed from February 2008 to December 2008, then rebounded from early 2009 to mid-2011. By 2012, farming profits erupted, as corn, soybean, and wheat prices jumped amid rising global demand and tight supplies. It was the first time in several decades that the total number of farmers 44 or younger in the Midwest increased.
From late 2008 through 2012, millennial farmers across the Midwest surged, increasing more than 40% in Iowa and Illinois, almost 57% in Indiana and 60% in Kansas, according to data from the US Department of Agriculture.
Reuters observed farmer Jim Taphorn's machinery get liquidated earlier this year at an auction. It was the fifth consecutive year Taphorn had depressed spot prices for grains, made worse by President Trump's trade war with China, the 68-year-old called it quits after risking the chance of filing for bankruptcy in the coming years if conditions didn't improve.
A Reuters photographer snapped a picture of Taphorn and his wife standing next to Sullivan Auctioneers, LLC's auction truck as their farm's equipment was liquidated for pennies on the dollar.
"Karen [Taphorn'swife], it’s ok to shed a tear," auctioneer Dan Sullivan said, as she hugged her husband. "It’s the end of an era."
Federal data shows that farmers are increasingly aging. The average farmer is 57.7 years old in 2017, up from 54.3 years in 1997.
The farm industry has been consolidating since 1997. Mid-sized farmers, those with annual sales under $5 million, are increasingly failing as the trade war sends the global economy into a synchronized slowdown.
The trade war with China, sparked by the tariffs Trump slapped on hundreds of billions of dollars of Chinese goods, has just entered its tenth month. In response, China levied on about $50 billion of US agricultural exports last summer including soy, corn, wheat, cotton, rice, sorghum, beef, pork, poultry, fish, dairy products, nuts, and vegetables.
China is a top buyer of American agricultural commodities. Since the tit-for-tat tariff disputes last year, exports to China have significantly decreased -- straining American farmers whose supply chains into the second largest economy were destroyed overnight.
The trade war, along with depressed commodity prices, is "speeding things up" for farmers to exit the industry, says H. Andrew Pyron, chief executive of Big Iron Auctions in St. Edward, Nebraska.
The collapse of multi-generational family farms has sent bankruptcies in the Midwest to ten-year highs.
"Bankruptcies in three regions covering major farm states last year rose to the highest level in at least 10 years. The Seventh Circuit Court of Appeals, which includes Illinois, Indiana and Wisconsin, had double the bankruptcies in 2018 compared with 2008. In the Eighth Circuit, which includes states from North Dakota to Arkansas, bankruptcies swelled 96%. The 10th Circuit, which covers Kansas and other states, last year had 59% more bankruptcies than a decade earlier," reported WSJ.
Steffes Group, a top auction firm in the upper Midwest, has seen auction activity rise 40% in 2019.
"Up until now, there wasn’t a lot of motivation to exit farming," said auctioneer Scott Steffes. "Now, what I’m hearing from folks is, ‘It’s no longer fun to farm.’"
Reuters noted that most farmers after they call it quits -- don't have 401Ks or other traditional retirement accounts. Now those farmers are worried about losing it all with no financial cushion, a disaster in the making.
"We’re getting calls every day from farmers looking to sell off their equipment, but keep the land," said Luke Sullivan of Sullivan Auctioneers, headquartered in Hamilton, Illinois.
And even bankers in the Midwest who lend funds to farms warn that more bankruptcies are immient as more producers "are running out of options."
"We are seeing producers who are running out of options," said Tim Koch, senior vice president at Omaha, Neb.-based Farm Credit Services of America, which lends to farmers in Iowa, Nebraska, South Dakota, and Wyoming.
An agricultural recession is around the corner. The most recent farm crisis occurred during the 1980s, and before that, a farm crisis was observed leading up to the Wall Street Crash of 1929. Could the rhythms of history be unfolding before our own very eyes today?