Author: Ryan Loy

What is Chapter 12 Bankruptcy?

Chapter 12 bankruptcy is a provision under the U.S. Bankruptcy Code tailored specifically for family farmers and fishermen. Introduced in 1986 during the height of the farm crisis, Chapter 12 allows qualifying family farmers to restructure their debts while continuing to operate. It offers a more flexible repayment structure than Chapter 11 or Chapter 13. 

Chapter 12 Filings in the Southern Region 

Data from 2015 to 2025 (measured from July 1 of the preceding year to June 30 of the labeled year) highlight important developments in Chapter 12 bankruptcy trends across the southern United States. Total Chapter 12 filings in the south have fluctuated over the past decade, peaking at 148 filings in 2020 before sharply declining to 53 in 2023 (see Figure 1). This decline aligns with post-pandemic trends across the United States due in part to government assistance and higher commodity prices, which improved short-term farm financial conditions. However, the most recent year of data (e.g., July 1, 2024 – June 30, 2025) shows a rebound to 101 filings. This may suggest that on-farm financial pressures are intensifying for southern producers. 

Figure 1. Total Chapter 12 Filings for the Southern Region, 2015 – 2025

Digging deeper into state-level filings reveals that Georgia, Texas, and Arkansas account for a large share of filings over the 2015 to 2025 period. Georgia recorded the highest total filings, with more than 30 annually through 2018 and peaking at 42 in 2017. Arkansas has shown a significant surge in the most recent reporting period from 4 filings in 2023 to 25 in 2025 (Figure 1). This increase in Chapter 12 filings signals financial stress in Arkansas despite more stable trends in neighboring states (e.g., Mississippi). The current state-level differences may point to uneven financial pressures within the southern region, which is likely shaped by crop mix, farm size, or local crop production systems. The 2025 rebound in filings could be due to the cyclical nature of agriculture following several years of low bankruptcy filings.  But the increase also raises concerns about on-farm financial stress in southern agriculture. For smaller family-owned operations with limited liquidity, these pressures can become untenable, making bankruptcy not just an option, but a necessity. 

Farm operations are often generational legacies, woven into family identity and rooted in the community. For many, bankruptcy is not only a financial loss but also an emotional burden. Bankruptcies serve as a reminder that financial stress in agriculture extends beyond the farm. It often impacts families, rural communities, and personal well-being. Tight (or non-existent) margins, increasing input costs, and mounting debt pressures can erode both financial stability and a producer’s sense of identity. These realities highlight the importance of timely support through open conversations, proactive engagement, and access to financial and mental health resources, including dedicated services such as the National AgriStress Helpline (1-833-897-2474) and the SAMHSA Disaster Distress Helpline (1-800-985-5990), both of which are available 24 hours a day, seven days a week. As pressure continues to mount, directly addressing farm stress is essential to sustaining farm operations and safeguarding the vitality of families and rural communities. 

References

Loy, Ryan, and Hunter Biram. “The Disparity Between Crop Prices Received and Input Prices Paid.” Southern Ag Today 4(28.3). July 10, 2024. Permalink

Fields, Erica, and Ronald Rainey. “Identifying Financial Stress in Farmers and Ranchers: A Guide for Families, Friends, and Agricultural Community Stakeholders.” University of Arkansas Factsheet. Retrieved from: https://www.uaex.uada.edu/publications/pdf/FSA96.pdf

USDA-Economic Research Service (2025). Farm Sector Income & Finances: Highlights from the Farm Income Forecast. Retrieved from: https://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/highlights-from-the-farm-income-forecast/

USDA- Economic, Statistics, and Market Information System. (2025). Agricultural Prices. Retrieved from: https://usda.library.cornell.edu/concern/publications/c821gj76b?locale=en

United States Courts. (2025). Caseload Statistics Data Tables. Retrieved from: https://www.uscourts.gov/statistics-reports/caseload-statistics-data-tables

Loy, Ryan, Erica Barnes Fields, and Ronald Rainey. “Tracking Chapter 12 Bankruptcies in the South: 2015 – 2025 Trends and Identifying On-Farm Stress.” Southern Ag Today 5(37.1). September 8, 2025. Permalink

Farmers in the Midsouth region are faced with several choices when planting and marketing their crops. The type of rental agreement can have a variety of impacts on a Midsouth farmer, particularly in terms of returns to cash operating expenses (or variable costs). For example, a farmer operating under a crop share agreement may require higher yields to cover variable costs than one operating under a cash rent agreement. This article highlights the breakeven potential for rice, corn, and soybeans under three land ownership scenarios: cash rent, 75-25 crop share agreement, and fully owned land. Understanding breakeven curves allows farmers to evaluate the minimum yield (or price) needed to cover costs under each agreement, an essential step in managing economic risk and optimal crop choice. The analysis aims to help Midsouth farmers understand their cost structure and to support more informed marketing decisions within the context of alternative rental agreements. 

The assumptions used to calculate breakeven values are given in Table 1 below. The listed Midsouth expenses represent estimated production expenses per acre for each crop; operating expenses do not include fixed overhead and other non-cash expenses such as depreciation. Breakeven combinations that exceed operating expenses do not include non-cash costs such as depreciation. Crop share agreements are assumed to follow a 75-25 split, with the landowner receiving 25% of the revenue and not contributing to production expenses. The cash rent value is an average derived from county-level estimates for irrigated farmland across the Midsouth region. We assume no associated land costs for the owned land scenario.  

Table 1. Breakeven Curve Assumptions

Figures 1 – 3 show the breakeven curves for Midsouth corn, soybean, and rice production. These curves plot the price and yield combinations necessary to cover total cash operating expenses, as defined in Table 1. Any price and yield point below the curve indicates a crop revenue that does not cover cash operating expenses, while points above the curve indicate positive returns above cash operating expenses.  To provide context for current market expectations, the 2025 USDA-RMA expected harvest price for Arkansas is plotted on each graph. Across all three crops, the owned land scenario consistently requires the lowest price/yield combination to break even, while crop share requires the highest combination. For instance, Figure 1 shows the breakeven curves for Midsouth corn production. At the expected harvest price of $4.65, the target breakeven yield under full ownership, cash rent, and crop share is 173 bu/acre, 206 bu/acre, and 231 bu/acre, respectively.  In simple terms, land tenure arrangements with higher expense obligations require either higher yields, higher market prices, or a combination of both to cover variable costs (Mills, 2023). The implication is that cash rent and land ownership are progressively more profitable than crop share.  However, it is important to remember that there are things to consider beyond cash operating expenses.  Specifically, both cash rent and owned land require the producer to bear a higher level of production risk, and land ownership requires the cost of capital investment.  

Figure 1. Midsouth Corn Breakeven Curves at an estimated $806/acre cash operating expense.

Figure 2. Midsouth Soybean Breakeven Curves at an estimated $510/acre cash operating expense.

Figure 3. Midsouth Rice Breakeven Curves at an estimated $993/acre cash operating expense.

References

Mills, Brian. “Forage Cost of Production and Breakeven Curves.” Southern Ag Today. July 19, 2023. https://southernagtoday.org/2023/07/19/forage-costs-of-production-and-breakeven-curves/

United States Department of Agriculture. (2024). Cash Rents County Estimates. Retrieved April 3, 2025, from https://www.nass.usda.gov/Surveys/Guide_to_NASS_Surveys/Cash_Rents_by_County/

United States Department of Agriculture – Risk Management Agency. (2025). Harvest Price Discovery. Retrieved April 7, 2025, from https://public-rma.fpac.usda.gov/apps/PriceDiscovery

Loy, Ryan. “Breakeven Curves Under Different Midsouth Rental Agreements.” Southern Ag Today 5(17.1). April 21, 2025. Permalink

Historically, low commodity prices, high input costs, and expensive financing have been some of the most significant issues farmers have faced in the last few years. Luckily, some financial relief may come in the form of lower interest rates from the Fed reducing COVID-era rate increases (Wright, 2024). The Fed aggressively moved in September to cut 50 basis points, bringing the target Federal Funds rate to 4.75 – 5%, with indications for at least another 50 basis points before the end of 2024 (Fannie Mae, 2024). This article explores a hypothetical situation of a producer leveraging lower interest rates to consolidate debt to improve short-term liquidity. 

Consider a farmer’s debt obligation for 2024 (Table 1). In this scenario, the farmer holds a land loan with an original principal balance of $450,000 at a fixed interest rate over 20 years. As of 2024, the remaining principal stands at $330,000, with 12 years left in the repayment period. Additionally, the farmer has a machinery loan with an original principal balance of $180,000, structured over a 7-year term. The outstanding balance on this loan is currently $110,000, with 4 years left until maturity. 

The farmer also faces a $50,000 operating loan, due at the end of this year. Unfortunately, this year has not been profitable, and he cannot cashflow all his debt obligations. 

Table 1. Current Debt Obligations – Before Consolidation

The farmer’s total current debt obligation amounts to $123,000 for the year (Table 2). To address this financial strain, the producer meets with their lender to explore options for restructuring their debt. They discuss the possibility of consolidating existing debt into a longer-term, more favorable interest rate structure. The lender agrees to consolidate the remaining principal balances on all three loans ($330,000 + $110,000 + $50,000) into a new 10-year note totaling $490,000 (Table 3). The lender agrees to secure this loan using the equity in the farmer’s financed land as collateral. 

Table 2. Debt Financing Structure Before Consolidation

Table 3. Consolidated Debt Structure

Under this new debt structure, the farmer not only relieves the burden of the current year payments, but also reduces the ongoing obligation from $73,000/year to $63,000/year.  While debt consolidation offers advantages, it’s also important to consider potential drawbacks. For example, under the original debt structure, the annual debt service obligation would have dropped to $40,000/year, after the machinery loan was paid off in 4 years.  Under the consolidated note, the producer is committed to $63,000/year for a full 10 years.  Longer-term debt obligations also potentially lead to paying higher total interest expenses, even with an interest rate lower than their original loan(s) due to the extended accrual period. Additionally, creating a new loan comes with closing costs and fees that could offset the immediate financial benefits. Every situation is unique, and the pros/cons are not always clear.  Those looking to consolidate existing debt should meet with their lenders and determine the best strategy for their farm’s short-term viability and long-term sustainability. 

References

Wright, Andrew. “Lower Interest Rates Create Opportunities for Managing Debt on the Farm.” Southern Ag Today 4(37.3). September 11, 2024.

Fannie Mae. (2024). Fed Cuts Interest Rates Amid Sluggish Existing Sales but a Rebound in Starts Activity. Retrieved November 5, 2024, from https://www.fanniemae.com/research-and-insights/forecast/fed-cuts-interest-rates-amid-sluggish-existing-sales-rebound-starts-activity#:~:text=The%20Federal%20Open%20Market%20Committee,rate%20of%202.75%2D3%20percent.