Chapter 12, Season Two
Tariffs, labor shortages, heavy harvests push farms into court
Q1 logged 88 Chapter 12 filings, nearly double the 45 in Q1 last year. Arkansas carried more than a quarter of cases, with auctions stacking up.
Bankruptcy attorneys still call the first year draining, because every operating decision runs through the court. File a motion to renew the seed note, wait, risk missing the window. That rhythm is back.
USDA’s ledger reads strong on the surface. Net farm income projected at $179.8B for 2025, +40.7% vs. 2024. Net cash farm income higher too.
Credit desks report the strain. Repayment rates soft in the Plains and Midwest; renewals and extensions up. Non-real-estate borrowing ran hot into 2024 and still climbs in 2025. Crop operations leak cash while cattle props statewide averages.
Receipts mark the weak spot: crop cash −2.5% (~$6.1B). Soybeans −7.2%, corn −3.7%, wheat hit hardest. Fruits and nuts provide only a small offset.
Supply Chains Flinch
The White House declared a national emergency in April and set a 10% baseline tariff, then added country moves. Beijing answered in March with extra duties on U.S. ag flows and fresh regulatory pressure on selected shippers.
By late August there were still no new-crop U.S. soybean bookings into China, the month buyers usually switch to U.S. origin.
North American friction added cost. A 25% hit on Canada and Mexico jolted inputs and outbound flows before carve-outs calmed parts of the list. Fertilizer and chemicals absorbed duties or risk premia. The machinery price index sat near record territory.
Operators stretched iron and paid in downtime. Fertilizer indices ticked higher again through Q2, phosphates leading.
Domestic demand patches were torn off mid-cycle. USDA canceled roughly $1B of Local Food Purchase Assistance and Local Food for Schools after agreements were already in motion. Food banks and school districts lost a direct line to nearby producers. Parts of Food for Peace returned in July; the spring cash-flow gaps did not.
Labor losses cut deeper. About 1.2 million foreign-born workers left the U.S. labor force between January and July. Raids and fear thinned California crews during peak harvest. Replacement at warehouse wages did not appear.
Regulation delivered one clean win. Agencies aligned WOTUS with the Sackett standard centered on relatively permanent waters with surface connection. Fewer gray zones for ditches and ephemeral flows. Fewer permit traps. Faster jobs. It trims legal friction. It does not fix price or basis.
The supply picture leans heavy. USDA raised corn output projections toward record territory for 2025, acreage at the highest since the 1930s. Soybean area increased as well while exports sagged without China. Big crops and frayed outlets keep cash bids stingy, which feeds back into the bankruptcy file count.
Multiple Wounds
Tariffs and soft receipts. Higher input indices and labor attrition. Policy whiplash layered on top. The safety net is catching more people than it was built for, just as ad-hoc checks get smaller and arrive later.
What helps is unglamorous:
Cool tariff salvos on ag lanes.
Keep USMCA flows predictable.
Lock in the Japan gains without pretending they replace China.
Stop canceling USDA agreements after capital is committed.
Unfreeze contracted conservation payments. Keep WOTUS clarity.
Add crush and feed capacity where spreadsheets say yes, not where press releases do.
Chapter 12 was designed to buy time. Policy keeps burning it.
VOTE JOKE GO BROKE