Ep. 50 Chapter 12 Bankruptcies in Arkansas and the U.S.: Trends and Implications for the Farm Economy

00;00;00;05 – 00;00;21;04
Dr. Ryan Loy
Chapter 12 bankruptcies are signaling continued financial stress, Arkansas’s share of bankruptcies is climbing, pointing to regional specific pressures and the widening gap between input and output prices. That, and so much more on this episode of Morning Coffee and Ag Markets.

00;00;21;06 – 00;00;35;11
Dr. Ryan Loy
I really appreciate you joining me. My name is Ryan, and, I’m going to actually be hosting today, Hunter is out at the lake with his family, enjoying the summer a little bit. And in the studio, today I’ve got Scott Stiles with me. Scott, how are you?

00;00;35;13 – 00;00;38;12
Scott Stiles
I’m great, Ryan. It’s good, good to be with you.

00;00;38;14 – 00;00;43;05
Dr. Ryan Loy
Good deal. Your summer going all right? You have any chance to go do anything fun, yet?

00;00;43;08 – 00;00;50;29
Scott Stiles
Not anything fun, yet. But, staying busy. That’s about all I can say, been working.

00;00;51;02 – 00;01;09;24
Dr. Ryan Loy
Good deal. Well, today’s episode, we’re going to talk about a topic that we’ve been kind of, you know, talking amongst ourselves back and forth for a few weeks now. And, that is going to be chapter 12 bankruptcies. And we’re going to kind of dive into this topic today and talk about some of the warning signs we see across the farm economy, and we’ll walk through what

00;01;09;24 – 00;01;28;19
Dr. Ryan Loy
chapter 12 bankruptcy is, you know, what kind of some of this recent data that we’ve been seeing is telling us about the trends in Arkansas and the United States. And really, out of curiosity, you know, what’s driving these changes? And I think that’ll be a good discussion today, because, you know, when we’re talking about bankruptcies, it’s going to be somewhat of a lagged effect.

00;01;28;19 – 00;01;49;23
Dr. Ryan Loy
And we’ll get into that in a little bit in terms of when you apply, you know, when you file for chapter 12 bankruptcy versus when you’re actually getting some of that financial stress. And so just to kind of, you know, roll into this here, I want to just cover exactly what chapter 12 bankruptcy is. You know, Scott, there’s a few options for bankruptcy.

00;01;49;26 – 00;02;10;05
Dr. Ryan Loy
And really all chapter 12 is, is a specific provision inside that US bankruptcy code. And it’s designed specifically for family farmers and fishermen. It was introduced in 1986, so right at the height of the peak of that farm crisis, you know, during that time, a lot of those farms were struggling even more so than they are now.

00;02;10;07 – 00;02;33;28
Dr. Ryan Loy
And the government saw a need for this to become a part of the US bankruptcy code. And the goal really was to just help keep family farms running while they restructure their debt obligations, which is an important distinction from something along the lines of chapter 7, which is a full liquidation bankruptcy. And they don’t get to continue to operate,

00;02;33;28 – 00;02;53;24
Dr. Ryan Loy
right? They have to fully liquidate and pay back their debt obligations. But unlike those other chapters, chapter 12 is more flexible and takes into account the seasonal nature of the farm income. So the farmers that file under the chapter 12 can keep operating the farm while repaying their debt over a 3 to 5 year period, and that’s all agreed upon

00;02;53;26 – 00;03;18;18
Dr. Ryan Loy
in the filing. But it’s really, you know, this this conversation is not going to be really surrounding the legal structure of chapter 12 and more, using it as a a thermometer, if you will, for current farm financial stress and even farm financial stress that we’ve been seeing over the last few years. You know, this can be a good proxy to tell us where farmers are struggling the most, and perhaps we can figure out why.

00;03;18;20 – 00;03;28;24
Dr. Ryan Loy
And Scott, have you, you know, just out of curiosity, have you heard or have experienced anybody you work with having to do this in the last year, the last two years that you work with personally?

00;03;28;27 – 00;03;30;09
Scott Stiles
I have not, Ryan.

00;03;30;12 – 00;03;44;08
Dr. Ryan Loy
Okay, okay. And so that was something that we were looking at, you know, just trying to think of looking at some of these auctions that we’ve been seeing and some of the chapter 12s and saying, you know, where those trends are headed over the from the last few years and where we’re continuing to move to.

00;03;45;25 – 00;03;46;21
Scott Stiles
Um…

00;03;46;24 – 00;03;47;14
Dr. Ryan Loy
Go ahead, Scott.

00;03;47;17 – 00;04;10;21
Scott Stiles
Well, I was going to mention that, when these… when a chapter 12 proceeding starts, it’s an all through. Is it a, a federal court or a a district court? Is that how does that kind of the procedure for how this starts? And, it may not be handled necessarily at the local level, but through more of a, at a district or at the federal level?

00;04;10;23 – 00;04;27;05
Dr. Ryan Loy
Yes, sir. It’s, in fact, for Arkansas, it’s going to be handled through the 8th U.S. District Court of Appeals. And so that’s where it will file from. And so that’s actually where we get a lot of this information. And funny enough, we’re going to talk about the 8th district, the 8th U.S. district a little bit in here today,

00;04;27;05 – 00;04;49;18
Dr. Ryan Loy
and Arkansas is a part of that, so anytime a chapter 12 bankruptcy goes through, that’s where it will be filed. And interestingly enough, and I think it actually speaks volumes to some of the data we’re going to talk about later, but what I would consider, you know, a southern state, Arkansas, really is the only southern state involved in the U.S. 8th District Court.

00;04;49;20 – 00;05;12;13
Dr. Ryan Loy
And so when we’re looking at a lot of this data compared to Arkansas, you know, we’re comparing ourselves against Iowa, Minnesota, Missouri, Nebraska and North and South Dakota. And it’s much different farming up there than it is here. And so, you know, we’ll kind of get into that a little bit more as I start talking about some of this, some of the charts and data that’s in the newsletter this week.

00;05;12;15 – 00;05;41;02
Dr. Ryan Loy
So kind of looking at some of these trends, if you look at the figure that we’ve provided inside of the newsletter, plots from 2015 to 2025, the chapter 12 filings for the United States, the 8th U.S. District Court, and Arkansas. So just kind of highlighting a few of these things and where we’ve seen this kind of head, you know, in 2019, national filings across the U.S., which was the highest in at least the past decade,

00;05;41;04 – 00;06;05;02
Dr. Ryan Loy
you know, was at 599, so almost 600 total filings in 2019 at that time. You know, that’s the highest in the past decade. However, by 2021, we saw that decline very dramatically, to 276. And really, you know, that drop was due in part to some of that pandemic-related assistance and stronger commodity prices at that time.

00;06;05;04 – 00;06;26;19
Dr. Ryan Loy
Now, 2019 there, you know, we’re kind of dealing with this issue, saying now, in 2019 timeframe, we’re looking at that export market that we’re really struggling in, right? The first trade war. And so what we saw a lot during that time is maybe, you know, a lot of people kind of not being able to get as much for their crop during that time because of the export markets,

00;06;26;19 – 00;06;45;25
Dr. Ryan Loy
the same situation we see now. And then some of that pandemic-related assistance came in, you know, the PARP and some of those debt forgiveness measures came through during that time. And those stronger commodity prices coming off of 2019 is what we really saw moving into the pandemic. But really what we’re seeing now is a reversal,

00;06;45;25 – 00;07;11;22
Dr. Ryan Loy
like I mentioned. You know, filings are rising again with 259 national filings so far in 2025. And that is already ahead of what 2024 was. And any 2025 values that I’m relaying in this, in this graph are going to be just through the first quarter of 2025. So we’re really comparing a quarter to an entire year,

00;07;11;22 – 00;07;42;16
Dr. Ryan Loy
and when you think about it from that perspective, we’re already, we’ve already beat last year in terms of national filings, but we’re on track to kind of continuously do that and add more, considering we still have three more quarters in the year. And so really, once you see this reemergence on a national level, it’s a clear sign that financial pressures that we saw before in the 2018 and ‘19 are kind of reemerging and have continuously put that downward pressure on farmers and their margins.

00;07;42;19 – 00;08;08;19
Scott Stiles
That’s true. I mean, commodity prices are back at levels where they were in the 2019, 2018/2019 era that you mentioned, earlier, Ryan, and that’s where we sit today. And in terms of, you know, comparable commodity prices, and that has a lot to do with a resurgence in bankruptcy numbers.

00;08;08;22 – 00;08;24;22
Scott Stiles
And, of course, you mentioned the stickiness of input costs. We’ve talked about that a lot, and we’ve continued to see input cost increase. They haven’t moved lower with commodity prices. In fact, they’ve continued trend higher.

00;08;24;24 – 00;08;49;24
Dr. Ryan Loy
That’s right. It just seems that, yeah, there’s no… the input prices, they just continue to go up and up and up. While the commodity prices, at least in the last few years, have continuously just declined. You know, then that spread between those two is, is really a cause for concern. And, you know, Scott, from your perspective, when we’re talking about a lot of this and we’re looking at these chapter 12 filings, you know, we’re looking at commodity prices that are this low.

00;08;49;26 – 00;08;56;24
Dr. Ryan Loy
What can a farmer do right now to help mitigate this stress?

00;08;56;27 – 00;09;21;12
Scott Stiles
Well, I mean, every day in a farmer’s mind, there’s a there’s a cost benefit analysis going on. In terms of, you know, where you can, you know, what can I do in this situation? And, there’s a lot of, you know, there’s a lot of concern at this point, about a lot of things, crop prices are one, input costs are another.

00;09;21;14 – 00;09;43;29
Scott Stiles
There’s concerns about the trade environment that we’re in. There’s certainly been a lot of weather challenges. And, so there’s a, you know, there’s a number of articles out there about what, what can growers do in response to this. And I think a lot of them are, they’re holding, number one is holding off on capital purchases right now.

00;09;44;01 – 00;10;08;25
Scott Stiles
Maybe during those good times you mentioned in 2022, they replaced equipment at that time. And so some of that equipment at this point, you know, 2 or 3 years old, but maybe they’re going to, you know, put more hours on equipment, and defer those, you know, those capital purchases. And that’s showing up, too. You know, but we talk about the impact this is having on farmers.

00;10;08;25 – 00;10;40;16
Scott Stiles
But there’s a downstream impact on other segments in ag industry that are impacted by this. Your input suppliers, your equipment dealers, you know, anybody that you know, provides a service to farmers is impacted by this, too. Every month, the Association of Equipment Manufacturers puts out a report on farm equipment sales. And their last report, they had tractor sales down 13% year on year.

00;10;40;19 – 00;11;04;01
Scott Stiles
Combine sales are down 48%. So it’s just a reflection of, what’s growers response to this? Well, you know, they’re… number one, they’re deferring capital purchases, among other things. But, I mean, that’s, that’s a common response that growers are taking to this downturn in commodity prices.

00;11;04;04 – 00;11;24;22
Dr. Ryan Loy
I think it’s a great point you made, Scott. And just thinking about, you know, we oftentimes focus on just the only the farmers in these situations. And that is the important point to make. But talking about the communities and all the support and the input suppliers and everything and how they’re impacted as well, you know, it’s a… it’s a massive kind of runoff, right?

00;11;24;22 – 00;11;48;10
Dr. Ryan Loy
You know, it’s going to start, and they’re all, you know, if the farmers are hurting, those communities are also going to hurt, which is very important point to make. And I appreciate you, bringing that up. You know, when we’re talking about these chapter 12 filings and focusing specifically on Arkansas, in the mid 2010’s, the state accounted for about 20 to 22% of the 8th district court’s

00;11;48;13 – 00;12;12;06
Dr. Ryan Loy
chapter 12 filings and recall, you know, the states that we’re comparing ourselves against Iowa, Minnesota, Missouri, Nebraska, North and South Dakota, again, very different agriculture. That share dropped to just 5% in 2021. So we went from the mid 2010’s that had about 20 to 22% of that share. Then we dropped to 5% in 2021.

00;12;12;10 – 00;12;41;06
Dr. Ryan Loy
But now, we’ve really reversed course. And we, you know, in 2024, Arkansas accounted for over 30% of the district’s filings over the whole year. And in 2025, we’re sitting right now at 26.8% of those total filings. And again, that’s just after quarter one. So we still have three more quarters of data to bring in,. and I would suspect that we’re going to probably outpace or at least be right on the margin of what 2024 looked like.

00;12;41;08 – 00;13;00;29
Dr. Ryan Loy
And this is a big shift and a real big cause for concern. And I’ve heard it be said many times before and, that, you know, any stress in agriculture, any issues in agriculture will always hit the South first before it hits the Midwest. Again, it’s just a different form of agriculture, different, you know, approach to agriculture in general, in different crops.

00;13;01;02 – 00;13;19;25
Dr. Ryan Loy
And so honestly, what I think we see here is kind of the canary in the coal mine, so to speak. What I mean by that is kind of some of those first warning signs of a nationwide agriculture issue, that more than we’ve already been seeing, in terms of Arkansas kind of leading that share of chapter 12 so far.

00;13;19;27 – 00;13;48;10
Scott Stiles
You know, in some states that have a little more diversity in agriculture, you know, it makes you think, okay, well, the livestock sector is fairly profitable right now. So if you’re a cow-calf operator, you’re, you know, you’re seeing some profitable price levels, so that’s. You know, when you look at, look at southern states, particularly Arkansas, at least the eastern third of it.

00;13;48;12 – 00;14;10;04
Scott Stiles
Yeah, it’s all row crop is not very diverse agriculture. It’s all crops. And at least on the, on the east side of the state. So. that’s something to… when you’re talking about the districtof Arkansas that’s in. Well, some of these northern states, you may see a little more livestock production in some of those areas and, and maybe less in Arkansas.

00;14;10;06 – 00;14;38;27
Dr. Ryan Loy
Yes, sir. That’s a good point, especially when we’re talking about those Nebraska and Dakota states, especially, you know, those are big up there. That is a very good point. And when we’re looking at, comparatively speaking, between Arkansas and these other states. You know, and so one of the questions I ask myself is, okay, so why, you know, why for the uptick in filings and what has really been going on, when we put, you know, pencil to paper, you know? And so now, you know, connecting the dots, you know, really all comes down to the margin pressure, right?

00;14;38;27 – 00;15;07;12
Dr. Ryan Loy
That squeeze between those rising input costs and stagnant, or really volatile, commodity prices. So what I, what we did is, we looked at the USDA’s crop price received index versus the input price received index. And they’re actually standardized to 2011. So what that means is that, it is basically a basket of goods, of crop prices, that were received, and a basket of input prices received to grow those crops across the nation.

00;15;07;18 – 00;15;37;03
Dr. Ryan Loy
Essentially, what they do is they put it all together in a basket of goods, and they index it to 2011. And 2011 was chosen because it was a good, stable year in agriculture. So both values, both indices, the crop price and the input price are 100 in 2011. So what that means is that as you move forward, if it’s, you know, 102% on one index, that means it’s 2% higher, on average, than what it would have been in 2011.

00;15;37;03 – 00;15;55;25
Dr. Ryan Loy
So that’s kind of what we’re looking at here, when you look at the last figure in the newsletter. And so really, what we’ve looked at from this, and it’s really staggering once you really kind of look at it. Since 2013, which recall is the time when, you know, our farm bill that we’re currently still operating under really was being written.

00;15;55;27 – 00;16;20;04
Dr. Ryan Loy
And during that time, you know, input prices and commodity prices were really, that index former right there. So, essentially, the way to look at that, is that what you’re putting in is what you’re getting out at that moment. And so that’s really where we’re basing a lot of what we wrote in that bill off of. And so you can, you can kind of see the issue now trying to operate under that same farm bill in what we’re at now.

00;16;20;04 – 00;16;38;01
Dr. Ryan Loy
And if you look at the figure, what we’ve seen since 2013 is input prices, especially for fertilizer, fuel and labor have climbed steadily. But those prices received for those crops have not kept the same pace, and in fact, have declined significantly over that time.

00;16;38;03 – 00;16;55;00
Scott Stiles
In 2013, the H-2A hourly wage rate was $9.50 an hour, and today it’s $14.83. So it’s 56% increase in labor.

00;16;55;00 – 00;17;18;16
Dr. Ryan Loy
Which is really just amazing. And then you think about the interest that you pay on all those operating expenses on top of that, right? You know, that was always a big talking point. But it’s become even bigger in the, in the recent few years. And so, really what we’re looking at when we when we’re, when Scott and I are referring to this graph, is that the gap between these two indices has grown wider, especially in the last few years.

00;17;18;18 – 00;17;39;18
Dr. Ryan Loy
And those are really those red circles that I have indicated, if you’re reading the newsletter. So from this perspective, even when corn or soybeans are selling at what seems like a decent price, the cost of producing those crops is even higher than it was the year before. And so when you look at that, you’re always being squeezed at the margin.

00;17;39;20 – 00;18;07;27
Dr. Ryan Loy
And when you’re being squeezed at the margin, liquidity dries up fast. And smaller farms, you know, especially family owned farms and ones that don’t have as big of an asset base as maybe a larger farm, or don’t have the same kind of working capital or liquidity, don’t have the reserves to ride it out. And so when we’re thinking about this perspective, it really is a alarm that we need updated farm safety nets and support, moving forward into the future.

00;18;07;27 – 00;18;41;11
Dr. Ryan Loy
Because if this trajectory continues, it’s going to be even more warranted to get a farm bill that’s updated, that’s reflective of the current farm economy, out the door. Scott, I really appreciate you joining me today. And, you know, just kind of a few key takeaways here, you know, in finishing up this episode: one, that margin squeeze that we just mentioned is real and it’s growing and without a complete reversal of input price cost or commodity prices received, or even just a safety net,

00;18;41;14 – 00;19;06;09
Dr. Ryan Loy
it’s going to continue to grow and it’s going to, you know, dry up that liquidity and dry up those reserves in the ag sector. Those chapter 12 filings are rising, and I think that that is a direct kind of, consequence of what we’ve seen over the last few years. And Arkansas has really started to become, you know, the, eighth U.S. district’s kind of hotspot for bankruptcy so far this year.

00;19;06;11 – 00;19;25;29
Dr. Ryan Loy
And rather than this being a doom and gloom story, it’s more of a call for attention and action to what is going on in the farm economy. Scott, thank you so much for joining me today. And, I really appreciate, if you have any thoughts., please, please feel free to share them. Otherwise, we’ll see you in the market report.

00;19;26;02 – 00;19;28;19
Scott Stiles
Okay. Thanks for having me on, Ryan. It’s great discussion.

00;19;28;23 – 00;19;30;01
Dr. Ryan Loy
Of course, Scott. Thank you.

00;19;30;02 – 00;19;49;10
Dr. Ryan Loy
Hello, everyone. This is Ryan, and I’m back with this week’s market report. September 2025 corn futures are at $4.04 a bushel. That’s down $0.30 from a month ago and down about $0.04 from a year ago. September 2025 rice is priced in right now at $13.38 per hundredweight.

00;19;49;12 – 00;20;18;11
Dr. Ryan Loy
That’s down about $0.11 from a month ago and down $2 from a year ago. November 2025 soybeans are priced in at $10.17 per bushel. That is down $0.34 from a month ago and down $0.87 from a year ago. December 2025 cotton futures are priced in at $0.68 per pound. That is unchanged from a month ago and down about $0.05 from a year ago.

00;20;18;13 – 00;20;47;13
Dr. Ryan Loy
July 2025 wheat is priced in at $5.21 per bushel, and that is down about $0.08 from a month ago and down about $0.33 from a year ago. U.S. weekly average for peanuts is $512 a ton. That is up $16 a month ago and up about $34 from a year ago. Arkansas highway diesel is currently priced in at $3.38 a gallon.

00;20;47;16 – 00;21;21;05
Dr. Ryan Loy
A month ago, that was $3.20 a gallon and a year ago, we were looking at $3.47 a gallon. Arkansas farm diesel is currently at $2.61 a gallon. A month ago, that was $2.33 a gallon, and a year ago that was $2.78 a gallon. Switching over to some inputs, our fertilizer data comes from Bloomberg Green Markets. Urea, currently priced in at $580 a ton.

00;21;21;07 – 00;21;53;19
Dr. Ryan Loy
That is, from a month ago at $678 and three months ago, it was $540 a ton. Ammonium nitrate is currently at $467 a ton. A month ago, that was $548 a ton, and three months ago that was $495 a ton. Ammonium sulfate is $558 a ton. A month ago, that was $556 a ton. And three months ago that was $540 a ton.

00;21;53;22 – 00;22;21;26
Dr. Ryan Loy
DAP is currently priced in at $830 a ton. A month ago, that was $791 per ton. Three months ago that was $759 a ton triple super phosphate is currently priced in at $688 a ton. A month ago, that was $656 a ton. And three months ago, $655 a ton. So we’ve seen that steadily come up over the year.

00;22;21;28 – 00;22;37;28
Dr. Ryan Loy
Potash is currently priced in at $458 a ton, and a month ago it was priced the exact same at $458 a ton and three months ago it was $452 a ton. That’s this week’s market report. Thank you for tuning in and have a great week.