Because of the nature of farming under the lash of capitalist competition, almost all working farmers are forced to take out loans to keep farming. As prices for farm produce are falling today, farmers face greater difficulty getting loans as interest rates are soaring. They are “debt slaves” to the banks and other, more cutthroat, financial institutions.
Farm debt, default payments and bankruptcies are all rising. In the 12-month period ending in September there was a 24% increase in farmers filing for bankruptcy compared with the previous year, the American Farm Bureau Federation reported.
Farm debt is predicted to hit a record $416 billion this year, up nearly 40% since 2012. This year record spring rains meant nearly 464,000 acres were left unplanted and the fall harvest has been slowed by sub-freezing temperatures and snow. The U.S. Department of Agriculture estimates that median farm income was a negative $1,548 in 2018.
As banks back away from lending, especially to smaller family farmers, many are being forced to turn to alternative lending sources outside of traditional banks, such as financial service firms Ag Resource Management, Fora Financial and FarmOp Capital. They profit from charging interest rates double that of the banks and put more stringent monitors on farmers’ production.
One way these vulture financial services companies try to guarantee getting paid is to use crop sales or insurance policies as collateral, rather than land or equipment. They extract hefty payments through automatic withdrawals from farmers’ accounts and put liens on each bushel of grain.
FarmOp Capital tracks crop growth with satellites and has production data transmitted to them from farmers’ machinery to monitor potential problems.
One Arkansas farmer, 32-year-old Heath Jobe, borrowed $118,000 at 9% interest from ARM for seed, chemicals and fuel. But after his rice, beans and corn were hurt by a year of dry weather, ARM turned him down for a new loan and he ended up in bankruptcy. “If you don’t make a crop and you have a bad year, they’ll clean your clock,” Jobe told the Wall Street Journal.
Dean Foods bankruptcy
Dairy farmers have been especially hard hit financially. The number of dairy farms has dropped by more than 93% since 1970 — from more than 640,000 to some 40,000 today.
Dean Foods, the largest milk processor in the country, declared bankruptcy Nov. 12. The Dallas-based company has some 60 dairy processing plants in 29 states and employs 15,000 workers.
“Overproduction” of milk — an essential food stuff badly needed by millions of people worldwide — is used to drive down the price farmers receive on the market. Dairy farmers’ income is below their costs of production. “One of the most pressing issues posed by Dean Food’s bankruptcy is the possibility that farmers won’t be able to find anywhere else to sell their product,” the New Food Economy website said the next day.
Retailers like Walmart, Kroger and Albertsons have opened their own in-house milk processing plants, cutting out middlemen like Dean Foods. They buy mostly from larger, capitalist farmers to lower their costs.