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Abstract

We evaluate farm financial stress within the U.S. over the past twenty years and the agricultural and economic factors which have impacted farm businesses. We further evaluate the effect of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) on farm financial stress. In particular, Chapter 12 bankruptcies ‐‐ which can only be filed by farmers ‐‐ were only a temporary measure until BAPCPA made Chapter 12 a permanent fixture in bankruptcy law. We utilize filings of Chapter 12 bankruptcies from 1997 until 2016 as a proxy for farm financial stress. Panel fixed effects models are used to determine relevant factors affecting financial stress for farmers from agricultural and macroeconomic perspectives. Further, models incorporating pre‐ and post‐BAPCPA regimes are utilized. We find that macroeconomic factors (interest and unemployment rates) are strong predictors of farm bankruptcies for farms while agricultural land values are the only consistent strong predictor among the agricultural factors. When evaluating the post‐BAPCPA regime, only agricultural land values continue to be a significant predictor of farm bankruptcies. Our findings also indicate a dynamic relationship with agricultural land values, where current year values are negatively related but previous year land values are positively related to bankruptcies. We provide an analysis of the post‐BAPCPA regime on farm bankruptcies that was not previously evaluated. Further, our findings illuminate discussion on a potentially dynamic relationship with financial stress and agricultural land values.

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