WASHINGTON, D.C. (RFD NEWS) — Last year marked the second straight annual increase in Chapter 12 farm bankruptcy filings, reflecting continued financial pressure from lower commodity prices and higher input costs. The trend is raising new questions about the overall health of the farm economy.
American Farm Bureau Federation (AFBF) economist Samantha Ayoub says new data from U.S. court filings paints a stark picture of the farm economy. Ayoub joined us on Thursday’s Market Day Report to break down the latest data.
“Chapter 12 bankruptcies increased for the second year in a row in 2025, reaching 315 filings,” Ayoub said. “That’s up 46% from 2024. That second increase in a row shows that the farm economy, as we’ve been talking about, is really struggling, and excessive debt loads are starting to hit family farms.”
In her interview with RFD NEWS, Ayoub discussed what the newly released farm bankruptcy figures reveal about the current state of the farm economy and explained how AFBF tracks annual filings over time.
Ayoub noted that farm bankruptcies are not a perfect indicator of the farm economy because the data often lag behind real farm finances.
“When you have some good years, that capital might be able to get you through a few downturns,” she explained. “We know we’ve seen declining receipts for four years now, and we’re just starting to see that second year in a row of increases in bankruptcies. And then secondly, a majority of farms actually don’t qualify for Chapter 12 farm bankruptcies. In order to qualify, you have to make the majority of your family income from farming.”
Ayoub also outlined some of the factors that have driven increases in farm bankruptcies over the years, including ongoing financial challenges facing producers, and whether bankruptcy filings fully represent the difficult decisions farmers and ranchers are making in today’s economic environment.
Rising Loan Sizes and Rates Strain Farm Borrowers
At the same time, farmers relying on USDA Farm Service Agency loans are facing sharply higher borrowing costs as larger loan sizes collide with higher interest rates. New analysis shows both trends have combined to push interest expenses and first-year loan payments to their highest levels in two decades.
Between 2005 and 2025, average FSA loan sizes increased across all programs, reflecting higher input costs, rising machinery expenses, and sharply higher farmland values. Guaranteed operating loans showed the largest growth, more than tripling over the period, while farm ownership loans more than doubled. These larger balances alone raised annual payment obligations.
At the same time, interest rates climbed rapidly after 2021 as the Federal Reserve raised benchmark rates to combat inflation. By 2024 and 2025, average interest rates on new FSA operating loans had returned to levels last seen before the 2008 financial crisis. The combination of higher rates and bigger loans drove first-year interest expenses up 70 to 90 percent, depending on loan type.
The result, according to Sarah Atkinson of the USDA’s Farm Production and Conservation Business Center, in a FarmDoc Daily article, is tighter cash flow, especially for highly leveraged operations and those relying on variable-rate or adjustable loans. The findings come from a two-part analysis of FSA lending trends by USDA researchers.
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