When a large company files for bankruptcy to reorganize, it can be a warning sign of things to come. On November 12, 2019, Dean Foods, the largest milk producer in the US, filed for Chapter 11 bankruptcy to reorganize. Dean Foods filing for bankruptcy could be seen as the canary in the coal mine.
“The company’s bankruptcy filing comes as the country’s dairy farmers are also struggling to adapt to the changing milk market. Falling dairy prices, trade turmoil and labor shortage have all hit farmers hard.”1
Chapter 12 bankruptcy filings are on the rise in Nebraska and nationwide. Poor grain and cattle prices along with the inability to plant or loss of grain because of flooding has started to really hit Nebraska farmers.
Affecting dairy farmers is the fact that Americans consume less milk than they used to leaving an oversupply in the market. Many dairy farmers operate at a loss or make enough to cover costs. The ripple effect of a bankruptcy the magnitude of Dean Foods may make its way to the producer who is already facing a tough market.
In Nebraska, there has been a downward trend in the number of licensed dairy farmers since the 1960s. In 1999, there were 748 licensed dairy farmers and by 2013 that number had decreased to only 195. During that same stretch, the average number of dairy cows per farm increased from 98 to 282. The production of milk also stayed steady as the production per cow increased with better diets, management, and genetics.2
Dairy farmers in Nebraska may be faced with unique challenges for addressing the strained milk market in America and how it impacts profits and the ability to survive and grow. For the family dairy farmer with less than $10,000,000 of debt, a Chapter 12 bankruptcy may be the perfect solution to reorganize and keep going. The Chapter 12 bankruptcy may also be a beneficial tool to exit the market by liquidating your dairy farm operation. It may even be the best way to pass your dairy farm operation to the next generation without the burden of overwhelming debt.
Deciding whether to file a bankruptcy is a complex and emotional decision. Finding the right attorney to work with you to make that decision is crucial. Instead of worrying what will come next, you should meet with a bankruptcy attorney to discover your options for dealing with your financial situation.
If you or someone you know is bracing for or already experiencing financial distress, the bankruptcy attorneys at Koenig|Dunne are here to help.