Got Milk? Markets Push More Farmers & Food Processors Into Bankruptcy

The Milwaukee Journal Sentinel reports that sales of milk as a beverage have barely risen since 1985. Part of that is due to increased competition. “Beverage companies, seeking to please a multitude of palates, flooded the market with sports drinks, energy drinks, plant-based sodas, fruit juices and designer coffees… Just in the last half-dozen years, the average grocery store has added nearly 600 new beverage options to its coolers and shelves…” 

The result is a glut of milk and a corresponding drop in milk prices that are driving family farms and food processing companies that specialize in dairy products out of business. 

Wisconsin’s Dairy Herd Dwindles, Farmers Are Filing for Bankruptcy More Often

Numbers released by the Wisconsin Department of Agriculture, Trade, and Consumer Protection showed the Dairy State lost 10% of its herds in 2019 alone. Some farmers are simply closing up shop, while others are being forced to file for Chapter 12 bankruptcy

Chapter 12 is a special chapter of the bankruptcy code that was enacted specifically so that “family farmers” and “family fishermen” can file for bankruptcy without losing all their assets and giving up their way of life.

Chapter 12 bankruptcies are like Chapter 11 or Chapter 13 bankruptcies in that the goal is to reorganize operations and repay debts on a payment plan. However, Chapter 12 is simpler and less expensive to file under than Chapter 11, which was designed with large corporations in mind. Compared to Chapter 13, Chapter 12 is better at dealing with the large debts and less predictable income that characterize family farming and fishing operations.

At Hanson & Payne, we are helping several farming families in Southeast Wisconsin determine what the best path forward for them may be. We don’t push our clients to file for bankruptcy. We lay out all of the available options and discuss the pros and cons so our clients can make the decision that is best for them.

Food Processors Are Also Facing Bankruptcy 

In the last few months, two major milk buyers have filed for bankruptcy — Borden Dairy Company and Dean Foods. As we have often said on this blog, one bankruptcy can often cause a chain reaction. 

The farmers Borden and Dean bought from must now find new buyers. Companies that depended on Borden and Dean products must now find new suppliers. A delay could cause financial distress on either end of that chain. 

If Borden and Dean are unable to make payments to their suppliers, they may end up pushing others toward bankruptcy. 

At Hanson & Payne, we are skilled at working with businesses that have a disruption in their supply or customer chain. If your business is in this situation, we can help you find a path forward. That path does not have to include bankruptcy. Our firm is skilled at negotiating workouts and working with commercial lenders. 

Moo-ving Forward 

The milk market is undergoing a lot of changes right now, but in the long-run, Wisconsin will always be America’s Dairyland. Our firm is ready to help farmers, food processors, and others in the dairy industry move forward and adapt. If you need assistance in this area, please contact us to schedule an initial consultation.